West Fraser
2023 Annual Report
Contents
Welcome to West Fraser
About West Fraser
Our Operations
Message From our President and CEO
Financial Highlights
Business Strategy
Our Products
Financial Performance
Management’s Discussion and Analysis
2023 Audited Statements
Consolidated Financial Statements
Appendix
Directors and Officers
Glossary of Key Terms
Corporate Information
Memberships and Partner Organizations
Product Circularity
2
3
4
6
8
9
10
12
14
78
78
122
123
124
125
126
127
2023 Annual Report | 1
Welcome to
West Fraser
About West Fraser
We make renewable, wood‑based building products
for the world, contributing to a more sustainable future.
West Fraser was founded nearly 70 years ago in
Quesnel, British Columbia, by three brothers — Sam,
Bill and Pete Ketcham — who pooled their resources
to buy a small planing mill with 12 employees.
Today, West Fraser is one of the world’s largest
producers of sustainable wood-based building
products, with more than 60 facilities in Canada,
the United States, the United Kingdom and Europe.
From responsibly sourced and sustainably managed
forest resources, West Fraser produces lumber,
engineered wood products (oriented strand board,
laminated veneer lumber, medium‑density fibreboard,
plywood, and particleboard), pulp, newsprint, wood
chips, other residuals, and renewable energy.
West Fraser’s products are used in home construction,
repair and remodelling, industrial applications, papers,
tissue, and boxes.
We aim to develop and maintain:
• Excellence in performance and people
• Leadership in our field
• Challenge and satisfaction
• Responsibility in communities in which we work
• Profitability
• Growth
2023 Annual Report | 3
Our Operations
West Fraser as of Dec 31, 2023
60+facilities in Canada, the
United States, the United
Kingdom and Europe
34
Lumber
Mills
15
OSB Mills
9
5
Engineered
Wood Mills
Pulp &
Newsprint Mills
~10,800
Employees
6
Renewable
Energy Facilities
British
Columbia
Alberta
Quesnel
Edmonton
Ontario
Quebec
Minnesota
St. Laurent (R&D)
Vancouver
Toronto
Tennessee
North
Carolina
Arkansas
Memphis
Alabama
South
Carolina
Georgia
Texas
Mississippi
Louisiana
Florida
United
Kingdom
Cowie
Belgium
Locations
Corporate Office
Lumber
Pulp & Newsprint
Engineered Wood Mills
Plywood
MDF, Particleboard
OSB
Veneer & LVL
2023 Annual Report | 5
Putting Safety First
Safety remains our primary operating focus and in
2023 we achieved a reduction in recordable safety
incidents compared to last year and our lowest rate ever
for serious injuries. Our commitment to continuously
improve safety remains our top priority as we work to
further enhance all of our core safety systems while
deepening involvement and ownership at all levels of
the organization.
North America’s Leading Lumber Producer
Despite near-term challenges, we remain optimistic
about the demand for lumber over the longer term
given projected demand for U.S. housing and the
shrinking lumber supply coming out of British Columbia
(B.C.). West Fraser’s proximity to market centres and
geographic diversification of our production position
us well to meet future demand. In 2023, 52% of West
Fraser lumber was produced in the U.S. south, 26% in
Alberta and 23% in B.C.
In 2023, we have continued to execute on our strategy
of modernizing our facilities to improve productivity
and our environmental footprint. Construction is
ongoing at our site in Henderson, Texas — a $255 million
investment to redevelop the mill with start-up expected
in the first half of 2025. We also completed the capital
upgrades to our sawmill in Maplesville, Alabama.
Our new Dudley sawmill achieved solid production
and continued lowering costs, while progressing
along its start-up curve. During 2023 we added a new
solar energy installation at the site which will help us
lower greenhouse gas emission while also lowering
energy costs.
Message From our President and CEO
Overall, slowing markets that began in the latter
half of 2022 carried on into 2023 as higher inflation
and mortgage rates dampened demand for new
home construction as well as repair and remodelling
spending. While lumber markets were particularly
challenging, demand for our engineered wood
products remained more robust.
In 2023, we achieved sales of nearly $6.5 billion and
Adjusted EBITDA(1) of $561 million, representing 9% of
sales. Our capital allocation strategy saw $477 million
invested back into the business and we returned
significant capital to shareholders, paying $100 million
in dividends and $129 million in share repurchases.
To date, we have repurchased 76% of the stock issued
to acquire Norbord in 2021.
Although the outlook for our markets is somewhat
uncertain as we head into 2024, our long-held business
strategy is designed for precisely these circumstances.
The strength of our people and our culture, combined
with our modern, diversified manufacturing platform
and a prudent balance sheet — with almost $2 billion
in available liquidity — positions us to invest in our
company and take advantage of opportunities that may
come our way in all cycles. And over the past year,
we did just that.
Beginning in January 2023, we began making a series
of moves to optimize our asset portfolio. The decision
to divest three pulp mills was announced this past
summer, while a performance review of our North
American lumber segment resulted in the indefinite
curtailment of one sawmill, the permanent closure of
three other sawmills and the acquisition of a sawmill
and wood treater in Cochrane, Alberta. By year end, we
had closed our furniture factory in southern England to
focus on our core wood products business.
We believe these actions improve our company for
the long-term and align with our strategy to be a
premier, low-cost, sustainable and renewable wood
building products manufacturer and key supplier to
our customers.
1) Adjusted EBITDA is a Non‑GAAP financial measure. Refer to the “Non‑GAAP
and other specified financial measures” section of our 2023 MD&A included
in this Annual Report.
A North American and European Engineered
Wood Leader
Advancing People and Culture
What sets West Fraser apart from our competitors is
the commitment, skills and performance of our people.
In 2023, we continued to advance our internal learning
programs for our employees and provided development
opportunities that help support our culture of excellence
and high performance. We also took steps this year
to foster a more inclusive workplace, and launched a
new Health and Wellness program, supported by tools
and resources to help everyone bring their best self to
work every day. For the eleventh consecutive year, West
Fraser was named one of Canada’s Top 100 Employers.
Driving Value
We can be proud of what we achieved in 2023. As we
look back, I would like to thank Ray Ferris, who retired
as President and CEO at the end of 2023, following a
26-year career of progressive growth with West Fraser.
I am grateful to the Board of Directors for their support
of the entire management team. And I would like to
acknowledge the enormous effort of our employees
for delivering solid results and helping position a
West Fraser that is ready to embrace the future.
As we move into 2024, although near-term
uncertainties exist across the industry, we are
confident in the company’s geographic and product
diversity — which combined with the right strategy,
people, assets and financial flexibility — will allow us
to thrive as we embrace the many challenges and
opportunities that lie ahead.
Sean McLaren
President and Chief Executive Officer
Our North American engineered wood products
segment, which includes manufacturing of oriented
strand board (OSB) and other wood-based panels
such as plywood, had strong performance in 2023,
generating $589 million Adjusted EBITDA. OSB demand
was strong across North America. We added to our OSB
capacity in June with the startup of our mill in Allendale,
South Carolina, following an $83-million capital upgrade
over the past two years. When operating at full capacity,
this large-scale mill is expected to be one of the lowest
cost producing mills across our OSB portfolio.
In our European engineered wood products segment,
our business is well positioned with a leading market
position in the U.K. With a modern, well-invested asset
base, we will be able to capitalize on the longer-term
demand tailwinds of continuing OSB substitution for
plywood and an aging housing stock. We are investing
in bringing rail service into our flagship Inverness,
Scotland OSB mill to expand its market reach and
reduce our carbon footprint and freight costs.
Producing Responsibly
We also took steps to further advance our sustainability
goals in 2023. In April, the globally-recognized, Science
Based Targets Initiative (SBTi) validated our targets
to materially reduce our greenhouse gas emissions
by 2030. By year’s end, each of our divisions had
progressed on an energy reduction roadmap that
identifies ways to reduce energy consumption and
cut emissions.
We share a responsibility for the communities where
we operate. This includes our commitment to build
meaningful relationships with Indigenous Nations and
seek to find opportunities to work together for economic
prosperity and community well-being. Over the past
year, we furthered our work to obtain Progressive
Aboriginal Relations (PAR) certification. We also invest
in people and their potential through our community
investment program. Our strategy saw each of our mills
invest in their local communities, prioritized to strategic
areas, for a total of $4.8 million invested in more than
500 community partnerships in 2023.
2023 Annual Report | 7
Financial Highlights
Achieved
Delivered
Invested
$6.5 b
in sales
$561 m
$477 m
Adjusted EBITDA, representing
9% of sales
capital to maintain and improve
the business
Repurchased
Returned
Available
$129 m
$100 m
worth of shares
in dividends
$1.95 b
liquidity at year-end, including
$900 m of cash
Rated
Investment Grade
by three leading rating agencies
Business Strategy
Our business strategy focuses on profitability and
excellence in people, driven by three key elements.
Being a low-cost
operator
Maintaining a prudent
balance sheet
Reinvesting our
profits
Makes us competitive
against other producers.
This means always
working as a team and
finding innovative ways
to control and reduce
our costs.
Ensures we remain
well-positioned to
pursue opportunities
to grow.
Strengthens our
operations for long-term
business sustainability.
S
U
C
O
F
O N P R O F I T A B I L
I
T
Y
st Profits
e
v
in
e
R
L
o
w
-
C
o
s
t
O
p
e
r
a
t
o
r
E
X
C
Prudent Balance S h e e t
E L L E N C E
I N P
O
E
E
L
P
2023 Annual Report | 9
Our Products
Why Wood
Wood is a sustainable, high‑value building material
that stores carbon. With the least embodied energy
of all major building materials, it requires less energy
from harvest to transport, manufacturing, installation,
maintenance and disposal or recycling. Wood is known
for its strength and durability in addition to its visual
appeal when used in building structures and finishings.
2023 Sales by Business Segment to External Customers
in millions of U.S. dollars
European Engineered Wood Products
Lumber
8%
$ 517
Pulp & Paper
10%
$ 612
North American Engineered Wood Products
40%
$ 2,602
42%
$ 2,722
42+42+
$6.5 b
Total Sales
40
+
40
+
10
+
10
+
8
+
8
+
X
Our Products
SPF
SYP
Spruce Pine Fir (SPF) is a species that includes Engelmann spruce,
white spruce, hybrid white spruce, lodgepole pine and subalpine fir.
This lumber is lightweight, easily worked, takes paint well, holds nails
well and exhibits small knots.
Southern Yellow Pine (SYP), known for its strength and durability,
grows in the southern United States from Virginia to Florida and
west to Texas. SYP lumber is a versatile product used in a variety of
applications.
OSB
Plywood
Oriented Strand Board (OSB) is a versatile structural wood panel.
Used in roofs, walls and floor applications, OSB makes use of wood
that may not otherwise have commercial value, which helps to
maximize forest utilization.
Plywood is made from multiple layers, or ply, of softwood veneer glued
together with the grain of each layer perpendicular to adjacent layers.
Plywood panels have superior dimensional stability, two-way strength
and stiffness properties and an excellent strength‑to‑weight ratio.
LVL
MDF
Laminated Veneer Lumber (LVL) is manufactured primarily for
structural framing in residential and commercial construction.
LVL is made from rotary-peeled veneers bonded together under heat
and pressure into large panels that are cut into a range of widths.
Medium-Density Fibreboard (MDF) is an engineered non-structural
wood panel made from 100% western white softwoods that have
a consistent light sandy colour. The purity and long fibre allow the
finishing to fit a variety of interior applications.
Particleboard
Pulp
Particleboard is a non-structural, engineered wood panel
produced by pressing recycled wood fibre to create a product
with a consistent, pristine surface that caters to many everyday
applications, such as furniture or cabinets.
Pulp is created through a chemical process, transforming chips into pulp
fibres. The fibres, often referred to as reinforcing pulp, are very strong
and are the basis for an extensive range of high-end paper products,
from tissues and paper towels to cardboard and packaging materials.
2023 Annual Report | 11
Financial Performance
Five-Year Financial Review
(in millions of U.S. dollars, except where indicated)
Earnings
Sales
Cost of product sold
Freight and other distribution costs
Export duties, net1
Amortization
Selling, general and administration
Equity-based compensation
Restructuring and impairment charges
Operating earnings
Finance income (expense), net
Other income (expense)
Tax recovery (provision)
Earnings
Adjusted EBITDA2
Cash flows from operating activities
Capital expenditures
Financial position
Current assets
PPE & timber licenses
Goodwill & other intangibles
Export duty deposits3
Other assets
Deferred income tax assets
Total assets
Current liabilities
Long-term debt (including current portion)
Other liabilities
Deferred income tax liabilities
Shareholders' equity
Total liabilities & equity
2023
2022
2021
2020
2019
6,454
(4,685)
(894)
(8)
(541)
(307)
(25)
(279)
(284)
51
5
61
(167)
561
525
477
2,377
4,211
2,307
377
137
6
9,415
750
499
260
683
7,223
9,415
9,701
(5,142)
(963)
(18)
(589)
(365)
(5)
(60)
2,559
(3)
37
(618)
1,975
10,518
(4,645)
(846)
(146)
(584)
(312)
(40)
—
3,945
(45)
(2)
(951)
2,947
4,373
(2,559)
(529)
(57)
(203)
(185)
(9)
—
831
(27)
(14)
(202)
588
3,212
4,569
1,043
2,207
3,552
477
635
2,749
4,333
2,358
354
175
4
9,973
792
499
268
795
7,619
9,973
3,217
4,468
2,440
242
58
8
10,433
1,206
499
360
712
7,656
10,433
968
180
1,336
2,029
591
178
35
9
4,178
528
500
408
264
2,478
4,178
3,673
(2,750)
(538)
(122)
(195)
(159)
(4)
(25)
(120)
(37)
(8)
52
(113)
104
87
309
883
2,028
594
61
20
8
3,594
644
500
350
195
1,905
3,594
Sales
in millions of U.S. dollars
Adjusted EBITDA2
in millions of U.S. dollars
Cash flows from operating activities
in millions of U.S. dollars
11,000
8,800
6,600
4,400
2,200
0
5,000
4,000
3,000
2,000
1,000
0
4,000
3,000
2,000
1,000
0
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Per common share (dollars)
Basic EPS
TSX Price range (CAD):
High
Low
Close
NYSE Price range:
High
Low
Close
Dividends declared per share
Shares outstanding at year-end ('000s)
Ratios
Net debt to capitalization4
2023
2022
2021
2020
2019
(2.01)
21.06
27.03
8.56
(1.64)
121.66
88.61
113.36
91.44
64.11
85.58
1.20
81,721
132.91
89.95
97.77
102.96
68.75
72.29
1.15
83,555
124.74
73.30
120.68
97.59
61.36
95.36
0.76
105,929
86.50
21.60
81.78
n/a
n/a
n/a
0.56
68,679
-5%
-9%
-16%
2%
80.13
43.93
57.28
n/a
n/a
n/a
0.60
68,663
29%
8,200
3,363
2,692
—
—
1,173
Number of employees at year-end
10,771
11,056
10,928
8,115
Shipments
SPF Lumber (MMfbm)
SYP Lumber (MMfbm)
NA OSB (MMsf 3/8" basis)
EU OSB (MMsf 3/8" basis)
Pulp (Mtonnes)
2,711
2,882
6,380
1,023
913
2,705
3,036
6,006
977
968
3,176
2,649
5,674
1,010
1,033
3,214
2,861
—
—
1,132
1. Export duties for 2023 are net of a $62 million recovery related to the USDOC finalization of the duty rates for the AR4 POI dated January 1, 2021 to December 31, 2021.
Export duties for 2022 are net of a $81 million recovery related to the USDOC finalization of the duty rates for the AR3 POI dated January 1, 2020 to December 31, 2020.
Export duties for 2021 are net of a $55 million recovery related to the USDOC finalization of the duty rates for the AR2 POI dated January 1, 2019 to December 31, 2019.
Export duties for 2020 are net of a $95 million recovery related to the USDOC finalization of the duty rates for the AR1 POI dated April 28, 2017 to December 31, 2018.
2. Adjusted EBITDA is a non‑GAAP financial measure. Refer to the “Non‑GAAP and Other Specified Financial Measures” section of our 2023 MD&A included in this
Annual Report for more information on this measure. Effective January 1, 2022, and for all comparative periods, export duties are no longer excluded from the definition
of Adjusted EBITDA.
3. Export duty deposits for 2022 include export duty receivable of $81 million for the AR3 POI dated January 1, 2020 to December 31, 2020.
Export duty deposits for 2021 include export duty receivable of $55 million for the AR2 POI dated January 1, 2019 to December 31, 2019.
Export duty deposits for 2020 include export duty receivable of $95 million for the AR1 POI dated April 28, 2017 to December 31, 2018.
4. Net debt to capitalization is a non‑GAAP financial measure. Refer to the “Non‑GAAP and Other Specified Financial Measures” section of our 2023 MD&A included in this
Annual Report for more information on this measure
SPF Lumber shipments
in MMfbm
SYP Lumber shipments
in MMfbm
NA OSB shipments
in MMsf 3/8" basis
EU OSB shipments
in MMsf 3/8" basis
4,000
3,000
2,000
1,000
0
4,000
3,000
2,000
1,000
0
7,000
5,250
3,500
1,750
0
1,200
800
400
0
2019 2020 2021 2022 2023
2019 2020 2021 2022 2023
2019 2020 2021 2022 2023
2019 2020 2021 2022 2023
2023 Annual Report | 13
Management’s Discussion and Analysis
MANAGEMENT’S DISCUSSION & ANALYSIS
INTRODUCTION
This discussion and analysis by management (“MD&A”) of West Fraser Timber Co. Ltd.’s (“West Fraser”, the “Company”,
“we”, “us”, or “our”) financial performance for the year and three months ended December 31, 2023 should be read in
conjunction with our annual audited consolidated financial statements and accompanying notes for the year ended
December 31, 2023 (the “Annual Financial Statements”).
The Company’s fiscal year is the calendar year ending December 31. Effective January 1, 2023, the Company’s fiscal
quarters are the 13-week periods ending on the last Friday of March, June, and September with the fourth quarter ending
on December 31. References to the three months ended December 31, 2023 and the fourth quarter of 2023 relate to the
period between September 30, 2023 and December 31, 2023.
Unless otherwise indicated, the financial information contained in this MD&A is derived from our Annual Financial
Statements, which have been prepared in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board (“IFRS Accounting Standards”). This MD&A uses various Non-GAAP and other
specified financial measures, including “Adjusted EBITDA”, “Adjusted EBITDA by segment”, “available liquidity”, “total
debt to capital ratio”, “net debt to capital ratio”, and “expected capital expenditures”. An explanation with respect to the
use of these Non-GAAP and other specified financial measures is set out in the section titled “Non-GAAP and Other
Specified Financial Measures”.
This MD&A includes statements and information that constitute “forward-looking information” within the meaning of
Canadian securities laws and “forward-looking statements” within the meaning of United States securities laws
(collectively, “forward-looking statements”). Please refer to the cautionary note entitled “Forward-Looking Statements”
below for a discussion of these forward-looking statements and the risks that impact these forward-looking statements.
Dollar amounts are expressed in the United States (“U.S.”) currency unless otherwise indicated. This MD&A uses
capitalized terms, abbreviations and acronyms that are defined under “Glossary of Key Terms”. Figures have been
rounded to millions of dollars to reflect the accuracy of the underlying balances and as a result certain tables may not add
due to rounding impacts. The information in this MD&A is as at February 14, 2024 unless otherwise indicated.
OUR BUSINESS AND STRATEGY
West Fraser is a diversified wood products company with facilities in Canada, the U.S., the U.K. and Europe,
manufacturing, selling, marketing and distributing lumber, engineered wood products (OSB, LVL, MDF, plywood,
particleboard), pulp, newsprint, wood chips and other residuals and renewable energy. As at December 31, 2023, our
business is comprised of 34 lumber mills, 15 OSB facilities, 6 renewable energy facilities, 3 plywood facilities, 3 MDF
facilities, 2 treated wood facilities, 1 particleboard facility, 1 LVL facility, 1 veneer facility, and 5 pulp and paper mills (as at
December 31, 2023, three of our pulp mills are held for sale, one of which has since been sold).
Our goal at West Fraser is to generate strong financial results through the business cycle, supported by robust product
and geographic diversity, and relying on our committed workforce, the quality of our assets and our well-established
people and culture. This culture emphasizes cost control in all aspects of the business and operating in a responsible,
sustainable, financially conservative and prudent manner.
The North American wood products industry is cyclical and periodically faces difficult market conditions. Our earnings are
sensitive to changes in world economic conditions, primarily those in North America, Asia and Europe and particularly to
the U.S. housing market for new construction and repair and renovation spending. Most of our revenues are from sales of
commodity products for which prices are sensitive to variations in supply and demand. As many of our costs are
denominated in Canadian dollars, British pounds sterling and Euros, exchange rate fluctuations of the Canadian dollar,
- 1 -
British pound sterling and Euro against the United States dollar can and are anticipated to be a significant source of
earnings volatility for us.
West Fraser strives to make sustainability a central principle upon which we and our people operate, and we believe the
Company’s renewable building materials that sequester carbon are a truly natural solution in the fight against climate
change. There are numerous government initiatives and proposals globally to address climate-related issues. Within the
jurisdictions of West Fraser’s operations, some of these initiatives would regulate, and do regulate and/or tax the
production of carbon dioxide and other greenhouse gases to facilitate the reduction of carbon emissions, providing
incentives to produce and use cleaner energy. In April 2023, the Science Based Targets Initiative (“SBTi”) completed its
validation of the science-based targets we set in the first quarter of 2022. This validation further supports West Fraser’s
plan to achieve near-term greenhouse gas (“GHG”) reductions across all our operations located in the United States,
Canada, U.K. and Europe.
We believe that maintaining a strong balance sheet and liquidity profile, along with our investment-grade debt rating,
enables us to execute a balanced capital allocation strategy. Our goal is to reinvest in our operations across all market
cycles to strategically enhance productivity, product mix, and capacity and to maintain a leading cost position. We believe
that a strong balance sheet also provides the financial flexibility to capitalize on growth opportunities, including the
pursuit of opportunistic acquisitions and larger-scale strategic growth initiatives, and is a key tool in managing our
business over the long term including returning capital to shareholders.
RECENT DEVELOPMENTS
Markets
In North America, changes in new home construction activity in the U.S. are a significant driver of lumber and OSB
demand. According to the U.S. Census Bureau, the seasonally adjusted annualized rate of U.S. housing starts averaged
1.46 million units in December 2023, with permits issued averaging 1.50 million units. U.S. housing starts were 1.41
million units for full year 2023, down 9% from 1.55 million units in 2022. The level of new housing construction began to
rebound somewhat in the final months of the year as central bankers paused rate increases and inflation and mortgage
rates moderated. Coupled with ongoing evidence of easing inflationary risks, the latest rate hiking cycle appears to be
nearing its end. Low supply of existing homes for sale and a large cohort of the population entering the typical home
buying age demographic are expected to support longer-term core demand for home construction activity.
Notwithstanding these factors, should the economy and employment slow more broadly, interest rates begin to track
meaningfully higher or housing prices not adjust sufficiently lower to offset a potential rise in mortgage rates, housing
affordability may be adversely impacted, which could reduce near-term demand for new home construction and thus
near-term demand for our wood-based building products.
In the fourth quarter, demand for our products used in repair and remodelling applications was relatively stable but
remained below the elevated demand levels seen in recent years. There is a risk that historically low rates of existing
home sales and a slowing economy will put further downward pressure on short-term repair and remodelling demand,
consistent with near-term industry forecasts for repair and remodelling spending. However, over the medium and longer
term, an aging housing stock and stabilization of inflation and interest rates are expected to stimulate renovation and
repair spending that supports growth in lumber, plywood and OSB demand.
Regarding lumber supply fundamentals, significant new capacity announcements in the U.S. South have not translated
into a meaningful increase in overall domestic supply. Capacity contraction within other key lumber producing regions of
North America have contributed to this trend, as have meaningful reductions in production from less competitive mills in
the U.S. South, a region that is generally lower-cost but is also heterogeneous in terms of mill costs associated with fibre
supply, modernization levels and labour reliability. Lower demand from offshore markets for North American lumber is
also a continuing factor, resulting in more domestically produced lumber remaining in the continent. Imports of lumber
from Europe, which had been elevated earlier in 2023, have slowed in recent months. However, should this import trend
reverse and head higher again, the rebalancing of supply and demand for lumber products in North America could
experience an extended time to recovery, particularly for SPF products that compete more directly with European lumber
imports. In the very near term, unusually warm weather in Western Canada has hampered logging activities so far this
winter, which has limited the accumulation of log inventories at some of our mills and has the potential to constrain our
ability to manufacture and ship SPF lumber.
- 2 -
2023 Annual Report | 15
2023 Annual Report | 15
A number of OSB mill greenfield and re-start projects have been announced in recent years, although actual new supply
has been slow to come to market. We believe this is largely a function of extended vendor equipment backlogs and
limited contractor availability, coupled with the 18-24 month start-up curves typical of OSB mills. While some of the
announced mill projects are apt to be completed over the near-to-medium term, we continue to see meaningful
constraints to significant new OSB supply in the near term. However, should new OSB supply come to market sooner, and
production ramp more quickly than is typical for mill start-ups, OSB markets may experience a period of imbalance
between supply and demand.
Completion of the Spray Lake Acquisition
On November 17, 2023, we completed the acquisition of the Spray Lake lumber mill located in Cochrane, Alberta and
associated timber tenures for $102 million (CAD$140 million), net of cash acquired of $1 million. This acquisition has been
accounted for as an acquisition of a business in accordance with IFRS 3, Business Combinations. Note 3 to our Annual
Financial Statements provides details on the preliminary purchase price allocation as at December 31, 2023.
