West Fraser Timber Co. Aktie

Good morning, ladies and gentlemen, and welcome to the West Fraser Q2 2026 Results Conference Call. [Operator Instructions] This call is being recorded on Thursday, July 30, 2026. During this conference call, West Fraser's representatives will be making certain statements about West Fraser's future financial and operational performance, business outlook and capital plans. These statements may constitute forward-looking information and forward-looking statements within the meaning of Canadian and United States securities laws. Such statements involve certain risks, uncertainties and assumptions, which may cause West Fraser's actual or future results and performance to be materially different from those expressed or implied in these statements.

Additional information about these risk factors and assumptions is included in both accompanying webcast presentation and in our 2025 annual MD&A and annual information form as updated in our quarterly MD&A, which can be accessed on West Fraser's website or through SEDAR+ for Canadian investors and EDGAR for United States investors. I would now like to turn the conference call over to Mr. Sean McLaren, President and Chief Executive Officer. Please go ahead.

Thank you, Kelsey. Good morning, everyone, and thank you for joining our second quarter 2026 earnings call. I am Sean McLaren, President and CEO of West Fraser. And joining me on the call today are Chris Virostek, Executive Vice President and Chief Financial Officer; Matt Tobin, Senior Vice President of Sales and Marketing; and other members of our leadership team. On the earnings call this morning, I will begin with a brief overview of West Fraser's second quarter and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks.

Our second quarter results reflect continued progress in a market environment where underlying demand remains measured. We generated $50 million of adjusted EBITDA with positive contributions from each of our 3 core reportable segments. Through the first half of the year, we produced approximately the same amount of Southern Yellow Pine as in the prior year period despite operating fewer mill, reflecting productivity gains and the continued high grading of our U.S. lumber portfolio. We are pleased with the ramp-up at our new Henderson mill as production has more than doubled in Q2 versus Q1 and is regularly exceeding levels at which the old mill produced. Our team sustained shipping momentum in the U.S. South, navigating significant transportation cost and availability challenges.

In Canada, SPF production increased by 13% compared to the previous quarter. In EWP, we completed the safe wind down of our high-level Alberta OSB mill during the quarter on time and under budget. This strategic decision more closely aligns our production footprint with customer demand, enhancing operational efficiency. We are encouraged by our performance in Europe, which has resulted in the strongest first half results since 2023. We continue to strengthen our balance sheet. We ended the quarter with approximately $1 billion of liquidity, maintaining strong financial flexibility. We are closely tracking wildfire conditions in British Columbia and Alberta.

At present, all West Fraser facilities remain safe, and there have been no wildfire-related impacts to our operations. Our focus remains on operating safely, serving our customers, improving the competitiveness of our assets, maintaining a strong balance sheet and allocating capital with discipline. With that high-level overview, I'll now turn the call to Chris for additional detail and comments.

Thank you, Sean. And a reminder that we report in U.S. dollars and all my references are to U.S. dollar amounts, unless otherwise indicated.

In the second quarter, we achieved sales of approximately $1.4 billion and delivered adjusted EBITDA of $59 million with a $13 million favorable softwood lumber duty adjustment contributing to an adjusted EBITDA margin of approximately 4%. This compares with sales of approximately $1.3 billion and reported adjusted EBITDA of negative $66 million in the first quarter, which included a $114 million noncash duty adjustment relating to prior year periods. Excluding the duty adjustments, underlying consolidated performance was stable between the quarters. The lumber segment generated $41 million of adjusted EBITDA in Q2 compared with reported adjusted EBITDA of negative $84 million in Q1.

Excluding the first quarter duty adjustment, the lumber segment generated modestly higher adjusted EBITDA this quarter. We were encouraged by both higher mill nets and higher shipment volumes during the quarter. Results were also affected by the seasonal timing of Canadian logging costs during spring breakup and certain costs are expensed during the temporary shutdown of logging operations rather than capitalized into inventory and NRV adjustments around quarter-end pricing trends.

The North America EWP segment generated $13 million of adjusted EBITDA in the second quarter, a slight improvement from the $11 million generated in the first quarter. North American OSB economics were primarily influenced by pricing dynamics, while controllable costs remained largely in line with Q1 levels despite ongoing resin inflation. North America OSB was also impacted by an NRV adjustment influenced by quarter end prices. We have analyzed the impact of the 50% tariff announcements made earlier this month under Section 338 of the Tariff Act of 1930.

For context, year-to-date, approximately 3% of our Canadian plywood shipments and 20% of our LVL shipments have been exported to the U.S. Our MDF shipments to the U.S., which represent approximately half our MDF shipments are not directly subject to tariffs. We continue to assess the potential indirect effects on downstream customers and end markets.

In Europe, we generated $13 million of adjusted EBITDA in the second quarter, improving on the $10 million earned in the first quarter. The Europe market continues to benefit from an improved environment of higher demand -- although resin and freight costs increased, we were able to effectively manage these increases through our pricing strategy. Our other operating segment showed an $8 million adjusted EBITDA loss, which was principally due to a maintenance shutdown at Caribou during the quarter.

Bridging our results from Q1 to Q2, higher realized prices in both lumber and Europe generated an incremental $51 million of adjusted EBITDA. Duties and tariffs were lower, which includes the $13 million adjustment we discussed earlier. Higher resin and freight costs and changes in inventory valuation reserves contributed most of the offsets to higher realized prices. Majority of the increase in freight costs was recovered through adjustments to freight adders included in our invoicing. Canadian SPF shipments were up 18% from Q1, mainly due to the restart of our Blue Ridge, Alberta facility mid-March. Additionally, SYP shipments were up 5% despite the transportation shortages facing the U.S. South. We generated $192 million of cash from operations as the seasonal working capital investment began to reverse, enabling us to repay $148 million of operating borrowings during the quarter.

This cash flow helped us reduce our net debt in the quarter by $140 million. We exited the quarter with only $55 million drawn on our $1 billion revolver, resulting in a 5% net debt-to-capital ratio and giving us ample financial flexibility to continue to execute on our business plan. We chose not to repurchase any shares in the second quarter to maintain financial flexibility and strengthen our balance sheet during this phase of the cycle.

Compared with the first half of 2025, unit costs across our U.S. lumber portfolio were approximately 4% lower in the first half of 2026 by lower production and Henderson start-up costs. We are targeting continued improvement in these numbers as Henderson ramps up during the remainder of 2026. We have made no changes to our shipment guidance across our main products as well as our capital expenditure range of $300 million to $350 million. Transportation and resin costs have risen in the first half of the year. Outbound transportation costs are largely passed on to the end customer in all of our markets. Resin and wax costs are influenced by oil prices. We estimate that a $10 change in crude oil prices impacts annual resin and wax costs by approximately $15 million.

Compared to Q1, we estimate there was a $13 million overall increase to our wax and resin costs. This is across both our North American and European EWP business. Encouragingly, against that backdrop, we have seen a decline in fiber costs, especially in the U.S. South that has offset much of this increase. There remains a lot of uncertainty on oil prices, but we have been successful at managing and mitigating these impacts to our business. With that overview, I'll pass the call back to Sean.

Thank you, Chris. I'll now shift to our general outlook and add some concluding remarks.

Looking ahead, our priorities are focused on improving the competitiveness of our assets and positioning the business to perform through a range of market conditions. In U.S. lumber, our multiyear portfolio optimization continues to translate into improved performance. As Henderson continues to ramp, we expect further production gains and lower unit costs. We also expect to maintain shipping momentum while effectively managing ongoing transportation constraints and finished goods inventory levels.

In North American OSB, we believe the market will reward efficient operators. Our portfolio has been enhanced by the closure of High Level, the progress at Allendale, a continued focus on reliability improvements and strong inventory and cost management. These actions lowered our unit costs in Q2, and we remain focused on further improvement. Pulp industry closures remain a headwind for lumber residual realizations in the U.S. South, but they are also increasing regional pulpwood availability and lowering OSB fiber costs, an example of these offsets within our diversified portfolio.

In Canada, our lumber mills increased production and shipments materially from Q1. We expect limited pressure on fiber inputs as the overall Canadian lumber supply has been shrinking. Duty rates will also drop coming out of the AR7 review when they take effect later this year. Our Canadian panels business continues to deliver reliable results. Our focus for the second half will be on managing potential tariff exposure, mainly in our LVL and MDF businesses and continuing to focus on unit cost performance across all mills.

In Europe, our OSB operations delivered strong year-over-year growth in both pricing and volumes, with teams successfully navigating energy-related cost pressures through strategic pricing, procurement and disciplined operational execution. Over the longer term, we continue to see support for wood-based construction in Europe, including increased adoption of timber frame in the U.K. The demand environment remains challenging. Mortgage rates are elevated and consumers are focused on affordability. Notwithstanding these pressures, lumber pricing has improved given the tightening supply-demand balance, reduced European imports and transportation constraints. OSB prices remain near levels that are challenging for higher cost capacity. Our priorities continue to lower our cost base, managing production and working capital.

Summarizing our discussion today, our second quarter performance demonstrates that the investments and portfolio actions we have taken are delivering results. The breadth of our portfolio is an important advantage. We reported positive EBITDA in all 3 of our operating segments and supporting our operations is a strong balance sheet that provides us full financial flexibility with $1 billion of liquidity and low net debt levels. Thank you again for your time and continued interest, and we look forward to updating you next quarter. With that, we'll turn the call back to the operator for questions.

[Operator Instructions] The first question comes from Ben Isaacson from Scotiabank.

I just have three quick questions, if that's okay. First one is, can you provide some color on these transportation constraints? Are there more -- is there more than one issue? Is it getting worse? Is there a solution that it could improve over time? How do you frame these transportation... Issues?

Okay. What I might do is ask Matt Tobin here just to give a bit of an update on transportation.

I would say that it's been a multilayered challenge. I think if we go back to quarter 4, we saw a lot of bankruptcies and trucking companies taking out supply. And then on top of that, we layered a spike in fuel. And then usually end of Q1, early Q2 is a seasonally tight period for trucks in the South since we see produce pick up and just increased demand. So we've seen that easing as of late. We've seen also railways responding more product moving by rail, a little bit easing as the seasonality of that tightness slows down. But I think with the geopolitical pressures and the fuel, it will remain tight, but we do see that easing somewhat here.

Great. My second question, Sean, you mentioned that duty rates will drop later this year. Would you expect pricing to fall on a dollar-for-dollar basis? Or is there an opportunity for margin capture? What is your experience watching these duties change over the years and through different cycles?

Yes, you bet that. I'll make a couple of comments, and then I'm going to ask Matt to just to add on to that. It really -- obviously, duties impact the cost floor. And price and really market conditions are supply-demand related. So it really depends on the supply-demand dynamics for that product in that moment. It's really difficult to predict if there's an imbalance there, pricing will be based on demand. If they're not, then really the cost floor adjusts, and it really depends on actions from everybody who's supply in that market. So really, really difficult to predict. I might ask Matt, if he would add anything to that.

No, I agree. I mean I think it's really a question of supply/demand and what demand is as those things change. We've been navigating this environment for the last 9 or 10 years. And I would say we historically have had a long-term advantage on rates. and supply/demand will tell us what happens when the rates drop off from there.

Yes. No, thanks, Matt. And I think I might add, we continue to kind of lean into our integrated model in Western Canada and work on our cost structure and our competitive position regardless of what the border measure is.

That's perfect. And then just a final one for Chris. Chris, you mentioned that you have not done buybacks this year. You do have an open NCIB, I believe. But I found that the tone in your Q2 MD&A has improved somewhat. Leverage is now moving in the right direction. Liquidity is ample. What should we -- what do we need to see in order for you to want to restart buybacks? Are there certain metrics that you're looking for?

Yes. Thanks, Ben, and great question. And look, I think as you probably heard in our remarks and noted in the MD&A, we're quite pleased with the progress that we're making organizationally across the company, and it really spans across all the segments, seeing improvements in Europe, the Henderson ramp-up proceeding, the successful wind down of high level, managing through these -- through the geopolitical impact on oil and resins and things like that. That being said, maintaining financial flexibility to preserve full optionality of a range of outcomes for us remains a priority for us, whether that be organic growth and continued investment in the business, inorganic opportunities that may present themselves at this time in the cycle or share buybacks.

