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Western Announces Second Quarter 2015 Results

by ahnationtalk on August 5, 2015489 Views

August 4, 2015 – Vancouver, British Columbia, Western Forest Products Inc. (TSX: WEF) (“Western” or the “Company”) announced results for the second quarter of 2015. The Company reported adjusted EBITDA of $29.2 million for the second quarter of 2015, consistent with the adjusted EBITDA of $29.6 million reported in the first quarter of 2015, and a decrease from $40.9 million reported in the second quarter of 2014. Adjusted EBITDA in the second quarter of 2015 benefitted from an improved lumber sales mix, led by growth in specialty product shipments, and an increase in export log shipments, but was limited due to lower commodity and Japan lumber pricing and a decline in export log pricing. Revenue increased 16% to $289.2 million in the second quarter of 2015 as compared to revenue of $248.6 million in the first quarter of 2015, and decreased by 2% from revenue of $296.2 million in the second quarter of 2014.

Q2 2015 HIGHLIGHTS

  • Set a record quarterly average lumber price for the Company of $879 per thousand board feet
  • Completed the successful restart of the second production line at the Duke Point sawmill
  • Returned $7.9 million to shareholders via the Company’s quarterly dividend program

“The ability to focus our production and sales on higher-margin specialty products limited Western’s exposure to the significant second quarter decline in commodity lumber pricing and weak market in Japan. Despite a challenging market environment, we achieved a record average lumber price in the quarter and reported EBITDA consistent with last quarter,” said Don Demens, President and Chief Executive Officer. “I am pleased with the recent progress we have achieved on strategic capital projects, including the restart of our second line at Duke Point as part of that mill’s ongoing modernization project. We continue to position Western for the future by implementing strategic capital in support of our strategy to sustainably harvest the complete forest profile.”

Net income of $19.1 million ($0.05 per diluted share) was reported for the second quarter of 2015, compared to $29.2 million ($0.07 per diluted share) for the second quarter of 2014 and $27.6 million ($0.07 per diluted share) for the first quarter of 2015

FINANCIAL SUMMARY

Three months ended Six months ended
June 30, June 30,
(millions of dollars except where noted) 2015 2014 2015 2014
Revenue $ 289.2 $ 296.2 $ 537.8 $ 542.2
Adjusted EBITDA 29.2 40.9 58.8 73.7
Adjusted EBITDA margin 10.1% 13.8% 10.9% 13.6%
Operating income prior to restructuring items and other income 21.0 31.3 41.1 56.2
Net income from continuing operations 19.1 29.2 37.6 52.8
Net income for the period 19.1 29.2 46.7 52.8
Basic and diluted earnings per share (in dollars) – continuing operations $ 0.05 $ 0.07 $ 0.10 $ 0.13
Basic and diluted earnings per share (in dollars) – discontinued operations $ $ $ 0.02 $
Net Debt at June 30, 70.7 65.5
Liquidity at June 30, 160.9 165.6

Overview

Western reported adjusted EBITDA of $29.2 million in the second quarter of 2015. Financial results were supported by our flexible operating platform, which enabled us to increase shipments of Western Red Cedar (“WRC”) lumber and reduce our exposure to the significant downturn in commodity and Japan lumber markets. The steep decline in commodity lumber pricing compared to a year ago led to the imposition of Softwood Lumber Agreement (“SLA”) export duties for the first time in 17 months, which negatively impacted results. Second quarter 2015 adjusted EBITDA declined $11.7 million compared to the second quarter of 2014 due to lower commodity and Japan lumber pricing and the imposition of lumber duties into the U.S., as well as lower prices for export logs.

Second quarter lumber revenue of $200.0 million declined 4% from the same period last year as we delivered an 8% increase in average realized lumber prices while the SPF commodity index, presented in Canadian dollar (“CAD”), fell 8% period over period. Lumber shipment volumes were down 11% in the second quarter of 2015 as compared to the same period last year due to weak commodity and Japan lumber markets. Lumber pricing was supported by a 13% increase in WRC lumber sales volumes and a weaker CAD. WRC lumber sales volumes increased to 32% of total lumber sold in the second quarter of 2015 as compared to 26% in the same period last year.

Log revenue of $71.0 million in the second quarter of 2015 was similar to the same period last year as higher sales volumes of sawlogs and higher prices for pulp logs were offset by lower pulp log volumes and a decline in export log pricing. Overall log shipment volumes declined by 3% in the second quarter of 2015 compared to the same period last year due to a 29% reduction in pulp log sales, as pulp mill downtime delayed deliveries. Domestic log sales remained strong due to continued demand for our specialty log offerings.

In the second quarter of 2015, our flexible operating platform allowed us to implement changes to our planned production to address poor commodity and Japan lumber market conditions by increasing WRC production and sales volumes. Lumber production volumes in the second quarter of 2015 mirrored those of the same quarter last year, and increased by 13% from the first quarter of 2015 as a result of the continued ramp-up of production at our Duke Point sawmill.

Unseasonably dry weather conditions in the second quarter of 2015 led to reduced log production as compared to the same period last year. As a result of our strategy to maximize logging activities in the first quarter, we were able to continue to load and haul logs while harvesting was curtailed, supplying our mills and log customers from a robust log inventory that increased by approximately 100,000 cubic metres at June 30, 2015 as compared to the same period last year. Log production costs increased in the second quarter over last year due to the change in the mix of harvest locations, higher helicopter logging volumes and increased labour costs.

Net income for the second quarter of 2015 was $19.1 million, or $0.05 per common share, as compared to net income of $29.2 million, or $0.07 per common share, for the same period in 2014. Net income decreased due to challenging conditions in commodity and Japan lumber markets and through the imposition of export tax on lumber sales to the U.S.

NT3

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