Facility Closures and Curtailments
On January 9, 2024, we announced the permanent closure of our lumber mill in Maxville, Florida and the indefinite
curtailment of operations at our lumber mill in Huttig, Arkansas. High fibre costs at Maxville and the current low-price
commodity environment have impaired the ability of both mills to profitably operate. In aggregate, this will reduce our
U.S. lumber capacity by approximately 270 million board feet. The closure of Maxville and the indefinite curtailment of
our Huttig lumber mill better aligns our U.S. lumber capacity with demand. We recorded restructuring and impairment
charges of $47 million in the fourth quarter of 2023 associated with this announcement.
On January 22, 2024, we announced the permanent closure of our lumber mill in Fraser Lake, B.C., following an orderly
wind-down. The decision is the result of our inability to access economically viable fibre in the region and will reduce our
Canadian lumber capacity by approximately 160 million board feet. We recorded restructuring and impairment charges of
$81 million in the fourth quarter of 2023 related to facility closures and curtailments due to availability of economic fibre
sources in B.C.
Completion of sale of Hinton pulp mill
On July 10, 2023, we announced an agreement to sell our unbleached softwood kraft pulp mill in Hinton, Alberta to
Mondi Group plc (“Mondi”). The transaction closed on February 3, 2024 following the completion of regulatory reviews
and satisfaction of customary closing conditions.
CVD and ADD Duty Rates
On February 1, 2024, the USDOC released the preliminary results from AR5 POI covering the 2022 calendar year, which
indicated a rate of 6.74% for CVD and 5.33% for ADD for West Fraser. The duty rates are subject to an appeal process,
and we will record an adjustment once the rates are finalized. If the AR5 rates were to be confirmed, it would result in an
expense of $35 million before the impact of interest for the POI covered by AR5. This adjustment would be in addition to
the amounts already recorded on our balance sheet. If these rates were finalized, our combined cash deposit rate would
be 12.07%.
Senior Leadership Transition
Effective January 1, 2024, Sean McLaren succeeded Ray Ferris as President and Chief Executive Officer and joined the
Board of Directors.
- 3 -
ANNUAL RESULTS
Summary Annual Results
($ millions, except as otherwise indicated)
Earnings
Sales
Cost of products sold
Freight and other distribution costs
Export duties, net
Amortization
Selling, general and administration
Equity-based compensation
Restructuring and impairment charges
Operating earnings (loss)
Finance income (expense), net
Other income (expense)
Tax recovery (provision)
Earnings (loss)
Adjusted EBITDA1
Basic earnings (loss) per share ($)
Diluted earnings (loss) per share ($)
Cash dividends declared per share2 ($)
Total assets
Long-term debt, non-current
Long-term debt, total
$
$
$
2023
2022
2021
6,454 $
(4,685)
(894)
(8)
(541)
(307)
(25)
(279)
(284)
51
5
61
(167) $
561 $
(2.01)
(2.01)
1.20
9,415
199
499
9,701 $
(5,142)
(963)
(18)
(589)
(365)
(5)
(60)
2,559
(3)
37
(618)
1,975 $
3,212 $
21.06
20.86
1.15
9,973
499
499
10,518
(4,645)
(846)
(146)
(584)
(312)
(40)
—
3,945
(45)
(2)
(951)
2,947
4,569
27.03
27.03
0.76
10,433
499
499
1.
2.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
Cash dividends declared during the year ended December 31, 2021 were comprised of CAD$0.70 per share in aggregate for the first three quarters
and USD$0.20 per share for the fourth quarter. The CAD amounts have been translated to USD for presentation purposes using the average
exchange rate during the quarter that the dividends were declared.
In 2023, our revenues were $6,454 million and we incurred a loss of $167 million, or $2.01 of diluted loss per share. This
compares with revenues of $9,701 million and earnings of $1,975 million, or $20.86 of diluted earnings per share, in
2022, and revenues of $10,518 million and earnings of $2,947 million, or $27.03 of diluted earnings per share, in 2021.
Our 2023 results were impacted primarily by decreases in lumber and OSB pricing, offset in part by lower input costs. We
recorded higher restructuring and impairment charges in 2023 related to the sale of certain of our pulp mills as well as
announced facility closures and curtailments in our lumber segment.
- 4 -
2023 Annual Report | 17
2023 Annual Report | 17
Discussion & Analysis of Annual Results by Product Segment
Lumber Segment
Lumber Segment Earnings
($ millions unless otherwise indicated)
Sales
Lumber
Wood chips and other residuals
Logs and other
Cost of products sold
Freight and other distribution costs
Export duties, net
Amortization
Selling, general and administration
Restructuring and impairment charges
Operating earnings (loss)
Adjusted EBITDA1
Capital expenditures
SPF (MMfbm)
Production
Shipments
SYP (MMfbm)
Production
Shipments
$
2023
2022
2,436 $
287
71
2,794
(2,215)
(405)
(8)
(185)
(164)
(137)
(319)
4,077
309
79
4,465
(2,489)
(435)
(18)
(186)
(194)
(31)
1,111
$
$
2 $
253 $
1,328
184
2,687
2,711
2,860
2,882
2,635
2,705
3,018
3,036
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure. 2023 Adjusted EBITDA was impacted by a one-time charge of $2 million related to inventory purchase price
accounting related to the Spray Lake lumber mill acquisition.
Sales and Shipments
Lumber sales decreased compared to 2022 due primarily to lower product pricing and, to a lesser extent, lower
shipments. The price variance resulted in a decrease in operating earnings and Adjusted EBITDA of $1,588 million
compared to 2022.
SPF shipment volumes were comparable versus 2022. SPF shipment volumes in Q1-23 increased year-over-year as Q1-22
was impacted by disruptions to rail and truck services resulting from severe weather and flooding in B.C. carried over
from Q4-21. This increase was substantially offset by lower shipment volumes resulting from weaker demand during the
balance of the year.
SYP shipment volumes decreased compared to 2022 due primarily to reductions in production volumes, discussed further
in the section below.
The volume variance resulted in an increase in operating earnings and Adjusted EBITDA of $4 million compared to 2022.
- 5 -
SPF Sales by Destination
U.S.
Canada
Other
2023
MMfbm
1,760
878
73
2,711
%
65%
32%
3%
2022
MMfbm
1,755
837
113
2,705
%
65%
31%
4%
We ship SPF to several export markets, while our SYP sales are almost entirely within the U.S. The relative proportion of
shipments of SPF by destination was comparable versus prior year. Exports of SPF outside North America have declined in
recent years due to reduced exports of low-grade lumber to China.
Wood chip and other residual sales decreased compared to 2022 due primarily to decreases in the pricing of chips and
lower lumber production in the U.S. South. Logs and other sales were broadly comparable to prior year.
Costs and Production
SPF production volumes were comparable versus 2022 due primarily to fewer reductions in operating schedules taken in
the current year, offset in part by the impact of the previously announced permanent curtailment of one shift at our
Fraser Lake and Williams Lake lumber mills and reduced production at certain of our lumber mills in Alberta in the
summer due to wildfire evacuation impacts.
SYP production volumes decreased compared to 2022 due primarily to the curtailment of operations at our lumber mill in
Perry, Florida and incremental production curtailments to manage inventory.
Cost inflation across a number of our inputs including supplies and materials, energy, labour costs, and transportation has
moderated.
Costs of products sold decreased compared to 2022 due primarily to lower log and manufacturing costs in our Canadian
operations, lower SYP shipment volumes, and a favourable $77 million variance relating to inventory write-downs. We
recorded significant inventory valuation reserves in Q4-22 due to low product pricing at period-end. Required inventory
valuation reserves were lower in 2023 due to decreases in inventory costs, primarily from lower log costs, and lower
overall inventory levels. Log harvesting in Western Canada in Q4-23 has been slowed by warm weather.
Most of our SPF log requirements are harvested from crown lands owned by the provinces of B.C. or Alberta. B.C.’s
stumpage system is tied to reported lumber prices, with a time lag, and publicly auctioned timber harvesting rights.
Alberta’s stumpage system is correlated to published lumber prices with a shorter time lag.
SPF log costs decreased compared to 2022 due primarily to lower stumpage rates in Alberta and B.C. and lower
purchased log costs.
SPF unit manufacturing costs decreased compared to 2022 due primarily to lower energy, supplies and materials, and
labour costs. The weakening of the CAD against the USD was also a contributing factor.
SYP log costs decreased compared to 2022 as availability of logs improved. SYP unit manufacturing costs increased
compared to 2022 due to higher maintenance and labour costs, offset by lower energy costs.
Freight and other distribution costs decreased compared to 2022 due primarily to lower trucking rates, favourable
changes in customer geography mix, and lower shipment volumes.
Export duty expense decreased compared to 2022. As disclosed in the table below, prior to consideration of the impact of
duty recoveries attributable to finalization of POIs, export duties for 2023 decreased compared to 2022 due primarily to
lower pricing, and a lower CVD cash deposit rate, offset in part by a higher estimated ADD rate. Export duties in 2023
- 6 -
2023 Annual Report | 19
2023 Annual Report | 19
included a recovery of $62 million related to the USDOC finalization of AR4 duty rates whereas export duties in 2022
included a recovery of $81 million related to the USDOC finalization of AR3 duty rates.
The following table reconciles our cash deposits paid during the year to the amount recorded in our statements of
earnings:
Duty impact on earnings ($ millions)
Cash deposits paid1
Adjust to West Fraser Estimated ADD rate2
Export duties, net
Duty recovery attributable to AR33
Duty recovery attributable to AR44
Net duty recovery (expense)
Net interest income on duty deposits receivable
2023
2022
(53) $
(17)
(70)
—
62
(8)
27 $
(117)
18
(99)
81
—
(18)
9
$
$
1.
2.
3.
4.
Represents combined CVD and ADD cash deposit rate of 11.12% for January 1 to January 9, 2022, 11.14% for January 10 to August 8, 2022, and
8.25% from August 9, 2022 to July 31, 2023, and 9.25% from August 1 to December 31, 2023.
Represents adjustment to West Fraser Estimated ADD rate of 8.84% for 2023 and 4.52% for 2022.
$81 million represents the duty recovery attributable to the finalization of AR3 duty rates for the 2020 POI. The final CVD rate was 3.62% and the
final ADD rate was 4.63% for AR3.
$62 million represents the duty recovery attributable to the finalization of AR4 duty rates for the 2021 POI. The final CVD rate was 2.19% and the
final ADD rate was 7.06% for AR4.
Amortization expense was comparable versus 2022.
Selling, general and administration costs decreased compared to 2022 due primarily to lower variable compensation
costs, offset in part by annual salary increases.
Restructuring and impairment charges of $137 million were recorded in 2023. Of this amount, $128 million related to
facility closures and curtailments due to availability of economic fibre sources in the U.S. South and B.C. The remaining
balance relates to impairment losses relating to an equity accounted investment that produces and distributes wood
pellets and the closure of a regional corporate office.
Restructuring and impairment charges of $31 million were recorded in 2022 relating to the curtailment of operations at
our lumber mill in Perry, Florida.
Operating earnings for the Lumber Segment decreased by $1,430 million compared to 2022 for the reasons explained
above.
Adjusted EBITDA for the Lumber Segment decreased by $1,326 million compared to 2022. The following table shows the
Adjusted EBITDA variance for the period. The impact of the contribution from our Spray Lake lumber mill from November
17, 2023, the date of acquisition, to December 31, 2023 is nominal and included under Other. This impact includes a one
time charge of $2 million related to inventory purchase price accounting. The impact of changes in pricing, cost and
volume for wood chip and other residuals is also included under Other. Energy revenues were also lower compared to the
prior year.
Adjusted EBITDA ($ millions)
Adjusted EBITDA - comparative period
Price
Volume
Changes in export duties
Changes in costs
Impact of inventory write-downs
Other
Adjusted EBITDA - current period
- 7 -
2022 to 2023
$
$
1,328
(1,588)
4
11
206
77
(36)
2
Softwood Lumber Dispute
On November 25, 2016, a coalition of U.S. lumber producers petitioned the USDOC and the USITC to investigate alleged
subsidies to Canadian softwood lumber producers and levy CVD and ADD duties against Canadian softwood lumber
imports. The USDOC has and continues to choose us as a “mandatory respondent” to both the countervailing and
antidumping investigations, and as a result, we have received unique company-specific rates.
Developments in CVD and ADD rates
We began paying CVD and ADD duties in 2017 based on the determination of duties payable by the USDOC. The CVD and
ADD cash deposit rates are updated upon the finalization of the USDOC’s AR process for each POI, as summarized in the
tables below.
On March 14, 2023, the USDOC initiated AR5 POI covering the 2022 calendar year. West Fraser was selected as a
mandatory respondent, which will result in West Fraser continuing to be subject to a company-specific rate.
The respective Cash Deposit Rates, the AR POI Final Rate and the West Fraser Estimated ADD Rate for each period are as
follows:
Effective dates for CVD
AR1 POI1,2
April 28, 2017 - August 24, 2017
August 25, 2017 - December 27, 2017
December 28, 2017 - December 31, 2017
January 1, 2018 - December 31, 2018
AR2 POI3
January 1, 2019 - December 31, 2019
AR3 POI4
January 1, 2020 - November 30, 2020
December 1, 2020 - December 31, 2020
AR4 POI5
January 1, 2021 - December 1, 2021
December 2, 2021 - December 31, 2021
AR5 POI6
January 1, 2022 – January 9, 2022
January 10, 2022 – August 8, 2022
August 9, 2022 - December 31, 2022
AR6 POI7
January 1, 2023 - July 31, 2023
August 1, 2023 - December 31, 2023
Cash Deposit
Rate
AR POI Final
Rate
24.12 %
— %
17.99 %
17.99 %
6.76 %
— %
6.76 %
7.57 %
17.99 %
5.08 %
17.99 %
7.57 %
7.57 %
5.06 %
5.06 %
5.08 %
3.62 %
3.62 %
2.19 %
3.62 %
3.62 %
2.19 %
2.19 %
n/a
n/a
n/a
n/a
n/a
1.
2.
3.
4.
5.
6.
7.
On April 24, 2017, the USDOC issued its preliminary rate in the CVD investigation. The requirement that we make cash deposits for CVD was
suspended on August 24, 2017, until the USDOC published the revised rate.
On November 24, 2020, the USDOC issued the final CVD rate for the AR1 POI.
On November 24, 2021, the USDOC issued the final CVD rate for the AR2 POI. On January 10, 2022, the USDOC amended the final CVD rate for the
AR2 POI from 5.06% to 5.08% for ministerial errors. This table only reflects the final rate.
On August 4, 2022, the USDOC issued the final CVD rate for the AR3 POI.
On August 1, 2023, the USDOC issued the final CVD rate for the AR4 POI.
The CVD rate for the AR5 POI will be adjusted when AR5 is complete and the USDOC finalizes the rate, which is not expected until 2024.
The CVD rate for the AR6 POI will be adjusted when AR6 is complete and the USDOC finalizes the rate, which is not expected until 2025.
- 8 -
2023 Annual Report | 21
2023 Annual Report | 21
Effective dates for ADD
AR1 POI1,2
June 30, 2017 - December 3, 2017
December 4, 2017 - December 31, 2017
January 1, 2018 - December 31, 2018
AR2 POI3
Cash Deposit
Rate
AR POI Final
Rate
West Fraser
Estimated
Rate
6.76 %
5.57 %
5.57 %
1.40 %
1.40 %
1.40 %
1.46 %
1.46 %
1.46 %
January 1, 2019 - December 31, 2019
5.57 %
6.06 %
4.65 %
AR3 POI4
January 1, 2020 - November 29, 2020
November 30, 2020 - December 31, 2020
AR4 POI5
January 1, 2021 - December 1, 2021
December 2, 2021 - December 31, 2021
AR5 POI6
January 1, 2022 - August 8, 2022
August 9, 2022 - December 31, 2022
AR6 POI7
January 1, 2023 - July 31, 2023
August 1, 2023 - December 31, 2023
5.57 %
1.40 %
1.40 %
6.06 %
6.06 %
4.63 %
4.63 %
7.06 %
4.63 %
4.63 %
7.06 %
7.06 %
n/a
n/a
n/a
n/a
3.40 %
3.40 %
6.80 %
6.80 %
4.52 %
4.52 %
8.84 %
8.84 %
1.
2.
3.
4.
5.
6.
7.
On June 26, 2017, the USDOC issued its preliminary rate in the ADD investigation effective June 30, 2017.
On November 24, 2020, the USDOC issued the final ADD rate for the AR1 POI.
On November 24, 2021, the USDOC issued the final ADD rate for the AR2 POI.
On August 4, 2022, the USDOC issued the final ADD rate for the AR3 POI.
On July 31, 2023, the USDOC issued the final ADD rate for the AR4 POI. On September 7, 2023, the USDOC amended the final ADD rate for the AR4
POI from 6.96% to 7.06% for ministerial errors. This table only reflects the final rate.
The ADD rate for the AR5 POI will be adjusted when AR5 is complete and the USDOC finalizes the rate, which is not expected until 2024.
The ADD rate for the AR6 POI will be adjusted when AR6 is complete and the USDOC finalizes the rate, which is not expected until 2025.
Accounting policies for duties
The CVD and ADD rates apply retroactively for each POI. We record CVD as export duty expense at the cash deposit rate
until an AR finalizes a new applicable rate for each POI. We record ADD as export duty expense by estimating the rate to
be applied for each POI by using our actual results and a similar calculation methodology as the USDOC and adjust when
an AR finalizes a new applicable rate for each POI. The difference between the cumulative cash deposits paid and
cumulative export duty expense recognized for each POI is recorded on our balance sheet as export duty deposits
receivable or payable.
The difference between the cash deposit amount and the amount that would have been due based on the final AR rate
will incur interest based on the U.S. federally published interest rate. We record interest income on our duty deposits
receivable, net of any interest expense on our duty deposits payable, based on this rate.
Appeals
On May 22, 2020, the North American Free Trade Agreement (“NAFTA”) panel issued its final decision on “Injury”. The
NAFTA panel rejected the Canadian parties’ arguments and upheld the USITC’s remand determination in its entirety.
On August 28, 2020, the World Trade Organization’s (“WTO”) dispute-resolution panel ruled unanimously that U.S.
countervailing duties against Canadian softwood lumber are inconsistent with the WTO obligations of the United States.
The decision confirmed that Canada does not subsidize its softwood lumber industry. On September 28, 2020, the U.S.
announced that it would appeal the WTO panel’s decision.
Under U.S. trade law, the International Trade Commission (“ITC”) must review antidumping and countervailing orders
every 5 years from the date of issuance. This process is referred to as a "Sunset Review". On November 30, 2023, the ITC
voted to maintain the ADD and CVD orders on softwood lumber from Canada on the grounds that the revocation would
- 9 -
likely lead to the continuation or recurrence of material injury to the U.S. domestic industry within a reasonably
foreseeable time.
The softwood lumber case will continue to be subject to NAFTA or the new Canada-United States-Mexico Agreement
(“CUSMA”), WTO dispute resolution processes, and litigation in the U.S. In the past, long periods of litigation have led to
negotiated settlements and duty deposit refunds. In the interim, duties remain subject to the USDOC AR process, which
results in an annual adjustment of duty deposit rates.
Notwithstanding the deposit rates assigned under the investigations, our final liability for CVD and ADD will not be
determined until each annual administrative review process is complete and related appeal processes are concluded.
North America Engineered Wood Products Segment
NA EWP Segment Earnings
($ millions unless otherwise indicated)
Sales
OSB
Plywood, LVL and MDF
Wood chips, logs and other
Cost of products sold
Freight and other distribution costs
Amortization
Selling, general and administration
Operating earnings
Adjusted EBITDA1
Capital expenditures
OSB (MMsf 3/8” basis)
Production
Shipments
Plywood (MMsf 3/8” basis)
Production
Shipments
2023
2022
$
1,998 $
587
23
2,608
(1,594)
(329)
(273)
(96)
316
$
$
589 $
156 $
6,389
6,380
727
731
3,004
759
26
3,789
(1,677)
(329)
(306)
(106)
1,371
1,677
235
6,109
6,006
716
707
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
Our NA EWP segment includes our North American OSB, plywood, MDF, and LVL operations.
Sales and Shipments
Sales decreased compared to 2022 due primarily to lower product pricing, in particular OSB, offset in part by higher OSB
shipment volumes.
The price variance resulted in a decrease in operating earnings and Adjusted EBITDA of $1,254 million compared to 2022.
OSB shipment volumes increased compared to 2022 as shipments in the first half of 2022 were constrained due to limited
availability of railcars to service our Western Canada and Ontario manufacturing facilities. Higher production volumes,
discussed further in the section below, was also a contributing factor. Plywood shipment volumes were slightly higher
compared to 2022.
The volume variance resulted in an increase in operating earnings and Adjusted EBITDA of $22 million compared to 2022.
- 10 -
2023 Annual Report | 23
2023 Annual Report | 23
Costs and Production
OSB production volumes increased compared to 2022. OSB production volumes in 2022 were impacted by reduced
operating schedules in the first half of the year to manage inventory levels as a result of transportation disruptions.
Improved productivity at a number of our facilities and the ramp-up of our Allendale, South Carolina mill were also
contributing factors to the increase year over year.
Plywood production volumes increased slightly compared to 2022 as improved recovery and reliability offset the impacts
of the previously announced permanent curtailment of one shift at our plywood mill located in Quesnel, B.C. that was
effective Q4-22.
Costs of products sold decreased compared to 2022 due to lower input prices, lower energy and fibre costs, lower labour
costs, improved productivity, and the weakening of the CAD against the USD. These factors were offset in part by higher
costs due to Allendale ramp-up.
Costs of products sold include the impact of incremental Allendale startup costs incurred in the current year. The 2023 NA
EWP segment results include $13 million incurred through the second quarter in connection with the preparation of the
Allendale, South Carolina mill for startup.
Freight and other distribution costs were comparable to 2022 as the impact of higher OSB shipment volumes was offset
by lower trucking rates.
Amortization expense decreased compared to 2022 as certain assets reached the end of their estimated useful lives.
Selling, general and administration costs were lower than 2022 due primarily to lower variable compensation costs, offset
in part by annual salary increases.
Operating earnings for the NA EWP Segment decreased $1,055 million compared to 2022 due to the reasons explained
above.
Adjusted EBITDA for the NA EWP Segment decreased by $1,088 million from 2022. The following table shows the
Adjusted EBITDA variance for the period.
Adjusted EBITDA ($ millions)
Adjusted EBITDA - comparative period
Price
Volume
Changes in costs
Impact of inventory write-downs
Other
Adjusted EBITDA - current period
2022 to 2023
$
$
1,677
(1,254)
22
156
7
(19)
589
- 11 -
Pulp & Paper Segment
Pulp & Paper Segment Earnings
($ millions unless otherwise indicated)
Sales
Cost of products sold
Freight and other distribution costs
Amortization
Selling, general and administration
Restructuring and impairment charges
Operating loss
Adjusted EBITDA1
Capital expenditures
Pulp (Mtonnes)
Production
Shipments
$
$
$
2023
2022
623 $
(555)
(120)
(24)
(25)
(142)
(242)
(77) $
32 $
913
913
807
(596)
(153)
(35)
(32)
(13)
(22)
26
29
940
968
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
Our Pulp & Paper segment results include the results of the Hinton pulp mill, Quesnel River Pulp mill, and Slave Lake Pulp
mill held for sale as the transactions had not completed as at December 31, 2023.
Sales and Shipments
Sales decreased compared to 2022 due primarily to lower pulp pricing and the volume impact of the transition of our
Hinton pulp mill to UKP. The price variance resulted in a decrease in operating earnings and Adjusted EBITDA of $144
million compared to 2022.
Pulp shipments decreased compared to 2022 due primarily to reduction in production volumes, discussed further in the
section below. The volume variance resulted in an increase in operating earnings and Adjusted EBITDA of $6 million
compared to 2022.
Costs and Production
Pulp production decreased compared to 2022 due primarily to the impact of transitioning our Hinton pulp mill, offset in
part by a recovery of volumes lost in the prior year due to reductions in operating schedules taken as a result of
transportation disruptions, in particular for our BCTMP mills, and lower production curtailments related to power prices
in Alberta.
Costs of products sold decreased compared to 2022 due primarily to lower shipment volumes, lower fibre costs driven by
lower pulp pricing, lower spend on chemicals and energy as a result of the Hinton pulp mill transition to UKP, and lower
power prices. This was partially offset by a $12 million unfavourable impact relating to inventory write-downs and higher
maintenance expenditures in the current year.
Freight and other distribution costs decreased compared to 2022 due to lower shipment volumes and lower ocean freight
costs.
Amortization expense decreased compared to 2022. The decrease in amortization expense relates to the write-down and
transfer of property, plant and equipment associated with the Hinton pulp mill, Quesnel River Pulp mill, and Slave Lake
Pulp mill to a disposal group held for sale. No further amortization expense was taken on the assets upon transfer to the
disposal group held for sale.
- 12 -
2023 Annual Report | 25
2023 Annual Report | 25
Selling, general, and administration costs decreased compared to 2022 due primarily to lower variable compensation
costs, offset in part by annual salary increases.
In 2023, we recorded impairment losses of $142 million relating to the sale of the Hinton pulp mill, Quesnel River Pulp
mill, and Slave Lake Pulp mill, including remeasurement of estimated working capital adjustments specified in the asset
purchase agreements. In 2022, we recorded impairment losses of $13 million related to equipment that was
decommissioned as part of the transition of the Hinton pulp mill to UKP.
Operating loss for the Pulp & Paper Segment increased by $220 million compared to 2022 due to the reasons explained
above.