So it'd be hard to nail it down to a single factor or a couple of factors that we say are going to influence that decision. It's really looking at all those variables and where do we think we can deploy capital in the way that creates the most value for shareholders over the long term. And that's really going to guide our thinking here. I do think that this far in on the lumber side, we are starting to see potentially an inflection point on the lumber here. And we've worked very hard over the last 3 years to do the right things for the business in as much of a cycle-agnostic way as we can.

And your next question comes from Hamir Patel from CIBC Capital Markets.

Sean, with your European OSB business finally rebounding, how do you think about your positioning in Europe and potential to expand that platform into other wood products, just thinking as perhaps some more distressed assets might come to market.

Yes. Of course, we're pleased with our progress over in Europe. I think as I mentioned on prior calls, we have a strong management team, efficient assets. And I think some of the -- even though the macro conditions in Europe are not great, I would say, our cost position and location of our assets, I think as there's cost pressure in other regions in Europe, we're pretty well positioned to compete through that. In terms of growth, I think what Europe brought to West Fraser was just another region for us to look at opportunities. And I think any growth opportunity would compete in Europe like it would compete anywhere else in our platform and would stand kind of us on its own 2 feet. And if it was compelling, we'd be considering it.

Fair enough. And just thinking about some of the perhaps organic opportunities, it looks like the Henderson ramp-up is progressing quite well. What's the next sort of Henderson type project that you're considering? And would that be -- are there also opportunities perhaps on the OSB side for something similar?

We've done a lot of work on our portfolio over the last 4 or 5 years. And I think we are very much in the mode of operationalizing those investments and making good progress in each one of our segments on the investments we've made. Really, our Bemidji project is the only major project that we have that is kind of under construction and will be ramping up early next year, and it's really a relife of a very solid asset. I would say we do have a basket of other opportunities, but our focus today is getting the value from the investments we've made and operationalizing that and keeping our focus there.

I add to that is through this cycle, we've done quite a lot of countercyclical investing. And so if we are if or when we reach that inflection point, we're not entering that with a bunch of deferred CapEx or deferred maintenance that we need to catch up on is that we feel we've done a really good job in this -- through the bottom of this cycle of maintaining and high-grading our asset portfolio.

Your next question comes from Ketan Mamtora from BMO Capital Markets. So our next question comes from Sean Steuart from TD Cowen.

A couple of questions. For Sean or Matt, trying to get a sense of what you're seeing from North American customers in terms of wood products demand. We've seen a great lift in lumber prices year-to-date for a lot of the reasons you laid out on the supply side, but we have 30-year mortgage rates up 70 to 80 basis points since February. affordability would still seem to be compromised. Can you give us a sense for OSB and lumber, what you're seeing in terms of order file activity, demand pull across, I guess, both new home construction and repair and remodeling.

I might ask Matt to maybe provide some commentary on that.

I think that we talked earlier in the call that on the lumber side, we're seeing a little bit better supply-demand mix, and that's held prices over the quarter. And I'd say we see consistent ordering and no real shifts in change, I would say, over the last period other than, I'd say, just that a little bit better balance, I feel like. And then on the R&R side, we don't really have great visibility into R&R. But while imperfect, we think treaters offer a good lens into R&R. And I'd say we're seeing seasonally in line order patterns from our treaters and our customers. And I wouldn't say we have seen a meaningful shift in demand that would change our view from the last few quarters in either R&R or new home construction.

Okay. That's encouraging. For Sean or Chris, I think a lot of the wording in previous calls with respect to North American M&A ambitions was you want to keep your powder dry, preserve financial flexibility, but you did anticipate more opportunities coming to market in the initial stages of a cyclical upturn. And I don't know if what we've had year-to-date qualified as a cyclical upturn yet, but has the M&A opportunity set in North America evolved at all year-to-date? Are you seeing more opportunities?

I wouldn't say it's changed much at all. I think folks are -- I'm just speculating, but I would imagine folks are waiting to see if there's durability to this. We're really only a couple of quarters in SYP to improve conditions and hard to say when others make choices about what they may want to do. And I think what I would add is I think we've been fairly consistent all along that one of the main things that we're looking for is quality, is high-quality assets. And those we're going to be pretty selective on if those opportunities do arrive.

Okay. Just one last quick one. North American engineered wood costs or unit costs were really held in check nicely this quarter. That was a surprise to us. And I know there's a lot of moving pieces, some of which you highlighted. But between lower pulpwood costs and maybe margin benefits associated with high level being out of the mix, can you give us a sense of if either one of those 2 items weighed or was a more important determinant of that cost progression this quarter? That was a nice surprise from our perspective.

Yes. Maybe just a few comments on that. I'd say, frankly, across the company, but as it relates to our North American OSB team, we continue to lean into cost reduction. And I think it's a whole number of things. One, I think we've become very adept at flexing our portfolio of assets to meet our customer demands as they fluctuate. And as we saw demand drifting lower and like lumber, we took action early at high level. I mean it took a number of months to unwind the log inventory there. We've really yet to see the full benefit of that but redeploying those products to other mills will improve our efficiency, and we expect to continue to help us manage cost. Finally, really operationalizing the capital investments we've made. Allendale, Chambord, both are exceeding -- meeting, exceeding expectations and continue to operate at a high level and have really reduced our -- allowed us to reduce cost.

That, along with, as Chris talked about in his comments, kind of southern wood cost as pulp mill -- pulp mills have been restructured as it relates to our drains that support our OSB mills, we've seen more competitive fiber coming to market.

And our last question comes from Ketan Mamtora from BMO Capital Markets. So we do have one last question from Matthew McKellar from RBC Capital Markets.

Appreciate all the help so far. Just a couple of cleanups on costs. First, I guess, how would you expect diesel prices to affect your Canadian log prices in Q3? I think you've been consuming quite a bit of the log that built through Q1 during Q2. What's the impact of rolling on to, I guess, more current costs as we progress into Q3.

Yes. What I might -- the way I might answer that, Matthew, is I think we -- most of our kind of agreements with our contractors, we would have fuel riders in there. So there'll be some impact depending on where diesel pricing is at that moment. Saying that, I think we have a number of other cost initiatives underway in Western Canada that are going to allow us to manage those -- any inflationary pressure there and manage those costs in the coming quarters.

Okay. Great. And then shifting over, I appreciate the help with the sensitivity provided, but maybe just to kind of a bit of a finer point given recent volatility, any nuances around timing. do you have a sense of how much of a sequential headwind resin and wax costs would be for North American EWP in Q3 versus Q2?

Yes. Again, I think we've provided some sensitivity. The way I would describe that sensitivity in our disclosure, though, is all things being equal. We had that headwind in Q2, but through a number of other initiatives, we were able to more than offset that. And I think we're going to continue to be navigating changes in the resin market. The -- our agreements we have around resin pricing and our other kind of chemical inputs are good. And I think we're going to be pretty -- it's going to affect the industry, and I think we'll be pretty well positioned to navigate through it.

And there are no further questions at this time. You may continue your conference, Mr. McLaren.

Thank you, Kelsey. As always, Chris and I are available to respond to further questions as is Anil Agrawala, our Director of Treasury and Investor Relations. Thank you again for your participation today. Stay well, and we look forward to reporting on our progress next quarter.

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation, and you may now disconnect. Have a great day.

Good morning, ladies and gentlemen, and welcome to the West Fraser Q1 2026 Results Conference Call. [Operator Instructions]

This call is being recorded on Thursday, April 30, 2026. During this conference call, West Fraser's representatives will be making certain statements about West Fraser's future financial and operational performance, business outlook and capital plans.

These statements may constitute forward-looking information or forward-looking statements within the meaning of Canadian and United States Securities laws. Such statements involve certain risks, uncertainties and assumptions which may cause West Fraser's actual or future results and performance to be materially different from those expressed or implied in these statements.

Additional information about these risk factors and assumptions is included both in accompanying webcast presentation and in our 2025 annual MD&A and Annual Information Form as updated in our quarterly MD&A, which can be accessed on West Fraser's website or through SEDAR+ for Canadian Investors and EDGAR for United States investors.

I would now like to turn the conference over to Sean McLaren. Please go ahead.

Thank you, Ena. Good morning, everyone, and thank you for joining our first quarter 2026 earnings call. I am Sean McLaren, President and CEO of West Fraser. And joining me on the call today are Chris Virostek, Executive Vice President and Chief Financial Officer; Matt Tobin, Senior Vice President of Sales and Marketing; and other members of our leadership team.

On the earnings call this morning, I will begin with a brief overview of West Fraser's first quarter and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks.

As we entered 2026, we saw a seasonal improvement in the lumber market. Southern Yellow Pine in particular, saw a better balance between available supply and seasonal demand. While underlying demand for new residential construction and repair and remodel remain subdued, we experienced healthier market conditions compared with the second half of 2025.

In OSB, Q1 market conditions remain challenging, though modest signs of improvement began to appear toward the end of the quarter as seasonal demand increased. Against this backdrop, West Fraser saw positive sequential turnaround in first quarter results, led by stronger lumber pricing and operational progress. We generated negative $66 million of adjusted EBITDA but this result includes $114 million of prior period duty adjustments, which Chris will get into shortly.

Removing the impact of these adjustments, the underlying business generated $48 million with all 3 of our segments: lumber, North American Engineered Wood Products and Europe contributing to the positive results. This reflects a significant improvement from the $79 million loss in the fourth quarter representing a turnaround of over $120 million. We continue to high grade our portfolio during the quarter. We have completed production activities at our high-level OSB mill in Alberta, and are 4 months into the production ramp-up at our new Henderson lumber mill in Texas.

Our U.S. lumber portfolio optimization continues to lower our cost structure with 5 mill closures and 2 brownfield modernizations over the past 5 years. Our balance sheet remains strong, providing us with the flexibility through the cycle and optionality for the future. We ended the quarter with liquidity close to $900 million. The change in Q1 reflects the normal seasonal buildup of log inventory in Western Canada, which is consistent with our typical working capital cycle. We expect this inventory investment to reduce in the second and third quarters as our mills work through their log inventories.

We continue to operate with a strong balance sheet, allowing us to execute our capital allocation strategy. Our financial position also provides optionality for value-creating opportunities should they arise. As always, we will be disciplined on execution and returns.

With that high-level overview, I'll now turn the call to Chris for additional detail and comments.

Thank you, Sean, and good morning, everyone. A reminder that we report in U.S. dollars and all my references are to U.S. dollar amounts, unless otherwise indicated.

In Q1, we generated negative $66 million of adjusted EBITDA. As Sean discussed, we had 2 large softwood lumber duty related adjustments in Q1 totaling $114 million. Both adjustments are noncash in nature. The first is based on preliminary rates released by the U.S. Department of Commerce for the 2024 calendar year. And the second, due to a change in our estimate of amounts recoverable and payable as a result of the liquidation process covering the last half of 2017.

I would point you to our news release of April 16 and our first quarter MD&A and financials for further details.

The lumber segment posted adjusted EBITDA of negative $84 million in the first quarter, but removing the duties impact results in a positive $30 million compared to negative $57 million in the fourth quarter, an improvement of $87 million. This improvement is largely a result of higher SYP and SPF pricing.

North America EWP segment delivered $11 million of adjusted EBITDA in the first quarter, an improvement from the prior quarter's negative $24 million. This $35 million improvement is due largely to better OSB pricing in the quarter.

In Europe, we generated $10 million of adjusted EBITDA in the first quarter, more than doubling the $4 million we generated in the fourth quarter. And we've seen an improvement -- improved environment in Europe with better demand and higher prices. This marks the highest level of adjusted EBITDA in Europe since the second quarter of 2023. We have moved our previously named Pulp and Paper segment to Other in the first quarter as the business has become a less significant part of our total operations and will no longer be specifically addressing the results of that segment.

Bridging our results from Q4 to Q1, a majority of the improvement came from higher prices in lumber and North American EWP. In addition, higher volumes in U.S. lumber in Europe and a favorable inventory adjustment represented the biggest variances. Costs were flat relative to Q4.

Lower SYP costs were offset by repair costs due to the fire of Blue Ridge. And in North America in OSB, we saw higher costs from resin and energy-related inputs. Resin plays a significant role in our panel cost structure and the recent rise in methanol-based resin pricing is a factor we anticipate will be more visible in our Q2 results.

