West Fraser sees Q4 earnings dip, but healthy full-year results17 February 2023
The world’s largest OSB producer West Fraser saw a sharp moderating of its performance in the fourth quarter of 2002 as more challenging market conditions started to bite.
The company’s Q4 adjusted earnings (EBITDA) fell to US$70m from US$426m in Q3, 2022.
West Fraser’s North America engineered wood products (EWP) business reported adjusted EBITDA of US$109m, while the Europe EWP business achieved EBITDA of US$30m.
But the 2022 full year results were still extremely healthy, with adjusted EBITDA of US$3.2bn, representing 33% of sales.
The lumber segment reported adjusted EBITDA of US$1.3bn; the NA EWP segment had adjusted EBITDA of US$1.67bn; and the Europe EWP segment had adjusted EBITDA of US$186m.
“In the fourth quarter of 2022, we faced a challenging demand market as rising interest rates dampened new home construction activity in the US, most acutely impacting our lumber business,” said Ray Ferris, West Fraser’s president & CEO.
“Despite these market conditions, West Fraser delivered another strong year of performance in 2022.
“Over the near term, we anticipate that the business will continue to experience moderating costs, although we expect continued labour constraints and potentially muted product demand as housing affordability and demand find a new equilibrium.”
West Fraser said costs and availability constraints for transportation, raw materials such as resins and chemicals, and energy are expected to continue to moderate near term, while labour availability is expected to remain challenging.
“Near-term challenges, including relatively high and rising interest rates, ongoing geopolitical developments and inflationary pressures, are expected to cause a temporary slowing of demand for our products in Europe, however, we are confident that we will be able to navigate through these periods and respond to opportunities for long-term growth ahead.”
It expects demand for new home construction and wood building products in the US may decline in the near term should interest rates remain elevated or continue to rise and consequently impact consumer sentiment and housing affordability.