VANCOUVER — West Fraser’s lumber segment generated operating earnings of $232 million (Q3-17 – $126 million) and Adjusted EBITDA of $258 million (Q3-17 – $195 million). This quarter’s results were favorably impacted by higher product pricing, higher SYP production and shipments, offset by slightly lower SPF production and shipments. Countervailing and anti-dumping duties, which were adjusted to reflect the final CVD rates and the estimated ADD rate, resulted in a recovery of $17 million for the current quarter. The integration of the Gilman mills is on track and they are performing in line with expectations.
West Fraser’s panels segment generated operating earnings in the quarter of $20 million (Q3-17 – $45 million) and Adjusted EBITDA of $24 million (Q3-17 – $48 million). The plywood market was strong throughout the year with record prices being achieved in the third quarter of 2017.
It’s pulp & paper segment generated operating earnings of $48 million (Q3-17 – $21 million) and Adjusted EBITDA of $60 million (Q3-17 – $30 million). The major factors contributing to the increase in operating earnings were higher Canadian dollar pulp prices and an increase in BCTMP shipments offset by lower NBSK shipments.
Softwood lumber dispute
The U.S. Department of Commerce determined a final West Fraser specific countervailing duty rate of 17.99% and an antidumping duty rate of 5.57% effective December 4, 2017. West Fraser has adjusted duties previously recorded at the preliminary rate of 24.12% to the final rate and recorded an estimate of the anti-dumping rate based on the Department of Commerce methods using actual data for the period. Of the $85 million of duties charged $48 million have been expensed in 2017 and $37 million has been established as a long-term export duty deposit receivable on our balance sheet.
2017 in review
There were a number of milestone accomplishments for West Fraser in 2017. Despite the challenges of the fires in B.C. in 2017, the company increased its lumber production by nearly 300 million board feet through improvement in operations and through acquisitions in the U.S. South. West Fraser completed the rebuild and restart of its WestPine MDF facility following a fire in 2016. It recorded the highest Adjusted EBITDA in company history, growing Adjusted EBITDA by $486 million or 72% over 2016. In August the company completed the acquisition of six sawmills in Florida and Georgia, complementing its existing U.S. South footprint and adding 700 mmfbm of high margin production to its base. West Fraser says it continues to execute well on significant capital projects that will benefit the company in 2018 and years to come. West Fraser commissioned a number of major sawmill and planer upgrades in Canada and the U.S. and has added to its drying capacity as well. It also had strong contributions from its panels and pulp business as strong pricing and improved operating performance over 2016 contributed to improved results.
While 2017 was a record year for the Company in terms of Adjusted EBITDA,West Fraser says it remains convinced of potential for further improvement in all its operations
Markets have started the year off strong as supply and demand fundamentals for its products remain favorable. However, the first month of the year presented a number of weather related challenges from cold temperatures in the US South and transportation challenges in western Canada. West Fraser says it continues to be pleased with the progress on its capital expenditure plan and is executing on a number of significant mill upgrades in 2018