Our U.S. lumber business continues to show improved operating efficiency, stemming from the actions we have taken. In the U.S. South, total cost per 1,000 board feet have reduced by approximately 6% in the last 2 years. During this period, we have closed 5 lumber mills, completed a full brownfield modernization and successfully completed a number of smaller but significant capital projects and cost reduction initiatives. This better enables us to react to changes in the external environment and improves our ability to compete more effectively and help provide low-cost supply to our customers.

In Q1, our SYP shipments were 4% higher than Q4 on better operating efficiencies. Excluding the impact of the downtime at Blue Ridge in Q1, our overall shipment volumes remained consistent with expectations. We saw higher shipments in both OSB in both North American OSB and European OSB. North American volumes increased due to the normal seasonal patterns. And in Europe, we increased shipments to meet higher demand.

Cash flow from operations was impacted by the seasonal build in working capital, resulting in negative $170 million in the first quarter, and a net debt position of $457 million. We expect this working capital position to reverse in the second and third quarters. Net debt was influenced by 2 dividend payments made during the quarter, which occurred as a result of our fiscal quarter ending on April 3 rather than March 31.

Our net debt to capital ratio remains in single digits, and our balance sheet is robust. With respect to share repurchases, we did not repurchase shares in the first quarter as we prioritized liquidity through the cycle. Our commitment to returning capital to shareholders through a combination of both dividends and tactical share repurchases has not changed.

Regarding our operational outlook for 2026, we have made no changes to our shipment guidance across our main products as well as our capital expenditure range. Transportation and resin costs have been influenced by evolving geopolitical dynamics, and we expect these factors to be more fully reflected in our second quarter results as we manage through the current environment. Due to the fluidity of the situation, it's hard to quantify what that impact may be, but we are actively managing where we can.

With that overview, I'll pass the call back to Sean.

Thank you, Chris. I'll now shift to our general outlook and offer some concluding remarks. Our first quarter results showed a solid improvement relative to the last half of 2025. The $120 million turnaround relative to Q4 shows what the underlying potential of our business is. Our strong balance sheet and a well-invested diversified portfolio positions us well to adapt to changing market conditions and capitalize on operating leverage while also mitigating downside risk.

We manage for the long run by reinvesting in our business and are improving our operating efficiency. In the first quarter, we continued to advance our heat energy and dryer project at amici, a project that when complete, will improve safety, increase throughput, lower cost and lower energy usage and emissions.

For our lumber assets in the U.S. South, as Chris discussed, we are seeing the results of the continued portfolio optimization work we are doing by removing costs, increasing margins and repositioning our production to lower cost and more efficient mills. We continue to ramp up our modernized Henderson mill, which we believe is positioned to be one of the lowest cost mills in our fleet once it achieves full operating rates.

In Canada, production at Blue Ridge was temporarily paused due to a fire and the mill has since resumed full operational capacity. We have also seen preliminary duty rates poised to come down later this year by approximately 6% with the release of the proposed AR7 rates, and we continue to hold a cost advantage in SPF relative to other Canadian exporters.

In our North American EWP business, the indefinite curtailment of our high-level Alberta OSB mill is complete. Our wind down of high level, a less competitive and higher cost mill representing approximately 860 million square feet will allow us to focus our operations on our most efficient production.

In Europe, we are encouraged by the progress achieved in Q1 and continue to navigate market dynamics, including managing energy and fiber costs. We are focused on operational improvements and cost reduction and expect our European operations to continue to be competitive through the cycle. Of course, this takes place in a dynamic environment influenced by developments in the Middle East.

Against this backdrop, global market conditions remain fluid, and we continue to assess how broader trends may influence end market demand and energy-related cost inputs across our business. In the near term, we expect costs to be influenced by inputs linked to energy prices, and we are adapting our logistics approach to reflect the current operating environment.

We continue to closely monitor these developments and remain focused on managing controllable costs, maintaining operational flexibility, and supporting our customers as conditions evolve. We are realistic about the demand environment. Housing remains challenged in the near term. However, we believe the longer-term demand drivers remain favorable. Since the start of the conflict, long-term mortgage rates have moved above 6% and gas prices have risen, reflecting current economic conditions that continue to shape consumer sentiment.

Despite ongoing macroeconomic and affordability pressures, lumber pricing improved modestly on a sequential basis in Q1 while uncertainties remain, the seasonally better supply-demand balance, combined with our cost reduction focus gives us cautious confidence as we navigate near-term uncertainties.

To summarize. First, our Q1 results demonstrate the operating leverage in our business as markets improve. Second, our balance sheet and diversified portfolio are strengths that continue to differentiate us in this environment. And third, we are focused on lowering costs and investing in capital projects that improve the quality of our portfolio.

Thank you again for your time and continued interest. We look forward to updating you next quarter.

With that, we'll turn the call back to the operator for questions.

[Operator Instructions]

And your first question comes from the line of Sean Steuart from TD Cowen.

A few questions. Sean, hoping we can pull apart the cost inflation piece a little bit. And the freight part, I think I understand, but I'm hoping you can give us a little bit more perspective around the magnitude of resin cost pressure and how that flows through? And how higher diesel will feed into delivered wood costs as well?

Okay. I'm going to make a few comments here then ask Chris to add anything more, fill in what I miss. So first off, on the magnitude, I would say a few comments here. First off, I would talk geographically that it's different in Europe than it is in North America. We saw the impact more quickly in Europe but our team in Europe quickly began navigating through that. Hard to really have a lot of exact visibility on Q2 other than the pressure continues to build, and our team continues to react and kind of navigate through that cost structure.

And our assets in Europe are -- this affects everybody. So our assets are well positioned to compete in this environment higher costs. In North America, I think we're still seeing that evolve. We've got, obviously, large relationships with our suppliers, and we're working with them to navigate the impact of that. Again, difficult to quantify for Q2, resin is a significant component of OSB costs. But to date, we've been able to navigate it effectively and to be determined to see how significant that is in the coming months.

On diesel pricing again in Western Canada, our wood supply is delivered. So this will be a Q3 issue as we begin to replenish log inventories. So we'll see where things are at, at that moment. And in the South, I think so far, we've been able to navigate that through and have not seen a material change in our cost structure yet, but it's something we're monitoring and watching closely. Chris, anything to add to that?

No, that's a great summary.

Okay. The second question I have is around chip offtake for your sawmills. We saw a recent announcement of a pulp no closure in the South. And I'm not asking you to speak to that initiative specifically. But Sean, can you give us a general comfort with respect to the strength of your wood chip offtake agreements across your sawmill system.

Yes, you bet, Sean. And I know we've maybe spoke about this on prior calls. But clearly, over the last several years, both in the U.S. and in Canada, the restructuring of the pulp industry has implications not only on sawmills, but on land owners, but in any number of areas where they operate and those closures happen.

From a West Fraser perspective, I'd maybe leave you with a few comments. One is our diverse portfolio, not only geographically between Western Canada and the U.S. South, but across both of those regions. And particularly in Western Canada, as we're integrated in British Columbia Caribou pulp. So we've got lots of optionality depending on where the impacts happen on how we reposition our production or our residuals and react to that.

In the South. We have a number of long-term relationships as well as a number of other kind of offtake agreements that we look to, and we've been successfully able to navigate each of these changes. Does it create pressure and pinch points? Absolutely, but our team is doing a terrific job navigating that.

And then finally, just as a reminder, that as pulp mills restructure, our OSB business also purchases pulpwood. So we have an offset or a hedge in our system that is -- that allows us to press on costs where those opportunities present themselves.

And your next question comes from the line of Ketan Mamtora from BMO Capital Markets.

Maybe to start with and not trying to put to find a point on the resin issue. But Sean to the extent it's possible, can you talk about sort of how you're navigating this dynamic environment? Is it using different types of resins in manufacturing OSB and if it's possible at all to -- maybe just give us some rough sensitivity in terms of what it means for, I don't know, like a 10% move in resin cost. Is there a way for us to think about it?

Yes. And this might again be a little repetitive from the last question. So it's really hard -- there's a lot of moving parts, as you can imagine within this. So resin, I think, is roughly 25% of the cost structure in OSB mill. The -- saying that, there are different types of resins. There are different ways for the team to be able to build the board. And first and foremost is us working with our resin suppliers to navigate through this period. And this is an issue that affects sort of everybody the same, like it's not a unique West Fraser issue. So I think it all comes back to how we feel our assets are positioned on the cost curve. And we feel like they're positioned pretty well. And we're going to be able to navigate this and compete through.

Understood. Okay. And then just maybe looking back at Q1, the price differential or not just the price differential, but the change in prices in Southern Yellow Pine versus SPF that we saw in Q1, can you talk about sort of what drove that, particularly against the backdrop of what's going on with supply cuts? I'm curious whether you are seeing any signs that Southern Yellow Pine is gaining share in the new residential market?

I'm going to turn it over to Matt to make a few comments on that, Ketan.

Sure. Yes, we saw Souther Yellow Pine prices rise off a low point from Q4. And this has been a pretty typical, I'd say, seasonal uplift with trigger activity picking up in the first quarter. So it's something we've seen, I'd say, the last few years is that rise in the first quarter demand. And I think that watching it and talking to customers, we don't see a structural shift in demand. I'd say it's just typical seasonal activities in the first quarter around SYP.

Understood. Okay. And then just last question from me. Chris, you talked about on the repurchase side, prioritizing liquidity. How should we think about sort of your approach over the next and the coming quarters against the backdrop of kind of weaker-than-expected housing demand. Should we expect that in the near term, this is on pause? Or is it sort of something that you're evaluating every quarter?

I think Ketan the best guide would be to look at what we've done historically, right, is we take a lot of pride in having a durable capital allocation strategy. So throughout this cycle, which we're 3 years in, in lumber now. We've been very disciplined in what we've done, right, with whether that's share repurchases or the level of the dividend or the management of the debt, the debt load and the cash balance.

And so look, we came through 2 negative quarters in the back half of last year. First quarter has turned positive the way that we look at it, excluding this $114 million on the duties. Clearly, there's a lot of uncertainty out there. But how we look at the intrinsic value of the company hasn't changed. And we're not a buyer necessarily at all times, but we're a buyer opportunistically when the flexibility is at a level on our balance sheet that we think is right and the shares are priced attractively. And I think you can count on us to continue to operate that way no differently today than over the past 2 or 3 years.

Your next question comes from the line of Ben Isaacson from Scotiabank.

I just wanted to extend Ketan's question, you talked about SYP, but didn't talk about SPF. Can you talk about whether you were surprised at the relative underperformance of SPF to SYP? Or was it kind of consistent with your thinking and why?

I would say, in the SPF, I mean we saw some steady markets, some slight price improvement over the quarter. I would say seasonally kind of normal tightening of those spreads in the first quarter, like I said, more to do with treater activity. I think we see those dislocations and price changes change relative to their kind of regional supply or their end user supply/demand structure. And so I would say, not necessarily unexpected to see a pickup in SYP and SPF just to be -- continue to be steady.

My second question is coming back to this cost pressure. I was just hoping you could frame it or provide some goalposts. If nothing were to change from today, can you give us some magnitude in terms of goalposts for cost? I mean should we expect a $30 to $50 per MBF change or 0 to $10? I mean how should we be thinking about it?

Yes. I'll make a few more comments here. And Chris, please fill in if we can add more. Again, very -- I know the conflicts a few months here. We've been able to navigate these pressures so far. But the pressure is building, and it's hard to predict where energy fuel prices might go. So I'm very reluctant to kind of speculate on magnitude because we just don't know. So we won't do that. What I would say is we've been so far able to navigate through the cost pressure.

Chris, would you add anything to that?

Yes, not really. I think as Sean indicated, resin is about 25% of the input cost. In OSB manufacturing. I think the other factors that he's raised that, look, this isn't something that uniquely affects West Fraser. It affects the entire industry. Because everybody uses resin to make OSB. So there's not, in our view, a disproportionate impact in one aspect, right, like our fleet of assets and how they exist in different markets and make different products, gives us a degree of flexibility that operators with smaller fleets may not have in order for us to mitigate more of this impact as we navigate this.

I think very difficult to speculate when you see oil price moving around the way that it's moving around on a day-to-day, week-to-week basis, trying to pin a number on this and say this is discretely what it's going to be in. There's as much likelihood that we're wrong as we're right in trying to give that guidance. So I think it goes back to -- look, we've -- throughout this cycle, we've made investments to lower costs consistently which gives us more headroom to deal with these shocks when they happen, and we like how we're positioned to be able to deal with this.