Adjusted EBITDA for the Pulp & Paper Segment decreased by $103 million compared to 2022. The following table shows
the Adjusted EBITDA variance for the period.
Adjusted EBITDA ($ millions)
Adjusted EBITDA - comparative period
Price
Volume
Changes in costs
Impact of inventory write-downs
Other
Adjusted EBITDA - current period
2022 to 2023
$
$
26
(144)
6
44
(12)
3
(77)
The Hinton pulp mill, Quesnel River Pulp mill, and Slave Lake Pulp mill held for sale comprise a significant portion of the
Pulp & Paper segment’s sales and operating earnings.
($ millions)
Sales relating to pulp mills held for sale
Operating earnings (losses) relating to pulp mills held for sale1
2023
2022
433
(250)
585
(39)
1.
Operating earnings (losses) include impairment losses of $141 million for 2023 and $13 million for 2022.
- 13 -
Europe Engineered Wood Products Segment
Europe EWP Segment Earnings
($ millions unless otherwise indicated)
Sales
Cost of products sold
Freight and other distribution costs
Amortization
Selling, general and administration
Restructuring and impairment charges
Operating earnings (loss)
Adjusted EBITDA1
Capital expenditures
OSB (MMsf 3/8” basis)
Production
Shipments
GBP - USD exchange rate
Closing rate
Average rate
2023
2022
$
$
$
517 $
(409)
(40)
(49)
(21)
—
(3)
46 $
30 $
1,016
1,023
1.27
1.24
738
(479)
(46)
(53)
(28)
(15)
117
186
20
954
977
1.21
1.24
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
Our Europe EWP segment includes our U.K. and Belgium OSB, MDF, and particleboard operations. Revenues and
expenses of our European operations, which have British pound sterling and Euro functional currencies, are translated at
the average rate of exchange prevailing during the period.
Sales and Shipments
Sales decreased compared to 2022 due to lower product pricing in local currency terms and, to a lesser extent, lower
shipment volumes.
The price variance resulted in a decrease in operating earnings and Adjusted EBITDA of $133 million compared to 2022.
The price variance represents the impact of changes in product pricing in local currency terms, with any associated
foreign exchange impact from the strengthening or weakening of the GBP against USD presented under Other in the
Adjusted EBITDA variance table.
Overall shipment volumes decreased versus 2022 due to weaker demand. The impact of modestly higher OSB shipment
volumes was more than offset by a significant decrease in MDF and particleboard shipment volumes. OSB shipment
volumes increased as 2022 shipment volumes were adversely impacted by the impacts of customer destocking in the
second half of the year. Shipment volumes of MDF and particleboard are highly correlated to home building activity and
decreased significantly compared to 2022 due to weaker demand driven by higher interest rates over the past year. The
volume variance resulted in a decrease of $25 million compared to 2022.
Costs and Production
Production volumes in both years were impacted by production curtailments taken to manage inventory levels for the
reasons discussed above. OSB had higher production curtailments in 2022 and MDF and particleboard had higher
production curtailments in 2023.
Costs of products sold decreased compared to 2022 due primarily to lower shipment volumes from MDF and
particleboard as well as lower energy and resin costs, offset in part by higher OSB shipment volumes and fibre costs.
- 14 -
2023 Annual Report | 27
2023 Annual Report | 27
Freight and other distribution costs decreased compared to 2022 due primarily to lower shipment volumes.
Amortization decreased compared to 2022 as certain assets reached the end of their estimated useful lives. The
impairment of our South Molton, England location in 2022 was also a contributing factor.
Selling, general and administration costs decreased compared to 2022 due primarily to lower variable compensation
costs, offset in part by annual salary increases.
Restructuring and impairment charges of $15 million were recorded in 2022 relating to our South Molton, England
location.
Operating earnings for the Europe EWP Segment decreased by $120 million compared to 2022 due to the reasons
explained above.
Adjusted EBITDA for the Europe EWP Segment decreased by $140 million from 2022. The following table shows the
Adjusted EBITDA variance for the period. The variances presented represent the impact of changes in price, volume and
cost in local currency terms, with any associated foreign exchange impact from the strengthening or weakening of the
GBP against USD presented under Other. The impact of the sale of carbon allowances is also included under Other.
Adjusted EBITDA ($ millions)
Adjusted EBITDA - comparative period
Price
Volume
Changes in costs
Other
Adjusted EBITDA - current period
2022 to 2023
$
$
186
(133)
(25)
15
3
46
- 15 -
Discussion & Analysis of Specific Items
Selling, general and administration
Selling, general and administration costs for 2023 were $307 million (2022 - $365 million).
Selling, general and administration costs decreased compared to 2022 due primarily to lower variable compensation
costs, offset in part by annual salary increases.
Selling, general and administration expense related to our operating segments are also discussed under “Discussion &
Analysis of Annual Results by Product Segment”.
Equity-based compensation
Our equity-based compensation includes our share purchase option, phantom share unit, and deferred share unit plans
(collectively, the “Plans”). Our Plans are fair valued at each period-end, and the resulting expense or recovery is recorded
in equity-based compensation over the vesting period.
Our valuation models consider various factors, with the most significant being the change in the market value of our
shares from the beginning to the end of the relevant period. The expense or recovery does not necessarily represent the
value that the holders of options and units will ultimately receive.
We recorded an expense of $25 million during 2023 (2022 - expense of $5 million). The expense for 2023 reflects an
increase in the price of our common shares traded on the TSX, changes in the expected payout multiple on our
performance share units, and additional vesting of units granted.
The expense for 2022 reflects changes in the expected payout on our performance share units and vesting of granted
units, offset in part by a decrease in the price of our common shares.
Finance income (expense), net
Finance income (expense), net includes interest earned on short-term deposits and interest recognized on our duty
deposits.
Finance income, net increased compared to 2022 due primarily to higher interest income earned on our cash equivalents,
higher net interest income related to export duties, including the impact of AR4 finalization in Q3-23, and higher net
interest income on our defined-benefit pension plans as our overall funded position has increased.
Other income
Other income of $5 million was recorded in 2023 (2022 - other income of $37 million). Other income in 2023 relates
primarily to gains on our electricity swaps driven by increases in forward electricity prices over the remaining term of the
contracts and settlement gains relating to pension annuity purchase agreements for certain retired and terminated
vested employees. These factors were offset in part by foreign exchange losses recorded on our CAD-denominated
monetary assets and liabilities as the CAD appreciated against the USD.
Other income in 2022 relates primarily to foreign exchange gains recorded on our CAD-denominated monetary assets and
liabilities and mark-to-market gains on our interest rate swap contracts.
Tax recovery (provision)
We recorded an income tax recovery in 2023 of $61 million compared to an income tax expense of $618 million in 2022.
The effective tax rate was 27% in 2023 compared to 24% in 2022. Note 20 to the Annual Financial Statements provides a
reconciliation of income taxes calculated at the statutory rate to the income tax expense.
- 16 -
2023 Annual Report | 29
2023 Annual Report | 29
Other comprehensive earnings – translation of operations with different functional currencies
Our European operations have British pound sterling and Euro functional currencies. Our Spray Lake lumber mill and
jointly-owned newsprint operation have Canadian dollar functional currency. Assets and liabilities of these entities are
translated at the rate of exchange prevailing at the reporting date, and revenues and expenses at average rates during
the period. Gains or losses on translation are included as a component of shareholders’ equity in Accumulated other
comprehensive loss.
We recorded a translation gain of $34 million during 2023 (2022 - translation loss of $83 million).
In general, a strengthening (weakening) of the USD against the Canadian dollar, British pound sterling or Euro results in a
translation loss (gain). The translation gain in the current year reflects a weakening of the USD against the
aforementioned currencies.
Other comprehensive earnings – actuarial gains/losses on retirement benefits
The funded position of our defined benefit pension plans and other retirement benefit plans is estimated at the end of
each period. The funded position, as shown in note 14 to the Annual Financial Statements, is determined by subtracting
the value of the plan assets from the plan obligations.
We recorded an after-tax actuarial loss of $35 million during 2023 (2022 - after-tax actuarial gain of $164 million).
The actuarial loss in 2023 reflects a decrease in the discount rate used to calculate plan liabilities and adjustments to
actuarial assumptions.
The actuarial gain in 2022 reflects an increase in the discount rate used to calculate plan liabilities offset in part by lower
returns on plan assets.
- 17 -
FOURTH QUARTER RESULTS
Summary Results
($ millions)
Earnings
Sales
Cost of products sold
Freight and other distribution costs
Export duties, net
Amortization
Selling, general and administration
Equity-based compensation
Restructuring and impairment charges
Operating earnings (loss)
Finance income, net
Other income (expense)
Tax recovery (provision)
Earnings (loss)
Adjusted EBITDA1
Q4-23
Q3-23
Q4-22
$
$
$
1,514 $
(1,117)
(212)
(8)
(136)
(80)
(15)
(134)
(187)
14
(30)
50
(153) $
1,705 $
(1,128)
(217)
39
(132)
(73)
4
(13)
184
21
11
(56)
159 $
1,615
(1,209)
(209)
(29)
(148)
(98)
(6)
(47)
(130)
3
2
31
(94)
97 $
325 $
70
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
Selected Quarterly Amounts
($ millions, unless otherwise indicated)
Sales
Earnings (loss)
Basic EPS (dollars)
Diluted EPS (dollars)
Q4-23
Q3-23
Q2-23
Q1-23
Q4-22
Q3-22
Q2-22
Q1-22
$ 1,514 $ 1,705 $ 1,608 $ 1,627 $ 1,615 $ 2,088 $ 2,887 $ 3,110
762 $ 1,090
(42) $
$
10.35
7.66
10.25
7.59
(153) $
(1.87)
(1.87)
(131) $
(1.57)
(1.57)
159 $
1.91
1.81
216 $
2.50
2.50
(0.50)
(0.52)
(1.12)
(1.13)
(94) $
Pricing for our products improved through Q1-22, although these pricing gains were offset in part by lower shipments as
a result of constraints on transportation availability. Subsequent decreases in sales and earnings through Q2-23 were
driven primarily by decreases in lumber and OSB pricing, inventory write-downs, maintenance-related costs and
downtime in our pulp segment, and impairment charges. Earnings improved in Q3-23, driven primarily by improvements
in OSB pricing, lower impairment charges, the impacts of AR4 finalization, and lower maintenance-related expenditures in
our pulp segment. Sales and earnings decreased in Q4-23 due primarily to decreases in lumber and OSB pricing, higher
export duties, and impairment charges related to announced facility closures and curtailments in our lumber segment.
- 18 -
2023 Annual Report | 31
2023 Annual Report | 31
Discussion & Analysis of Quarterly Results by Product Segment
Lumber Segment
Lumber Segment Earnings
($ millions unless otherwise indicated)
Sales
Lumber
Wood chips and other residuals
Logs and other
Cost of products sold
Freight and other distribution costs
Export duties, net
Amortization
Selling, general and administration
Restructuring and impairment charges
Operating loss
Adjusted EBITDA1
SPF (MMfbm)
Production
Shipments
SYP (MMfbm)
Production
Shipments
Q4-23
Q3-23
Q4-22
$
530 $
66
18
614
(521)
(93)
(8)
(48)
(43)
(128)
(228)
613 $
68
15
697
(551)
(100)
39
(46)
(41)
—
(2)
611
73
17
701
(607)
(92)
(29)
(51)
(51)
(31)
(160)
$
(51) $
44 $
(77)
687
658
655
662
693
678
709
704
594
582
707
713
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure. Q4-23 Adjusted EBITDA was impacted by a one-time charge of $2 million related to inventory purchase price
accounting related to the Spray Lake lumber mill acquisition.
Sales and Shipments
Lumber sales decreased compared to Q3-23 due to lower product pricing and lower shipment volumes. Lumber industry
supply and demand balances continue to experience the effects of softened repair and remodelling market demand and
relatively elevated imports of SPF products from Europe. Q4-23 lumber sales decreased compared to Q4-22 due primarily
to lower product pricing offset in part by higher shipment volumes. Higher SPF shipment volumes more than offset lower
SYP shipment volumes resulting in a positive volume variance compared to Q4-22.
The price variance resulted in a decrease in operating earnings and Adjusted EBITDA by $65 million compared to Q3-23,
and a decrease by $99 million compared to Q4-22.
SPF shipment volumes were slightly lower than Q3-23. SPF shipment volumes increased compared to Q4-22 due to higher
production volumes, discussed further in the section below.
SYP shipment volumes decreased compared to Q3-23 and Q4-22 due primarily to lower production volumes, discussed
further in the section below.
The volume variance resulted in a decrease in operating earnings and Adjusted EBITDA of $5 million compared to Q3-23
and an increase of $5 million compared to Q4-22.
- 19 -
SPF Sales by Destination
U.S.
Canada
Other
Q4-23
Q3-23
Q4-22
MMfbm
388
243
26
657
%
59%
37%
4%
MMfbm
454
210
14
678
%
67%
31%
2%
MMfbm
347
213
22
582
%
60%
37%
3%
We ship SPF to certain export markets, while our SYP sales are almost entirely within the U.S. The relative proportion of
shipments of SPF by destination remained broadly comparable versus comparative periods.
Wood chip and other residual sales were comparable to Q3-23 and decreased compared to Q4-22 due primarily to lower
chip pricing. Sales relating to logs and other were consistent with comparative periods.
Costs and Production
SPF production volumes decreased slightly compared to Q3-23 due to the impact of incremental reductions in operating
schedules to manage inventory levels at our B.C. mills, offset in part by incremental production volume from our newly
acquired Spray Lake lumber mill. SPF production volumes increased compared to Q4-22 as the prior year period was
impacted by higher reductions in operating schedules to manage inventory levels. Incremental production volume from
our Spray Lake lumber mill was also a contributing factor in the comparison.
SYP production volumes decreased compared to Q3-23 and Q4-22 due to incremental reductions in operating schedules
to manage inventory levels. The impacts of the previously announced curtailment of operations at our Perry, Florida
lumber mill was also a contributing factor in the comparison to Q4-22.
Costs of products sold decreased compared to Q3-23 due primarily to lower shipment volumes and a favourable $11
million variance relating to inventory write-downs. Q3-23 was adversely impacted by an increase in inventory valuation
reserves whereas inventory valuation reserves were largely unchanged in Q4-23. Despite lower product pricing compared
to Q3-23, inventory valuation reserves remained largely unchanged in Q4-23 due primarily to lower log costs, offset in
part by a seasonal increase in log inventory volumes over the fourth quarter.
Costs of products sold decreased compared to Q4-22 due primarily to lower log costs, lower unit manufacturing costs in
our Western Canada operations, and a favourable $40 million variance relating to inventory write-downs. These factors
were offset in part by higher shipment volumes. We recorded significant inventory valuation reserves in Q4-22 due to low
product pricing at period-end whereas inventory valuation reserves were largely unchanged in Q4-23 as compared to
Q3-23.
Most of our SPF log requirements are harvested from crown lands owned by the provinces of B.C. or Alberta. B.C.’s
stumpage system is tied to reported lumber prices, with a time lag, and publicly auctioned timber harvesting rights.
Alberta’s stumpage system is correlated to published lumber prices with a shorter time lag.
SPF log costs in Q4-23 decreased slightly compared to Q3-23 due primarily to lower B.C. stumpage rates. SPF log costs
decreased compared to Q4-22 due primarily to lower B.C. stumpage rates and purchased log costs. Lower Alberta
stumpage rates was also a contributing factor.
SPF unit manufacturing costs were broadly consistent versus Q3-23. SPF unit manufacturing costs decreased compared to
Q4-22 due primarily to higher production and lower energy costs.
SYP log costs were comparable to Q3-23 and decreased compared to Q4-22 as availability of logs improved. SYP unit
manufacturing costs decreased compared to Q3-23 due to lower maintenance, labour, and energy costs, offset in part by
lower production in the current period. SYP unit manufacturing costs decreased compared to Q4-22 due primarily to
lower labour and energy costs, offset in part by lower production in the current period.
Freight and other distribution costs decreased compared to Q3-23 due to lower shipment volumes and favourable
changes in customer geography mix. Freight and other distribution costs were comparable to Q4-22 as the costs related
to higher SPF shipment volumes were offset by lower SYP shipment volumes, lower trucking rates, and favourable
changes in customer geography mix.
- 20 -
2023 Annual Report | 33
2023 Annual Report | 33
We recorded export duty expense in Q4-23 versus export duty recovery in Q3-23, which was attributable to the USDOC
finalization of AR4 duty rates during Q3-23. The recovery primarily represents the difference between the final CVD rate
of 2.19% and the CVD cash deposit rates paid on shipments of SPF lumber to the U.S. during AR4, which ranged from
5.06% to 7.57%.
Export duties, net decreased compared to Q3-23 due to lower estimated duty rates, as well as lower pricing and lower
shipment volumes to the U.S. Export duties, net decreased compared to Q4-22 due primarily to lower pricing and a
positive adjustment to West Fraser's annualized estimated ADD rate in Q4-23, offset in part by higher shipment volumes
to the U.S.
The following table reconciles our cash deposits paid during the period to the amount recorded in our statements of
earnings:
Duty impact on earnings ($ millions)
Cash deposits paid1
Adjust to West Fraser Estimated ADD rate2
Export duties, net
Duty recovery attributable to AR44
Net duty recovery (expense)
Net interest income on duty deposits receivable
Q4-23
Q3-23
Q4-22
(12)
4
(8)
—
(8)
6
(14)
(9)
(23)
62
39
14
(12)
(17)
(29)
—
(29)
3
1.
2.
3.
Represents combined CVD and ADD cash deposit rate of 9.25% for August 1 to December 31, 2023, 8.25% for for January 1 to July 31, 2023, and
8.25% for August 9 to December 31, 2022.
Represents adjustment to the annualized West Fraser estimated ADD rate of 8.84% for Q4-23, 10.40% for Q3-23, 4.52% for Q4-22.
$62 million represents the duty recovery attributable to the finalization of AR4 duty rates for the 2021 POI. The final CVD rate was 2.19% and the
final ADD rate was 7.06% for AR4.
Amortization expense was broadly consistent versus comparative periods.
Selling, general and administration costs were comparable to Q3-23. Selling, general and administration costs decreased
compared to Q4-22 due primarily to lower variable compensation costs, offset in part by annual salary increases.
Restructuring and impairment charges of $128 million were recorded in Q4-23 related to facility closures and
curtailments due to availability of economic fibre sources in the U.S. South and B.C. Restructuring and impairment
charges of $31 million were recorded in Q4-22 relating to the curtailment of operations at our lumber mill in Perry,
Florida.
Operating earnings for the Lumber Segment decreased by $225 million compared to Q3-23 and decreased by $68 million
compared to Q4-22 for the reasons explained above.
Adjusted EBITDA for the Lumber Segment decreased by $95 million compared to Q3-23 and increased by $26 million
compared to Q4-22. The following table shows the Adjusted EBITDA variance for the period. The impact of the
contribution from our Spray Lake lumber mill from November 17, 2023, the date of acquisition, to December 31, 2023 is
nominal and included under Other. This impact includes a one time charge of $2 million related to inventory purchase
price accounting.
Adjusted EBITDA ($ millions)
Adjusted EBITDA - comparative period
Price
Volume
Changes in export duties
Changes in costs
Impact of inventory write-downs
Other
Adjusted EBITDA - current period
Q3-23 to Q4-23
Q4-22 to Q4-23
$
$
44 $
(65)
(5)
(47)
17
11
(6)
(51) $
(77)
(99)
5
21
67
40
(8)
(51)
- 21 -
North America Engineered Wood Products Segment
NA EWP Segment Earnings
($ millions unless otherwise indicated)
Sales
OSB
Plywood, LVL and MDF
Wood chips, logs and other
Cost of products sold
Freight and other distribution costs
Amortization
Selling, general and administration
Operating earnings
Adjusted EBITDA1
OSB (MMsf 3/8” basis)
Production
Shipments
Plywood (MMsf 3/8” basis)
Production
Shipments
Q4-23
Q3-23
Q4-22
$
516 $
137
7
661
(410)
(81)
(69)
(27)
74
627 $
145
5
777
(386)
(80)
(67)
(22)
222
447
157
6
610
(397)
(76)
(73)
(27)
35
$
143 $
289 $
109
1,549
1,590
183
184
1,606
1,589
182
178
1,442
1,409
162
181
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
Our NA EWP segment includes our North American OSB, plywood, MDF, and LVL operations.
Sales and Shipments
Sales decreased compared to Q3-23 due primarily to lower OSB pricing. Sales increased compared to Q4-22 due primarily
to higher OSB shipment volumes and, to a lesser extent, higher OSB pricing. These increases were offset in part by lower
plywood, LVL, and MDF pricing.
The price variance resulted in a decrease in operating earnings and Adjusted EBITDA of $110 million compared to Q3-23,
and a decrease of $7 million compared to Q4-22.
OSB shipment volumes were comparable to Q3-23. OSB shipment volumes increased compared to Q4-22 due to higher
production volumes, discussed further in the section below. Plywood shipment volumes were consistent versus
comparative periods.
The volume variance resulted in a decrease in operating earnings and Adjusted EBITDA of $1 million compared to Q3-23,
and an increase of $14 million compared to Q4-22.
Costs and Production
OSB production volumes decreased compared to Q3-23 due to higher major maintenance shutdowns and production
curtailments taken to manage inventory levels, offset in part by the continued ramp-up of our Allendale, South Carolina
mill and improved productivity at certain facilities. OSB production volumes increased compared to Q4-22 due to the
commencement of production from our Allendale mill, improved productivity, offset in part by higher major maintenance
shutdowns and production curtailments taken to manage inventory levels.
Plywood production volumes were comparable to Q3-23. Plywood production volumes increased compared to Q4-22 due
to more consistent operating schedules in the current quarter.
- 22 -
2023 Annual Report | 35
2023 Annual Report | 35
Costs of products sold increased compared to Q3-23 due primarily to higher maintenance spend, the strengthening of the
CAD against the USD, and the impacts of Allendale ramp-up.
Costs of products sold increased compared to Q4-22 due primarily to higher OSB shipment volumes, the recognition of
$14 million in insurance recoveries in Q4-22, and the impacts of Allendale ramp-up. These factors were offset in part by
lower resin, energy, fibre, and labour costs, improved productivity, and a $5 million favourable impact relating to
inventory valuation adjustments.
Freight and other distribution costs were comparable to Q3-23. Freight and other distribution costs increased compared
to Q4-22 due to higher OSB shipment volumes, offset in part by lower trucking rates.
Amortization expense was comparable to Q3-23. Amortization expense decreased compared to Q4-22 as certain assets
reached the end of their useful lives.
Selling, general and administration costs were broadly consistent versus Q3-23. Selling, general and administration costs
were comparable to Q4-22 due primarily to lower variable compensation costs, offset in part by other factors including
annual salary increases.
Operating earnings for the NA EWP Segment decreased by $148 million compared to Q3-23 and increased by $39 million
compared to Q4-22 due to the reasons explained above.
Adjusted EBITDA for the NA EWP Segment decreased by $146 million compared to Q3-23 and increased by $34 million
compared to Q4-22. The following table shows the Adjusted EBITDA variance for the period. The impact of the insurance
recovery recorded in Q4-22 is included under Other.
Adjusted EBITDA ($ millions)
Adjusted EBITDA - comparative period
Price
Volume
Changes in costs
Impact of inventory write-downs
Other
Adjusted EBITDA - current period
Pulp & Paper Segment
Pulp & Paper Segment Earnings
($ millions unless otherwise indicated)
Sales
Cost of products sold
Freight and other distribution costs
Amortization
Selling, general and administration
Restructuring and impairment charges
Operating earnings (loss)
Adjusted EBITDA1
Pulp (Mtonnes)
Production
Shipments
Q3-23 to Q4-23
$
Q4-22 to Q4-23
289 $
(110)
(1)
(37)
2
—
143 $
109
(7)
14
38
5
(16)
143
$
$
Q4-23
Q3-23
Q4-22
159 $
(120)
(31)
(3)
(6)
(6)
(7)
128 $
(107)
(27)
(4)
(6)
(13)
(29)
190
(136)
(32)
(9)
(8)
—
6
$
2 $
(12) $
15
258
244
232
206
221
217
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
- 23 -
Our Pulp & Paper segment results include the results of the Hinton pulp mill, Quesnel River Pulp mill, and Slave Lake Pulp
mill held for sale as the transactions had not completed as at December 31, 2023.
Sales and Shipments
Sales increased compared to Q3-23 due to higher shipment volumes and product pricing. Sales decreased compared to
Q4-22 due to lower product pricing, offset in part by higher shipment volumes.
The price variance resulted in an increase in operating earnings and Adjusted EBITDA of $1 million compared to Q3-23
and a decrease of $47 million compared to Q4-22.
Pulp shipments increased versus comparative periods due to production volume changes as discussed further in the
section below. In addition, Q3-23 shipment volumes were impacted by a labour dispute at B.C. ports, which impacted our
ability to ship our products to overseas customers during July.
The volume variance resulted in a nominal change to operating earnings and Adjusted EBITDA compared to Q3-23, and a
decrease of $5 million compared to Q4-22.
Costs and Production
Pulp production volumes increased compared to Q3-23 due primarily to our Slave Lake Pulp mill, which in Q4-23
benefited from fewer curtailments related to high power prices and management of inventory levels. Pulp production
volumes increased compared to Q4-22. Q4-22 production volumes were impacted by the transition of our Hinton pulp
mill to single-line production of UKP in October 2022, the curtailment at our Cariboo pulp mill to align operating capacity
with the available supply of wood chips, and incremental production curtailments taken at Slave Lake Pulp mill to manage
power prices in Alberta.
