Western Forest Products Q3 2026 Earnings Results & Report

Western Forest Products EPS Results

• Actual EPS: -C$0.44
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A
• EPS Beat Rate: 3 of last 7 quarters

Western Forest Products Revenue Results

• Actual Revenue: C$237 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Western is an integrated forest products company building a margin-focused log and lumber business to compete successfully in global softwood markets. With operations and employees located primarily on the coast of British Columbia and Washington State, Western is a premier supplier of high-value, specialty forest products to worldwide markets. Western has a lumber capacity of 785 million board feet from five sawmills, as well as operates four remanufacturing facilities and two glulam manufacturing facilities. The Company sources timber from its long-term licences, First Nations arrangements, and market purchases. Western supplements its production through a wholesale program providing customers with a comprehensive range of specialty products.

Western Forest Products Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Adjusted EBITDA improved to CAD 1.9 million from a loss of CAD 65.9 million a year earlier, helped by higher realized lumber prices, favorable harvesting conditions, and a 71% increase in log shipments. Results included a CAD 7.7 million insurance recovery, while lumber shipments fell 11% and higher duties and tariffs remained a headwind.
• Positive Sentiment: The post-quarter sale of Stillwater Forest for approximately CAD 80 million brought the company into a net cash position, following about CAD 180 million in gross proceeds from asset monetizations over two years. Management said it expects to preserve flexibility and excess cash over the next 12 months amid uncertainty, while evaluating longer-term investment opportunities.
• Positive Sentiment: New kilns at the Value-Added Division are meeting operating targets and are expected to support higher-margin kiln-dried production; moving cedar programs to more efficient mills has also improved recovery and margins. The AI-enabled Duke Point autograder upgrade is expected to be commissioned in early 2027.
• Neutral Sentiment: The company expects a 114-million-board-foot fourth-quarter order file, stable industrial demand, and improving commodity prices, with Japan demand steady and China demand potentially strengthening later in the year. However, cedar and other exterior product pricing remains soft amid affordability pressures and excess supply, and winter seasonality could reduce harvesting and raise costs.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to Western Forest Products Third Quarter 2026 Results Conference Call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. Following prepared remarks, there will be an opportunity for analysts to ask questions. To join the question queue, press star one on your telephone keypad. Should anyone need assistance during the conference call, they may reach an operator by pressing star zero. During this conference call, Western's representatives may make forward-looking statements within the meaning of applicable securities laws. These statements can be identified by words like anticipate, plan, estimate, will, and other references to future periods. Although these forward-looking statements reflect management's reasonable beliefs, expectations, and assumptions, they are subject to inherent uncertainties, and actual results may differ materially.

[Operator]

There are many factors that could cause actual outcomes to be different, including those factors described under risks and uncertainties in the company's annual MD&A, which can be accessed on SEDAR and is supplemented by the company's quarterly MD&A. Forward-looking statements are based only on information currently available to Western and speak only as of the date on which they are made. Except as required by law, Western undertakes no obligation to update forward-looking statements. Accordingly, listeners should exercise caution in relying upon forward-looking statements. I would now like to turn the meeting over to Mr. Steven Hofer, President and CEO of Western Forest Products. Mr. Hofer, please go ahead.

[Steven Hofer, President and CEO at Western Forest Products]

Thank you, Danielle, and good morning, everyone. I would like to welcome you to Western Forest Products 2026 Third Quarter Conference Call. Joining me on the call today is Glen Nontell, our Chief Financial Officer. We issued our 2026 third quarter results yesterday. I will provide you with some introductory comments and then ask Glen to take you through our financial results, and then I will follow Glen's review with our outlook section before we open the call to your questions. We continued our momentum in executing our strategic priorities, which will position the business well as the sector continues to face high softwood lumber duties, tariffs, and market volatility. Over the last 24 months, this has included monetizing private timberlands, tenure, and other non-core assets at premium valuations to their current public trading value. Overall, this process, we have generated gross proceeds of approximately CAD 180 million.

[Steven Hofer, President and CEO at Western Forest Products]

We have strategically utilized these proceeds into repaying debt and bring the balance sheet into a net cash position, navigate challenging market conditions and high duties and tariffs, and completed targeted capital investment and make operational improvements to position the business for long-term success. These capital investments include commissioning two new continuous dry kilns and one thermal kiln at our Value-Added Division. These kilns have been achieving uptime and operational targets in line with our expectations and will result in more kiln-dried lumber production, generating higher margins than green lumber and enabling the expansion of our global customer base. We also continue to advance the upgrade of our autograder at Duke Point, which will utilize AI technology and is anticipated to be commissioned in early 2027.