And my final question, Sean, can you just give a quick outlook for OSB as it relates to North America versus Europe? How are you feeling about kind of each of those regions?

Yes. No, thank you, Ben. Yes, maybe just a few comments. First off, in Europe, as Chris mentioned in his comments, our best quarter since mid-2023. So it's been 3 years. And the macro in Europe is -- continues to be difficult, like North America. Saying that, our 2 OSB assets over in Europe are pretty well positioned. We have a terrific management team. We're located in good markets, good raw material areas. So our cost position, we feel quite good about.

And at the same time, there is cost pressure in other regions that have resulted, we believe, in better market conditions over in Europe. So hard to -- again, the macro continues to be challenging over there. But some good sequential improvement in those markets over the last 12 to 18 months.

And then in North America, again, a lot of uncertainty and I can tell you a gain from West Fraser's perspective, we are just leaning into the things that we could control. Our asset ramp-up at Allendale, the work we've done at Chambord, the adjustments we made at high level, all those things make our our platform and OSB stronger and continue to push down costs, continue to give us the ability to navigate like Chris talked about the spike in resin costs or whatever comes our way. Hard to say on the market all as I would say is without any change, we're putting ourselves in a better position to compete.

[Operator Instructions] Your next question comes from the line of Nikolay Gurupi from CIBC Capital Markets.

Given the attractive margin dynamics for lumber in the U.S. South, do you suspect that meaningful production has already come back online across the industry in the region?

You gain hard for us to speculate on what others are doing. I'll only maybe speak to our platform. And we were navigating to the demands of our customers the last 2 quarters to second half of last year. As Matt touched on, things improve seasonally. So we were able to respond to that, saying that our ability to add other than the ramp-ups we're in, the capital execution we're in, our operating excellence focus, our ability to quickly react I think you saw that in Q1.

If you look compared to Q3 and Q4, you see the difference there. So I -- others may be in a little different spot. Hard for me to speculate on that. I know from our perspective, we're going to continue to be cautious, and we haven't seen a fundamental change in the underlying fundamentals. So we'll continue to manage our business against that backdrop.

Great. I see. And any more color you can provide what you're hearing from customers regarding the health of R&R demand?

I might ask Matt to maybe comment on that.

Sure. I'd say customers are mixed. I'd say some customers thinking it's going to be flat. Others are more positive. But I would say across the customer base, it really kind of mixed visibility there. And from what we see with treated customers that we think are a decent lens into that market, it remains subdued.

And your next question comes from the line of Mate McKellar from RBC Capital Markets.

Thanks to for all the details so far, particularly on costs. I'd like to I guess, following that theme, just a little bit, but from a slightly different angle and ask about capital equipment. Can you provide any perspective on if or how capital cost to build or even maintain lumber and OSB mills in the U.S. specifically, may have evolved over the past few quarters, what was new tariffs and tariffs that have changed in scope and magnitude.

Maybe just a few comments on that. First comment I would make is, we've done a lot of work -- a lot of capital work the last 3, 4 years. And we're really in the mode of operationalizing that capital and start up, getting the benefit from all the money we've spent. So our exposure to some of those costs today are considerably less than they've been the last couple of years. The one big project we have underway is Bamijian that equipment is largely delivered. And so we're, again, our exposure there is very little exposure left on that project. Saying that, I don't think it's fundamentally different today if you were going to do a major project, and then you add on the potential of steel and other tariff issues for equipment that comes from outside of the U.S. So pressure is probably higher, but we're largely into the operational phase of our capital program.

Great. Just one more for me. I appreciate, I guess, the diesel is pushing transportation costs higher pretty generally and that the impact remains hard to quantify -- are you seeing any actual scarcity of capacity beyond that that would potentially create any bottlenecks for you or your customers?

Maybe I'll turn that one over to Matt.

Sure. I would say it's been a challenging market in freight market. And I think if we look back to the end of last year, there's been quite a few publications talk about the uptick in bankruptcies and trucking companies to end '25. And I'd say logistics, we'll always kind of correct to the size of the demand. And so we've definitely seen a little bit more tightness. And when you layer on top of as well end of Q1, early Q2 is a seasonally tight period for trucks anyway.

You get uptick in produce and other things. And so you layer on a spike in fuel, and it certainly created tightness in the market. And we're working with our vendors and our customers to try to continue to provide on-time shipments of our products every day.

There are no further questions at this time. I will now hand the call back to Mr. Sean McLaren for any closing remarks.

Thank you, Ina. As always, Chris and I are available to respond to further questions. As is Anil Agarwal, our new Director of Treasury and Investor Relations. Thank you for your participation today. Stay well, and we look forward to reporting on our progress next quarter.

This concludes today's call. Thank you for participating. You may all disconnect.

I'm Hank Ketcham, Chairman of the Board of Directors of West Fraser. I'll act as Chair of this meeting, and Tom Theodorakis, our Corporate Secretary, will act as Recording Secretary. I appoint Ellis Amabel from Computershare Investor Services to act as scrutineer for the meeting.

We respectfully acknowledge that we are gathered in Vancouver, British Columbia on the traditional and ancestral territories of the Musqueam Squamish and Tsleil-Waututh peoples.

I'm also pleased to inform you that members of our Board of Directors and the executive management team are here with us in Vancouver. On behalf of the Board of Directors and the management team, I'm pleased to welcome you to the 2026 Annual General Meeting and Special Meeting of West Fraser, including those of you joining us through the live webcast.

Our plan this morning will be to first deal with the formal items of business. At the end of the meeting, our President and CEO, Sean McLaren, will provide an update on the company's operations. Following Sean's update, if there are any questions, we will be happy to answer them.

I'd like to set out a few procedures for the orderly conduct of the meeting. I'll introduce the various motions or resolutions and request that each be proposed and seconded by a registered shareholder or proxy holder. Voting on the motion to appoint the auditor and fixing the number of directors will be conducted by a show of hands unless a ballot is demanded.

In order to have an accurate record of the votes for the election of each director for the purposes of our majority voting policy and to properly record the vote on the resolution approving the company's say-on-pay advisory resolution and reconfirmation and continuation of the company's shareholder rights plan, we will conduct the vote on each of these resolutions by ballot.

Most shareholders will have already submitted a proxy, which will be counted in the vote. If you have not previously submitted a proxy, you may vote by ballot. The scrutineer has provided a form of ballot for these resolutions to each shareholder or authorized representative present in person and each proxy holder who is present and has not already submitted a proxy. If you are one of those persons but do not have these ballots, please raise your hand.

When voting on the resolution to elect the directors, please mark an X on your ballot in the box under the heading for to the right of the name of each director you wish to elect. And if you do not wish to elect certain nominees, mark an X in the box under the heading Withhold to the far right of the name of the director you do not wish to elect.

When voting on the other resolutions by ballot, please insert the number of shares being voted for or against on your ballot. Are there any questions at this point on the procedures for the meeting? For the shareholders joining us through the webcast, questions in respect of a motion may be submitted by any registered shareholder or duly appointed proxy holder who have properly logged in with their control numbers or user name by using the instant messaging service on the Lumi platform.

Please note that there may be a slight delay in questions being submitted to us. Questions on the formal meeting items will be addressed as each item is tabled. Any questions received of a more general nature will be addressed at the end of the meeting. If we are unable to address your general questions during the meeting, a representative of West Fraser will reach out to you following the meeting with a response.

Are there any questions at this point on the procedures for the meeting?

The notice calling this meeting, the management information circular and the form of proxy were mailed to shareholders on or around March 17, 2026. I will dispense with the reading of the notice of meeting. Copies of the notice of meeting, management information circular and other meeting materials are available under the company's profiles on SEDAR+, EDGAR and on the company's website.

Our transfer agent, Computershare Investor Services, Inc., has attested to the proper mailing of the notice calling this meeting. The Secretary of the company has also confirmed that notice calling the meeting was mailed to all shareholders of the company entitled to receive such notice and Computershare has provided an affidavit of mailing. Accordingly, I confirm that the notice calling this meeting and all proxy-related meeting materials were delivered to the shareholders in accordance with the requirements of the company's articles, the British Columbia Business Corporation Act and Canadian securities laws.

The articles of the company require that a quorum be present to ensure the meeting is properly constituted. I've been informed by the scrutineer that we have the shareholders present or represented by proxy who hold a sufficient number of shares to constitute a quorum. I therefore declare that there is a quorum at this meeting. The scrutineer's report will be kept by the Secretary with the records of the meeting.

The notice of the meeting having been duly delivered and a quorum being present, I now declare the meeting to be duly called and regularly constituted for the transaction of business.

I now table and submit to you the report of the auditor, PricewaterhouseCoopers LLP, and the financial statements for the year ended December 31, 2025. We had mailed to requesting shareholders a copy of the annual report containing the auditor's report and the financial statements with the notice of the meeting, and it has been filed on SEDAR+ and EDGAR and is available on our website. Are there any questions concerning the auditor's report or the financial statements?

I declare that the financial statements and auditor's report have been received by the shareholders as submitted to this meeting. We will now proceed with fixing the number of directors to 11. I now move that shareholders approve to fixing the number of directors to 11. Would someone please second the motion? Thank you.

Each of those in favor of the motion, please raise a hand. Each of those against the motion, please raise a hand. Thank you.

The motion is carried, and I now declare that the number of directors has been fixed at 11.

We will now proceed with the election of Directors for the upcoming year. The number of Directors to be elected is 11. The company has implemented an advance notice policy requiring shareholders to provide advanced notice of any additional director nominations. The Secretary of the company has advised that no nomination has been received other than those persons named as director nominees in the information circular for this meeting mailed to shareholders.

I would now like to nominate the following individuals to hold office as the Directors of the company until the next annual meeting, and I would ask each nominee available to join us today to stand. Doyle Beneby, Eric Butler, Reid Carter, John Floren, Ellis Ketcham Johnson; Brian Kenning; Marian Lawson, Sean McLaren, Colleen McMorrow, Gillian Winckler and myself, Hank Ketcham. These persons are management's nominees for election to the Board as stated in the information circular for this meeting. With there being no further nominations, I declare the nominations closed.

I now move that shareholders approve the election of directors for the upcoming year. As previously mentioned, a vote by ballot will be conducted for the election of directors. If you have previously voted on this matter by proxy and do not wish to change your vote, no further action is required. Please vote using the form of ballot on election of directors provided earlier. Please make sure that your name is printed clearly on the ballot.

Would the scrutineer please collect the ballots? Thank you.

We will proceed with the next matter. PricewaterhouseCoopers LLP is currently the auditor of the company. I now move that shareholders approve the appointment of PricewaterhouseCoopers LLP chartered accountants as auditors of the company at a remuneration to be fixed by the Directors. You've heard the motion. Is there any discussion?

Each of those in favor of the motion, please raise a hand. Each of those against the motion, please raise a hand. Thank you.

The motion is carried, and I declare that PricewaterhouseCoopers LLP chartered accountants has been appointed as auditors of the company at a remuneration to be fixed by the Directors.

The next item of business is for shareholders to vote on the company's approach to executive compensation, also known as the say-on-pay advisory resolution. Our executive compensation policies and programs are based on the fundamental principle of pay for performance to align the interest of our executives with those of our shareholders. This compensation approach allows us to attract and retain high-performing executives who will be strongly incentivized to create value for our shareholders on a sustainable basis.

I now move that shareholders approve the company's say-on-pay advisory resolution as more fully described in the information circular. As previously mentioned, a vote by ballot will be conducted for the company's say-on-pay advisory resolution. I'd like to remind you that if you have previously voted on this matter by proxy and do not wish to change your vote, no further action is required. Would someone please second the motion? Thank you.

Is there any discussion on this matter? Please vote using the form of ballot on the say-on-pay advisory resolution provided earlier. Please make sure that your name is printed clearly on the ballot. Would the scrutineer please collect the ballots. Thank you.

We'll proceed to the next matter. The next item of business is for shareholders to vote on the resolution approving the reconfirmation and continuation of the company's shareholder rights plan. The company's shareholder rights plan was ratified and approved by the company's shareholders at the 2020 Annual General Meeting and amended, restated and continued at the 2023 Annual and Special Meeting. It will terminate on the conclusion of this meeting unless the shareholders approve its confirmation and continuation.

The rationale for the shareholder rights plan is outlined in more detail in the information circular delivered in connection with this meeting. The rights plan is not being adopted in response to or in anticipation of any pending or threatened takeover bid nor to deter takeover bids generally, but to encourage fair treatment of West Fraser shareholders in connection with the takeover bid and to protect against creeping bids.

