Western Announces Fourth Quarter and Fiscal 2024 Results

February 13, 2025 – Vancouver, British Columbia – Western Forest Products Inc. (TSX: WEF) (“Western” or the “Company”) announced today improved fourth quarter and fiscal 2024 results compared to the same period last year.

Adjusted EBITDA was $14.4 million in the fourth quarter of 2024, as compared to negative $1.2 million in the fourth quarter of 2023, and negative EBITDA of $10.7 million in the third quarter of 2024. Adjusted EBITDA was $8.9 million for fiscal 2024, as compared to negative $29.9 million in fiscal 2023.

Net loss was $1.2 million in the fourth quarter of 2024, as compared to a net loss of $14.3 million in the fourth quarter of 2023, and a net loss of $19.6 million in the third quarter of 2024.

(millions of Canadian dollars except per share amounts Q4 Q4 Q3 Annual Annual
and where otherwise noted) 2024 2023 2024 2024 2023
Revenue $ 273.2 $ 246.6 $ 241.7 $ 1,063.9 $ 1,017.5
Adjusted EBITDA (1) 14.4 (1.2) (10.7) 8.9 (29.9)
Adjusted EBITDA margin (1) 5% (0%) (4%) 1% (3%)
Operating loss prior to restructuring and other items $ (0.4) $ (14.4) $ (24.4) $ (46.4) $ (83.4)
Net loss (1.2) (14.3) (19.6) (34.5) (70.1)
Loss per share, diluted (0.00) (0.04) (0.06) (0.10) (0.22)
Net debt (1), end of period 77.6 82.4 86.4
Liquidity (1), end of period 144.6 147.8 137.3
Net debt to capitalization (1) 12% 13% 13%

(1) Refer to Adjusted EBITDA, Adjusted EBITDA margin, Liquidity and Net debt to capitalization in the Non-GAAP Financial Measures section.

Fourth Quarter 2024 Financial and Operational Summary

⦁ Lumber production of 135 million board feet (versus 125 million board feet in Q4 2023).

⦁ Lumber shipments of 146 million board feet (versus 136 million board feet in Q4 2023).
⦁ Cedar lumber shipments of 36 million board feet (versus 30 million board feet in Q4 2023).
⦁ Specialty lumber mix of 52% (versus 60% in Q4 2023).
⦁ Average lumber selling price of $1,467 per mfbm (versus $1,313 per mfbm in Q4 2023), primarily due to improvements in lumber markets, an increased mix of Cedar and Industrial lumber sales and stronger USD to CAD average exchange rate.

⦁ Average BC log sales price of $121 per m3 (versus $112 per m3 in Q4 2023), on stronger sales mix.

Annual 2024 Financial and Operational Summary

⦁ Lumber production of 558 million board feet (versus 561 million board feet in 2023).

⦁ Lumber shipments of 588 million board feet (versus 588 million board feet in 2023).
⦁ Cedar lumber shipments of 138 million board feet (versus 131 million board feet in 2023).
⦁ Specialty lumber mix of 54% (versus 51% in 2023).

⦁ Average lumber selling price of $1,390 per mfbm (versus $1,329 per mfbm in 2023), primarily due to improvements in lumber markets, a stronger specialty sales mix and stronger USD to CAD average exchange rate.
⦁ Average BC log sales price of $129 per m3 (versus $122 per m3 in 2023), on stronger sales mix.

Accelerating the Transition to Higher Value Products

⦁ The new Saltair continuous kiln continues to perform well and since commissioning in April 2024 has operated at 99.2% of full capacity utilization and produced 42 million board feet of higher value kiln-dried lumber.
⦁ Continue to advance pre-engineering and permitting related to two previously announced continuous dry kilns. Due to certain permitting delays, the kilns are now expected to be completed and commissioned in early 2026.

⦁ At Duke Point, we commissioned new automated grading equipment, which is assisted by artificial intelligence, in September 2024, that has led to increased product and value recovery. In early January 2025, we commissioned a new slabber head to support increased production and improvements in chip recovery.

Balance Sheet and Cash Flow

⦁ Near-term priority remains maintaining a strong balance sheet and financial flexibility.

⦁ Ended the year with liquidity of $144.6 million and a net debt to capitalization ratio of 12%.
⦁ 2025 capital expenditure spending is anticipated to be between $60 and $65 million, which includes approximately $30 million of planned spending on the two previously announced continuous dry kilns.
⦁ Cumulative duties of US Dollar (“USD”) $184 million (CAD$264 million), or approximately $0.61 per share on an after-tax basis, held in trust by the US Department of Treasury as at December 31, 2024.

Other Items

⦁ Hourly employees represented by the United Steelworkers Local 1-1937 ratified a new six-year collective bargaining agreement in January 2025.

⦁ Completed the sale of certain fee simple land, biological assets and infrastructure on northern Vancouver Island to a Canadian affiliate of the Eastwood Climate Smart Forestry Fund I LP for $69.2 million on February 10, 2025.

⦁ Entered into an asset purchase agreement for the sale of our Alberni Pacific Division for approximately $7.3 million. The sale is subject to certain customary closing conditions and is anticipated to close in the first quarter of 2025.

⦁ Plan to have shareholders vote on a proposed share consolidation as part of our 2025 Annual General Meeting.