Costs of products sold increased compared to Q3-23 due to higher shipment volumes and fibre costs driven by higher
pulp pricing, offset in part by lower power prices in Alberta. Costs of products sold decreased compared to Q4-22 due to
lower fibre costs driven by lower pulp pricing and lower spend on chemicals and energy as a result of the Hinton pulp mill
transition and lower power prices in Alberta, offset in part by higher shipment volumes.
Freight and other distribution costs generally trended with changes in shipment volumes. Lower ocean freight costs
provided an offsetting factor in the comparison to Q4-22.
Amortization expense decreased versus comparative periods. The decrease in amortization expense relates to the write-
down and transfer of property, plant and equipment associated with the Hinton pulp mill, Quesnel River Pulp mill, and
Slave Lake Pulp mill to a disposal group held for sale. No further amortization expense was taken on the assets upon
transfer to the disposal group held for sale.
Selling, general and administration costs were comparable to Q3-23 and decreased versus Q4-22 due primarily to lower
variable compensation costs, offset in part by annual salary increases.
Restructuring and impairment charges of $6 million were recorded in Q4-23 upon remeasurement of estimated working
capital adjustments specified in the asset purchase agreements for the Hinton pulp mill, Quesnel River Pulp mill, and
Slave Lake Pulp mill.
In Q3-23, we recorded impairment losses of $17 million in relation to the sale of the Quesnel River Pulp mill and Slave
Lake Pulp mill. In addition, we recorded an impairment reversal of $4 million in relation to the sale of the Hinton pulp mill
upon remeasurement of estimated working capital adjustments specified in the asset purchase agreement.
Operating earnings for the Pulp & Paper Segment increased by $22 million compared to Q3-23 and decreased by $13
million compared to Q4-22 due to the reasons explained above.
Adjusted EBITDA for the Pulp & Paper Segment increased by $14 million compared to Q3-23 and decreased by $13 million
compared to Q4-22. The following table shows the Adjusted EBITDA variance for the period.
- 24 -
2023 Annual Report | 37
2023 Annual Report | 37
Adjusted EBITDA ($ millions)
Adjusted EBITDA - comparative period
Price
Volume
Changes in costs
Impact of inventory write-downs
Other
Adjusted EBITDA - current period
Europe Engineered Wood Products Segment
Europe EWP Segment Earnings
($ millions unless otherwise indicated)
Sales
Cost of products sold
Freight and other distribution costs
Amortization
Selling, general and administration
Restructuring and impairment charges
Operating earnings (loss)
Adjusted EBITDA1
OSB (MMsf 3/8” basis)
Production
Shipments
GBP - USD exchange rate
Closing rate
Average rate
Q3-23 to Q4-23
Q4-22 to Q4-23
$
$
(12) $
1
—
14
(2)
1
2 $
15
(47)
(5)
38
7
(6)
2
Q4-23
Q3-23
Q4-22
$
100 $
(87)
(7)
(13)
(3)
—
(10)
121 $
(101)
(10)
(12)
(6)
—
(8)
$
3 $
4 $
213
227
235
245
1.27
1.24
1.22
1.27
142
(97)
(9)
(12)
(7)
(15)
3
30
184
201
1.21
1.17
1.
This is a non-GAAP financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
Our Europe EWP segment includes our U.K. and Belgium OSB, MDF, and particleboard operations. Revenues and
expenses of our European operations, which have British pound sterling and Euro functional currencies, are translated at
the average rate of exchange prevailing during the period.
Sales and Shipments
Sales decreased compared to Q3-23 due to lower product pricing and lower shipment volumes. Sales decreased
compared to Q4-22 due primarily to lower product pricing and lower MDF and particleboard shipment volumes, offset in
part by the strengthening of the GBP against the USD.
The price variance resulted in a decrease in operating earnings and Adjusted EBITDA of $3 million compared to Q3-23 and
a decrease of $31 million compared to Q4-22. The price variance represents the impact of changes in product pricing in
local currency terms, with any associated foreign exchange impact from the strengthening or weakening of the GBP
against USD presented under Other in the Adjusted EBITDA variance table.
Shipment volumes decreased compared to Q3-23 as demand weakened for all products. OSB shipment volumes
increased compared to Q4-22 as Q4-22 shipment volumes were adversely impacted by the impacts of customer
destocking. Shipment volumes of MDF and particleboard are highly correlated to home building activity and decreased
significantly compared to Q4-22 due to weaker demand driven by higher interest rates over the past year.
- 25 -
The volume variance resulted in a decrease in operating earnings and Adjusted EBITDA of $3 million compared to Q3-23
and an increase of $1 million compared to Q4-22.
Costs and Production
Production volumes in all comparative periods were impacted by production curtailments taken to manage inventory
levels. Production volumes decreased versus Q3-23 due to incremental production curtailments taken in the current
period. OSB production volumes increased compared to Q4-22 as higher production curtailments were taken in the prior
period in response to the impacts of customer destocking discussed above. MDF and particleboard production volumes
decreased compared to Q4-22 due to incremental production curtailments in the current period.
Costs of products sold decreased versus Q3-23 due primarily to lower shipment volumes and lower fibre costs. These
factors were offset in part by seasonally higher energy costs. Costs of products sold decreased compared to Q4-22 due to
lower resin and labour costs, offset in part by a strengthening of the GBP against the USD and lower gains from the sale of
carbon allowances. Costs of products sold in Q4-22 included a $7 million gain from the sale of carbon allowances whereas
a gain of $2 million was recorded in Q4-23.
Freight and other distribution costs generally trended with changes in shipment volumes.
Amortization was consistent with comparable periods.
Selling, general and administration costs were broadly consistent versus Q3-23. Selling, general and administration costs
decreased compared to Q4-22 due primarily to lower variable compensation, offset in part by annual salary increases.
Restructuring and impairment charges of $15 million were recorded in Q4-22 relating to our South Molton, England
location.
Operating earnings for the Europe EWP Segment decreased by $2 million compared to Q3-23 and decreased by $12
million compared to Q4-22 due to the reasons explained above.
Adjusted EBITDA for the Europe EWP Segment decreased by $1 million compared to Q3-23, and decreased by $27 million
compared to Q4-22. The following table shows the Adjusted EBITDA variance for the period. The variances presented
represent the impact of changes in price, volume and cost in local currency terms, with any associated foreign exchange
impact from the strengthening or weakening of the GBP against USD presented under Other. The impact of the sale of
carbon allowances is also included under Other.
Adjusted EBITDA ($ millions)
Adjusted EBITDA - comparative period
Price
Volume
Changes in costs
Other
Adjusted EBITDA - current period
Q3-23 to Q4-23
$
Q4-22 to Q4-23
4 $
(3)
(3)
3
2
3 $
30
(31)
1
4
(1)
3
$
- 26 -
2023 Annual Report | 39
2023 Annual Report | 39
Discussion & Analysis of Specific Items
Selling, general and administration
Selling, general and administration costs for Q4-23 was $80 million (Q3-23 - $73 million and Q4-22 - $98 million).
Selling, general and administration costs increased compared to Q3-23 due to increased levels of community investment,
which are typically executed in the fourth quarter, and annual salary increases. Selling, general and administration costs
decreased compared to Q4-22 due primarily to lower variable compensation costs, offset in part by annual salary
increases and increased levels of community investment.
Selling, general and administration expense related to our operating segments are also discussed under “Discussion &
Analysis of Quarterly Results by Product Segment”.
Equity-based compensation
We recorded an expense of $15 million during Q4-23 (Q3-23 - recovery of $4 million; Q4-22 - expense of $6 million). The
expense in the current quarter reflects an increase in the price of our common shares traded on the TSX from
September 30, 2023 to December 31, 2023.
Finance income, net
We recorded finance income, net of $14 million in Q4-23 compared to finance income, net of $21 million in Q3-23 and
finance income, net of $3 million in Q4-22.
Finance income decreased compared to Q3-23 due primarily to the recognition of $11 million of interest income related
to the finalization of our AR4 duty rates in Q3-23.
Finance income increased compared to Q4-22 due primarily to higher interest income earned on our cash equivalents,
fluctuations in interest relating to export duties, and higher net interest income on our defined-benefit pension plans as
our overall funded position has increased.
Other income (expense)
Other expense of $30 million was recorded in Q4-23 (Q3-23 - other income of $11 million; Q4-22 - other income of $2
million).
Other expense in Q4-23 relates primarily to foreign exchange losses recorded on our CAD-denominated monetary assets
and liabilities as the CAD appreciated against the USD and losses on our electricity swaps driven by decreases in forward
electricity prices over the remaining term of the contracts.
Tax recovery (provision)
Q4-23 results include an income tax recovery of $50 million, compared to income tax expense of $56 million in Q3-23 and
income tax recovery of $31 million in Q4-22, resulting in an effective tax rate of 25% in the current quarter compared to
26% in Q3-23 and 25% in Q4-22.
Other comprehensive earnings – translation of operations with different functional currencies
We recorded a translation gain of $27 million during Q4-23 (Q3-23 - translation loss of $21 million; Q4-22 - translation
gain of $50 million).
In general, a strengthening (weakening) of the USD against the Canadian dollar, British pound sterling or Euro results in a
translation loss (gain). The translation gain in the current quarter reflects a weakening of the USD against the
aforementioned currencies.
- 27 -
Other comprehensive earnings – actuarial gains/losses on retirement benefits
We recorded an after-tax actuarial loss of $57 million during Q4-23 (Q3-23 - after-tax actuarial gain of $30 million; Q4-22 -
after-tax actuarial gain of $15 million). The actuarial loss in Q4-23 reflects a decrease in the discount rate used to
calculate our plan liabilities and adjustments to actuarial assumptions, offset in part by higher returns on plan assets.
OUTLOOK AND OPERATIONS
Business Outlook
Markets
Several key trends that have served as positive drivers in recent years are expected to continue to support medium and
longer-term demand for new home construction in North America.
The most significant uses for our North America lumber, OSB and engineered wood panel products are residential
construction, repair and remodelling and industrial applications. Over the medium term, improved housing affordability
from stabilization of inflation and interest rates, a large cohort of the population entering the typical home buying stage,
and an aging U.S. housing stock are expected to drive new home construction and repair and renovation spending that
supports lumber, plywood and OSB demand. Over the longer term, growing market penetration of mass timber in
industrial and commercial applications is also expected to become a more significant source of demand growth for wood
building products in North America.
The seasonally adjusted annualized rate of U.S. housing starts was 1.46 million units in December 2023, with permits
issued of 1.50 million units, according to the U.S. Census Bureau. While there are near-term uncertainties for new home
construction, owing in large part to interest rate expectations and the direction of changes to mortgage rates and the
resulting impact on housing affordability, unemployment remains relatively low in the U.S. and central bankers across
North America have indicated that the current rate hiking cycle appears to be nearing its end. However, demand for new
home construction and our wood building products may decline in the near term should the broader economy and
employment slow or interest rates remain elevated or increase further than currently expected, impacting consumer
sentiment and housing affordability.
Although we continue to experience near-term softness, we expect demand for our European products will grow over the
longer term as use of OSB as an alternative to plywood grows. Further, an aging housing stock supports long-term repair
and renovation spending and additional demand for our wood building products. Near-term risks, including relatively high
interest rates, ongoing geopolitical developments and the lagged impact of recent inflationary pressures, may cause
further temporary slowing of demand for our panel products in the U.K. and Europe. Despite these risks, we are confident
that we will be able to navigate through this period and capitalize on the long-term growth opportunities ahead.
Softwood lumber dispute
Canadian softwood lumber exports to the U.S. have been the subject of trade disputes and managed trade arrangements
for several decades. Countervailing and antidumping duties have been in place since April 2017, and we are required to
make deposits in respect of these duties. Whether and to what extent we can realize a selling price to recover the impact
of duties payable will largely depend on the strength of demand for softwood lumber. The USDOC commenced
Administrative Review 5 (“AR5”) in March 2023, with final rates expected in August 2024. Additional details can be found
under the section “Discussion & Analysis of Annual Results by Product Segment - Lumber Segment - Softwood Lumber
Dispute".
Operations
Anticipated shipment levels assume no significant change from current market demand conditions, sufficient availability
of logs within our economic return criteria, and no additional temporary, indefinite or permanent curtailments. Our
operations and results could be negatively affected by increasing or elevated interest rates, softening demand, the
availability of transportation, the availability of labour, disruption to the global economy resulting from the conflicts in
Ukraine and the Middle East, inflationary pressures, including increases in energy prices, adverse weather conditions in
our operating areas, intense competition for logs, elevated stumpage fees and production disruptions due to other
uncontrollable factors.
- 28 -
2023 Annual Report | 41
2023 Annual Report | 41
We expect total lumber shipments in 2024 will be largely similar to 2023 levels as the acquisition of Spray Lake lumber
mill and reliability and capital improvement gains across our lumber mill portfolio will be largely offset by capacity
reductions from the recently announced permanent closures of our Maxville mill in Florida and Fraser Lake mill in British
Columbia and the indefinite curtailment of the Huttig mill in Arkansas. In 2024, we expect SPF shipments to be 2.6 to 2.8
billion board feet and SYP shipments to be 2.7 to 2.9 billion board feet. On January 1, 2024, stumpage rates decreased
slightly in B.C. due to the market-based adjustments related to lumber prices; that notwithstanding, inflationary
pressures on development, logging and delivery costs continue to provide upward bias to fibre costs. Given the current
commodity price environment, B.C. stumpage rates are expected to decrease modestly through much of Q1-24 before
stabilizing as we head into Q2-24 given the stability in recent commodity prices. In Alberta, Q1-24 stumpage rates are
expected to be largely similar to Q4-23 levels, remaining relatively low as they too are closely linked to the price of
lumber but with a quicker response to changing lumber prices. We expect average 2024 log costs across the U.S. South to
be largely similar to those of 2023, while region-specific log costs are likely to vary depending on the unique conditions in
each procurement zone.
In our NA EWP segment, we expect 2024 OSB shipments to be consistent with 2023 levels and so are guiding to
shipments of 6.3 to 6.6 billion square feet (3/8-inch basis) this year. Start-up of the Allendale mill is progressing and we
continue to anticipate a ramp-up period for the mill of up to three years to meet targeted production levels. We expect
our overall OSB platform to be better and lower cost with a modern Allendale facility operating, and as with all our wood
products operations, demand is a key input in determining our operating schedules across our manufacturing footprint.
While input costs for the NA EWP business moderated through much of 2023, we expect these costs to stabilize in 2024.
In the Pulp & Paper segment, the Hinton pulp sale transaction closed on February 3, 2024 following the completion of the
customary regulatory reviews and closing conditions. Activities in respect of the closing conditions for the sale of Quesnel
River Pulp mill and Slave Lake Pulp mill are proceeding and we continue to anticipate closing of the transaction in early
2024.
In our Europe EWP segment, we expect near-term demand weakness to persist for our panel products and therefore
expect 2024 shipments of MDF, particleboard and OSB to be similar to 2023 levels. For OSB, we are guiding to shipments
in the range of 0.9 to 1.1 billion square feet (3/8-inch basis). Input costs for the Europe EWP business, including energy
and resin costs, are expected to stabilize in 2024 but remain elevated.
In Q4-23, we experienced continued moderation of costs and improved availability for inputs across our supply chain,
including resins, chemicals, transportation and energy, although labour availability and some capital equipment lead
times remained challenging. We expect these trends to largely continue over the near term.
We will continue to regularly evaluate the factors above as well as evolving market conditions in making production
decisions across the business.
Cash Flows
We continue to anticipate levels of operating cash flows and available liquidity will support our capital spending estimate
for 2024. Based on our current outlook, assuming no deterioration from current market demand conditions during the
year and that there is no additional lengthening of lead times for projects underway or planned, we anticipate we will
invest approximately $450 million to $550 million in 20241. Our total capital budget consists of various improvement
projects and maintenance expenditures, projects focused on optimization and automation of the manufacturing process,
and projects targeted to reduce greenhouse gas emissions. Expected capital expenditures1 in 2024 include approximately
$80 million for the modernization of the Henderson, Texas lumber manufacturing facility, which we now expect will be
ready for ramp-up starting in H1-25.
1. This is a supplementary financial measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
We expect to maintain our investment grade debt rating and intend to preserve sufficient liquidity to be able to take
advantage of strategic growth opportunities that may arise.
Under our 2022 NCIB that expired February 22, 2023, we purchased 10,194,000 Common shares of the Company, which
was the full purchase authorization.
- 29 -
On February 22, 2023, we renewed our 2023 NCIB, allowing us to acquire up to 4,063,696 Common shares for
cancellation from February 27, 2023 until the expiry of the bid on February 26, 2024. As of February 13, 2024, 1,878,648
Common shares have been repurchased for cancellation, leaving 2,185,048 available to purchase at our discretion until
the expiry of the 2023 NCIB.
As of February 13, 2024, we have repurchased for cancellation 41,620,442 of the Company’s Common shares since the
closing of the Norbord Acquisition on February 1, 2021 through the completion of the 2021 SIB, the 2022 SIB and normal
course issuer bids, equalling 76% of the shares issued in respect of the Norbord Acquisition.
We have paid a dividend in every quarter since we became a public company in 1986 and expect to continue this practice.
At the latest declared quarterly dividend rate of $0.30 per share, the total anticipated cash payment of dividends in 2024
is $98 million based on the number of Common and Class B Common shares outstanding on December 31, 2023.
We will continue to consider share repurchases with excess cash, subject to regulatory approvals, if we are satisfied that
this will enhance shareholder value and not compromise our financial flexibility.
Estimated Earnings Sensitivity to Key Variables
(based on 2023 shipment volumes - $ millions)
Factor
Lumber price
NA OSB price
Europe OSB price
Canadian - U.S. $ exchange rate2
Variation
$10 (per Mfbm)
$10 (per Msf)
£10 (per Msf)
$0.01 (per CAD)
$
Change in pre-tax
earnings1
56
55
9
20
1.
2.
Each sensitivity has been calculated on the basis that all other variables remain constant and is based on changes in our realized sales prices.
Represents the USD impact of the initial $0.01 change on CAD revenues and expenses. Additional changes are substantially, but not exactly, linear.
LIQUIDITY AND CAPITAL RESOURCES
Capital Management Framework
Our business is cyclical and is subject to significant changes in cash flow over the business cycle. In addition, financial
performance can be materially influenced by changes in product prices and the relative values of the Canadian and U.S.
dollars. Our objective in managing capital is to ensure adequate liquidity and financial flexibility at all times, particularly at
the lower points in the business cycle.
Our main policy relating to capital management is to maintain a strong balance sheet and otherwise meet financial tests
that rating agencies commonly apply for investment-grade issuers of public debt. Our debt is currently rated as
investment grade by three major rating agencies.
We monitor and assess our financial performance to ensure that debt levels are prudent, taking into account the
anticipated direction of the business cycle. When financing acquisitions, we combine cash on hand, debt, and equity
financing in a proportion that is intended to maintain an investment-grade rating for debt throughout the cycle. Debt
repayments are arranged, where possible, on a staggered basis that takes into account the uneven nature of anticipated
cash flows. We have established committed revolving lines of credit that provide liquidity and flexibility when capital
markets are restricted. In addition, as a normal part of our business, we have in the past and may from time to time seek
to repurchase our outstanding securities through issuer bids or tender offers, open market purchases, privately
negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity
requirements, contractual and legal restrictions and other factors.
A strong balance sheet and liquidity profile, along with our investment-grade debt rating, are key elements of our goal to
maintain a balanced capital allocation strategy. Priorities within this strategy include: reinvesting in our operations across
all market cycles to strategically enhance productivity, product mix, and capacity; maintaining a leading cost position;
maintaining financial flexibility to capitalize on growth opportunities, including the pursuit of acquisitions and larger-scale
strategic growth initiatives; and returning capital to shareholders through dividends and share repurchases.
- 30 -
2023 Annual Report | 43
2023 Annual Report | 43
Liquidity and Capital Resource Measures
Our capital structure consists of Common share equity and long-term debt, and our liquidity includes our operating
facilities.
Summary of Liquidity and Debt Ratios
($ millions, except as otherwise indicated)
Available liquidity
Cash and cash equivalents
Operating lines available (excluding newsprint operation)1
Available liquidity
Total debt to total capital2
Net debt to total capital2
December 31,
2023
December 31,
2022
$
$
900
1,054
1,954
$
$
1,162
1,053
2,215
7%
(5%)
7%
(9%)
1. Excludes demand line of credit dedicated to our jointly-owned newsprint operation as West Fraser cannot draw on it.
2. This is a capital management measure. Refer to the “Non-GAAP and Other Specified Financial Measures” section of this document for more
information on this measure.
Available liquidity as at December 31, 2023 was $1,954 million (December 31, 2022 - $2,215 million). Available liquidity
includes cash and cash equivalents, cheques issued in excess of funds on deposit, and amounts available on our operating
loans, excluding the demand line of credit dedicated to our 50% jointly-owned newsprint operation.
Please refer to the “Cash Flow” section for analysis of the changes in cash and cash equivalents. Total debt to total capital
was comparable to prior year and we remain well positioned with a strong balance sheet and liquidity profile.
Credit Facilities
As at December 31, 2023, our credit facilities consisted of a $1 billion committed revolving credit facility which matures
July 2028, $35 million of uncommitted revolving credit facilities available to our U.S. subsidiaries, a $19 million
(£15 million) credit facility dedicated to our European operations, and a $11 million (CAD$15 million) demand line of
credit dedicated to our jointly-owned newsprint operation.
As at December 31, 2023, our revolving credit facilities were undrawn (December 31, 2022 - undrawn) and the associated
deferred financing costs of $2 million (December 31, 2022 - $1 million) were recorded in other assets. Interest on the
facilities is payable at floating rates based on Prime Rate Advances, Base Rate Advances, Bankers’ Acceptances, Secured
Overnight Financing Rate (“SOFR”) Advances at our option. On July 25, 2023, we amended and restated the revolving
credit facilities agreement to extend its maturity to July 2028 and replaced the previous London Inter-Bank Offered Rate
(“LIBOR”) floating rate option with SOFR.
In addition, we have credit facilities totalling $133 million (December 31, 2022 - $131 million) dedicated to letters of
credit. Letters of credit in the amount of $43 million (December 31, 2022 - $61 million) were supported by these facilities.
All debt is unsecured except the $11 million (CAD$15 million) jointly-owned newsprint operation demand line of credit,
which is secured by that joint operation’s current assets.
As at December 31, 2023, we were in compliance with the requirements of our credit facilities.
Long-Term Debt
In October 2014, we issued $300 million of fixed-rate senior unsecured notes, bearing interest at 4.35% and due October
2024, pursuant to a private placement in the U.S. The notes are redeemable, in whole or in part, at our option at any time
as provided in the indenture governing the notes.
We have a $200 million term loan maturing July 2025. Interest is payable at floating rates based on Base Rate Advances
or SOFR Advances at our option. This loan is repayable at any time, in whole or in part, at our option and without penalty
but cannot be redrawn after payment. On July 25, 2023, we amended and restated the term loan agreement to extend its
maturity from August 2024 to July 2025 and replaced the LIBOR floating rate option with SOFR.
- 31 -
We have interest rate swap contracts to pay fixed interest rates and receive variable interest rates on $200 million
notional principal amount of indebtedness. These swap agreements have the effect of fixing the interest rate on the $200
million 5-year term loan discussed above. In June 2023, these interest rate swaps were amended to reference 3-month
SOFR (previously 3-month LIBOR) effective August 2023. The weighted average fixed interest rate payable under the
contracts was 0.91% following the amendment (previously 1.14%).
In January 2024, these interest rate swaps were further amended to extend their maturity from August 2024 to July 2025.
Following this amendment, the weighted average fixed interest rate payable under the contract is 2.61%.
Debt Ratings
We are considered investment grade by three leading rating agencies. The ratings in the table below are as at
February 13, 2024.
Agency
DBRS
Moody’s
Standard & Poor’s
Rating
BBB
Baa3
BBB-
Outlook
Stable
Stable
Stable
These ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at
any time by the rating agencies.
Shareholder’s Equity
Our outstanding Common share equity consists of 79,427,614 Common shares and 2,281,478 Class B Common shares for
a total of 81,709,092 Common shares issued and outstanding as at February 13, 2024. As of February 13, 2024, we held
31,943 Common shares as treasury shares for cancellation.
The Common shares and Class B Common shares are equal in all respects, including the right to dividends, rights upon
dissolution or winding up and the right to vote, except that each Class B Common share may at any time be exchanged
for one Common share. Our Common shares are listed for trading on the TSX and NYSE under the symbol WFG, while our
Class B Common shares are not. Certain circumstances or corporate transactions may require the approval of the holders
of our Common shares and Class B Common shares on a separate class by class basis.
Share Repurchases
Normal Course Issuer Bid
Under our 2022 NCIB that expired February 22, 2023, we repurchased for cancellation 10,194,000 Common shares of the
Company, which was the full purchase authorization.
On February 22, 2023, we renewed our 2023 NCIB allowing us to acquire up to 4,063,696 Common shares for cancellation
from February 27, 2023 until the expiry of the bid on February 26, 2024. For the year ended December 31, 2023, we
repurchased for cancellation 1,834,801 Common shares under our 2023 NCIB program.
2022 Substantial Issuer Bid
On June 7, 2022, we completed a substantial issuer bid pursuant to which we repurchased for cancellation a total of
11,898,205 Common shares at a price of $95.00 per share for an aggregate purchase price of $1.13 billion.