I now move that shareholders approve the ordinary resolution approving the reconfirmation and continuation of the company's shareholder rights plan as more fully described in the information circular. A vote by ballot will be conducted for the ordinary resolution approving the reconfirmation and continuation of the company's shareholder rights plan.

I'd like to remind you that if you have previously voted on this matter by proxy and do not wish to change your vote, no further action is required. Would someone please second the motion? Thank you. Is there any discussion on this matter?

Please vote using the form of ballot on the reconfirmation and continuation of the company's shareholder rights plan provided earlier. Please make sure that your name is printed clearly on the ballot. Would the scrutineer please collect the ballots? Thank you.

While we wait for the scrutineer's report, we will pause the meeting. I've been advised by the scrutineer that the ballots and proxies deposited for the meeting indicate that each director nominee received a majority of yes votes, and I declare them duly elected to act as directors of the company for the ensuing year. Also, based on the preliminary results of voting, the two other resolutions by ballot, namely the advisory resolution on the company's approach to executive compensation, say-on-pay, and the reconfirmation and continuation of the company's shareholder rights plan have been approved.

I direct that the results of the poll be included with the minutes of this meeting and the results of the voting be announced in a news release in accordance with TSX and New York Stock Exchange policies and filed on SEDAR+ and EDGAR. As the formal items of the business as set out in the notice of the meeting have now been dealt with and as there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded.

Before calling on Sean McLaren, President and CEO, to provide an update on the company's operations, I wanted to take the opportunity to recognize the retirement and long-standing contribution of Janice Rennie as Board member for West Fraser. Having joined the Board in April 2004, this April marks 22 years of service and commitment by Janice to West Fraser and its shareholders. Janice has been a dedicated and valuable member of the Board, and we want to thank you, Janice, you will be dearly missed in your well-earned retirement.

I'll now turn the meeting over to Sean McLaren, President and Chief Executive Officer of the company, to provide an update on the company's operations.

Thank you, Hank, and thank you to our shareholders. Good morning, and welcome to the West Fraser Annual General and Special Meeting. I would like to thank each of you for attending today, either virtually or in person. Your presence demonstrates your commitment to our company and the West Fraser community. Each year, I give an update on our operations and each year, that update begins with safety.

This past Friday evening, we experienced a tragic accident at our mill in Henderson, Texas. To the employees' family and our entire Henderson team, every one of our West Fraser hearts are with you. It is a stark reminder that no matter how hard we work, how many investments and improvements we make that in an instant, tragedy can strike. There are no second chances when it comes to safety, and we will continue to be unrelenting in our pursuit of an accident-free West Fraser.

I will now provide a brief update on our operations. We also have a presentation that I will be referring to for those in attendance and who are following us via the webcast. Since West Fraser's start in 1955, when the company was founded by the 3 Ketcham Brothers, our strategy has been one that has been straightforward and durable. That is to be a low-cost producer, reinvest in our business and maintain a prudent and resilient balance sheet.

Our team is experienced in navigating commodity market cycles, has a proven track record and is ready to take on what we believe is a strong future in Wood Products. We also have experience in managing uncertainty. Our Canadian lumber operations have navigated the softwood lumber dispute for decades, including long-standing duties that increased last fall, along with the addition of new tariffs. We are taking a number of proactive steps, including how we run our Canadian lumber business to compete in a higher tariff duty rate environment and maintaining close communications with our provincial and federal governments to make certain our industry's voice is heard, and we have a handle on the latest engagements between Canada and the U.S.

Our annual results ending December 31, 2025, and management information circular have already been disseminated. However, I would like to recap a number of key highlights from 2025. Throughout this period of lower demand for our wood building products, we have remained committed to investing in our people, our operations and communities, ensuring we are well prepared to face these challenges and come back stronger at the next market recovery.

Over the past year, our capital allocation strategy saw us invest $411 million into the business to modernize our mills. In 2025, we repurchased $129 million of our shares and paid $101 million in dividends. As of the end of 2025, we had repurchased 83% of the stock issued to acquire Norbord in 2021. We continue to serve markets with attractive longer-term fundamentals, while a variety of factors have contributed to near-term supply and demand imbalances affecting both our lumber and OSB product lines. In response to these conditions, we have made difficult but necessary decisions to align production with current demand.

During the fourth quarter, we announced closures or curtailments of a number of uneconomic facilities. As demand improves, we retain the same ability to increase our supply of building products using our more modern, lower-cost mills. Throughout this process, we are working closely with our employees to transition into vacant roles at other West Fraser operations. The actions we took in 2025 build directly on actions taken over the past several years to strengthen our operating footprint and remain responsive to aligning production with demand, strengthening our portfolio by exiting higher cost assets and concentrating capital where it delivers the greatest long-term value.

Since 2023, we have been busy repositioning our portfolio of assets against the backdrop of reducing costs and making us more competitive in each of our product lines. At the same time, we also reshaped our footprint through significant investments in our business. Over the past 5 years, we have selectively expanded and strengthened our most competitive assets in both lumber and OSB. This includes the ramp-up and expansion of key operations such as Allendale OSB as well as the acquisition of a sawmill and treated wood facility in Cochrane, Alberta. These actions strengthen West Fraser for the long term and are fully aligned with our strategy to be a premier low-cost producer of sustainable, renewable wood building products and a reliable trusted supplier to our customers through all stages of the cycle.

West Fraser faced challenging market conditions in both our lumber and OSB product lines in the second half of last year, resulting in West Fraser generating only $56 million total adjusted EBITDA in 2025. Similar themes that have impacted the lumber industry since 2023 continued to impact the market in 2025 as elevated mortgage rates and housing costs impacted affordability and demand for housing.

The latter half of 2025 saw a weakening OSB market due to these same factors, combined with new supply that came online during the year. West Fraser continued to respond with a number of actions that allow the company to compete effectively and to provide low-cost supply to meet our customer needs.

As 2026 moves into the second quarter, we have seen some regional improvement in lumber prices as well as a moderate increase in OSB prices, which we attribute to seasonally better demand conditions. Recent events in the Middle East have not yet impacted demand, but we have seen long-term interest rates rise as a result. We are continuing to monitor the situation.

We believe the long-term market fundamentals for renewable wood building products and the implementation of our proven business strategy support attractive long-term value creation for our shareholders. As one of the world's largest producers of renewable wood-based building products, we contend that West Fraser offers many advantages. We offer financial resilience through a portfolio that is both product and geographically diverse. We do this by providing a wide range of home and building construction products across multiple markets in 2 continents. This financial resilience comes partly through our footprint.

Our top line capacity in lumber is 6.5 billion board feet, while another 9 billion square feet of engineered wood products capacity, positioning us well for lumber and OSB sales across North America. In addition, we are the largest producer of wood-based panels in the United Kingdom, which also gives us access to the Continental European market. Complementing our geographic diversity, our diverse product mix provides high-quality, reliable solutions across the full spectrum of residential construction and renovation.

Our products are used throughout a new home construction and subsequent years of repairs and remodeling. As a company with a geographically diverse footprint spanning 2 continents and 4 countries, West Fraser has grown into being one of the world's largest wood products manufacturers. Having exposure to multiple geographies allows us to serve our customers efficiently.

We serve markets with attractive longer-term fundamentals. Although new housing starts have decreased since peaking in 2021, underlying demographic trends remain positive for housing starts with approximately 13,000 people in America expected to turn 35 every day over the next decade. Across North America, all local, provincial, state and federal governments continue to prioritize housing as a key challenge to overcome. The need for new and renovated housing should continue to rise over time.

The repair and remodeling market saw significant growth during COVID. And although total spend has come down, we expect that the same factors that will ultimately support new home construction will also support repair and remodeling demand. North American domestic production peaked in 2021 and has since fallen below 60 billion board feet. Over the last decade, the change in net North American lumber supply has been essentially nil as increases in the U.S. South supply have offset reductions centered around British Columbia. This is in spite of housing starts going from 1.2 million up to 1.6 million at the previous peak.

Contrasting the lack of supply growth, which we do not expect to change significantly with our positive view of medium- to longer-term prospects for wood products demand, the picture becomes clearer. Medium- to longer-term lumber market fundamentals pointing to growth should support an attractive market environment for the products that we produce.

Adding new greenfield lumber capacity in the U.S. South requires significant and complex investment, including the significant capital required, the need for specialized operating expertise and hiring skilled local workforce and reduced availability of residual outlets, all of which make building new mills increasingly complicated. With these factors in mind, West Fraser is well positioned to compete. Rather than focusing on greenfield expansion, we have leveraged our existing footprint and continue to reinvest and drive down costs in mills with strong long-term potential, placing us in a strong position to compete when markets turn.

We have a track record of disciplined and balanced capital allocation. Our strategy prioritizes keeping a strong balance sheet, reinvesting in our business where appropriate and rewarding our shareholders by returning capital in a disciplined, predictable fashion. Maintaining financial flexibility remains the foundation of our capital allocation approach. We prioritize keeping appropriate liquidity and a conservative debt profile to position us to invest in the business and act on strategic growth opportunities across all parts of the cycle.

We continually reinvest in our business to maintain our low-cost position, modernize our footprint and replace end-of-life assets, ensuring the long-term competitiveness of our facilities. The third leg of our strategy is rewarding our shareholders for their continued loyalty. We return excess capital to our shareholders through a balanced approach that includes tactical share repurchases and a stable, sustainable dividend.

Over the last 9-plus years, we have generated over $10 billion of cash from operations. Of this, we have invested more than $4 billion back into the business through capital expenditures and acquisitions and have returned over $5 billion to our shareholders through buybacks and dividends. Even as 2025 results were poor relative to our historical standards, we exited the year with over $1.2 billion in available liquidity. We are well positioned to continue to invest in our company, maintain our focus on operations and be ready to take advantage of opportunities that may come our way.

West Fraser has the scale, scope and expertise to unlock further growth opportunities. Our growth strategy has been consistent over our 70-year existence. Our long-held values and proven strategy remain at the forefront of what we do, and we continue to invest in our company's growth when and where it makes economic and strategic sense.

In the last 5 years, we have acquired 2 lumber mills and 1 OSB mill and completed 2 brownfield modernizations in our U.S. South lumber portfolio. We've also closed and curtailed a number of smaller, less competitive and higher cost mills and mostly exited the pulp business. These actions that significantly strengthen the resilience of our overall portfolio. We are well positioned to benefit from strong sustainability fundamentals. At West Fraser, sustainability is embedded in how we operate and foundational to the long-term success of our business.

We continue to strengthen the connection between sustainability and operational excellence through major investments at both our McDavid, Florida lumber mill and our Bemidji, Minnesota OSB facility. These projects improve environmental management and working conditions while significantly reducing costs. Achieving all of the goals -- all of these goals defines what being sustainable is in West Fraser.

In our Canadian operations, progression of our sustainability strategy includes advancing meaningful indigenous relations. In 2025, we signed a long-term fiber supply agreement with the Lake Babine Nation. We are pleased with the early results as we have seen better access and fiber supply certainty to our Smithers, British Columbia mill. This is a great example of improved fiber security and a more stable future rooted in local decision-making, all against the backdrop of a strong First Nation partnership.

I want to thank all of the stakeholders who made this agreement a reality. We continue to advance similar agreements with several other BC First Nations as well as a number of good relation agreements in Alberta. And finally, we have an attractive track record of creating shareholder value, driven by our culture, our values and our operating philosophy. These actions have positioned us to create long-term value for our shareholders, and we have delivered an annualized total shareholder return of approximately 8.5% since 2006.

As we look ahead, it is worth remembering that our progress is built on a legacy that began many years ago. 2025 mark 70 years since West Fraser's story began when the Ketcham Brothers, Sam, Bill and Pete purchased Two Mile Planing Mills in Quesnel, British Columbia. Even though the mill was modest, the values and the business strategy that the Ketcham Brothers and that 12-person crew established have continued to guide us.

From that foundation, our growth followed, not always in a straight line, but through a combination of consistent disciplined reinvestment, a conservative balance sheet and our unique West Fraser resilience that from generation to generation has allowed us to navigate challenges and realize opportunities.

As we move through 2026, we are confident in the company's geographic and product diversity, financial flexibility and sustainability fundamentals. When combined with our people and our proven strategy, we are well positioned as we embrace the many challenges and opportunities that lie ahead.