[Steven Hofer, President and CEO at Western Forest Products]

We have also successfully transferred our Western red cedar cutting programs that were at our curtailed Chemainus and Cowichan Bay sawmills to our more efficient Duke Point and Saltair sawmills, resulting in greater outturns, recovery, and margin. From an operational perspective, we continued our focus on creating a safe work environment, with our year-to-date medical incident rate down 30% compared to 2025. In our Timberlands group, we continued to manage costs and log margin opportunities, increasing harvest volumes by 92% compared to the same quarter last year. This was supported by more favorable weather conditions and a restart of our La-kwa sa muqw Forestry Limited Partnership earlier this year. In our Manufacturing and Sales group, we continued our operational focus on uptime, reliability, and on-time shipping performance, achieving 87% and 86%, respectively. Looking ahead, we remain focused on continuing to demonstrate evidence of progress in executing our strategic priorities.

[Steven Hofer, President and CEO at Western Forest Products]

We look forward to engaging with the newly elected B.C. provincial government and have been very encouraged by the consistent pro-forestry comments from Premier-elect Doerkson made throughout the election campaign. I will now turn it over to Glen to review our key financial results.

[Glen Nontell, CFO at Western Forest Products]

Thanks, Steven. Third quarter adjusted EBITDA was positive CAD 1.9 million as compared to negative CAD 65.9 million in the same period last year. Third quarter EBITDA in 2026 included CAD 7.7 million in business interruption insurance recovery related to our former Columbia Vista operation, CAD 3.9 million in non-cash duty expense, and CAD 1.2 million in share-based compensation expense. As compared to the prior year, results in the third quarter of 2026 benefited from higher realized lumber prices and favorable harvesting conditions, leading to a 71% increase in log shipments. This was partially offset by an 11% reduction in lumber shipments and higher softwood lumber duties and tariffs. We closed the third quarter with approximately 64 million board feet of lumber inventory and 697,000 cubic meters of log inventory.

[Glen Nontell, CFO at Western Forest Products]

Turning to CapEx, our 2026 total CapEx spending is expected to be between CAD 45 million-CAD 50 million, which includes approximately CAD 23 million related to our completed kiln investment at our Value-Added Division and ongoing upgrades to the autograder at Duke Point. From a balance sheet perspective, our third quarter ending net debt declined by CAD 17.5 million, and liquidity improved compared to the end of the second quarter. We ended the third quarter with a net debt-to-cap ratio of 3%, compared to 6% at the end of the second quarter. We finalized the insurance process and property sale at our former Columbia Vista sawmill in the third quarter. Between the insurance process and property sale, we have generated $48 million through the process. We expect to pay approximately CAD 1.7 million in income tax related to the proceeds in the fourth quarter of 2026.

[Glen Nontell, CFO at Western Forest Products]

Post-quarter end, we completed the sale of our Stillwater Forest operation for approximately CAD 80 million, further bolstering our available liquidity and bringing our balance sheet into a net cash position. We expect to pay approximately CAD 9.1 million in income tax related to the transaction in the first quarter of 2027. Turning to fourth quarter seasonality, typically in fourth quarters, lumber consumption declines in North America as construction slows with the onset of winter. In our Timberlands, harvest volumes decline as we lose daylight operating hours. In addition, winter weather can negatively impact operations and further limit production. The combination of weather-related curtailments and reduced operating hours can put upward pressure on harvest costs. I will now turn it over to Steven to go through the market outlook.

[Steven Hofer, President and CEO at Western Forest Products]

Thanks, Glen. Turning to our market outlook. Industrial product lines are expected to be stable through the fourth quarter, with some improvements in matting products following the announcement of significant capital projects here in Canada. In North America, cedar demand and pricing has softened in certain knotty product segments, primarily due to affordability pressures from elevated interest rates and higher fuel costs. We expect pricing in decking, trim, and fencing products to remain soft as supply continues to outstrip demand in these categories. While North American commodity markets have recently declined, we expect prices to improve in the fourth quarter of 2026, supported by a focus on higher-value customers, such as our treating and mat stock customers. Housing activity in Japan remained resilient throughout the summer. Lumber demand in Japan is expected to be stable in the fourth quarter of 2026 and into Q1 2027.

[Steven Hofer, President and CEO at Western Forest Products]

Market inventories in China have built over the past few months, reflecting a seasonal slowdown in consumption during the summer. Demand is expected to strengthen towards the end of the year as inventories are drawn down and customers look to replenish stock prior to the 2027 Lunar New Year. Overall, we currently have a current fourth quarter order file of approximately 114 million board feet. That concludes my remarks. With that, operator, we can open the call up to questions.

[Operator]

Thank you. We will now take questions from the telephone lines. If you have a question, please press star one. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. The first question comes from Sean Steuart from TD Cowen. Please go ahead.

[Sean Steuart, Analyst at TD Cowen]

Thanks. Good morning, everyone. Steven, I want to start with capital allocation, or Glen, I suppose. You touched on the transition to net cash after the Stillwater sale. We have seen this coming for a while now. I think the prior messaging has been there is further opportunities to optimize the current coastal footprint before you would think about broader growth initiatives, whether it is outside the coast or into new product lines. Can you give us perspective on how you are thinking about that opportunity set now, how quickly or not quickly you might start to deploy some of this excess capital you have built on the balance sheet?