- 32 -
2023 Annual Report | 45
2023 Annual Report | 45
The following table shows our purchases under our NCIB and SIB programs in 2022 and 2023:
Share repurchases
(number of common shares and price per share)
NCIB:
January 1, 2022 to December 31, 2022
2022 SIB:
June 7, 2022
NCIB:
January 1, 2023 to December 31, 2023
Share Options
Common
Shares
Average Price
in USD
10,475,115 $
11,898,205 $
1,834,801 $
82.01
95.00
70.24
As at February 13, 2024, there were 828,453 share purchase options outstanding with exercise prices ranging from
CAD$40.97 to CAD$123.63 per Common share.
- 33 -
Cash Flow
Our cash is deployed primarily for operating purposes, interest payments, repayment of debt, investments in property,
plant, equipment, acquisitions, share repurchases, and dividends. In normal business cycles and in years without a major
acquisition or debt repayment, cash on hand and cash provided by operations have typically been sufficient to meet
these uses.
We are exposed to commodity price changes. To manage our liquidity risk, we maintain adequate cash and cash
equivalents balances and appropriate lines of credit. In addition, we regularly monitor and review both actual and
forecasted cash flows. Refinancing risks are managed by extending maturities through regular renewals and refinancing
when market conditions are supportive.
Cash Flow Statement
($ millions - cash provided by (used in))
Cash provided by operating activities
Earnings (loss)
Adjustments
Amortization
Restructuring and impairment charges
Finance (income) expense, net
Foreign exchange loss (gain)
Export duty
Retirement benefit expense
Net contributions to retirement benefit plans
Tax (recovery) provision
Income taxes paid
Other
Changes in non-cash working capital
Receivables
Inventories
Prepaid expenses
Payables and accrued liabilities
Cash used for financing activities
Repayment of lease obligations
Finance expense paid
Repurchase of Common shares for cancellation
Dividends paid
Cash used for investing activities
Spray Lake Acquisition, net of cash acquired
Additions to capital assets
Interest received
Other
Change in cash and cash equivalents
Years Ended
December 31, December 31,
2022
2023
$
(167) $
1,975
541
279
(51)
7
(45)
77
(37)
(61)
(24)
(4)
6
132
4
(131)
525
(15)
(24)
(129)
(100)
(268)
(100)
(477)
47
—
(530) $
589
60
3
(28)
(99)
103
(76)
618
(982)
(11)
140
20
(6)
(99)
2,207
(14)
(23)
(1,990)
(99)
(2,126)
—
(477)
17
1
(459)
(273) $
(378)
2023 Annual Report | 47
2023 Annual Report | 47
$
$
- 34 -
Operating Activities
The table above shows the main components of cash flows provided by operating activities for each year. The significant
factor contributing to the decrease compared to 2022 was lower earnings, offset in part by lower income taxes paid.
Changes in working capital was a contributing factor to the decrease year over year.
Earnings, after adjusting for non-cash items, were lower versus prior year due primarily to lower product pricing, offset in
part by lower costs. Income taxes paid were lower in 2023 due to lower installment payments in the current year and
receipt of refunds relating to prior year installment payments.
Working capital decreased modestly in 2023 due primarily to decreases in inventories offset by decreases in payables and
accrued liabilities. Decreases in inventories is driven primarily by lower volumes of logs on hand. Accounts payable and
accrued liabilities decreased due primarily to decreases in accrued compensation.
Financing Activities
Cash used in financing activities in 2023 decreased compared to 2022 due to lower share repurchases.
We returned $129 million and $1,990 million during 2023 and 2022 respectively to our shareholders through Common
shares repurchased under our NCIB and SIB programs. During the year ended December 31, 2022, we repurchased for
cancellation a total of 11,898,205 Common shares at a price of $95.00 per share for an aggregate purchase price of $1.13
billion under the 2022 SIB.
We also returned a total of $100 million during 2023 to our shareholders through dividend payments (2022 - $99 million).
Investing Activities
Cash payment of $100 million, representing the cash consideration transferred net of acquired cash, was made in relation
to the Spray Lake Acquisition during 2023.
Interest received increased compared to 2022 due to higher interest income earned on our cash equivalents.
Capital expenditures of $477 million in 2023 (2022 - $477 million) reflect our philosophy of continued reinvestment in our
mills.
Capital Expenditures by Segment
($ millions)
Profit
Improvement
Maintenance
of Business1
Safety
Total
Lumber
North America EWP
Pulp & Paper
Europe EWP
Corporate
Total
157
41
2
11
—
73
86
27
18
7
210
211
23
28
3
2
—
56
253
156
32
30
7
477
1. Maintenance of business includes expenditures for roads, bridges, mobile equipment and major maintenance shutdowns.
Contractual Obligations
The estimated cash payments due in respect of contractual and legal obligations as at December 31, 2023, including debt
and interest payments and major capital improvements, are summarized as follows. Contractual obligations do not
include energy purchases under various agreements, defined contribution pension plans, equity-based compensation, or
contingent amounts payable.
- 35 -
Contractual Obligations
(at December 31, 2023, in $ millions)
Long-term debt
Interest on long-term debt1
Lease obligations
Contributions to defined benefit pension plans2
Payables and accrued liabilities
Purchase commitments
Reforestation and decommissioning obligations
Electricity swaps
Total
Total
2024
2025
2026
2027
$
500 $
25
45
68
620
265
137
(14)
300 $
18
13
19
620
265
64
(3)
$ 1,646 $ 1,296 $
200 $
7
8
16
—
—
20
—
251 $
— $
—
5
33
—
—
7
—
45 $
Thereafter
—
—
16
—
—
—
39
(10)
45
— $
—
3
—
—
—
7
(1)
9 $
1.
2.
Assumes debt remains at December 31, 2023 levels and includes the impact of interest rate swaps terminating August 2024.
Contributions to the defined benefit pension plans are based on the most recent actuarial valuation. Future contributions will be determined at
the next actuarial valuation date.
Financial Instruments
Our financial instruments, their accounting classification, and associated risks are described in note 23 to the Annual
Financial Statements.
ACCOUNTING MATTERS
Critical Accounting Estimates and Judgments
The preparation of financial statements in conformity with IFRS Accounting Standards requires management to make
estimates, assumptions, and judgments that affect the amounts reported. Our significant accounting policies are
disclosed in our Annual Financial Statements.
In determining our critical accounting estimates, we consider trends, commitments, events or uncertainties that we
reasonably expect to materially affect our methodology or assumptions. Our statements in this MD&A regarding such
considerations are made subject to the “Forward-Looking Statements” section.
We have outlined below information about judgments, assumptions, and other sources of estimation uncertainty as at
December 31, 2023 that have the most significant impact on the amounts recognized in our financial statements. The
discussion of each critical accounting estimate does not differ between our reportable segments unless explicitly noted.
Recoverability of Goodwill
Goodwill is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the business
combination from which it arose. Goodwill exists in relation to our Lumber, North America EWP, and Europe EWP
reportable segments.
Goodwill is tested annually for impairment, or more frequently if an indicator of impairment is identified.
Recoverability of goodwill is assessed by comparing the carrying value of the CGU or group of CGUs associated with the
goodwill balance to its estimated recoverable amount, which is the higher of its estimated fair value less costs of disposal
and its value in use.
We determined the value in use of CGU groups using discounted cash flow models. Key assumptions include production
volume, product pricing, raw material input cost, production cost, terminal multiple, and discount rate. Key assumptions
were determined using external sources and historical data from internal sources.
An impairment loss is recorded if the carrying value exceeds the estimated recoverable amount.
The estimated recoverable amounts of the CGU groups exceeded their respective carrying amounts and as such, no
impairment losses were recognized for the year ended December 31, 2023 (2022 - nil).
- 36 -
2023 Annual Report | 49
2023 Annual Report | 49
The estimates and assumptions regarding expected cash flows and the appropriate discount rates require considerable
judgment and are based upon historical experience, approved financial forecasts and industry trends and conditions.
There is a material degree of uncertainty with respect to the estimates of the recoverable amounts of the CGU groups,
given the necessity of making key economic and operating assumptions about the future. If the future were to differ
adversely from our best estimate and associated cash flows were to materially decrease, we could potentially experience
future impairment charges in respect of our goodwill balances.
Recoverability of Capital Assets
We assess property, plant and equipment, timber licences, and other definite-lived intangible assets for indicators of
impairment at each reporting date and whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. We conduct a review of external and internal sources of information to assess for any
impairment indicators. Examples of such triggering events related to our capital assets include, but are not limited to: a
significant adverse change in the extent or manner in which the asset is being used or in its physical condition; a change
in management’s intention or strategy for the asset, including a plan to dispose of the asset or idle the asset for a
significant period of time; a significant adverse change in our long-term price assumption or in the price or availability of
inputs required for manufacturing; a significant adverse change in legal factors or in the business climate that could affect
the asset’s value; and a current period operating or cash flow loss combined with a history of operating or cash flow
losses, or a projection or forecast that demonstrates continuing losses associated with the asset’s use.
When a triggering event is identified, recoverability of capital assets is assessed by comparing the carrying value of an
asset or cash-generating unit to its estimated recoverable amount, which is the higher of its estimated fair value less costs
of disposal and its value in use.
We determined the value in use of assets and cash-generating units using discounted cash flow models. Key assumptions
included production volume, product pricing, raw material input cost, production cost, and discount rate. Key
assumptions used in estimating recoverable amount were based on industry sources as well as management estimates.
An impairment loss is recorded if the carrying value exceeds the estimated recoverable amount.
In the year ended December 31, 2023, we recorded restructuring and impairment charges of $279 million.
In our Pulp & Paper segment, we recorded an impairment loss of $121 million in relation to the sale of the Hinton pulp
mill. In addition, we recorded an impairment loss of $20 million in relation to the sale of the Quesnel River Pulp mill and
Slave Lake Pulp mill.
In our Lumber segment, we recorded restructuring and impairment charges of $47 million associated with the
announcement of the permanent closure of our lumber mill in Maxville, Florida and the indefinite curtailment of
operations at our lumber mill in Huttig, Arkansas. We recorded restructuring and impairment charges of $81 million
related to facility closures and curtailments due to availability of economic fibre sources in B.C. We estimated the
recoverable amount of the impaired assets based on their value in use. The recoverable amount of the property, plant
and equipment subject to impairment, other than the disposal group discussed above, was $36 million.
The assessment of impairment indicators requires the exercise of judgment given the necessity of making key economic
and operating assumptions about the future. If the future were to differ adversely from our best estimate and associated
cash flows were to materially decrease, we could potentially experience future impairment charges in respect of our
capital assets.
Fair Value of PPE and Intangible Assets Acquired in Business Combinations
On November 17, 2023, we acquired the Spray Lake lumber mill located in Cochrane, Alberta and associated timber
tenures (“Spray Lake Acquisition”) for preliminary cash consideration of $102 million (CAD$140 million), net of cash
acquired of $1 million.
We recognize and measure the assets acquired and liabilities assumed in a business combination based on their
estimated fair values at the acquisition date. Any excess of the purchase consideration compared to the fair value of the
net assets acquired is recorded as goodwill.
- 37 -
A significant amount of judgment is involved in estimating the fair values of property, plant and equipment and intangible
assets acquired in a business combination. The Spray Lake Acquisition resulted in the recognition of PPE and timber
licenses in our Lumber segment.
We use all relevant information to make these fair value determinations and engage an independent valuation specialist
to assist for material acquisitions.
We applied the market comparison approach and cost approach in determining the fair value of acquired property, plant,
and equipment. We considered market prices for similar assets when they were available, and depreciated replacement
cost in other circumstances. Depreciated replacement cost reflects adjustments for physical deterioration as well as
functional and economic obsolescence. The key assumptions used in the estimation of depreciated replacement cost are
the asset’s estimated replacement cost at the time of acquisition and estimated useful life.
The fair value of timber licenses acquired was determined by using a market comparison technique based on precedent
transactions in Western Canada.
There is a material degree of uncertainty with respect to the estimates of fair value of PPE and intangible assets given the
necessity of making economic assumptions about the future. If our estimates of the acquisition-date fair value of
property, plant and equipment and intangible assets acquired in business combinations were incorrect, we could
experience increased or decreased charges for depreciation or amortization in the future. If the future were to differ
adversely from our best estimate of key economic assumptions and associated cash flows were to materially decrease,
we could potentially experience future impairment charges in respect to our PPE or intangible assets.
Defined Benefit Pension Plan Assumptions
We maintain defined benefit pension plans for many of our employees. We use independent actuarial specialists to
perform actuarial valuations of our defined benefit pension plans.
Key assumptions used in determining defined benefit pension expense and accrued benefit obligations included the
assumed rates of increase for employee compensation and the discount rate. Note 14 to the Annual Financial Statements
provides the sensitivity of our accrued benefit obligations to changes in these key assumptions.
If the future were to adversely differ from our best estimate of assumptions used in determining our accrued benefit
obligations, we could experience increased defined benefit pension expense, financing costs and charges to other
comprehensive earnings in the future.
CVD and ADD Duty Rates
On November 25, 2016, a coalition of U.S. lumber producers petitioned the USDOC and the USITC to investigate alleged
subsidies to Canadian softwood lumber producers and levy CVD and ADD against Canadian softwood lumber imports. The
USDOC chose us as a “mandatory respondent” to both the countervailing and antidumping investigations, and as a result,
we have received unique company-specific rates. Details can be found under the section “Discussion & Analysis of Annual
Results by Product Segment - Lumber - Softwood Lumber Dispute.”
The CVD and ADD rates are subject to adjustment by the USDOC through an AR of POI. The CVD and ADD rates apply
retroactively for each POI. We record CVD as export duty expense at the cash deposit rate until an AR finalizes a new
applicable rate for each POI. We record ADD as export duty expense by estimating the rate to be applied for each POI by
using our actual results and a similar calculation methodology as the USDOC and adjust when an AR finalizes a new
applicable rate for each POI. The difference between the cumulative cash deposits paid and cumulative export duty
expense recognized for each POI is recorded on our balance sheet as export duty deposits receivable or payable.
The difference between the cash deposit amount and the amount that would have been due based on the final AR rate
will incur interest based on the U.S. federally published interest rate. We record interest income on our duty deposits
receivable, net of any interest expense on our duty deposits payable, based on this rate.
The softwood lumber case will continue to be subject to NAFTA or the new CUSMA and WTO dispute resolution
processes and litigation in the U.S. In the past, long periods of litigation have led to negotiated settlements and duty
deposit refunds.
- 38 -
2023 Annual Report | 51
2023 Annual Report | 51
In the interim, duties remain subject to the USDOC AR process, which results in an annual adjustment of duty deposit
rates. Notwithstanding the deposit rates assigned under the investigations, our final liability for CVD and ADD will not be
determined until each annual administrative review process is complete and related appeal processes are concluded.
If the future were to adversely differ from our best estimate of the duty deposit rate, we could experience material
adjustments to duty expense and such adjustments could result in an increase of cash outflows.
Reforestation and Decommissioning Obligations
We recognize provisions for various statutory, contractual or legal obligations. In Canada, regulations in most provinces
require timber quota holders to carry out reforestation to ensure re-establishment of the forest after harvesting.
Reforested areas must be tended for a period sufficient to ensure that they are well established. The time needed to
meet regulatory requirements depends on a variety of factors.
In our operating areas, the time to meet reforestation standards usually spans 12 to 15 years from the time of harvest.
We record a liability for the estimated cost of the future reforestation activities when the harvesting takes place,
discounted at an appropriate rate. The liability is accreted over time through charges to finance expense and reduced by
silviculture expenditures. Changes to estimates are credited or charged to earnings.
We record the best estimate of the expenditure to be incurred to settle decommissioning obligations, such as landfill
closures. This liability is determined using estimated closure and/or remediation costs discounted using an appropriate
discount rate. On initial recognition, the carrying value of the liability is added to the carrying amount of the associated
asset and amortized over its useful life, or expensed when there is no related asset. The liability is accreted over time
through charges to finance expense and reduced by actual costs of settlement. Changes to estimates result in an
adjustment to the carrying amount of the associated asset or, where there is no asset, they are credited or charged to
earnings.
Key assumptions underlying the reforestation and decommissioning obligations included the timing and the amount of
forecasted expenditures and the discount rate.
Material changes in financial position can arise as the actual costs incurred at the time of silviculture activities or
decommissioning may differ from the estimates used in determining the liability. If the provisions for the reforestation
and decommissioning obligations were to be inadequate, we could experience an increase to expenses in the future. A
charge for an inadequate reforestation and decommissioning obligation provision would result in an increase of cash
outflows at the time the obligation is satisfied.
Accounting Policy Developments
Note 2 to the Annual Financial Statements contains a description of current and future changes in accounting policies,
including: (1) initial application of standards, interpretations and amendments to standards and interpretations in the
reporting period and (2) standards, interpretations and amendments to standards and interpretations issued but not yet
effective.
RISKS AND UNCERTAINTIES
Our business is subject to a number of risks and uncertainties that can significantly affect our operations, financial
condition and future performance. We have a comprehensive process to identify, manage, and mitigate risk, wherever
possible. The risks and uncertainties described below are not necessarily the only risks we face. Additional risks and
uncertainties that are presently unknown to us or deemed immaterial by us may adversely affect our business.
Product Demand and Price Fluctuations
Our revenues and financial results are primarily dependent on the demand for, and selling prices of, our products, which
are subject to significant fluctuations. The demand and prices for lumber, plywood, OSB, particleboard, MDF, LVL, pulp,
newsprint, wood chips and other wood products are highly volatile and are affected by factors such as:
- 39 -
•
•
•
•
•
•
•
•
•
•
•
global economic conditions including the strength of the U.S., Canadian, Chinese, Japanese, European and other
international economies, particularly U.S. and Canadian housing markets and their mix of single and multifamily
construction, repair, renovation and remodelling spending and industrial application;
elevated and continued rising of interest rates, and the consequential impacts of these interest rates on
mortgage rates and housing affordability;
alternative products to lumber or panels;
construction and home building disruptor technologies that may reduce the use of lumber or panels;
changes in industry production capacity;
changes in global inventory levels;
increased competition from other consumers of logs and producers of lumber or panels;
regulatory regimes setting a price on carbon that would increase the price of energy or fuel affecting the
manufacturing cost of our products;
ongoing geo-political developments, including disruptions to the global economy resulting from the conflict in
Ukraine and the Middle East;
inflationary pressures, including increases in energy prices; and
other factors beyond our control.
In addition, unemployment levels, interest rates, the availability of mortgage credit and the rate of mortgage foreclosures
have a significant effect on housing affordability and residential construction and renovation activity, which in turn
influences the demand for, and price of, building materials such as lumber and panel products. Declines in demand, and
corresponding reductions in prices, for our products may adversely affect our financial condition and results of
operations.
Our business is highly exposed to fluctuations in demand for and pricing of our wood products. Our sensitivity to
commodity product pricing may result in a high degree of sales and earnings volatility. In the past, we have been
negatively affected by declines in product pricing and have taken production downtime or indefinite curtailments to
manage working capital and minimize cash losses. Severe and prolonged weakness in the markets for our wood products
could seriously harm our financial position, operating results and cash flows.
We have developed a sales strategy that includes the development of sales plans to reduce our exposure to pricing and
sales volatility that are based on pricing and demand forecasts and trends that we develop. These forecasts will be based
on assumptions that we make as to the markets in which our products are sold. Our inability to accurately forecast the
demand and pricing for our products or to effectively execute on our sales strategy could result in increased exposure of
our business to pricing and demand volatility, with the result that our revenues and our financial condition could be
adversely impacted.
We cannot predict with any reasonable accuracy future market conditions, demand or pricing for any of our products due
to factors outside our control. Prolonged or severe weakness in the market for any of our principal products would
adversely affect our financial condition. Future demand could also be impacted by the perceived sustainability of our
wood products in contrast with competing alternatives.
Competition
We compete with global producers, some of which may have greater financial resources and lower production costs than
we do. Currency devaluations can have the effect of reducing our competitors’ costs and making our products less
competitive in certain markets. In addition, European lumber producers and South American panel producers may enter
the North American market during periods of peak prices. Markets for our products are highly competitive. Our ability to
maintain or improve the cost of producing and delivering products to those markets is crucial. Factors such as cost and
availability of raw materials, energy and labour, the ability to maintain high operating rates and low per unit
manufacturing costs, and the quality of our final products and our customer service all affect our earnings. Some of our
products are also particularly sensitive to other factors including innovation, quality and service, with varying emphasis
on these factors depending on the product. To the extent that one or more of our competitors become more successful
with respect to any key competitive factor, our ability to attract and retain customers could be materially adversely
affected. If we are unable to compete effectively, such failure could have a material adverse effect on our business,
financial condition and results of operations.
Our products may compete with non-fibre based alternatives or with alternative products in certain market segments.
For example, steel, engineered wood products, plastic, wood/plastic or composite materials may be used by builders as
- 40 -
2023 Annual Report | 53
2023 Annual Report | 53
alternatives to the products produced by our wood products businesses such as lumber, plywood, OSB, LVL, particleboard
and MDF products. Changes in prices for oil, chemicals and wood-based fibre can change the competitive position of our
products relative to available alternatives and could increase substitution of those products for our products. In addition,
our customers or potential customers may factor in environmental and sustainability factors in assessing whether to
purchase our wood products. As the use of these alternatives grows, demand for our products may further decline.
Because commodity products have few distinguishing properties from producer to producer, competition for these
products is based primarily on price, which is determined by supply relative to demand and competition from substitute
products. Prices for our products are affected by many factors outside of our control, and we have no influence over the
timing and extent of price changes, which often are volatile. Accordingly, our revenues may be negatively affected by
pricing decisions made by our competitors and by decisions of our customers to purchase products from our competitors.
In addition, continued consolidation in the retail and construction industries could expose us to increased concentration
of customer dependence and increase customers’ ability to exert pricing pressure on us and our products. In addition,
concentration of our business with fewer customers as a result of consolidation could expose us to risks associated with
the loss of key customers. For example, the loss of a significant customer, any significant customer order cancellations or
bad debts could negatively affect our sales and earnings.
Availability of Fibre
Canada
A significant majority of our Canadian log requirements are harvested from lands owned by a provincial government.
Provincial governments control the volumes that can be harvested under provincially-granted tenures and otherwise
regulate the availability of Crown timber for harvest. Determinations by provincial governments: (i) to reduce the volume
of timber, to issue or not issue operating permits to harvest timber; (ii) to limit the areas that may be harvested under
timber tenures; (iii) to restrict the transfer or acquisition of timber tenures; (iv) to regulate the processing of timber or
use of harvesting contractors; (v) in response to jurisprudence or government policies respecting Indigenous rights and
title or reconciliation efforts, land use management and planning processes, including those agreements between the
B.C. provincial government and the Blueberry River First Nations or potential reallocation of harvesting rights to
Indigenous Nations or communities; (vi) to restrict log processing to local or appurtenant sawmills or to mandate
amounts of work to be provided or rates to be paid to harvesting contractors; or (vii) to change the methodology or rates
for stumpage, may reduce our ability to secure log or residual fibre supply, may increase our log purchase and residual
fibre costs, may adversely impact lumber grade and recovery and may impact our operations, including require us to
reduce operating rates. These determinations may be made by the provincial government with the objective to protect
the environment or endangered species, species at risk and critical habitat or to address the impact of forest fires,
mountain pine beetle infestations, harvest and caribou conservation plans. Accordingly, forest fires, mountain pine beetle
infestations, environmental protection measures and policies respecting indigenous rights and reconciliation efforts may
result in government actions to reduce annual allowable cuts and timber supply that may adversely impact our access to
fibre supply for our Canadian operations, and may significantly increase the cost of our Canadian operations. Our inability
to access secure, economical and sustainable fibre supply has resulted in decisions to permanently curtail production at
certain of our Canadian operations and may result in future curtailment of production.
In addition, our timber supply in B.C. may also be negatively impacted by rapid and on-going forest policy review by the
B.C. Provincial Government. The continued evolution of B.C. forest policy is creating some uncertainty and constraining
access to our timber harvesting land base. This development and implementation of updated forest policy is ongoing and
the impacts to timber supply will not be fully understood for some time. These actions could have a material impact on
both the amount of our AAC forest tenures and the amount of timber that we are able to harvest from these tenures.
Without significant policy change in B.C., the B.C. forest sector may continue to experience further contraction.
We rely on third party independent contractors to harvest timber in areas over which we hold timber tenures. Increases
in rates charged by these independent contractors or the limited availability of these independent contractors or new
regulations on the work to be provided and rates to be paid to these contractors may increase our timber harvesting
costs.
We also rely on the purchase of logs through open market purchases and private supply agreements and log exchange
agreements and increased competition for logs, or shortages of logs may result in increases in our log purchase costs.
- 41 -
Unusually warm weather in Western Canada, including through the 2023/2024 winter, has hampered, and may hamper in
the future, our ability to conduct logging activities which has the potential to limit our ability to accumulate the necessary
log inventories, constrain our ability to manufacture and ship SPF lumber or necessitate reduced operating schedules.
United States
We rely on log supply agreements in the U.S. which are subject to log availability and based on market prices. The
majority of the aggregate log requirements for our U.S. mills is purchased on the open market. Open market purchases
come from timber real estate investment trusts, timberland investment management organizations and private land
owners. Changes in the log markets in which we operate may reduce the supply of logs available to us and may increase
the costs of log purchases, each of which could adversely affect our results. In addition, changes in the market for
residuals may reduce the demand and selling price for the residuals produced by our operations and increase the disposal
costs, which could adversely affect our results. We may experience higher competition for sustainable log supply sourcing
as supply is limited by alternative demand for forests in carbon sequestration and through the increase in conversion to
forest plantations or non-forest use where there is significant regional forest area decline.