In closing, I want to express my gratitude for the strategic guidance and unwavering support to Hank, to our Board of Directors. On behalf of our management team, I would also like to thank Janice Rennie, who is retiring as a West Fraser Director after 22 years of service and guidance.

And finally, I would like to acknowledge the tremendous effort of the entire West Fraser team in pursuit of delivering strong results and your efforts in 2026 in building an even stronger company that together with our proud legacy will guide us towards a bright future.

Thank you. And Hank, that concludes my update.

Thank you, Sean. And now I ask that shareholders or duly appointed proxy holders who would like to ask a question to raise their hands and identify themselves or to type their questions in the instant messaging feature of the virtual interface if they are joining us via the webcast. We will answer as many questions as time permits. We'll now give attendees a moment to ask or type in their questions.

As we've received no further questions, on behalf of the Board and Management, thank you to our shareholders, executives and directors for participating in this meeting. With that, Lumi, we can now end the meeting.

Good morning, ladies and gentlemen, and welcome to the West Fraser Q4 2025 Results Conference Call. [Operator Instructions]. This call is being recorded on February 12, 2026.

During this conference call, West Fraser's representatives will be making certain statements about West Fraser's future financial and operational performance, business outlook and capital plans. These statements may constitute forward-looking information or forward-looking statements within the meaning of Canadian and United States securities laws. Such statements involve certain risks, uncertainties and assumptions, which may cause West Fraser's actual or future results and performance to be materially different from those expressed or implied in these statements.

Additional information about these risk factors and assumptions is included both in the accompanying webcast presentation and in our 2025 annual MD&A and annual information form as updated in our quarterly MD&A which can be accessed on West Fraser's website or SEDAR+ for Canadian investors and EDGAR for United States investors.

I would now like to turn the conference over to Mr. Sean McLaren, President and CEO. Thank you. Please go ahead.

Thank you, Mina. Good morning, everyone, and thank you for joining our fourth quarter 2025 earnings call. I am Sean McLaren, President and CEO of West Fraser. And joining me on the call today are Chris Virostek, Executive Vice President and CFO, and Matt Tobin, Senior Vice President of Sales and Marketing; and other members of our leadership team.

On the earnings call this morning, I will begin with a brief overview of West Fraser's Q4 and fiscal 2025 financial results and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks.

West Fraser generated negative $79 million of adjusted EBITDA in the fourth quarter of 2025, an improvement from the negative $144 million reported in the prior quarter, which had included a $67 million out-of-period duty expense relating to the calendar 2023 duty year. Results remained soft across our business in Q4 as broader housing and repair and remodeling markets continued to face affordability pressures.

For full year 2025, we generated $56 million of adjusted EBITDA -- down from the $673 million reported in 2024. The lumber segment had a challenging 2025 with the protracted down cycle in lumber among the toughest we've experienced in many years. During the year, we made meaningful progress high-grading our mill portfolio, which included a number of closures or curtailments of higher cost assets, but more importantly, the completion of the ramp-up of our Allendale OSB mill in South Carolina and the completion and commissioning of our new Henderson lumber mill in Texas.

In terms of our balance sheet, we had more than $1.2 billion of available liquidity at year-end, which offers us the financial flexibility and strength to support a consistent capital allocation strategy through the cycle.

With that high-level overview, I'll now turn the call to Chris for additional detail and comments.

Thank you, Sean. And a reminder that we report in U.S. dollars and all my references are to U.S. dollar amounts, unless otherwise indicated. The lumber segment posted adjusted EBITDA of negative $57 million in the fourth quarter compared to negative $123 million in the third quarter. The Q4 result is actually quite comparable with the prior quarter. If one excludes the $67 million export duty expense reported in the third quarter, which had related to the 2023 calendar year. While not included in our adjusted EBITDA, we reported $473 million of noncash restructuring and impairment charges in the lumber segment in the fourth quarter. This was related to a goodwill impairment of our U.S. lumber business as well as the closure of 2 of our sawmills.

The North America EWP segment reported negative $24 million of adjusted EBITDA in the fourth quarter compared to negative $15 million in the third quarter. Not included in this EBITDA, you will also have seen that we reported a $239 million noncash restructuring and impairment charge in this segment in the fourth quarter, which was related to the indefinite curtailment of our OSB mill in High Level, Alberta. The Pulp & Paper segment reported negative $1 million of adjusted EBITDA in the fourth quarter compared to negative $6 million in the third quarter. Sequential improvement in this segment was largely owing to the major maintenance shutdown at the mill in the third quarter.

In our Europe segment, adjusted EBITDA was $4 million in the fourth quarter versus $1 million in the third quarter as that business experienced a moderately improved business environment. In terms of our overall Q4 results, the sequential EBITDA improvement was supported by reduced SPF log costs, lower Southern Yellow Pine manufacturing costs and lower OSB labor costs as well as the absence of the $67 million out-of-period duty expense that we reported last quarter, partially offset by lower lumber and North American OSB prices.

Our lumber business continued to benefit from the portfolio optimization actions we have taken in recent years. In some instances, we have been able to replace output from now closed mills with production from our more modern, larger scale and lower-cost mills, helping to enhance the overall cost structure of the operation. For instance, in the U.S. South, our Q4 2025 Southern Yellow Pine shipments were 6% lower quarter-over-quarter, while SYP unit manufacturing costs were also lower.

Cash flow from operations was negative $172 million in the fourth quarter, with net debt at $131 million compared to a net cash position of $212 million reported last quarter. This change in our net debt is attributed to a normal seasonal build in working capital, $139 million of capital expenditures and $32 million of cash deployed towards share buybacks and dividends.

With respect to our operational outlook for 2026, we have reiterated previously released guidance for the year, as shown on Slide 8 and as detailed further in our earnings release. Note that if and as the U.S. administration's tariffs and other policies evolve, we will evaluate the impact of the tariffs on our operations and determine revisions to our 2026 forecast as appropriate.

With that financial overview, I will pass the call back to Sean.

Thank you, Chris. Before I shift to concluding remarks, I'd like to make a few comments on our liquidity. As you can see on Slide 9, we had a healthy balance sheet and total liquidity exceeding $1.2 billion as we exited 2025. While our liquidity has trended lower over the last few years during this extended down cycle, our financial position remains strong, providing us with sufficient flexibility to navigate further economic challenges should they unfold.

I think it's also important to reflect upon the history of attractive returns West Fraser has generated for our shareholders. As you can see in the figure at bottom of Slide 10, our shareholders have been rewarded for their patience as we have continued to execute on our plans to grow the business, optimize our portfolio through dispositions and/or closures of highly variable or uneconomic assets and return surplus capital through dividends and buybacks. With the total annualized return approaching 9% since the beginning of 2006, a which includes share price appreciation and reinvested dividends, we remain proud of what the West Fraser team has been able to accomplish.

I'll now shift to our general outlook and add some concluding remarks. There's no avoiding the fact that we face difficult end markets in 2025, but we manage our business for the long run. We have not been resting waiting for a market recovery. We've been actively investing in and improving the business. And because of that, we remain optimistic about West Fraser's future.

For our lumber assets in the U.S. South, we continue to refine and optimize our operations by removing costs and looking for additional margin opportunities. We are also ramping up our modernized Henderson mill, which we believe is positioned to be one of the best mills in our fleet once it achieves full operating rates.

In Canada, the supply and demand for SPF products continues to show relative advantages compared to SYP as the U.S. South absorbs the new capacity introduced in the region in recent years. We continue to execute on our portfolio optimization strategy, which includes the reduction of higher cost capacity across our lumber platform.

Since 2022, we have removed over 1.1 billion board feet of capacity through mill closures and permanent shift reductions, representing a 16% decrease in the company's lumber operating capacity. We've also reduced the number of shifts or hours of operations at various lumber mills across our platform as a means to manage cost. At the same time, we have invested nearly $1 billion of capital into our lumber business over the last 4 years, modernizing assets, adding flexibility to our production platform, removing costs, implementing margin expansion projects and making our mill safer for our employees.

Specifically with the startup of Henderson, we are nearing completion of the major U.S. lumber investment we have made over the past number of years with our focus increasingly turned towards operationalizing the capital we have invested in the region.

Taking such a proactive approach to portfolio management has further strengthened our cost position and competitiveness. In our North American EWP business, we have largely completed the ramp-up of our Allendale OSB mill, while more recently, we announced the planned indefinite curtailment of our high-level OSB mill this spring, which will remove 860 million square feet of currently uneconomic capacity in an effort to balance our production with customer demand.

In conclusion, while we rise to meet the needs of our customers every day, we are also dealing with limited macro visibility. In response, we have been actively managing our portfolio to be low cost and diverse by both geography and product to mitigate uncertainties. We remain optimistic about our longer-term prospects and we'll continue to focus on operational excellence, creating a leading wood building products company that is resilient and sustainable through the cycle. And we will do all this while maintaining the type of financial strength that gives us the flexibility to be able to take advantage of growth opportunities as they arise.

Thank you. And with that, we'll turn the call back to the operator for questions.

[Operator Instructions]. And your first question comes from the line of Ben Isaacson from Scotiabank.

Just 2 questions for me. The first question, can you give a little bit of qualitative color as to how balanced or imbalanced margins were between SPF and SYP in Q4? And how does that look right now?

Ben, we don't specifically call out our different segments, saying that as we saw through the quarter, you've seen -- you've watched the spreads start to close between the pricing between the products. So I think that's reflective of things kind of moving as customers adjust their needs and demand patterns depending on the end users of the products. Saying that, I think we're -- as we look to this year on both sides of the border, both products we're actively looking to make cost -- reducing costs, as you saw with both 100 Mile and Augusta in Q4. And we believe both those businesses are positioned to operate through the bottom of the cycle here.

Great. And then I think you mentioned lower log costs for SPF, lower manufacturing for SYP and lower labor for OSB. Among those 3, how much of that is sustainable going forward versus a one-off for Q4?

Ben, I'd say we've been very active in -- across all 3 segments on not only adjusting capacity on uneconomic assets, but modernizing assets through investment as well as reducing costs through flexible operating schedules. And I think the trends you are seeing in our cost structure are really the result of the work we've done over the last several years to lower cost.

And your next question comes from the line of Ketan Mamtora from BMO Capital Markets.

Maybe to start with, Sean, can you talk about sort of the M&A opportunities that you are seeing right now, given how depressed lumber prices have been for the last couple of years? Would that be an area of interest at this point, which certainly looks like bottom of the cycle? And related to that, any interest in growing outside of North America in lumber?

Yes, I'll make a couple of comments here, and Chris, please add anything I miss. And I think we maybe talked about this a few times over the quarters. For us, it's really about how do we make the company stronger at the bottom of the cycle in the current conditions we're in. So asset quality is very important. And over the last number of years, we've actioned a few things, but not very many. And every one of those things has been designed to make us stronger at the bottom. We have a balance sheet to be able to react to anything of quality that presents itself saying that we typically, the stronger assets are going to wait for a better time to be available. So those would be the only comments that I would say on M&A.

Chris, anything to add there?

No, that's a great point. Thanks, Sean.

Yes. And then in terms of any outside of North America, of course, even though the macro environment in Europe continues to be slow, we are pleased with our team, pleased with our assets over in Europe, and they're performing well at the bottom of the market. We continue to work with them to look at how we make our European business stronger. And I think I would just leave it there. There would be nothing in front of us today that we would talk about. It would be the same conditions we would look at in North America, makes us stronger at the bottom of the cycle, and it's a good return and our team is ready to take it on. We've got the flexibility to be able to consider it.

Understood. That's helpful. And then just one more from me. How should we think about ramp-up of the Henderson mill in the context of demand environment, which is quite muted?

Yes. And I think -- so it's very early days in Henderson. The mill began commissioning at the end of Q4. So we're in the early stages of startup. And as a reminder, it replaces an existing mill. So that volume had been in the market, and we expect through this year to be ramping up to replace that volume. And I think we will continue to look at our customer needs as we move beyond that. And this just gives us another low-cost asset to be able to adjust our full platform with.

And your next question comes from the line of Sean Steuart from TD Cowen.

A question for Sean or for Matt. We've seen a good lift in North American lumber and OSB prices the past couple of months. Interested in your perspective on how much of that you would attribute to seasonal activity picking up in advance of the spring building season versus maybe the initial stages of the cyclical recovery as supply is rationalized in the market.

