What West Fraser Timber (WFG) Said on Its Q3 Earnings Call

Key Points

• Q3 performance weakened: West Fraser reported $1.36 billion in sales and $38 million in adjusted EBITDA, down from $1.43 billion and $59 million in Q2, as lower OSB and SYP pricing, elevated resin and diesel costs, and challenging housing demand pressured results.
• Mill curtailments announced: The company will indefinitely wind down its Huguley, Alabama, OSB mill and Leola, Arkansas, lumber mill by the end of 2026 to better align production with demand and concentrate operations at more competitive facilities.
• Liquidity remains strong despite cautious outlook: West Fraser ended Q3 with approximately $1.2 billion of liquidity and reduced its combined U.S. duty deposit rate to 20.02% from 26.47%, but expects lumber and North American OSB shipments toward the low end of guidance and significantly lower capital spending in 2027.

West Fraser Timber NYSE: WFG reported third-quarter 2026 sales of $1.36 billion and adjusted EBITDA of $38 million, compared with $1.43 billion in sales and $59 million in adjusted EBITDA in the second quarter, as mixed wood-products pricing and demand conditions continued to pressure results.

President and Chief Executive Officer Sean McLaren said the company’s operations in the U.S. South benefited from completed capital investments and improved operating performance despite difficult markets, while higher spruce-pine-fir, or SPF, lumber pricing supported Canadian results.

“Demand remains challenging,” McLaren said, citing U.S. housing starts running at an annualized rate of about 1.22 million units, elevated mortgage rates, affordability constraints and weaker consumer and builder confidence.

Mill Curtailments Announced

After the quarter ended, West Fraser announced indefinite curtailments of its Huguley oriented strand board, or OSB, mill in Lanett, Alabama, and its lumber mill in Leola, Arkansas. The facilities are expected to wind down by the end of 2026.

The Huguley mill has annual OSB capacity of 500 million square feet on a three-eighths-inch basis, while the Leola facility has annual southern yellow pine, or SYP, lumber capacity of 225 million board feet.

McLaren said the moves were intended to align production with customer demand in new-home construction and repair and renovation markets. He said West Fraser would support affected employees through the transition.

Asked why Leola was selected, McLaren said the mill primarily serves markets to the west, including Texas, where West Fraser has made investments in East Texas and has capacity at its Henderson, New Boston and Angelina operations. The company aims to direct available demand to those facilities and operate them at higher levels, he said.

The company has not made plans to dismantle either curtailed site. McLaren said any restart would require sufficient demand, appropriate fiber supply and residual-market conditions, along with a view that the assets could be competitive through a future downturn.

Segment Results and Cost Pressures

Executive Vice President and Chief Financial Officer Chris Virostek said the lumber segment generated $34 million of adjusted EBITDA. Results included a $12 million favorable adjustment to the estimated antidumping rate and a $5 million favorable inventory valuation swing.

Higher SPF prices were offset by lower SYP prices, leaving lumber pricing roughly neutral overall. SPF shipments were about 5% below the second quarter, while SYP shipments increased slightly alongside production.

North American engineered wood products recorded negative adjusted EBITDA of $4 million, primarily reflecting lower OSB prices and higher resin costs. Lower fiber costs and a $7 million favorable inventory valuation impact partly offset those pressures.

European operations generated $4 million of adjusted EBITDA, with scheduled maintenance reducing OSB and medium-density fiberboard output and pricing modestly lower. The company’s other operating segment, including Cariboo Pulp and its 50% Alberta Newsprint interest, generated $5 million of adjusted EBITDA, improving by $13 million from the second quarter due to lower fiber and unit manufacturing costs and the absence of a second-quarter planned maintenance shutdown at Cariboo Pulp.

Virostek said lower prices reduced quarterly adjusted EBITDA by about $23 million, largely in North American EWP. Inventory valuation reserve releases across lumber, North American EWP and pulp added about $25 million. Higher costs in lumber and North American EWP, including resin, labor and diesel-related log hauling, added $13 million in costs.

Diesel costs have risen about 80% year to date, adding roughly $15 per thousand board feet to lumber log costs in both SPF and SYP, Virostek said. Resin and wax costs increased by about $3 million sequentially, following a $13 million impact identified in the prior quarter.

Liquidity, Duties and Outlook

West Fraser generated $72 million of cash from operations during the quarter, aided by lower inventories and a working-capital release. It invested $53 million in capital expenditures and paid $25 million in dividends.

In September, the company refinanced a $300 million term loan into a $500 million term loan due in September 2029. West Fraser ended the quarter with just over $200 million in cash, an undrawn $1 billion revolver, approximately $1.2 billion in liquidity and a net debt-to-capital ratio of 6%.

Virostek said the additional borrowing capacity provides flexibility to manage through uncertain market conditions and pursue opportunities that may arise. He added that the company expects capital spending to decline “fairly significantly” in 2027 as major projects wind down, with future spending largely focused on maintaining its operating platform. The company said it would provide 2027 capital and shipment guidance before year-end.

The U.S. Department of Commerce’s final administrative review results reduced West Fraser’s combined cash deposit rate for countervailing and antidumping duties to 20.02% from 26.47%, effective Oct. 19. The new rate includes a 15.31% countervailing duty rate and a 4.71% antidumping duty rate.

• North American lumber shipments are expected toward the lower end of the company’s 2.4 billion to 2.7 billion board-foot guidance range.
• North American OSB shipments are expected toward the lower end of the 5.9 billion to 6.3 billion square-foot range.
• European OSB shipment guidance of 1 billion to 1.25 billion square feet was maintained.
• Capital expenditure guidance remained $300 million to $350 million, with $212 million spent year to date.

McLaren said OSB pricing improved toward the end of the third quarter, though the pace at which the market absorbs expected new supply will depend partly on residential construction. He said the company believes its completed and ramping capital projects, alongside portfolio optimization actions, position it to benefit if demand and pricing recover.

About West Fraser Timber (NYSE:WFG)

West Fraser Timber Co Ltd. is a diversified wood products company that manufactures and sells building materials for residential, commercial and industrial applications. Its principal products include lumber, oriented strand board, laminated veneer lumber and other engineered wood products used in construction, remodeling and manufacturing.

The company operates wood product manufacturing facilities and manages timber resources across Canada and the United States, with a significant presence in Western Canada and the U.S.

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