While the U.S. South remains a critical area of lumber supply growth and a key region for West Fraser’s growth strategy,
it is important to note that this region’s economic fibre supply, cost profile and access to end-use markets for sawmill
residuals are not homogenous, and that all of these factors could limit our growth opportunities.
U.K. and Europe
Wood fibre for our U.K. and Belgium OSB, particleboard and MDF operations is purchased from government and private
landowners. Changes in the log markets in which we operate may reduce the supply of logs available to us and may
increase the costs of log purchases, each of which could adversely affect our results.
Residuals
We rely on fibre off-take agreements for certain of our Canadian solid wood operations under which we supply to third
parties wood chips and other residuals generated from our lumber operations. While certain of these fibre supply
agreements are long-term take-or-pay arrangements, we face counterparty risk in the event that the purchasers of our
wood chips and other residuals default on their obligations. Default by our counterparties could force us to sell our wood
chips and other residuals at then prevailing market prices which may be less than the prices under our fibre supply
agreements.
We rely on third party consumers of wood chips, including pulp mills and paper mills, to purchase wood chips and other
residuals generated at our U.S. solid wood mills. Recent pulp and paper mill closures in the U.S. South have reduced
market demand for wood chips and other residuals in the areas where we operate. In addition, wood chip and residuals
supply has increased as a result in regional increases in lumber production. These demand and supply factors can both
decrease the price that we can obtain for our residuals in the U.S. market and require us to seek alternate means of sale
or disposal of residuals, each of which could decrease the revenues and/or increase the overall costs of our U.S.
operations.
Additional Risks to Availability of Fibre
When timber, wood chips, other residual fibre and wood recycled materials are purchased on the open market, we are in
competition with other uses of such resources, where prices and the availability of supply are influenced by factors
beyond our control. Fibre supply can also be influenced by natural events, such as forest fires, severe weather conditions,
insect epidemics and other natural disasters, which may increase wood fibre costs, restrict access to wood fibre or force
production curtailments.
Transportation Requirements
Our business depends on our ability to transport a high volume of products and raw materials to and from our production
facilities and onto both domestic and international markets at cost effective rates. We rely primarily on third-party
transportation providers for both the delivery of raw materials to our production facilities and the transportation of our
products to market. These third-party transportation providers include truckers, bulk and container shippers and
railways. Our ability to obtain transportation services from these transportation service providers is subject to risks which
- 42 -
2023 Annual Report | 55
2023 Annual Report | 55
include, without limitation, availability of equipment and operators, disruptions due to weather, natural disasters and
labour disputes. To the extent that climate change results in more frequent severe weather occurrences, we may
experience increased frequency of transportation disruptions in future years which may again result in a disruption of our
ability to ship lumber and other products that we manufacture, including significant transportation disruptions from
severe flooding, hurricanes, and other natural disasters. In addition, the potential of increased frequency of severe
weather events may ultimately result in increased transportation costs as transportation providers, including railways,
undertake capital expenditures to improve the ability of the transportation infrastructure to withstand severe weather
events or to repair damage from severe weather events in order to maintain services.
Transportation services may also be impacted by seasonal factors, which could impact the timely delivery of raw
materials and distribution of products to customers. As a result of rail and truck capacity constraints, access to adequate
transportation capacity has at times been strained and could affect our ability to transport our products to markets and
could result in increased product inventories. Any failure of third-party transportation providers to deliver finished goods
or raw materials in a timely manner, including failure caused by adverse weather conditions or work stoppages, could
harm our reputation, negatively affect customer relationships or disrupt production at our mills. Transportation costs are
also subject to risks that include, without limitation, increased rates due to competition, increased fuel costs and
increased capital expenditures related to repair, maintenance and upgrading of transportation infrastructure. Increases in
transportation costs will increase our operating costs and adversely impact our profitability. If we are unable to obtain
transportation services or if our transportation costs increase, our revenues may decrease due to our inability to deliver
products to market and our operating expenses may increase, each of which would adversely affect our results of
operations.
Costs and Availability of Materials and Energy
We rely heavily on certain raw materials, including logs, wood chips and other fibre sources, chemicals, and energy
sources, including natural gas and electricity, in our manufacturing processes. Competition from our industry and other
industries, as well as supply disruptions may result in increased demand and costs for these raw materials and energy
sources. We have experienced significant cost inflation across a number of our inputs including supplies and materials
and energy. Increases in the costs of these raw materials and energy sources will increase our operating costs and will
reduce our operating margins. There is no assurance that we will be able to fully offset the effects of higher raw material
reduction programs.
or energy costs through hedging arrangements, price increases, productivity improvements or cost
From time to time, we enter into arrangements with renewable power generators to purchase environmental attributes
and receive settlements by reference to generation volumes and the spot price for electricity and pay settlements by
reference to generation volumes and a fixed contractual price. These agreements act as a partial hedge against future
electricity price increases. Fair values of our electricity swaps may be volatile and sensitive to fluctuations in forward
electricity prices and counterparty credit risk.
-
Our operations depend on an uninterrupted supply of resins and chemicals, production inputs, and other supplies and
resources such as skilled personnel. Supply may be interrupted due to a shortage or the scarce nature of inputs,
especially with regard to chemicals. Supply might also be interrupted due to transportation and logistics associated with
the remote location of some of our operations, and government restrictions or regulations which delay importation of
necessary items. COVID-19 has had a significant impact on global supply chains, which has impacted our ability to source
supplies required for our operations and has increased the costs of those supplies. Any interruptions to the procurement
and supply of resins, chemicals, production inputs and other supplies, or the availability of skilled personnel, as well as
continued increased rates of inflation, could have an adverse impact on our future cash flows, earnings, results of
operations, and financial condition.
Operational Curtailments
From time to time, we suspend or curtail operations at one or more of our facilities in response to market conditions,
environmental risks, or other operational issues, including, but not limited to scheduled and unscheduled maintenance,
temporary periods of high electricity prices, power failures, equipment breakdowns, adverse weather conditions, labour
disruptions, transportation disruptions, unavailability of staff, fire hazards, and the availability or cost of raw materials
including logs, wood chips, resins and chemicals. In addition, the potential increased frequency of extreme weather
events associated with climate change may result in operational curtailments becoming more frequent than we have
experienced historically.
- 43 -
In addition, our ability to operate at full capacity may be affected by ongoing capital projects. As a result, our facilities
may from time to time operate at less than full capacity. These operational suspensions could have a material adverse
effect on our financial condition as a result of decreased revenues and lower operating margins.
In Canada, a substantial portion of the wood chip requirements of our Canadian pulp and paper operations are provided
by our Canadian sawmills and plywood and LVL plants. If wood chip production is reduced because of production
curtailments, improved manufacturing efficiencies or any other reason, our pulp and paper operations may incur
additional costs to acquire or produce additional wood chips or be forced to reduce production. Conversely, pulp and
paper mill production curtailments may require our sawmills and panel mills to find other ways to dispose of residual
wood fibre and may result in curtailment or suspension of lumber, plywood or LVL production and increased costs.
In Canada, a substantial portion of the sawdust requirements of our Canadian MDF operations are provided by our
Canadian sawmills and plywood and LVL plants. If sawdust is reduced because of production curtailments, improved
manufacturing efficiencies or any other reason, our MDF operations may incur additional costs to acquire or produce
additional sawdust or be forced to reduce production. Conversely, MDF mill production curtailments may require our
sawmills and panel mills to find other ways to dispose of residual wood fibre and may result in curtailment or suspension
of lumber, plywood or LVL production and increased costs.
Labour and Services
Our operations rely on experienced local and regional management and both skilled and unskilled workers as well as third
party services such as logging and transportation and services for our capital projects. Because our operations are
generally located away from major urban centers, we often face strong competition from our industry and others such as
oil and gas production, mining and manufacturing for labour and services, particularly skilled trades. Shortages of key
services or shortages of management leaders or skilled or unskilled workers, including those caused by a failure to attract
and retain a sufficient number of qualified employees and other personnel or high employee turnover could impair our
operations by reducing production or increasing costs or impacting the ability to execute on our capital projects including
timing and costs. In addition, shortages of qualified employees may result in challenges to meet the objectives of our
workforce diversity programs.
We employ a unionized workforce in a number of our operations. Walkouts or strikes by employees could result in lost
production and sales, higher costs, supply constraints and litigation that could have a material adverse effect on our
business. In addition, disputes with the unions that represent our employees may lead to litigation, the result of which
may adversely impact cash flow and profitability of certain of our operations. Also, we depend on a variety of third parties
that employ unionized workers to provide critical services to us. Labour disputes experienced by these third parties could
lead to disruptions at our facilities.
Approximately 30% of our employees are covered by collective agreements. There were 6 expired collective agreements
remaining as at December 31, 2023 representing approximately 29% of our unionized employees. All of our U.K. and
Belgian union contracts are evergreen. Union agreements representing approximately 13% and 43% of our unionized
employees expire in 2024 and 2025, respectively. In the event that we are unable to renew these collective agreements
upon their expiry or the expired collective agreement in the near term, we could experience strikes or labour stoppages
at the impacted facilities which could result in lost production and sales, higher costs and/or supply constraints.
Trade Restrictions
A substantial portion of our products that are manufactured in Canada are exported for sale. Our financial results are
dependent on continued access to the export markets and tariffs, quotas and other trade barriers that restrict or prevent
access represent a continuing risk to us. Canadian softwood lumber exports to the U.S. have been the subject of trade
disputes and managed trade arrangements for the last several decades. During the period from October 2006 through
October 2015 these exports were subject to a trade agreement between the U.S. and Canada and on the expiry of that
agreement, a one-year moratorium on trade sanctions by the U.S. came into place. That moratorium has expired and in
November 2016 a group of U.S. lumber producers petitioned the USDOC and the USITC to impose trade sanctions against
Canadian softwood lumber exports to the U.S. In 2017 duties were imposed on Canadian softwood lumber exports to the
U.S. The current duties are likely to remain in place until and unless some form of trade agreement can be reached
between the U.S. and Canada (which trade agreement could include other tariffs or duties or quotas that restrict lumber
exports) or a final, binding determination is made as a result of litigation. Unless the additional costs imposed by duties
can be passed along to lumber consumers, the duties will increase costs for Canadian producers and, in certain cases,
- 44 -
2023 Annual Report | 57
2023 Annual Report | 57
could result in some Canadian production becoming unprofitable. Whether and to what extent duties can be passed
along to consumers will largely depend on the strength of demand for softwood lumber, which is significantly influenced
by the levels of new residential construction in the U.S. If duties can be passed through to consumers in whole or in part
the price of Canadian softwood lumber will increase (although the increase will not necessarily be for the benefit of
Canadian producers) which in turn could cause the price of SYP lumber, which would not be subject to the duty, to
increase as well.
While the USDOC has issued its final duty rates for 2017 through 2021, the duty rates for the 2022 POI has not been
finalized, and there is no assurance that the final rates for antidumping duty and countervailing duty will not differ
materially from the cash deposit rates in place for those years.
The application of U.S. trade laws could, in certain circumstances, create significant burdens on us. We are a mandatory
respondent in current investigations being conducted by the USDOC into alleged subsidies and dumping of Canadian
softwood lumber. In addition, the current trade dispute between the U.S. and China could negatively impact either or
both the U.S. and Chinese economies which could have an adverse effect on the demand for our products and could
adversely affect our financial results. Further, the current diplomatic and trade issues between Canada and China could
result in tariffs and other trade barriers that restrict access to the market in China for our products.
The future performance of our business is dependent upon international trade and, in particular, cross border trade
between Canada and the U.S. and between the U.K. and European Union. Access to markets in the U.S., the European
Union, China and other countries may be affected from time to time by various trade-related events. The financial
condition and results of operations of our business could be materially adversely affected by trade rulings, the failure to
reach or adopt trade agreements, the imposition of customs duties or other tariffs, or an increase in trade restrictions in
the future.
Environment
We are subject to regulation by federal, provincial, state, municipal and local environmental authorities, including, among
other matters, environmental regulations relating to air emissions and pollutants, wastewater (effluent) discharges, solid
and hazardous waste, landfill operations, forestry practices, permitting obligations, site remediation and the protection of
threatened or endangered species and critical habitat. Concerns over climate change, carbon emissions, water and land-
use practices and the protection of threatened or endangered species and critical habitat could also lead governments to
enact additional or more stringent environmental laws and regulations that may require us to incur significant capital
expenditures, pay higher taxes or fees, including carbon related taxes or otherwise could adversely affect our operations
or financial conditions.
We have incurred, and will continue to incur, capital expenditures and operating costs to comply with environmental laws
and regulations, including the U.S. Environmental Protection Agency’s Boiler MACT (maximum achievable control
technology) regulations and the National Ambient Air Quality Standards for Particulate Matter (PM) for PM2.5. These
regulations include environmental laws and regulations relating to air emissions, wastewater discharges, solid and
hazardous waste management, plant and wildlife protection and site remediation, as well as workplace safety. These
laws, regulations and restrictions may be expanded to require us to take measures to protect or enhance the
environment in which we operate, including measures to protect biodiversity, conserve habitats and reduce risk of
invasive transportation of species to new ecosystems. In addition, changes in the regulatory environment respecting
climate change have and may lead governments and regulatory bodies to enact additional or more stringent laws and
regulations and impose operational restrictions or incremental levies and taxes applicable to our Company which could
require us to incur increased capital expenditures, including further Best Available Control Technology or result in
increased operating expenses or limit or constrain our ability to obtain permits and authorizations to advance our
business and capital/modernization plans. In addition, we anticipate incurring additional capital expenditures in
connection with capital projects that we plan to undertake in order to achieve our targeted greenhouse gas emission
objectives. These capital expenditures may be greater than initially projected, and changes in environmental laws could
impose more stringent requirements than our targeted objectives and result in increased capital expenditures or
acceleration of the time for completion of the capital projects or delays in our ability to obtain permitting or execute on
our new capital and modernization plans.
No assurance can be given that changes in these laws and regulations or their application will not have a material adverse
effect on our business, operations, financial condition and operational results. Similarly, no assurance can be given that
capital expenditures necessary for future compliance with existing and new environmental laws and regulations could be
- 45 -
financed from our available cash flow. Failure to comply with applicable laws and regulations could result in fines,
penalties or other enforcement actions that could impact our production capacity or increase our production costs. In
addition, laws and regulations could become more stringent or subject to different interpretation in the future.
We may discover currently unknown environmental problems, contamination, or conditions relating to our past or
present operations. This or any failure to comply with environmental laws and regulations may require site or other
remediation costs or result in governmental or private claims for damage to person, property, natural resources or the
environmental or governmental sanctions, including fines or the curtailment or suspension of our operations, which could
have a material adverse effect on our business, financial condition and operational results.
We are currently involved in investigation and remediation activities and maintain accruals for certain environmental
matters or obligations, as set out in the notes to the Annual Financial Statements. Changing weather patterns and
climatic conditions due to natural and man-made causes, including temperature shifts and changes to seasonal norms for
winter and summer, can adversely impact our ability to meet our reforestation obligations and the expected cost to settle
these liabilities. There can be no assurance that any costs associated with such obligations or other environmental
matters will not exceed our accruals.
Our Canadian woodland operations, and the harvesting operations of our many key U.S. log and European wood fibre
suppliers, in addition to being subject to various environmental protection laws, are subject to third-party certification as
to compliance with internationally recognized, sustainable forest management standards. Demand for our products may
be reduced if we are unable to achieve compliance or are perceived by the public as failing to comply, with these
applicable environmental protection laws and sustainable forest management standards, or if our customers require
compliance with alternate forest management standards for which our operations are not certified. In addition, changes
in sustainable forest management standards or our determination to seek certification for compliance with alternate
sustainable forest management standards may increase our costs of wood fibre and operations.
Climate Change, Environmental and Social Risks
We face direct risks associated with climate change and the environment, as well as indirect risks resulting from the
growing international concern regarding climate change, environmental and social matters. Specifically, there has been a
significant increase in focus on the timing and ability of organizations to transition to a lower-carbon economy and to
demonstrate a commitment to environmental, social and governance issues. Governments, financial institutions,
insurance companies, environmental and governance organizations, institutional investors, social and environmental
activists, and individuals are increasingly seeking to implement, among other things, regulatory developments, policy
changes and investment patterns, which, individually and collectively may have financial implications for both us and our
stakeholders (i.e., customers, suppliers, shareholders).
Our business operations face risks associated with climate change and the environment. These risks include the following,
as identified and discussed in this Risk and Uncertainties section of this MD&A:
•
•
•
•
reduced access to fibre for our operations due to increased tree mortality or damage, including as a result of
wildfire, extreme weather, drought and insect infestation;
transportation disruption due to extreme weather events, including flooding and forest fires;
risk to the availability of timber supply resulting from reduced timber supply, forest fires, and reduced forest
access;
unplanned mill curtailments due to extreme weather or fire damage or power disruption.
We also face transition risks attributable to climate change resulting from adaptation to climate change and government
regulations in response to climate change, including:
•
•
•
•
•
the potential of increasing energy costs;
changes in land-use and forest conservation practices;
increased capital expenditures associated with improving energy efficiency and meeting decarbonization
objectives;
increased operating expenses associated with carbon pricing;
our inability to successfully transition to low-carbon technologies and operations.
- 46 -
2023 Annual Report | 59
2023 Annual Report | 59
In addition, climate change and its associated impacts may increase our exposure to, and magnitude of, other risks
identified in this Risk and Uncertainties section of this MD&A.
Overall, we continue to assess the degree to which climate change related regulatory, climatic conditions, and climate-
related transition risks could impact our financial and operating results. Our business, financial condition, results of
operations, cash flows, reputation, access to capital, access to insurance, cost of borrowing, access to liquidity, ability to
fund dividend payments and/or business plans may, in particular, without limitation, be adversely impacted as a result of
climate change and its associated impacts. We have initiated a formal climate change scenario analysis, informed by the
Task Force on Climate-related Disclosures (TCFD) recommendations, to understand the potential impacts of climate-
related risks and opportunities using different scenarios to help enhance our corporate strategy, supply planning and risk
management and create awareness with our stakeholders, and build business resiliency.
We also face potential strategic, reputational, business, legal and regulatory risks relating to our actual or perceived
actions, or inaction, in relation to climate change and other environmental and social risk issues, progress against our
environmental or social commitments, or our disclosures on these matters. Investors and stakeholders increasingly
compare companies based on climate-related performance and a perception among financial institutions and investors
that our ESG initiatives, including the forestry industry’s sustainability initiatives, are insufficient, could adversely affect
our reputation and ability to attract investors and capital.
In 2022, we joined the Science-Based Targets Initiative, which included setting specific science-based targets to achieve
GHG emissions reduction across all our operations by 2030, as part of our overall sustainability and ESG initiatives. There
is a risk that we will not meet our GHG emissions reduction targets, that some or all of the expected benefits and
opportunities of achieving our various GHG and sustainability targets may fail to materialize, and that achieving the
targets may cost more to achieve than projected or may not occur within anticipated time periods. Our failure to achieve
our GHG or our sustainability targets, or a perception by key stakeholders, including our customers and our investors,
that our GHG targets or other ESG initiatives are insufficient, could adversely affect our reputation and our ability to
attract investors, capital and insurance coverage. Further, actions taken by us to meet our GHG targets and achieve our
sustainability objectives may ultimately increase our projected capital expenditures and our costs of operations. In
addition, our ability to access capital or the costs of available capital may be adversely affected in the event that financial
institutions, investors, rating agencies and/or lenders adopt more restrictive sustainability policies than we have
committed to.
Indigenous Groups
Issues relating to Indigenous groups, including Indigenous Nations, Métis and others, have the potential for an impact on
resource companies operating in Canada including West Fraser. Risks include potential delays or effects of governmental
decisions relating to Canadian Crown timber harvesting rights (including their grant, renewal or transfer or authorization
to harvest) in light of the government’s duty to consult and accommodate Indigenous groups in respect of Aboriginal
rights or treaty rights, agreements governments may choose to enter into with Indigenous groups or steps governments
may take in favour of Indigenous groups even if not required by law, related terms and conditions of authorizations and
potential findings of Aboriginal title over land. This includes potential Indigenous joint decision-making and consent
agreements under the B.C. Declaration on the Rights of Indigenous Peoples Act related to forestry.
We participate, as requested by the government, in the consultation process in support of the government fulfilling its
duty to consult. We also seek to develop and maintain good relationships and, where possible, agreements with
Aboriginal groups that may be affected by our business activities. However, as the jurisprudence and government policies
respecting Indigenous rights and title and the consultation process continue to evolve, as treaty and non-treaty
negotiations continue, and as governments continue to announce and implement further policy and legislative changes to
Indigenous interests (including, but not limited to the British Columbia Declaration of the Rights of Indigenous Peoples
Act) and the federal United Nations Declaration on the Rights of Indigenous Peoples Act, we cannot assure that
Indigenous claims will not in the future have a material adverse effect on our timber harvesting rights or our ability to
exercise or renew them or secure other timber harvesting rights.
The Government of British Columbia’s evolving forest policy’s coupled with Indigenous Nations consultation and
involvement in the land use planning process is expected to reduce the availability of and increase the timeline for,
receipt of cutting permits and restrict volume available for harvest.
Recoverability of Capital Assets and Goodwill
- 47 -
Our capital assets and goodwill could become impaired, which could have a material non-cash adverse effect on our
results of operations. We review our operations for events and circumstances that could indicate that the carrying value
of our long-lived assets and goodwill may not be recoverable. If indicators of impairment are determined to exist, we
review the recoverability of the carrying value of long-lived assets by estimating the recoverable amount of the asset,
which is the higher of its estimated fair value less costs of disposal and its value in use. We also review our goodwill for
impairment annually and when events or changes in circumstances indicate that the carrying value of the CGU or group
of CGUs associated with the goodwill balance is not recoverable. We determine the value in use of assets and cash-
generating units using discounted cash flow models. We make multiple assumptions in estimating future cash flows. Key
assumptions include production volume, product pricing, raw material input cost, production cost, terminal multiple, and
discount rate. Key assumptions were determined using external sources and historical data from internal sources. There
are numerous uncertainties inherent in making these estimates, including many factors beyond our control, that could
cause actual results to differ materially from expected financial and operating results. We may be required to recognize
material non-cash charges relating to impairments of capital assets and/or goodwill in the future if actual results differ
materially from management’s estimates. If a goodwill impairment charge is incurred, such charges are not reversible at a
later date even when the events and circumstances that caused the impairment loss are favourably resolved. As a result
of these uncertainties and the significant amount of goodwill ($1,949 million at December 31, 2023), our operating results
may be significantly impacted from both the impairment and the underlying trends in the business that triggered the
impairment, and actual results may be less favourable than estimated returns and initial financial outlook. As it relates to
the North America EWP and Europe EWP CGU groups, a prolonged downturn in product pricing with an extended
recovery could cause their carrying amounts to exceed their recoverable amounts. For additional information regarding
goodwill, see note 9 to the Annual Financial Statements.
Regulatory
Our operations are subject to extensive general and industry-specific federal, provincial, state, municipal and other local
laws and regulations and other requirements, including those governing forestry, exports, taxes (including, but not
limited to, income, sales and carbon taxes), employees, labour standards, occupational health and safety, waste disposal,
environmental protection and remediation, protection of endangered and protected species and land use and
expropriation. We are required to obtain approvals, permits and licences for our operations, which may require advance
consultation with potentially affected stakeholders including Indigenous groups and impose conditions that must be
complied with. If we are unable to obtain, maintain, extend or renew, or are delayed in extending or renewing, a material
approval, permit or license, our operations or financial condition could be adversely affected. There is no assurance that
these laws, regulations or government requirements, or the administrative interpretation or enforcement of existing laws
and regulations, will not change in the future in a manner that may require us to incur significant capital expenditures,
pay higher taxes or otherwise could adversely affect our operations or financial condition. Failure to comply with
applicable laws or regulations, including approvals, permits and licences, could result in fines, penalties or enforcement
actions, including orders suspending or curtailing our operations or requiring corrective measures or remedial actions.
Natural and Man-Made Disasters and Climate Change Adaptation
Our operations are subject to adverse natural or man-made events such as forest fires, flooding, drought, hurricanes and
other severe weather conditions, climate change, timber diseases and insect infestations including those that may be
associated with warmer climate conditions, and earthquake activity. Over the past several years, changing weather
patterns and climatic conditions due to natural and man-made causes, including temperature shifts and changes to
seasonal norms for winter and summer, have added to the unpredictability and frequency of natural events such as
severe weather, hurricanes, flooding, hailstorms, wildfires, mudslides, road washouts, snow, ice storms, and the spread
of disease and insect infestations. These conditions have hampered, and may hamper in the future, our ability to conduct
logging activities, constrain our ability to manufacture and ship our products or necessitate reduced operating schedules.
Trends towards heavier precipitation patterns, changes to water quality and water storage on the land base can result in
the overall degradation of water quality and reduced water supply levels. These events could damage or destroy or
adversely affect the operations at our physical facilities or the cost, availability, and quality of our timber supply, and
similar events could also affect the facilities of our suppliers or customers. Any such damage or destruction could
adversely affect our financial results as a result of the reduced availability of timber, decreased production output,
increased operating costs or the reduced availability of transportation. Although we believe we have reasonable
insurance arrangements in place to cover certain of such incidents related to damage or destruction, there can be no
assurance that these arrangements will be sufficient to fully protect us against such losses. As is common in the industry,
we do not insure loss of standing timber for any cause.
- 48 -
2023 Annual Report | 61
2023 Annual Report | 61
In addition, government action to address climate change, carbon emissions, water and land use and the protection of
threatened or endangered species and critical habitat may result in the enactment of additional or more stringent laws
and regulations that may require us to incur significant capital expenditures, pay higher taxes or fees, including carbon
related taxes, or otherwise could adversely affect our operations or financial conditions.