Advancing Our Strategic Priorities

“Despite challenging markets, we were successful in returning our business to positive EBITDA in 2024,” said Steven Hofer, President and CEO of Western Forest Products. “Over the last year, we also demonstrated success in executing on our strategic priorities to support repositioning our business and balance sheet, providing for a strong foundation to continue to build on in 2025.”

Some notable highlights since the beginning of 2024 include:

⦁ Continued focus on safety, with several operations achieving zero recordable incidences in 2024. As part of our commitment to safety, we are implementing a safety performance component to our annual incentive plan for all salaried employees in 2025.

⦁ Rolled out new Company vision and values to enhance our culture and support a mindset aligned with our values of building a better world, being entrepreneurial and leading by example.

⦁ Continued to focus on improving the stratification of our specialty log sorts, such as pole and peeler logs, to support incremental margin within our timberland and fibre supply operations. We also increased our log inventory turnover year-over-year, despite permitting challenges and delays in certain tenures.

⦁ Improved our operational uptime in our manufacturing operations and continued to focus on log and lumber recovery, while also reducing our lumber inventory year-over-year.

⦁ Grew key strategic customer accounts, while developing value-added products and programs targeted with the end-user in mind within our sales and marketing group. We continued to focus on the customer experience, including improving on time shipping performance and reducing customer claims. Supporting our customer initiatives was wholesale lumber shipment growth of 58% year over year.

⦁ Completed and commissioned the first continuous dry kiln on the BC Coast at our Saltair sawmill in April 2024 to support advancing our transition to higher value products. We also commissioned new automated grading equipment and a new slabber head at our Duke Point facility to support increased product and value recovery and production. In 2025, in addition to our previously announced two new continuous kilns, we are exploring the opportunity in thermally modified hemlock.

⦁ Negotiated a new, six-year collective agreement that covers hourly employees represented by United Steelworkers Local 1- 1937, which is one of the longest-term agreements in the history of the BC Coastal forest sector. The agreement was ratified in January 2025.

⦁ Completed the sale of a 34% interest in our newly formed La-kwa sa muqw Forestry Limited Partnership to four Vancouver Island First Nations (Tlowitsis, We Wai Kai, Wei Wai Kum, and K’ómoks First Nations) for gross proceeds of $35.9 million in March 2024.

⦁ Advanced joint and collaborative planning of forestry activities with First Nations, building upon Western’s well-established forestry practices and in support of greater long-term clarity for the stewardship and management of the land base. This included submitting BC’s first draft Forest Landscape Plan in TFL 37 to the BC government in collaboration with the ‘Namgis First Nation.

⦁ Repositioned our balance sheet through the sale of non-core assets, including our private timberlands on northern Vancouver Island for $69.2 million and the pending sale of our Alberni Pacific Division assets. In July 2024, we also extended the maturity of our $250 million credit facility to July 2026.

⦁ Focused on working capital reductions throughout the business, which included increasing our overall inventory turnover year-over-year, as well as continuing to find opportunities to reduce costs and overhead in the Company through margin improvement programs and reducing controllable spending.

Incremental US Tariff

On February 1, 2025, US President Donald Trump signed an executive order imposing a tariff of 25% (the “incremental US tariff”) on imported goods from Canada to the US with an originally planned implementation date of February 4, 2025. On February 3, 2025, the implementation date was delayed to March 4, 2025. The incremental US tariff is in addition to the existing combined US Softwood Lumber countervailing duty (“CV”) and anti-dumping duty (“AD”) rates of 14.40% which the Company is currently subject to.

“The planned incremental US tariff is both punitive and unjustified,” said Steven Hofer. “While they unfairly target and harm Canadian exporters like us, they will also hurt American consumers, particularly US home buyers and builders during a housing crisis, through higher lumber prices.”

We have informed customers of our intention to pass on the incremental US tariff. The potential implementation and duration of the incremental US tariff is unknown and could have a material impact on our operating earnings and cash flows. We are also working with all levels of governments across Canada to advocate for programs and policies that will best enable the forestry sector to serve global markets and manage through these uncertain times.

Market Outlook

Demand and pricing for our North American Cedar product lines are expected to improve in the first quarter of 2025, with most of our business already booked with major distributors. The overall North American cedar market is expected to experience shortages in most products in the second quarter of 2025 which is expected to lead to further price increases.

In Japan, consumption is expected to remain moderate as housing starts and overall construction activities are low. Pricing continues to remain more challenged due to a weaker Japanese yen to USD exchange rate.

Demand for our Industrial lumber products have been strong and is expected to continue to gain momentum in the first quarter of 2025, with decreased supply across all species. For commodity lumber, North American demand and pricing in the first quarter of 2025 is anticipated to benefit from industry-wide curtailments experienced late in 2024. In China, despite a continued slowdown in housing and real estate, softwood lumber markets are performing above expectations. Inventories are low and prices have risen as a result. Going forward, volatility is expected as the incremental US tariff threat may impact exports to the US and result in lower demand for lumber.

Management Discussion & Analysis (“MD&A”)

Readers are encouraged to read our 2024 Annual MD&A and audited annual consolidated financial statements and accompanying notes which are available on our website at www.westernforest.com and “SEDAR+” at www.sedarplus.ca.

Risks and Uncertainties

Risk and uncertainty disclosures are included in our 2024 Annual MD&A, as well as in our public filings with securities regulatory authorities. See also the discussion of “Forward-Looking Statements” below.

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