Western Announces First Quarter 2023 Results

Press Release

May 3, 2023 – Vancouver, British Columbia – Western Forest Products Inc. (TSX: WEF) (“Western” or the “Company”) reported a net loss of $17.7 million in the first quarter of 2023, as compared to a net loss of $21.4 million in the fourth quarter of 2022, and net income of $38.0 million in the first quarter of 2022. Results in the first quarter of 2023 reflect more challenging macroeconomic conditions, resulting in lower lumber prices and reduced demand compared to the same period last year.

Adjusted EBITDA was negative $5.0 million in the first quarter of 2023, as compared to Adjusted EBITDA of negative $11.9 million in the fourth quarter of 2022, and adjusted EBITDA of $65.4 million in the first quarter of 2022.

Operating loss prior to restructuring and other items was $18.1 million in first quarter of 2023, as compared to income of $52.2 million in the first quarter of 2022. The first quarter of 2023 included $5.2 million in restructuring costs primarily related to our Alberni Pacific Division (“APD”).

Highlights:
 Advanced BC Coastal strategic investments at our Saltair sawmill and Duke Point facility
 Progressed integrated resource management and forest landscape planning initiatives with First Nations
 Engineered wood products business continues to perform to expectations
 Returned $4.0 million to shareholders through dividends
 Maintained liquidity of $205.4 million to support our strategic priorities and balanced capital allocation

“Our first quarter results reflect a challenging global market environment driving lower demand and pricing across all business segments, though we did see some increased stability building through the quarter,” said Western’s President and CEO Steven Hofer. “Despite the more challenging environment, we continued to advance operational improvements in the first quarter to best position the company for future success. This included renewing our focus on solidifying key customer relationships and improving on-time delivery
performance and reliability. As a company, we are focused on maintaining a strong balance sheet and executing on operational plans and our overall strategy to drive value and margin for every log harvested. Capital programs at our Duke Point and Saltair facilities progressed well through the first quarter, and are important initiatives to move our products further up the value chain.”

(1) Refer to Adjusted EBITDA, Liquidity, Adjusted EBITDA margin in the Non-GAAP Financial Measures section.
(2) Net debt (cash), a supplemental measure, is defined as cash and cash equivalents less long-term debt and bank indebtedness.

Summary of First Quarter 2023 Results

We reported Adjusted EBITDA of negative $5.0 million in the first quarter of 2023, as compared to Adjusted EBITDA of $65.4 million in the same period last year. Results in the first quarter of 2023 reflect more challenging macroeconomic conditions, resulting in lower lumber prices and reduced demand compared to the same period last year.

Net loss was $17.7 million in the first quarter of 2023, as compared to net income of $38.0 million in the same period last year. Operating loss prior to restructuring and other items was $18.1 million in first quarter of 2023, as compared to income of $52.2 million in the same period last year. The first quarter of 2023 included $5.2 million in restructuring costs primarily related to APD.

Sales
Lumber revenue was $211.0 million in the first quarter of 2023 as compared to $313.9 million in the same period last year. The 33% decline was due to lower lumber shipment volumes, lower average lumber prices and a weaker sales mix, slightly offset by a stronger US Dollar (“USD”) to Canadian Dollar (“CAD”) exchange rate.

Specialty lumber shipments represented 40% of total lumber shipment volumes in the first quarter of 2023, as compared to 51% in the same period last year. Cedar lumber shipment volumes were down 35% compared to the same period last year due to more cautious buyer activity and a slower start to the spring building season. Japan lumber shipment volumes were down 53% compared to the same period last year due to increased levels of supply from domestic manufacturing, Europe and Russia.

Our average realized lumber price was $1,241 per thousand board feet in the first quarter of 2023, as compared to $1,688 per thousand board feet in the same period last year. The decrease of 26% was due to a weaker lumber sales mix and lower lumber prices, partially offset by a stronger USD to CAD exchange rate.

Log revenue was $38.6 million in the first quarter of 2023, as compared to $32.7 million in the same period last year. The increase of 18% was due to higher log sales to balance log inventories to lumber market conditions and fibre requirements of our manufacturing facilities, partially offset by lower average domestic log prices.

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