Information Technology
We are reliant on our information and operations technology systems to operate our manufacturing facilities, access
fibre, communicate internally and with suppliers and customers, to sell our products and to process payments and payroll
as well as for other corporate purposes and financial reporting. An interruption or failure or unsuccessful implementation
and integration of our information and operations technology systems could result in a material adverse effect on our
operations, business, financial condition and results of operations.
In order to optimize performance, we regularly implement business process improvement initiatives and invest capital to
upgrade our information technology infrastructure. These initiatives may involve risks to the operations and we may
experience difficulties during the transition to these new or upgraded systems and processes. Difficulties in implementing
new or upgraded information systems or significant system failures could disrupt operations and have a material adverse
effect on the business.
In addition, the history of our operations has resulted in multiple information technology platforms and applications
across our business operations which complicates our business controls and processes, including our internal controls
over financial reporting. Our strategy is to integrate and unify these information technology systems in order to avoid
inefficiencies in our operations and to optimize our finance, sales, inventory management, maintenance and business
intelligence functions. Our inability to integrate these systems, or delay in completing this integration, could result in
impediments to our growth and profitability and increase our costs of operations and regulatory compliance.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, proprietary
business and confidential financial information and identifiable personal information of our employees. We rely on
industry accepted security measures and technology to protect our information systems and confidential and proprietary
information. If our security measures and technology are not effective in ensuring unauthorized access to personally
identifiable information, we may be subject to fines and/or penalties under privacy laws and regulations and our
reputation with our customers, suppliers and employees may be adversely impacted.
Cyber Security
Our information and operations technology systems, including process control systems, are still subject to cyber security
risks and are vulnerable to natural disasters, fires, power outages, vandalism, attacks by hackers or others or breaches
due to employee error or other disruptions. We have had in the past, and may in the future, experience cyber security
incidents. Any such incident, attack on or breach of our systems including through exposure to potential computer viruses
or malware could compromise our systems and stored information may be accessed, publicly disclosed, lost or
compromised, which could result in legal claims or proceedings, liability under laws that protect the privacy of personal
information, regulatory penalties, disruptions to our operations, decreased performance and production, increased costs,
and damage to our reputation, which could have a material adverse effect on our business, financial condition and results
of operations. As cyber security threats continue to evolve, we may be required to expend additional resources to
continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.
However, our exposure to these risks cannot be fully mitigated due to the nature of these threats. Our inability to
adequately address risks from cyber security attacks could result in significant disruption to our information technology
infrastructure and business applications, stoppage to our major operating, sales and financial processes and harm to our
reputation and relationships with our customers and suppliers. Further, disruptions resulting from cyber security
breaches could expose us to potential liability or other proceedings by affected individuals, business partners and/or
regulators. As a result, we could face increased costs as a result of cyber security incidents for which we do not have
insurance coverage.
In order to mitigate against the impact of potential cyber security breaches, we will be reliant on our disaster recovery
and business continuity plans in order to continue our business operations with minimal disruption in the event of a cyber
security breach. The success of these disaster recovery and business continuity plans will be contingent upon our ability
to design and maintain effective plans that are resilient and will enable us to protect our information technology systems
and data without disruption to our business. Our inability to design and maintain effective recovery systems may
- 49 -
adversely impact our ability to manage a cyber security breach without disruption to our operations with the result that
our reputation may be harmed, we may be subject to regulatory reporting risk, our relationships with our customers and
suppliers may be harmed and our result of operations may be adversely impacted.
In addition to risks we face from cyber security incidents directed at our systems, we also face risks from cyber security
incidents impacting third parties, including but not limited to contractors, consultants and suppliers, directly or indirectly
involved in our business and operations. We are vulnerable to damage and interruptions from incidents involving these
third parties, and may be exposed to consequences that could have a material adverse effect on our financial condition,
operations, production, sales and business.
Legal Proceedings
The Company is subject to various investigations, claims and legal, regulatory and tax proceedings covering a wide range
of matters, including civil claims and lawsuits, regulatory examinations, investigations, audits and requests for
information by various governmental regulatory agencies and law enforcement authorities in various jurisdictions. Each
of these matters is subject to various uncertainties and it is possible that some of these matters may be resolved
unfavourably. We establish provisions for matters that are probable and can be reasonably estimated in accordance with
our accounting policies, however there is no assurance that our estimates will be accurate. We also carry liability
insurance coverage, however such insurance does not cover all risks to which we might be exposed and in other cases,
may only partially cover losses incurred by us. In addition, we may be involved in disputes with other parties in the future
that may result in litigation, which may result in a material adverse effect on our financial position, cash flow and results
of operations.
We produce a variety of wood-based panels that are used in new home construction, repair and remodelling of existing
homes, furniture and fixtures, and industrial applications. In the normal course of business, the end users of our products
have made, and could in the future make, claims with respect to the fitness for use of its products or claims related to
product quality or performance issues.
In addition, we have been and may in the future be, involved in legal proceedings related to antitrust, negligence,
personal injury, property damage, environmental matters, and labour and other claims against us or our predecessors.
Tax Exposures
In the normal course of business, we take various positions in the filing of our tax returns, and there can be no assurance
that tax authorities will not challenge such filing positions. In addition, we are subject to further uncertainties concerning
the interpretation and application of tax laws in various operating jurisdictions. We provide for known estimated tax
exposures in all jurisdictions. These exposures are settled primarily through the closure of audits with the jurisdictional
taxing authorities. However, future settlements could differ materially from our estimated liabilities.
Capital Intensity
Our business and the production of wood-based products is capital intensive. There can be no assurance that key
manufacturing facilities and pieces of equipment will not need to be updated, modernized, repaired or replaced, or that
operation of our manufacturing facilities could not otherwise be disrupted unexpectedly, for example by adverse
weather, labour disputes, information technology disruptions, power outages, fire, explosion or other hazards including
combustible wood dust. In certain circumstances, the costs of repairing or replacing equipment, and the associated
downtime of the affected production line, may not be insurable.
We are required to review our long-lived assets for indicators that their carrying values are not recoverable. Indicators
could include high raw material costs, high energy costs, changes in demand for our products, declines in product pricing,
changes in technology, prolonged negative results or operational curtailments, and may result in non-cash impairment or
accelerated depreciation charges in the future and therefore have a negative impact to earnings in the period when these
charges are recorded.
Potential Future Changes in Tax Laws, including Tax Rates
Our corporate structure is based on prevailing taxation law, regulations and practice in the local jurisdictions in which we
operate. We are aware that new taxation rules could be enacted or that existing rules could be applied in a manner that
- 50 -
2023 Annual Report | 63
2023 Annual Report | 63
subjects our profits to additional taxation or otherwise has a material adverse effect on our profitability, results of
operations, deferred tax assets and liabilities, financial condition or the trading price of our securities, including without
limitation the Pillar Two model rules and other tax reforms. Our management is continually monitoring changes in tax
policy, tax legislation (including in relation to taxation rates), and the interpretation of tax policy or legislation or practice
that could have such an effect. At any given time, we may face tax exposures arising out of changes in tax or transfer
pricing laws, tax reassessments or otherwise. Governments around the world are increasingly seeking to regulate
multinational companies and their use of differential tax rates between jurisdictions. This effort includes a greater
emphasis by various nations to coordinate and share information regarding companies and the taxes they pay. Changes in
governmental taxation policies and practices could adversely affect us or result in negative media coverage and,
depending on the nature of such policies and practices, could have a greater impact on the Company than on other
companies.
Foreign Currency Exchange Rates
Our Canadian operations sell the majority of their products at prices denominated in U.S. dollars or based on prevailing
U.S. dollar prices while a significant portion of their operational costs and expenses are incurred in Canadian dollars.
Upon closing of the Norbord Acquisition, we changed the functional currency and presentation currency of our Canadian
operations, with the exception of our Spray Lake lumber mill and Canadian newsprint operation, from Canadian dollars to
United States dollars. Our U.K. operations sell a portion of their products at prices denominated in Euros while the
majority of their costs are incurred in British pounds sterling.
Accordingly, exchange rate fluctuations will result in exchange gains or losses recorded in earnings and other
comprehensive earnings. This results in significant earnings sensitivity to changes in the relative value of the United
States dollar in comparison to the value of the Canadian dollar, British pound sterling and Euro. These exchange rates are
affected by a broad range of factors which makes future rates difficult to accurately predict. Significant fluctuations in
relative currency values may also negatively affect the cost competitiveness of our facilities, the value of our foreign
investments, the results of our operations and our financial position.
Financial
Capital Plans
Our capital plans will include, from time to time, expansion, productivity improvement, technology upgrades, operating
efficiency optimization and maintenance, repair or replacement of our existing facilities and equipment. In addition, we
will from time to time undertake the acquisition of facilities or the rebuilding or modernization of existing facilities,
including the rebuilding and modernization of existing and newly acquired facilities and the incorporation of new
technologies in our production facilities to improve operating efficiencies and reduce costs. We may also in the future be
required to undertake capital projects to (i) address or mitigate the impacts of climate change and extreme weather
events at our facilities, (ii) comply with new government regulation directed at reducing the impacts of climate change;
(iii) reduce the carbon intensity or footprint of our existing operations by reducing or eliminating fossil fuel usage, or (iv)
comply with new government regulation directed at improving environmental protection. If the capital expenditures
associated with these capital projects are greater than we have projected or if construction timelines are longer than
anticipated, or if we fail to achieve the intended efficiencies, our financial condition, results of operations and cash flows
may be adversely affected. In addition, our ability to expand production and improve operational efficiencies will be
contingent on our ability to execute on our capital plans. Our capital plans and our ability to execute on such plans may
be adversely affected by availability of, and competition for, qualified workers and contractors, machinery and equipment
lead times, changes in government regulations, unexpected delays and increases in costs of completing capital projects
including due to increased materials, machinery and equipment costs resulting from trade disputes and increased tariffs
and duties.
In addition, our ability to achieve our capital plans on budget and within the projected time frames will be contingent on
our ability to build accurate business plans, budget and forecasts based on sound business assumptions. Our inability to
develop accurate business plans, budgets and forecasts could result in increased costs of completion and our inability to
realize the planned economic benefits of our capital plans. Our inability to modernize and incorporate new technologies
into our existing production facilities could result in increased or high operating expenses or less than optimum
operational capacities which may result in our facilities not being competitive with the production facilities of our
competitors.
- 51 -
Capital Resources
We believe our capital resources will be adequate to meet our current projected operating needs, capital expenditures
and other cash requirements. Factors that could adversely affect our capital resources include prolonged and sustained
declines in the demand and prices for our products, unanticipated significant increases in our operating expenses and
unanticipated capital expenditures. If for any reason we are unable to provide for our operating needs, capital
expenditures and other cash requirements on commercially reasonable terms, we could experience a material adverse
effect to our business, financial condition, results of operations and cash flows.
Availability of Credit
We rely on long-term borrowings and access to revolving credit in order to finance our ongoing operations. Our ability to
refinance or renew such facilities will be dependent upon our financial condition, profitability and credit ratings and
prevailing financial market conditions. Any change in availability of credit in the market, as could happen during an
economic downturn, could affect our ability to access credit markets on commercially reasonable terms. In the future we
may need to access public or private debt markets to issue new debt. Deteriorations or volatility in the credit markets
could also adversely affect:
•
•
•
•
our ability to secure financing to proceed with capital expenditures for the repair, replacement or expansion of
our existing facilities and equipment;
our ability to comply with covenants under our existing credit or debt agreements;
the ability of our customers to purchase our products; and
our ability to take advantage of growth, expansion or acquisition opportunities.
In addition, deteriorations or volatility in the credit market could result in increases in the interest rates that we pay on
our outstanding non-fixed rate debt, which would increase our costs of borrowing and adversely affect our results.
We have notes maturing in 2024 and a term loan maturing in 2025. There is no assurance that financing will be available
to us when required or available to us on commercially favourable or otherwise satisfactory terms in the future to re-
finance these borrowings when they become due.
Credit Ratings
Credit rating agencies rate our debt securities based on factors that include our operating results, actions that we take,
their view of the general outlook for our industry and their view of the general outlook for the economy. Actions taken by
the rating agencies can include maintaining, upgrading or downgrading the current rating or placing us on a watch list for
possible future downgrading. Downgrading the credit rating of our debt securities or placing us on a watch list for
possible future downgrading could limit our access to the credit markets, increase our cost of financing and have an
adverse effect on our financial condition.
Wood Dust
Our operations generate wood dust which has been recognized for many years as a potential health and safety hazard
and operational issue. The potential risks associated with wood dust have been increased in those of our B.C. and Alberta
facilities that have been processing mountain pine beetle-killed logs and fire damaged logs as the wood dust generated
from these logs tends to be drier, lighter and finer than wood dust typically generated. We have adopted a variety of
measures to reduce or eliminate the risks and operational challenges posed by the presence of wood dust in our facilities
and we continue to work with industry and regulators to develop and adopt best mitigation practices. Any explosion or
similar event at any of our facilities or any third-party facility could result in significant loss, increases in expenses and
disruption of operations, increases in insurance costs, exposure to litigation, regulatory fines and/or penalties and
damage to our reputation as an employer, each of which would have a material adverse effect on our business.
Pension Plan Funding
We are the sponsor of several defined benefit pension plans which exposes us to market risks related to plan assets and
liabilities. Funding requirements for these plans are based on actuarial assumptions concerning expected return on plan
assets, future salary increases, life expectancy and interest rates. If any of these assumptions differs from actual
outcomes such that a funding deficiency occurs or increases, we would be required to increase cash funding contributions
- 52 -
2023 Annual Report | 65
2023 Annual Report | 65
which would in turn reduce the availability of capital for other purposes. We are also subject to regulatory changes
regarding these plans which may increase the funding requirements which would in turn reduce the availability of capital
for other purposes.
International Sales
A portion of our products are exported to customers in China, Japan and in developing markets. International sales
present a number of risks and challenges, including but not limited to the effective marketing of our products in foreign
countries, collectability of accounts receivable, tariffs and other barriers to trade and recessionary environments in
foreign economies.
Strategic Initiatives
Our future success may in part be dependent on the performance of strategic initiatives, which could include growth in
certain segments or markets and acquisitions. There can be no assurance that we will be able to successfully implement
important strategic initiatives in accordance with our expectations, which may adversely affect our business, financial
results and future growth prospects.
Acquisitions
We may evaluate and complete potential acquisitions from time to time and have in the past grown through acquisitions.
However, there is no assurance that we in the future will be able to successfully identify potential acquisitions or
efficiently and cost-effectively integrate any assets or business that we acquire without disrupting existing operations.
Our inability to identify accretive acquisition targets and complete acquisitions may negatively impact our ability to grow
our business operations and deploy our capital.
Acquisitions are subject to a range of inherent risks, including the assumption of incremental regulatory/compliance,
pricing, labour relations, litigation, environmental, tax and other risks. There is no assurance that the due diligence that
we undertake, including accounting, tax, regulatory and business due diligence, will be sufficient to identify all risks
associated with any prospective acquisition that we undertake. Further, we may not be able to successfully integrate or
achieve anticipated synergies from those acquisitions which we do complete and/or such acquisitions may be dilutive in
the short to medium term. Specifically, there is no assurance that we will achieve the anticipated growth opportunities,
synergies, efficiencies and costs savings from the combined business in respect of any acquisition that we undertake. Any
of these adverse outcomes could result in us not achieving the financial benefits of prospective acquisitions and have a
material adverse effect on our profitability.
Return of Capital to Shareholders
We have returned capital to our shareholders in 2023 through a combination of dividends and share repurchases, both
through our normal course issuer bid and in 2022 through our substantial issuer bid. There is no assurance that we will
continue to return capital to shareholders in future years, or as to the amount of capital that will be returned. Further,
decisions to return capital to shareholders remain at the discretion of our board of directors and shareholders may not
agree with the manner and the amounts of capital that are returned to shareholders. The declaration and payment of
cash dividends remains within the discretion of our board of directors. Historically, cash dividends have been declared on
a quarterly basis payable after the end of each quarter. There is no assurance that our board of directors will continue to
maintain our dividend at the current rate. Our board of directors has the power to declare dividends at its discretion and
in any manner and at any time as it may deem necessary or appropriate in the future. For these reasons, as well as
others, there can be no assurance that dividends that we pay in the future will be equal or similar to the dividends
historically paid by West Fraser or that our board of directors will not decide to suspend or discontinue the payment of
cash dividends in the future.
Risks Associated with the NYSE Listing and Litigation
The West Fraser Common shares are listed on the NYSE. Our continued listing on the NYSE may expose us to additional
regulatory proceedings, litigation (including class actions), mediation, and/or arbitration from time to time, which could
adversely affect our business, financial condition and operations. Monitoring and defending against legal actions, with or
without merit, can be time-consuming, may divert management’s attention and resources and can cause us to incur
significant expenses. In addition, legal fees and costs incurred in connection with such activities may be significant and we
- 53 -
may, in the future, be subject to judgments or enter into settlements of claims for significant monetary damages. While
we have insurance that may cover the costs and awards of certain types of litigation, the amount of insurance may not be
sufficient to cover any costs or awards. Substantial litigation costs or an adverse result in any litigation may adversely
impact our business, financial condition, or operations. Litigation, and any decision resulting therefrom, may also create a
negative perception of West Fraser.
Risk Associated with Internal Controls
We are required to maintain and evaluate the effectiveness of our internal control over financial reporting under National
Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings in Canada and under the Securities
Exchange Act of 1934 in the United States. Effective internal controls are required for us to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in
accordance with IFRS Accounting Standards. Management assesses the effectiveness of our internal control over financial
reporting based on the criteria set forth in the Internal Control – Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission. We also engage an independent registered public accounting
firm to audit and provide an independent opinion on the effectiveness of our internal control over financial reporting.
There is no assurance that we will be able to achieve and maintain the adequacy of our internal control over financial
reporting as such standards are modified, supplemented, or amended from time to time, and we may not be able to
ensure that we can conclude on an ongoing basis that our internal control over financial reporting are effective. Also,
projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject
to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. No evaluation can provide complete assurance that our internal control
over financial reporting will prevent or detect misstatements on a timely basis, or detect or uncover all failures of persons
employed by us to disclose material information otherwise required to be reported. The effectiveness of our controls and
procedures could also be limited by simple errors or faulty judgments. In addition, as we continue to expand, the
challenges involved in implementing appropriate internal control over financial reporting will increase and will require
that we continue to improve our internal control over financial reporting.
Our failure to satisfy these requirements on a timely basis could result in the loss of investor confidence in the accuracy
and reliability of our financial statements, which in turn could harm our business, expose us to legal or regulatory actions
and negatively impact the trading price of our Common shares. In addition, any failure to implement required new or
improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to
fail to meet our reporting obligations. There can be no assurance that we will be able to remediate material weaknesses,
if any, identified in future periods, or maintain all of the controls necessary for continued compliance, and there can be
no assurance that we will be able to retain sufficient skilled finance and accounting personnel, especially in light of the
increased demand for such personnel among publicly traded companies. Future acquisitions of companies may provide
us with challenges in implementing the required processes, procedures and controls in our acquired operations. Acquired
companies may not have disclosure controls and procedures or internal control over financial reporting that are as
thorough or effective as those required by securities laws currently applicable to us.
Contagious Disease
Pandemics, epidemics and other outbreaks of contagious diseases, including COVID-19 and future COVID-19 variants,
could cause interruptions to our business and operations and otherwise have an adverse effect on our business, financial
condition and/or results of operations including as a result of the effects on: (i) global economic activity, (ii) the business,
operations, financial condition, and solvency of our customers caused by operating shutdowns or disruptions or financial
or liquidity issues, (iii) the demand for and price of our products, (iv) the health of our employees and the impact on their
ability to work or travel, (v) our ability to operate our manufacturing facilities, (vi) our supply chain and the ability of third
party suppliers, service providers and/or transportation carriers to supply goods or services on which we rely on to
transport our products to market, and (vii) our revenues, cash flow, liquidity and ability to maintain compliance with the
covenants in our credit agreements. In addition, our future business may be impacted by the local, regional, national or
international outbreak or escalation of other contagious diseases, viruses or other illnesses, including the resurgence of
COVID-19 and any future variants, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1
influenza virus, avian flu or any other similar illness, or fear of the foregoing,
Demand and prices for our products may be adversely affected by contagious diseases that affect levels of economic
activity, and we are unable to predict or estimate the timing or extent of the impact of such pandemics, epidemics, and
other outbreaks. Governmental measures or restrictions, including those requiring the closures of businesses, restrictions
- 54 -
2023 Annual Report | 67
2023 Annual Report | 67
on travel, country, provincial or state and city-wide isolation orders, and physical distancing requirements, may directly
affect our operations and employees and those of our customers, suppliers and service providers, and the demand for
and pricing of our products. The spread of such contagious diseases among our employees or those of our suppliers or
service providers could result in lower production and sales, higher costs, and supply and transportation constraints.
Accordingly, our production, costs, and sales may be negatively affected, which could have a material adverse effect on
our business, financial condition and/or results of operation.
Given the ongoing nature of the COVID-19 outbreak, it is challenging to predict the impact on the Company’s business.
The extent of such impact will depend on future developments, which are uncertain, including the resurgence of
COVID-19 and any variants, new information that may emerge concerning the spread and severity, and actions taken to
address its impact, among others. It is difficult to predict how this virus may affect our business in the future, including its
effect (positive or negative; long or short term) on the demand and price for our products. It is possible that the
resurgence of COVID-19, including any future variants, particularly if it has a prolonged duration, could have a material
adverse effect on our supply chain, market pricing and customer demand, and distribution networks and may result in
our inability to fully staff our manufacturing facilities, with the result that we may be forced to temporarily close facilities
or reduce production rates during periods. These factors may further impact our operating plans, business, financial
condition, liquidity, the valuation of long-lived assets, and operating results.
Our Common Shares May be Subject to Trading Volatility
Our Common shares will be subject to material fluctuations in trading prices and volumes which may increase or decrease
in response to a number of events and factors, which will include:
•
•
•
•
•
•
•
•
•
•
•
changes in the market price of the commodities that we sell and purchase;
current events affecting the economic situation in North America, Europe and the international markets in which
our products are sold;
trends in the lumber and OSB industries and other industries in which we operate;
regulatory and/or government actions;
changes in financial estimates and recommendations by securities analysts;
future acquisitions and financings;
the economics of current and future projects undertaken by us;
variations in our operating results, financial condition or dividend policies;
the operating and share price performance of other companies, including those that investors may deem
comparable to West Fraser;
the issuance of additional equity securities by us; and
the occurrence of any of the risks and uncertainties described above.
In addition to factors directly affecting West Fraser, our Common shares may also experience volatility that is attributable
to the overall state of the stock markets in which wide price swings may occur as a result of a variety of financial,
economic and market perception factors. This overall market volatility may adversely affect the price of our Common
shares, regardless of our own relative operating performance.
CONTROLS AND PROCEDURES
West Fraser is responsible for establishing and maintaining disclosure controls and procedures and internal control over
financial reporting, each as defined in NI 52-109 in Canada and under the Securities Exchange Act of 1934, as amended, in
the United States.
Limitations on Scope of Design of DC&P and ICFR
In accordance with the provisions of NI 52-109, our management has limited the scope of its design of the Company’s
disclosure controls and procedures and internal control over financial reporting to exclude controls, policies and
procedures of Spray Lake Sawmills (1980) Ltd., which was acquired on November 17, 2023.
Spray Lake’s contribution to our consolidated financial statements for the year ended December 31, 2023 was $5 million
of sales, representing approximately 0.1% of consolidated sales, and $1 million of loss, representing 0.7% of consolidated
loss. Additionally, assets attributed to Spray Lake’s assets were $134 million, representing approximately 1.4% of our total
assets as at December 31, 2023.
- 55 -
Disclosure Controls and Procedures
We have designed our disclosure controls and procedures to provide reasonable assurance that information that is
required to be disclosed by us in our annual filings, interim filings and other reports that we file or submit under securities
legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation.
These include controls and procedures designed to ensure that information that we are required to disclose under
securities legislation is accumulated and communicated to our management, including our President and Chief Executive
Officer (“CEO”) and the Senior Vice-President, Finance and Chief Financial Officer (“CFO”), as appropriate to allow timely
decisions regarding required disclosure.
Our management, under the supervision and with the participation of our CEO and CFO, has conducted an evaluation of
our disclosure controls and procedures as of December 31, 2023. Based on this evaluation, management, under the
supervision of our CEO and CFO, have concluded that our disclosure controls and procedures are effective as of
December 31, 2023.
Management’s Report on Internal Control Over Financial Reporting
Management, under the supervision of the CEO and CFO, is responsible for establishing and maintaining adequate
internal control over financial reporting, as defined under NI 52-109 in Canada and the Securities Exchange Act of 1934,
as amended, in the United States, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external reporting purposes in accordance with IFRS Accounting
Standards.
During the year ended December 31, 2023, we completed the migration of the enterprise resource planning (“ERP”)
system used at our North American OSB operations to the ERP system used by our other North American operations.