Maybe, Matt, I'll hand that one over to you.

Sure. I think what we've seen is just from what we hear from our customers is just a little bit more difficult to get what they're looking for at the time they're looking for it. And so just as I think supply shrinks and demand stays relatively steady over the last couple of quarters, just a little bit harder for our customer to get the product they're looking for when they're looking for it, and it's had an impact on pricing.

And as far as spring, I would say, probably a little early to say today. I said, you usually see a bump in buying in the spring. But as you know, spring is usually defined by that warmer weather. And so just coming out of a couple of weeks of freeze in the U.S., I'd say, we're still a little early to see there. And once the weather turns, we'll have a better idea of what spring looks like.

And Matt, any perspective on the relative strength we've seen for U.S. South pricing of late versus Canada?

Like I said, I think from what we hear from our customers, it's a little harder for them to find the product they need when they need it. I think a lot of curtailment that Sean has talked about that we and the industry has taken that make it a little harder to find the product. And so just reflecting in the pricing based on that available supply.

Okay. Chris, I wanted to follow up on the prior question around M&A. And I appreciate you guys aren't -- you don't want to tip your hand too much in terms of thing of what you'd be looking at or specific areas or products. But I know the priority here is sort of sustaining a balance sheet that's flexible. Can you give us any perspective on how thoughts are evolving around minimum liquidity thresholds or maximum leverage targets that the company might be comfortable with as acquisition opportunities are considered in the initial stages of an upturn?

Thanks, Sean. I think there's a lot of latent financial flexibility in the business on the leverage side. I think anything that we would consider on leverage would -- we'd have to see a very clear path to getting leverage metrics and interest burden to a level that's very manageable through the cycle. So I wouldn't say that we would rule out putting leverage on to do something. But there'd have to be a pretty clear path through that to a deleveraging quickly afterwards, through value creation, and that really translates to quality assets, right, is, as Sean said, things that make us better, generate cash flow, there's a synergy opportunity. And if we incur some leverage to do something, a path to quickly pay that down to metrics that are very durable through the cycle for us and maintain that flexibility for us. So it's not off the table, but have to be a very clear path.

Okay. Understood. And then I guess just following on that, when you talk about anticipation of more opportunities on acquisitions coming to the table in the initial stages of an upturn. Is that you need to see that initial upturn to get comfortable that there will be a deleveraging path? Or is it in anticipation of more potential sellers looking to take advantage of a better valuation environment in the initial stages of an upturn. I'm just trying to sort of scale that up and how you think about the timing?

Sean, maybe I'll jump in on that one. Again, you never know what might be available when. I think our comments around quality and every one of our assets gets pressure tested at the bottom of the market. So we have an opportunity to see what the level of quality is of an asset. And it's hard to say when those assets become available, whether it's in the early stages of recovery or whatever is happening. I think that is the criteria for us. So it's not -- I think we have a balance sheet that regardless of timing, we'll be able to consider and look at it. And it's just hard for us to predict when those opportunities may present themselves. I would say, for us, we are focused on operationalizing what we've invested inside West Fraser and ready if something presents itself that makes us stronger.

And your next question comes from the line of Hamir Patel from CIBC Capital Markets.

Sean, there's been a lot of discussion around potential housing measures, the Trump administration may implement to boost affordability. What do you think would be the most meaningful initiatives that they could bring about? And how soon could that translate into real-world incremental lumber demand?

Well, first off, Hamir, we would like all of them. So it's hard to pick and choose which ones would be the best, but we are pleased to see the attention the administration is paying to housing affordability and the different ideas that are being talked about and the different measures that are being taken. Anything that allows homebuyers to be able to get into a single-family or multifamily home and improves demand, and that is good for our industry and obviously good for West Fraser. So hard to predict how quickly what will happen, when it will happen, how long it will take effect. I would say from our perspective, we're just pleased. It's being talked about quite a bit with the administration on both sides of the border, frankly.

Fair enough. And Sean, it sounded like from your outlook, a bit more cautious on the demand outlook for the year ahead for OSB versus lumber. Can you speak to maybe what drives the difference there and maybe what you're hearing from your customers for growth on the R&R side?

Yes. Maybe before I answer that, I might just ask Matt to maybe a few comments on the R&R side.

Sure. I'd say kind of mixed from our customers. I mean, some projecting low growth, others flat. So I'd say we're seeing a mix of sentiment on the year, but I don't know, consensus on a shift from what we've seen recently in the R&R markets.

And in terms of our outlook, Hamir, again, I think we would always take a cautious view because we really don't know, and we are going to manage our business to be competitive at the bottom of the market. And if it lasts, we're going to continue to look to take out -- remove cost and make ourselves more competitive. And I really think that's been our focus the last 3 years and will continue to be our focus.

Fair enough. Thanks a lot.

Thank you. That ends our question-and-answer session. I will now hand the call back to Sean McLaren for any closing remarks.

Thank you, Mina. As always, Chris and I are available to respond to further questions as is Robert Winslow, our Director of Investor Relations and Corporate Development. Thank you for your participation today. Stay well, and we look forward to reporting on our progress next quarter.

This concludes today's call. Thank you for participating. You may all disconnect.

Good morning, ladies and gentlemen, and welcome to the West Fraser Third Quarter 2025 Results Conference Call.

[Operator Instructions]

This call is being recorded on Thursday, October 23, 2025.

During this conference call, West Fraser's representatives will be making certain statements about West Fraser's future financial and operational performance, business outlook and capital plans. These statements may constitute forward-looking information or forward-looking statements within the meaning of Canadian and United States securities laws. Such statements involve certain risks, uncertainties and assumptions, which may cause the West Fraser's actual or future results and performance to be materially different from those expressed or implied in these statements.

Additional information about these risk factors and assumptions is included both in the accompanying webcast presentation and in our 2024 annual MD&A and annual information form as updated in our quarterly MD&A, which can be accessed on West Fraser's website or through SEDAR+ for Canadian investors and EDGAR for United States investors.

I would like to turn the conference over to Mr. Sean McLaren. Thank you. Please go ahead.

Thank you, Inna. Good morning, and thank you for joining our third quarter 2025 Earnings Call. I am Sean McLaren, President and CEO of West Fraser. And joining me on the call today are Chris Virostek, Executive Vice President and Chief Financial Officer; Matt Tobin, Senior Vice President of Sales and Marketing; and other members of our leadership team.

On the earnings call this morning, I will begin with a brief overview of West Fraser's Q3 2025 financial results and then pass the call to Chris for additional comments before I share some thoughts on our outlook and offer concluding remarks.

West Fraser posted negative $144 million of adjusted EBITDA in the third quarter of 2025 as we continue to operate within an extended cycle trough. Of note, this quarter included a $67 million out-of-period duty expense related to the finalization of Administrative Review 6 or AR6. New home construction remained relatively stable during the period, albeit at uninspiring levels, with annualized U.S. housing starts averaging just 1.31 million units through August on a rolling 3-month seasonally-adjusted basis as mortgage and interest rates continue to present headwinds to U.S. housing demand and affordability.

And as we've noted for several quarters, repair and remodeling demand was subdued once again this quarter. Despite the tough Q3, our balance sheet continues to demonstrate strength as we exited the quarter with nearly $1.6 billion of available liquidity and a healthy cash position that remains positive net of debt. A strong balance sheet and liquidity profile, along with our investment-grade rating remain key elements of our defensive capital allocation strategy, which allows us to invest in our business countercyclically and take advantage of investment opportunities if and when they arise.

With that brief overview, I'll now turn the call to Chris for additional detail and comments.

Thank you, Sean. And a reminder that we report in U.S. dollars and all my references are to U.S. dollar amounts, unless otherwise indicated. The lumber segment posted adjusted EBITDA of negative $123 million in the third quarter, inclusive of the previously mentioned $67 million out-of-period duty expense. This is in comparison to $15 million of adjusted EBITDA reported in the second quarter with the sequential change driven largely by lower pricing and the AR6 duty expense.

Of note, operations at our old Henderson site are winding down and the new mill is entering its commissioning phase. Our North America EWP segment posted negative $15 million of adjusted EBITDA in the third quarter, down from $68 million in the second quarter, with the sequential change largely driven by lower OSB pricing. The Pulp and Paper segment posted negative $6 million of adjusted EBITDA in the third quarter compared to negative $1 million in the second quarter, with the sequential change largely attributable to Cariboo Pulp's annual maintenance shut that occurred in the third quarter. Prior to and following the maintenance outage, we are seeing improved operating performance from Cariboo Pulp in terms of daily output.

Finally, our Europe business generated $1 million of adjusted EBITDA in the third quarter similar to the $2 million reported in the second quarter. In terms of our overall Q3 results, lower product prices for our lumber and North American OSB products were the largest contributing to tractors as compared to Q2. We were also buffeted by a number of major maintenance activities during the quarter, most significantly the Cariboo maintenance shut. Cash flow from operations was $58 million in the third quarter with our net cash balance at $212 million, down from $310 million in the prior quarter. The relative decrease in our net cash balance reflects lower earnings offset by -- in part by a reduction of working capital plus the impact of $90 million of capital expenditures and approximately $65 million of cash deployed towards share buybacks and dividends.

In terms of our 2025 shipments guidance, with the demand softness, we continue to experience across our lumber product portfolio, we are narrowing our outlook by reducing the top end of the guidance range for both SPF and SYP 2025 shipments, while maintaining the North American OSB and EU OSB shipment guides for 2025.

We are also confirming our 2025 CapEx guidance range of $400 million to $450 million. All updated views on our 2025 outlook are presented on Slide 8. Regarding softwood lumber duties. Earlier in the third quarter, the U.S. Department of Commerce released final CVD and ADD rates for AR6 which are based on the year 2023. These rates were largely as we had anticipated and at a combined rate of 26.5%. West Fraser has the lowest duty rate in the Canadian industry. More recently, the U.S. administration issued a proclamation that imposed Section 232 tariffs of 10% on imported softwood timber and lumber into the U.S., which came into effect on October 14, 2025. This tariff is in addition to the existing softwood lumber duties.

With that financial overview, I'll pass the call back to Sean.

Thank you, Chris. Looking forward, we continue to monitor macroeconomic conditions complicated by shifting trade policies. Despite such a backdrop, the company remains well positioned to navigate the dynamic and difficult business environment we face today, backstopped by a strong financial position. As a reminder, we acted early in this down cycle, optimizing our portfolio of assets to create a more resilient company. This included permanently removing 170 million board feet of capacity in our Canadian lumber business in 2022 and 650 million board feet of capacity in 2023 and 2024, through the permanent or indefinite closure of 5 of our leased economic lumber mills in the U.S. and Canada.

Combined, these capacity removals account for 820 million board feet, representing approximately 12% of the company's lumber capacity prior to the actions taken. Considering our shipment guidance for 2025, our implied Q4 operating rate reflects the curtailment of approximately 20% to 25% of that capacity. Furthermore, we divested 3 pulp mills for $124 million in 2024 and acquired high-quality lumber and OSB assets. In the aggregate all these actions to high-grade the portfolio have made us better at the bottom of the cycle.

Going forward, we will continue to take this approach of managing our asset portfolio to do what is both prudent for the long term and necessary in the short term. Also expect us to continue to be flexible in our operating strategy, meeting the needs of our customers and operationalizing the benefits of our strategic capital to drive down costs, all while keeping our focus on a safe working environment for our employees. We are wrapping up a number of capital projects that have been in progress during the current market and expect the start of these projects will continue to lower cost as they are operationalized.

We will also continue to pursue a balanced capital allocation strategy that includes investment in value-enhancing projects, pursuit of opportunistic investments in growth, and the return of capital to shareholders as we leverage the competitive advantage of our balance sheet strength and available liquidity. In terms of our more general medium- to longer-term outlook, we will continue to lean on our industry knowledge and experience to make the decisions that we believe will not only keep the company resilient in the trough of the cycle, but will also allow the company to be better prepared for the next industry demand recovery whenever that may be.

North American support lumber supply has been trending lower in recent years, with a material proportion of that capacity closed permanently due to factors including high-cost fiber supply, legacy technology, shrinking residual markets and now more recently, increased duties and tariffs. When lumber supply demand dynamics eventually find balance and demand cyclically improves, we expect our ability to add material new supply will face the same significant obstacles, access to economically viable fiber, high capital costs that challenge returns on investment and long-term viable outlets for residual products.