[Glen Nontell, CFO at Western Forest Products]

Sure, Sean. It is Glen. Maybe I will start, and then I will have Steven chime in also. I think in the near term, we remain focused on a strong balance sheet and navigating sort of the sector uncertainty, given elevated levels of duties and tariffs. I would say probably over the next 12 months, we might look to maintain excess dry powder to retain that flexibility. That said, when we look to the mid to long term, we remain committed to executing our strategic priorities, and we will continue to evaluate opportunities that create shareholder value, which could include reinvesting in our business or pursuing external growth opportunities that are complementary to our business.

[Glen Nontell, CFO at Western Forest Products]

Obviously, you would have seen the federal budget come out yesterday, and maybe I will let Steven provide some remarks on some of the pools of money that have been directed to the forest sector that we could potentially look to access as part of that optimization of our business.

[Steven Hofer, President and CEO at Western Forest Products]

Sure. Just to build on Glen’s comments, and Sean, thanks for the question. I am very proud of the effort and the execution that our team has made on getting our balance sheet to where it is at today. It took a great deal of time and effort by our team, and we have executed at a very high level in this strategy. Now that we are in this position, we also want to be very mindful of what lays ahead here in the next 12 to 24 months from a macroeconomy standpoint, and we do not want to jeopardize or do anything that would undermine all the great work that we have done to get us to this point.

[Steven Hofer, President and CEO at Western Forest Products]

I am very encouraged, though, by what was released yesterday by the federal government, and this really builds on some previous announcements that we've been participating in terms of EDC and BDC opportunities. The government presents forestry as both a traditional economic strength and a future-orientated manufacturing sector, with a strong emphasis around innovation, engineered wood products, investment attraction, and improved competitiveness. When I look at Western's strategy and I look at what the federal government has announced as their strategy through this Forest Sector Transformation Strategy, there's almost 100% alignment. We'll be exploring these opportunities that have just been announced, and I think we'll be able to do some fun, exciting things as we go forward in our company and continue to position Western as a premium manufacturer of specialty building materials.

[Sean Steuart, Analyst at TD Cowen]

That's great detail. Thanks for that, Steven. One follow-on. Cedar markets are relatively weak. You guys are a big part of that market. You've rationalized a lot of supply in recent years. Historically, through commodity lumber market troughs, your specialty in cedar business has held up relatively well. It's supported margins. That's been less the case this cycle. You guys have done a lot. Perspective on opportunities or expectations that others. There's room for more capacity rationalization across the cedar and specialty industry, not just the coast, but I suppose into the Pacific Northwest as well. Do you expect more can happen on that front?

[Steven Hofer, President and CEO at Western Forest Products]

Well, look, I think the cedar business as a whole, it had a big impact as a result of this additional increase in duty and tariffs here in 2026. When you go out into the marketplace and you look at and you discuss the role of cedar with builders and with developers and with retailers, cedar is still very much a very desirable product line. Now, it does come down to affordability, and I think certainly in the knotty categories, affordability, especially in some of the southern U.S. markets, had a big impact on takeaway at the shelf level. As we see a reduction in duties here in Q4 and into 2027, we're anticipating a little bit more takeaway in some of these key markets.

[Steven Hofer, President and CEO at Western Forest Products]

The industrial component of our cedar business, so that's the Shop and Better grades, the clear grades, very resilient and continued very strong global demand for that. We're fortunate that we're able to have both a combination of the small, tight knot product lines as well as the clear fiber that we're able to recover to supplement the overall cedar program. Overall, I'm a little bit more optimistic as we go into 2027 on where cedar will position itself in the overall supply chain. As far as rationalization or further rationalization, I can't comment on what other organizations are planning to do. I just know that for Western, our team has done an excellent job at positioning cedar inside of our Duke Point sawmill, positioning cedar inside of our Saltair sawmill, as well as our small log facility at Ladysmith.

[Steven Hofer, President and CEO at Western Forest Products]

We found a way to be successful at cutting cedar inside those three facilities at higher productivity rates, higher recovery rates and higher product values. It is a huge success for our Manufacturing and Sales team to be able to do this and to ensure that we have this continuous supply for our global customer base across all of our cedar SKUs.

[Sean Steuart, Analyst at TD Cowen]

That is great detail. Thanks, Steven. That is all I have for now.

[Steven Hofer, President and CEO at Western Forest Products]

Thanks, Sean.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Mr. Hofer for closing remarks.

[Steven Hofer, President and CEO at Western Forest Products]

Well, thanks, everyone, for joining our call today. We certainly appreciate your continued interest in our company, and we look forward to our next call in February. Have a great Friday. Thank you.

[Operator]

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation today. Thank you.

Participants

Executives

• Steven Hofer, President and CEO
• Glen Nontell, CFO

Analysts

• Sean Steuart, Analyst at TD Cowen