Shifting briefly to tariffs. Regardless of what may happen on this front, as we have said before, we continue to monitor the Canada-U.S. trade situation closely and remain agile and ready to respond as needed, and we will continue to work closely with our federal and provincial governments to support discussions when called upon as they relate to softwood lumber.

In closing, at West Fraser, we aim to deliver strong financial results through the business cycle. We achieved this leveraging our product and geographic diversity, modern, well-capitalized assets and the dedication of our people and culture rooted in cost discipline and a commitment to operate responsibly and sustainably. We remain steadfast in the strategy. Although we continue to have a challenged near-term outlook, we are optimistic about the longer-term prospects for our industry and for West Fraser, and we look forward to continuing to build one of the world's leading sustainable buildings products companies.

Thank you. And with that, we'll turn the call back to the operator for questions.

[Operator Instructions]

And your first question comes from the line of Ketan Mamtora from BMO Capital Markets.

Maybe to start with and recognizing that this is a pretty tough backdrop right now. I'm just curious sort of your approach to managing production in both lumber and North America OSB, particularly in this environment, which increasingly looks like that demand is likely to remain soft here in the near term. Can you sort of just give us some part on sort of how do you approach sort of managing production, particularly as we are looking at sort of another year where EBITDA could be kind of negative in lumber?

Ketan, happy to touch on that. And maybe I'll just start with -- by reinforcing a few things that -- the actions we took early in the cycle, which we're closing permanently or indefinitely a number of our mills adjusting our shift configurations. And we have remained nimble in our lumber portfolio against after those actions. And as sort of -- you have seen in our guidance as the year has unfolded. So we maintain in both of our main -- all of our product lines, but in particular, lumber and OSB, a variable kind of operating strategy that first runs to our economics and our customer demand needs. So that's how we manage that, and we make those decisions all the time within our platform.

Understood. And then on OSB, what was sort of the implied Q4 operating rate looked like based on what you all have discussed. You talked about sort of 25% temporary curtailment in lumber. How does that look like in...

Yes. I'll let Chris touch on that one.

Yes. I think, Ketan, as you'll recall, I think when we've discussed this before, right, Q4 is always very heavy for us on maintenance shuts. We strategically take that maintenance downtime in Q4 because it is a weaker seasonal period. So I think our -- with the shipment guide that is out there, that would imply an operating rate of somewhere around 80% in the fourth quarter.

Understood. And then just last one from me. On the balance sheet side, clearly, the balance sheet is very strong. You've got a net cash position. Curious about sort of how you think about M&A opportunity in this kind of down cycle at the moment? And where do you think you've got the most opportunity for inorganic growth?

Yes. Sure. I'll jump in there, and then Sean, you can add if you like. I think we're very consistent the last several years in how we've talked about M&A. And for us, it's quality first, right? And I think clearly, an environment like we're in today necessitates that -- it just shows how important that quality-first approach is around all those things that Sean mentioned that are challenges, whether that's residual supply or asset quality or workforce availability or timber availability.

So I think the way that we have the balance sheet we have flexibility to pursue our -- the strategy that we've always had, and growth has always been part -- inorganic growth has always been part of the company's DNA going back decades. So -- but we're going to be guided first and foremost by quality and things that make the company stronger. And I think you can see that certainly in the actions that we've taken over the last several years where we've added to the portfolio, it's been very selective and high quality, and we've also removed things from the portfolio that we don't think make us stronger at the bottom of the cycle. So I think that will be the guide as to what we consider as opportunities is there's got to be -- we got to be satisfied with the quality that's out there. Sean?

No, that's perfect, Chris, all quality and enhancing our strength at the bottom of the cycle. Those are the priorities as we think about what might be next for West Fraser.

And your next question comes from the line of Ben Isaacson from Scotiabank.

Just two questions for me. Sean, I think last conference call, so 3 months ago, the federal government was starting to talk about a possible support and conversations around that when it comes to lumber. So it's been 3 months and things have not really improved in terms of the macro backdrop. Can you talk about what you're willing to share in terms of how those conversations are going and how federal support for lumber is starting to stack up.

I can't remember, I don't have the exact date in front of me. I believe it was in early August, and it was in British Columbia, which was encouraging at a small business in -- a small lumber business for the premier rolled out some different support measures. I don't have all the details are all in the public domain, but they were providing some level of support for the industry, some level of funding for exploring different markets.

But that would all be in the public domain. I think we, as a mandatory responded, we continue to and frankly, with a balance sheet that we -- that remains strong. We continue to support those measures for the industry with the government. And at the same time, are kind of maintaining our own balance sheets, which is reinforcing our operations. So I probably wouldn't add more than that Ben.

Okay. That's fair. And then just a second question is perhaps for you or for Matt. With respect to your own customers that you talk to regularly, can you give some kind of sense in terms of how many months or days or weeks of inventory is in the U.S. channel, again, when it comes to your customers only relative to normal conditions for mid-October.

Go ahead there, Matt.

Sure. I can answer that. I would say we don't really have visibility into our customer supply chain or their inventory levels. What I can speak to is our inventory levels and they're lean in both SYP and SPF which has been intentional in this uncertain market to run our inventories lean.

Okay. So just to be clear, I mean, from the rate of reorder, you don't have a sense as to -- in terms of planning when your customers are going to come back and what their needs will be in the next kind of 2 to 3 months.

No, I'd say they're buying as their needs come to them, and we're ready to service them in whatever regions they're in. But I would say no fundamental change or visibility to their inventory levels.

One thing I might add to that, Ben, is our customers are -- products readily available. So they're buying what they need as they need it. And I think our guidance would -- we're maintaining our inventories in a below average position. And so our guidance would -- things are flowing through based on that guidance.

Your next question comes from the line of Sean Steuart from TD Cowen.

Sean, I want to follow up on the M&A question, and I appreciate your comments around all the assets and building strength at the bottom of the cycle. I guess the follow-on is, we're 3 years into this lumber downturn in North America. Have you seen more opportunities coming to the surface. And if so, would those opportunities include the types of assets you're looking for? I guess I'm trying to gauge what the opportunity set looks like now and how that's changed over the last 3 to 6 months.

Sean, probably not -- I think we maybe had this question on a prior call. Probably not a lot of change this year. I think there -- what you typically see is early in an upswing as people are thinking about if a quality asset to sell, people would then maybe look to market that. And then I would say in the pipeline, I don't think there's anything any more than normal and for sure, higher quality assets typically are being held to a better time to market them.

So all those things saying that we wouldn't be -- there wouldn't be anything that is jumping out today, that is high quality and available that fit.

And I also wanted to follow up with your comments on North American supply management on the lumber side and appreciating you've done a lot of work on permanent and indefinite closures over the last 3 years. Is a part of the decision making for you at this point in the cycle, we're arguably closer to the end of this downturn than the start at this point, hopefully. Is there reluctance to take more permanent or indefinite shuts at this point when maybe we can see the light at the end of the tunnel as affordability headwinds start to ease. Is that part of the thinking and the thought process when you're gauging sort of rolling downtime versus further definite or permanent closures.

Yes. No, it's a good question. I think we always look at it against the backdrop of how is that asset holding up during the current down cycle, and do we have a clear path for the next down cycle. And we make kind of decisions against that backdrop, it's really hard to predict. I mean, I agree with your comments that hopefully, we're here closer to the end than in the middle or the beginning, but we really don't know that.

So I think we always have to really challenge ourselves, especially in this environment. Is there a a better operating model that lowers our cost here at the -- and makes us more competitive at the bottom of the cycle. And I would look across our SPF business, Southern Yellow Pine, OSB major business lines and volume is coming out of those businesses and costs are lower. So that's really the way we look at all those decisions and -- but they really -- every asset gets pressure tested in this environment.

And your next question comes from the line of Matthew McKellar from RBC Capital Markets. .

I appreciate all the details so far. First from me, could you maybe just share with us how conditions in the Canadian markets have evolved in the last few months, is there anything to call out in terms of differences with the band between the U.S. and Canada?

And then are you seeing any of your competitors behave any differently in the Canadian market since higher U.S. duties or the tariffs took effect?

Yes, I can take that. I would say that the Canadian market remains competitive. It's a much smaller market than the U.S. market. So while it's an important market for us and we service those customers, it generally doesn't drive demand. And I would say it remains competitive just with where we are in the cycle and all the other things you've mentioned going on, but I would say nothing unusual, just having to compete every day to service our customers in that market.

And then just a couple of cleanups. If we're in an improved, but still, relatively soft wood products market next year, how should we be thinking about CapEx? I appreciate that Henderson will fade year-over-year. How does that evolve into '26 in your view? And second would be just the fire of the Cowie facility, can you help us understand what the state of that facility is today?

Sure. Yes. Thanks. So on CapEx, as we look forward, I think as we said in the comments, right, like we've spent a lot of capital. And I think that's one of the advantages of our strong balance sheet is we've been able to be durable with our capital allocation strategy and invest for the future in what have been pretty difficult market in the last couple of years, considering that, as Sean said, we're wrapping up a lot of fairly major projects here, and our focus is shifting to operationalizing those. So I think you can sort of think about what that means relative to 2026. We'll be out in February with our 2026 CapEx guidance.

We have had 2 pretty busy years with with big projects going on. With respect to Cowie, I think, flagged in the materials, right, that incident happened about 5 weeks before the end of the quarter. Facility has been repaired back up and running, and I think we're pretty pleased with what we're starting to see in the European segment in terms of maybe some green shoots of things starting to turn around there.

[Operator Instructions]

And your next question comes from the line of Hamir Patel from CIBC Capital Markets.

Sean, we don't have access to the U.S. trade data at the moment during the shutdown. But on the ground, are you seeing any signs of European lumber imports increasing just given that their competitive position has improved relative to Canada with all the duty and tariff changes since August.

Ask Matt, if there's -- I don't think we have a lot of visibility to that, Hamir, without the data coming in. But Matt, would you add anything to that?

No, I'd say like you said, not a lot of visibility and no meaningful change that we can see in them.

Okay. Fair enough. And I just want to ask in Europe, if you have any comments on -- with respect to OSB demand, how things are faring on both the new res and R&R side?

Yes. And Chris sort of touched on that as unfortunate incident at Cowie, our team did an excellent job of making the repairs and getting the mill back up and running and it kind of shadowed that event really did shadow some progress in Europe, and we are seeing -- hard to say how much is kind of demand driven, some of it still may be supply driven, but kind of sequentially quarter-over-quarter, we are seeing some price improvement in OSB and seeing some demand improvement there. So we're looking more optimistically in Europe over the next few quarters, and we'll see how all that unfolds.

And we have a follow-up question from Mr. Sean Steuart from TD Cowen.

Chris, you guys have done a good job on working capital management. And yes, I appreciate the seasonality in Q1 you'll update big log deck builds in Canada. Can you speak generally though, to, I guess, the changes you've made in terms of how you're managing working capital, over the mid- to long-term room for more reductions there, ability to pull more cash out of that, just broader perspective on how you're thinking about that item.

Yes. Look, I got to give a lot of kudos to the operations teams across the company on this front, right? I think it spans all elements of the working capital, we manage our credit and receivables very tightly, while still maintaining good relationships with our customers. The cycle there is pretty short. I think as Matt indicated in his comments, in many of our businesses were at or below target levels and operating with fairly lean inventories, which, look, presents some challenges from time to time in terms of filling orders. But the teams are doing a remarkable job of managing through that and learning how to operate with lower inventories.

And then lots of work, I'll say, going on in terms of on the procurement side as well as vendors and vendor selection and things like that. So say it spans all aspects of this. And I'd say it's not just something that because of the environment that we're in, that it's getting any more focus than it ordinarily does, think the teams work hard on this stuff all the time. They're probably tired of hearing me talk about working capital. But it's really been, I think, a source of strength for us here in the last while, really releasing on, frankly, all aspects of the balance sheet, and it helps run a more efficient and effective business. So what does that translate into going forward? Hard to say on the way out, but I think some great learnings across the business and a deep focus on strong execution.

And there are no further questions at this time. I will now hand the call back to Mr. Sean McLaren for any closing remarks.

Thank you, Inna. As always, Chris and I are available to respond to further questions as is Robert Winslow, our Director of Investor Relations and Corporate Development. Thank you for participation today. Stay well, and we look forward to reporting on our progress next quarter.

And this concludes today's call. Thank you for participating. You may all disconnect.