Although the implementation has allowed for improved standardization within the accounting function, it did not
materially affect our internal control over financial reporting. There has been no change in our internal control over
financial reporting during the year ended December 31, 2023, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Management, under the supervision of the CEO and CFO, has assessed the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2023 based on the criteria set forth in Internal Control - Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based
on this assessment, management has concluded that the Company’s internal control over financial reporting was
effective as of December 31, 2023.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by
PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, as stated in their report included
with our annual audited consolidated financial statements and accompanying notes for the year ended December 31,
2023.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a
timely basis. Additionally, projections of any evaluation of the effectiveness of internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
- 56 -
2023 Annual Report | 69
2023 Annual Report | 69
DEFINITIONS, RECONCILIATIONS, AND OTHER INFORMATION
Transactions Between Related Parties
The Company has entered into executive compensation arrangements with key management personnel, consisting of our
directors and officers. These individuals have the authority and responsibility for overseeing, planning, directing, and
controlling our activities. Total compensation expense for key management personnel was $29 million in 2023, compared
to $19 million in 2022. The increase in compensation expense was due primarily to higher equity-based compensation,
influenced by changes in the price of our Common shares, vesting of granted units, and changes in the expected payout
multiple on our performance share units, offset in part by lower salary and short-term employee benefits. See note 21 to
the Annual Financial Statements for additional details.
Non-GAAP and Other Specified Financial Measures
Throughout this MD&A, we make reference to (i) certain non-GAAP financial measures, including Adjusted EBITDA and
Adjusted EBITDA by segment (our “Non-GAAP Financial Measures”), (ii) certain capital management measures, including
available liquidity, total debt to capital ratio, and net debt to capital ratio (our “Capital Management Measures”), and (iii)
certain supplementary financial measures, including our expected capital expenditures (our “Supplementary Financial
Measures”). We believe that these Non-GAAP Financial Measures, Capital Management Measures, and Supplementary
Financial Measures (collectively, our “Non-GAAP and other specified financial measures”) are useful performance
indicators for investors to understand our operating and financial performance and our financial condition. These Non-
GAAP and other specified financial measures are not generally accepted financial measures under IFRS Accounting
Standards and do not have standardized meanings prescribed by IFRS Accounting Standards. Investors are cautioned that
none of our Non-GAAP Financial Measures should be considered as an alternative to earnings or cash flow, as determined
in accordance with IFRS Accounting Standards. As there is no standardized method of calculating any of these Non-GAAP
and other specified financial measures, our method of calculating each of them may differ from the methods used by
other entities and, accordingly, our use of any of these Non-GAAP and other specified financial measures may not be
directly comparable to similarly titled measures used by other entities. Accordingly, these Non-GAAP and other specified
financial measures are intended to provide additional information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with IFRS Accounting Standards. The reconciliation of the
Non-GAAP measures used and presented by the Company to the most directly comparable measures under IFRS
Accounting Standards is provided in the tables set forth below.
Adjusted EBITDA and Adjusted EBITDA by Segment
Adjusted EBITDA is defined as earnings determined in accordance with IFRS Accounting Standards adding back the
following line items from the consolidated statements of earnings and comprehensive earnings: finance income or
expense, tax provision or recovery, amortization, equity-based compensation, restructuring and impairment charges, and
other income or expense.
Adjusted EBITDA by segment is defined as operating earnings determined for each reportable segment in accordance
with IFRS adding back the following line items from the consolidated statements of earnings and comprehensive earnings
for that reportable segment: amortization, equity-based compensation, and restructuring and impairment charges.
EBITDA is commonly reported and widely used by investors and lending institutions as an indicator of a company’s
operating performance, ability to incur and service debt, and as a valuation metric. We calculate Adjusted EBITDA and
Adjusted EBITDA by segment to exclude items that do not reflect our ongoing operations and that should not, in our
opinion, be considered in a long-term valuation metric or included in an assessment of our ability to service or incur debt.
We believe that disclosing these measures assists readers in measuring performance relative to other entities that
operate in similar industries and understanding the ongoing cash generating potential of our business to provide liquidity
to fund working capital needs, service outstanding debt, fund future capital expenditures and investment opportunities,
and pay dividends. Adjusted EBITDA is used as an additional measure to evaluate the operating and financial performance
of our reportable segments.
The following tables reconcile Adjusted EBITDA to the most directly comparable IFRS measure, earnings.
- 57 -
See note 19 to the Annual Financial Statements for a breakdown of the items making up Other. Other is comprised
primarily of foreign exchange revaluations and gains/losses on our electricity swaps and interest rate swaps.
Annual Adjusted EBITDA
($ millions)
Earnings (loss)
Finance expense (income), net
Tax provision (recovery)
Amortization
Equity-based compensation
Restructuring and impairment charges
Other expense (income)
Adjusted EBITDA
Quarterly Adjusted EBITDA
($ millions)
Earnings (loss)
Finance income, net
Tax provision (recovery)
Amortization
Equity-based compensation
Restructuring and impairment charges
Other expense (income)
Adjusted EBITDA
2023
2022
2021
(167) $
(51)
(61)
541
25
279
(5)
561 $
1,975 $
3
618
589
5
60
(37)
3,212 $
2,947
45
951
584
40
—
2
4,569
Q4-23
Q3-23
Q4-22
(153) $
(14)
(50)
136
15
134
30
97 $
159 $
(21)
56
132
(4)
13
(11)
325 $
(94)
(3)
(31)
148
6
47
(2)
70
$
$
$
$
The following tables reconcile Adjusted EBITDA by segment to the most directly comparable IFRS measures for each of
our reportable segments. We consider operating earnings to be the most directly comparable IFRS measure for Adjusted
EBITDA by segment as operating earnings is the IFRS measure most used by the chief operating decision maker when
evaluating segment operating performance.
Annual Adjusted EBITDA by Segment ($ millions)
2023
Lumber
NA EWP
Pulp & Paper
Europe EWP
Corporate &
Other
Total
Operating earnings (loss)
$
(319) $
Amortization
Equity-based compensation
Restructuring and impairment
charges
185
—
137
316 $
273
—
—
(242) $
(3) $
(35) $
(284)
24
—
142
49
—
—
10
25
—
Adjusted EBITDA by segment
$
2 $
589 $
(77) $
46 $
— $
541
25
279
561
2022
Lumber
NA EWP
Pulp & Paper
Europe EWP
Corporate &
Other
Total
Operating earnings (loss)
$
1,111 $
1,371 $
(22) $
117 $
(18) $
Amortization
Equity-based compensation
Restructuring and impairment
charges
186
—
31
306
—
—
35
—
13
53
—
15
9
5
—
2,559
589
5
60
Adjusted EBITDA by segment
$
1,328 $
1,677 $
26 $
186 $
(5) $
3,212
- 58 -
2023 Annual Report | 71
2023 Annual Report | 71
136
15
134
97
184
132
(4)
13
325
(130)
148
6
47
70
Quarterly Adjusted EBITDA by Segment ($ millions)
Q4-23
Lumber
NA EWP
Pulp & Paper
Europe EWP
Corporate &
Other
Total
Operating earnings (loss)
$
(228) $
Amortization
Equity-based compensation
Restructuring and impairment
charges
48
—
128
74 $
69
—
—
Adjusted EBITDA by segment
$
(51) $
143 $
(7) $
3
—
6
2 $
13
—
—
3
15
—
3 $
— $
(10) $
(17) $
(187)
Q3-23
Lumber
NA EWP
Pulp & Paper
Europe EWP
Corporate &
Other
Total
Operating earnings (loss)
$
(2) $
222 $
(29) $
Amortization
Equity-based compensation
Restructuring and impairment
charges
46
—
—
67
—
—
4
—
13
Adjusted EBITDA by segment
$
44 $
289 $
(12) $
(8) $
12
—
—
4 $
2 $
3
(4)
—
1 $
Q4-22
Lumber
NA EWP
Pulp & Paper
Europe EWP
Corporate &
Other
Total
Operating earnings (loss)
$
(161) $
Amortization
Equity-based compensation
Restructuring and impairment
charges
51
—
31
35 $
73
—
—
Adjusted EBITDA by segment
$
(77) $
109 $
6 $
9
—
—
15 $
3 $
(14) $
12
—
15
2
6
—
30 $
(6) $
Available liquidity
Available liquidity is the sum of our cash and cash equivalents and funds available under our committed and
uncommitted bank credit facilities. We believe disclosing this measure assists readers in understanding our ability to
meet uses of cash resulting from contractual obligations and other commitments at a point in time.
Available Liquidity
($ millions)
Cash and cash equivalents
Operating lines available (excluding newsprint operation)1
Cheques issued in excess of funds on deposit
Borrowings on operating lines
Available liquidity
December 31,
2023
900 $
$
1,054
1,954
—
—
1,954 $
$
December 31,
2022
1,162
1,053
2,215
—
—
2,215
1.
Excludes demand line of credit dedicated to our jointly-owned newsprint operation as West Fraser cannot draw on it.
Total debt to total capital ratio
Total debt to total capital ratio is total debt divided by total capital, expressed as a percentage. Total capital is defined as
the sum of total debt plus total equity. This calculation is defined in certain of our bank covenant agreements. We believe
disclosing this measure assists readers in understanding our capital structure, financial solvency, and degree of leverage
at a point in time.
- 59 -
The following table outlines the composition of the measure.
Total Debt to Capital
($ millions)
Debt
Operating loans
Current and long-term lease obligation
Current and long-term debt
Derivative liabilities1
Open letters of credit1
Total debt
Shareholders’ equity
Total capital
Total debt to capital
December 31,
2023
December 31,
2022
$
$
— $
39
500
—
43
582
7,223
7,805 $
7%
—
37
500
—
61
598
7,619
8,217
7%
1.
Letters of credit facilities and the fair value of derivative liabilities are part of our bank covenants’ total debt calculation.
Net debt to capital ratio
Net debt to capital ratio is net debt divided by total capital, expressed as a percentage. Net debt is calculated as total
debt less cash and cash equivalents, open letters of credit, and the fair value of any derivative liabilities. Total capital is
defined as the sum of net debt plus total equity. We believe disclosing this measure assists readers in understanding our
capital structure, financial solvency, and degree of leverage at a point in time. We believe that using net debt in the
calculation is helpful because net debt represents the amount of debt obligations that are not covered by available cash
and cash equivalents.
The following table outlines the composition of the measure.
Net Debt to Capital
($ millions)
Debt
Operating loans
Current and long-term lease obligation
Current and long-term debt
Derivative liabilities1
Open letters of credit1
Total debt
Cash and cash equivalents
Open letters of credit
Derivative liabilities
Cheques issued in excess of funds on deposit
Net debt
Shareholders’ equity
Total capital
Net debt to capital
December 31,
2023
December 31,
2022
$
$
— $
39
500
—
43
582
(900)
(43)
—
—
(361)
7,223
6,862 $
(5%)
—
37
500
—
61
598
(1,162)
(61)
—
—
(625)
7,619
6,994
(9%)
1.
Letters of credit facilities and the fair value of derivative liabilities are part of our bank covenants’ total debt calculation.
Expected capital expenditures
This measure represents our best estimate of the amount of cash outflows relating to additions to capital assets for the
current year based on our current outlook. This amount is comprised primarily of various improvement projects and
maintenance-of-business expenditures, projects focused on optimization and automation of the manufacturing process,
and projects targeted to reduce greenhouse gas emissions. This measure assumes no deterioration in market conditions
- 60 -
2023 Annual Report | 73
2023 Annual Report | 73
during the year and that we are able to proceed with our plans on time and on budget. This estimate is subject to the
risks and uncertainties identified in this MD&A.
Glossary of Key Terms
We use the following terms in this MD&A:
Term
AAC
ADD
AR
B.C.
BCTMP
Description
Annual allowable cut
Antidumping duty
Administrative Review by the USDOC
British Columbia
Bleached chemithermomechanical pulp
CAD or CAD$
Canadian dollars
CEO
CFO
CGU
COSO
President and Chief Executive Officer
Senior Vice-President, Finance and Chief Financial Officer
Cash generating unit
Committee of Sponsoring Organizations of the Treadway Commission
Crown timber
Timber harvested from lands owned by a provincial government
CVD
EDGAR
ESG
EWP
GBP
GHG
IFRS Accounting
Standards
LIBOR
LVL
MDF
NA
NA EWP
NBSK
NCIB
2022 NCIB
2023 NCIB
NI 52-109
Norbord
Countervailing duty
Electronic Data Gathering, Analysis and Retrieval System
Environmental, Social and Governance
Engineered wood products
British pound sterling
Greenhouse gas
International Financial Reporting Standards as issued by the International Accounting Standards Board
London Interbank Offered Rate
Laminated veneer lumber
Medium-density fibreboard
North America
North America Engineered Wood Products
Northern bleached softwood kraft pulp
Normal course issuer bid
Normal course issuer bid - February 23, 2022 to February 22, 2023
Normal course issuer bid - February 27, 2023 to February 26, 2024
National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings
Norbord Inc.
Norbord Acquisition
Acquisition of Norbord completed February 1, 2021
NYSE
OSB
POI
PPE
New York Stock Exchange
Oriented strand board
Period of Investigation in respect of an USDOC administrative review
Property, plant, and equipment
Q1-23 or Q1-22
three months ended March 31, 2023 or 2022 and for balance sheet amounts as at March 31, 2023 or
2022
Q2-23 or Q2-22
three months ended June 30, 2023 or 2022 and for balance sheet amounts as at June 30, 2023 or 2022
Q3-23 or Q3-22
Q4-23 or Q4-22
three months ended September 29, 2023 or September 30, 2022 and for balance sheet amounts as at
September 29, 2023 or September 30, 2022
three months ended December 31, 2023 or 2022 and for balance sheet amounts as at December 31,
2023 or 2022
SEDAR+
System for Electronic Document Analysis and Retrieval +
- 61 -
2021 SIB
2022 SIB
SOFR
SOX
SPF
Our substantial issuer bid completed in August 2021
Our substantial issuer bid completed in June 2022
Secured Overnight Financing Rate
Section 404 of the Sarbanes-Oxley Act
Spruce/pine/balsam fir lumber
Spray Lake lumber mill
Spray Lake Sawmills (1980) Ltd.
SYP
TSX
U.K.
UKP
U.S.
Southern yellow pine lumber
Toronto Stock Exchange
United Kingdom
Unbleached kraft pulp
United States
USD or $ or US$
United States Dollars
USDOC
USITC
United States Department of Commerce
United States International Trade Commission
Forward-Looking Statements
This MD&A includes statements and information that constitutes “forward-looking information” within the meaning of
Canadian securities laws and “forward-looking statements” within the meaning of United States securities laws
(collectively, “forward-looking statements”). Forward-looking statements include statements that are forward-looking or
predictive in nature and are dependent upon or refer to future events or conditions. We use words such as “expects,”
“anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts,” or negative versions
thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would,” and
“could,” to identify these forward-looking statements. These forward-looking statements generally include statements
which reflect management’s expectations regarding the operations, business, financial condition, expected financial
results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of
West Fraser and its subsidiaries, as well as the outlook for North American and international economies for the current
fiscal year and subsequent periods.
Forward-looking statements included in this MD&A include references to:
Discussion
Our Business and Strategy
Recent Developments – Markets
Recent Developments - Completion of
Spray Lake Acquisition
Recent Developments - CVD and ADD
Duty Rates
Discussion & Analysis of Annual
Results by Product Segment - Lumber
Segment - Softwood Lumber Dispute
Business Outlook – Markets
Forward-Looking Statements
our corporate strategy and objectives to generate strong financial results through the
business cycle, maintain a strong balance sheet and liquidity profile along with an
investment-grade debt rating, to maintain a leading cost position and to return capital to
shareholders, reinvest in operations, renewable building materials, and achieve science-
based targets to achieve near-term greenhouse gas reductions across all our operations
impact of interest rates and inflationary price pressures, mortgage rates, housing demand
and affordability, housing prices, unemployment rates, repair and remodelling demand,
inflationary pressures on demand for lumber and OSB, expectations regarding near, medium
and longer-term core demand, import trends and inflation; impact of new lumber and OSB
production capacity on market supply and pricing
finalization of certain post-close working capital adjustments and purchase price allocation
relating to the purchase of Spray Lake Sawmills (1980) Ltd.
the finalization of the AR5 and AR6 duty rates and their impact on our financial position
administrative review commencement, adjustment of export duty rates, proceedings related
to duty rates, and timing of finalization of AR5 and AR6 duty rates
market conditions, housing affordability, demand for our products over the near, medium
and longer term, impacts of interest rates, ongoing geopolitical conflict, inflationary
pressures, timing of finalization of AR5 and AR6 duty rates; ability to capitalize on long-term
opportunities; and expectations as to stabilization and moderation of interest rates
- 62 -
2023 Annual Report | 75
2023 Annual Report | 75
Business Outlook – Operations
Business Outlook – Cash Flows
production levels, demand expectations, projected SPF and SYP lumber shipments, projected
OSB shipments, operating costs, B.C. and Alberta stumpage rates and U.S. South log costs
and trends, the moderation of impact of inflationary pressures and availability constraints for
labour, transportation, raw materials such as resins and chemicals, and energy, expectations
as to availability of transportation services, the timing, costs of restart, ramp up period to
target production and contribution to shipments of Allendale OSB facility, and the overall
OSB platform with modern Allendale OSB facility; expectations as to moderation of log and
input costs and increasing or elevated interest rates; satisfaction of the conditions to closing
of the sale of Quesnel River Pulp mill and Slave Lake Pulp mill and the timing of closing these
transactions
projected cash flows from operations and available liquidity, projected capital expenditures
and completion dates (including with respect to the modernization of the Henderson, Texas
lumber manufacturing facility), expected results of capital expenditures, including
improvements, maintenance, optimization and automation projects and projects targeted to
reduce greenhouse gas emissions, maintenance of our investment grade debt rating,
strategic growth opportunities, expected continuity of dividends and share repurchases
Liquidity and Capital Resources
Available liquidity
By their nature, these forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both
general and specific, which contribute to the possibility that the predictions, forecasts, and other forward-looking
statements will not occur. Factors that could cause actual results to differ materially from those contemplated or implied
by forward-looking statements include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
assumptions in connection with the economic and financial conditions in the U.S., Canada, U.K., Europe and
globally and consequential demand for our products, including the impact of the conflicts in Ukraine and the
Middle East;
continued increases in interest rates and inflation and sustained higher interest rates and rates of inflation could
impact housing affordability and repair and remodelling demand, which could reduce demand for our products;
global supply chain issues may result in increases to our costs and may contribute to a reduction in near-term
demand for our products;
continued governmental approvals and authorizations to access timber supply, and the impact of forest fires,
infestations, environmental protection measures and actions taken by government respecting Indigenous rights,
title and/or reconciliation efforts on these approvals and authorizations;
risks inherent in our product concentration and cyclicality;
effects of competition for logs, availability of fibre and fibre resources and product pricing pressures, including
continued access to log supply and fibre resources at competitive prices and the impact of third-party certification
standards; including reliance on fibre off-take agreements and third party consumers of wood chips;
effects of variations in the price and availability of manufacturing inputs, including energy, employee wages, resin
and other input costs, and the impact of inflationary pressures on the costs of these manufacturing costs, including
increases in stumpage fees and log costs;
availability and costs of transportation services, including truck and rail services, and port facilities, and impacts on
transportation services of wildfires and severe weather events, and the impact of increased energy prices on the
costs of transportation services;
transportation constraints may continue to negatively impact our ability to meet projected shipment volumes;
the timing of our planned capital investments may be delayed, the ultimate costs of these investments may be
increased as a result of inflation, and the projected rates of return may not be achieved;
various events that could disrupt operations, including natural, man-made or catastrophic events including
wildfires, cyber security incidents, any state of emergency and/or evacuation orders issued by governments, and
ongoing relations with employees;
risks inherent to customer dependence;
impact of future cross border trade rulings or agreements;
implementation of important strategic initiatives and identification, completion and integration of acquisitions;
impact of changes to, or non-compliance with, environmental or other regulations;
the impact of the COVID-19 pandemic on our operations and on customer demand, supply and distribution and
other factors;
government restrictions, standards or regulations intended to reduce greenhouse gas emissions and our inability
to achieve our SBTi commitment for the reduction of greenhouse gases as planned;
the costs and timeline to achieve our greenhouse gas emissions objectives may be greater and take longer than
anticipated;
- 63 -
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
changes in government policy and regulation, including actions taken by the Government of British Columbia
pursuant to recent amendments to forestry legislation and initiatives to defer logging of forests deemed “old
growth” and the impact of these actions on our timber supply;
impact of weather and climate change on our operations or the operations or demand of our suppliers and
customers;
ability to implement new or upgraded information technology infrastructure;
impact of information technology service disruptions or failures;
impact of any product liability claims in excess of insurance coverage;
risks inherent to a capital intensive industry;
impact of future outcomes of tax exposures;
potential future changes in tax laws, including tax rates;
risks associated with investigations, claims and legal, regulatory and tax proceedings covering matters which if
resolved unfavourably may result in a loss to the Company;
effects of currency exposures and exchange rate fluctuations;
fair values of our electricity swaps may be volatile and sensitive to fluctuations in forward electricity prices;
future operating costs;
availability of financing, bank lines, securitization programs and/or other means of liquidity;
continued access to timber supply in the traditional territories of Indigenous Nations;
our ability to continue to maintain effective internal control over financial reporting;
satisfaction of the conditions to closing of our sales of Quesnel River Pulp mill and Slave Lake Pulp mill and related
timing of the closing of these transactions, including impacts to proceeds from the sale if the working capital at
closing is below target;
continued access to timber supply in the traditional territories of Indigenous Nations;
our ability to continue to maintain effective internal control over financial reporting;
finalization of certain post-close working capital adjustments and purchase price allocation relating to the purchase
of Spray Lake Sawmills (1980) Ltd.;
the risks and uncertainties described in the 2023 Annual MD&A; and
other risks detailed from time to time in our annual information forms, annual reports, MD&A, quarterly reports
and material change reports filed with and furnished to securities regulators.
In addition, actual outcomes and results of these statements will depend on a number of factors including those matters
described under “Risks and Uncertainties” in this annual MD&A and may differ materially from those anticipated or
projected. This list of important factors affecting forward-looking statements is not exhaustive and reference should be
made to the other factors discussed in public filings with securities regulatory authorities. Accordingly, readers should
exercise caution in relying upon forward-looking statements and we undertake no obligation to publicly update or revise
any forward-looking statements, whether written or oral, to reflect subsequent events or circumstances except as
required by applicable securities laws.
Additional Information
Additional information on West Fraser, including our Annual Information Form and other publicly filed documents, is
available on the Company’s website at www.westfraser.com, on SEDAR+ at www.sedarplus.ca and on the EDGAR section
of the SEC website at www.sec.gov/edgar.shtml.
Where this MD&A includes information from third parties, we believe that such information (including information from
industry and general publications and surveys) is generally reliable. However, we have not independently verified any
such third-party information and cannot assure you of its accuracy or completeness.
- 64 -
2023 Annual Report | 77
2023 Annual Report | 77
2023 Audited
Statements
Consolidated Financial Statements
West Fraser Timber Co. Ltd.
December 31, 2023 and 2022
RESPONSIBILITY OF MANAGEMENT
Management’s Report on the Consolidated Financial Statements
The accompanying consolidated financial statements and related notes are the responsibility of the management of West Fraser
Timber Co. Ltd. (the “Company”). They have been prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board (“IFRS Accounting Standards”) and include amounts based on estimates
and judgments. Financial information included elsewhere in this report is consistent with the consolidated financial statements.
The consolidated financial statements are approved by the Board of Directors on the recommendation of the Audit Committee.
The Audit Committee, appointed by the Board of Directors, is composed entirely of independent directors. The Audit
Committee reviews the Company’s consolidated financial statements and reports its findings to the Board of Directors for
consideration before the consolidated financial statements are approved for issuance to shareholders and submitted to
securities commissions or other regulatory authorities.
The Audit Committee’s duties also include reviewing critical accounting policies and significant estimates and judgments
underlying the consolidated financial statements as presented by management and approving the fees of the Company’s
independent registered public accounting firm.
The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, performed an audit of the
consolidated financial statements, the results of which are reflected in their Report of Independent Registered Public
Accounting Firm for 2023. PricewaterhouseCoopers LLP has full and independent access to the Audit Committee to discuss their
audit and related matters.
Management’s Report on Internal Control over Financial Reporting
Under our supervision, management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined under National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings in
Canada and Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting
purposes in accordance with IFRS Accounting Standards.
In accordance with the provisions of NI 52-109, our management has limited the scope of its design of the Company’s disclosure
controls and procedures and internal control over financial reporting to exclude controls, policies and procedures of Spray Lake
Sawmills (1980) Ltd. (“Spray Lake”), which was acquired on November 17, 2023.
Spray Lake’s contribution to our consolidated financial statements for the year ended December 31, 2023 was $5 million of
sales, representing approximately 0.1% of consolidated sales, and $1 million of loss, representing 0.7% of consolidated loss.
Additionally, assets attributed to Spray Lake’s assets were $134 million, representing approximately 1.4% of our total assets as
at December 31, 2023.
Under our supervision, management has assessed the effectiveness of the Company’s internal control over financial reporting
as of December 31, 2023 based on the criteria set forth in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, management has
concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2023 has been audited by
PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, as stated in their report which
appears herein.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely
basis. Additionally, projections of any evaluation of the effectiveness of internal control over financial reporting to future
periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Sean McLaren
Sean McLaren
/s/ Chris Virostek
Chris Virostek
President and Chief Executive Officer
Senior Vice-President, Finance and Chief Financial Officer
February 14, 2024
-2-
2023 Annual Report | 79
2023 Annual Report | 79
2023 Annual Report | 79
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of West Fraser Timber Co. Ltd.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of West Fraser Timber Co. Ltd. and its
subsidiaries (together, the Company) as of December 31, 2023 and 2022, and the related consolidated
statements of earnings (loss) and comprehensive earnings (loss), of changes in shareholders’ equity and
of cash flows for the years then ended, including the related notes (collectively referred to as the
consolidated financial statements). We also have audited the Company’s internal control over financial
reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and its financial
performance and its cash flows for the years then ended in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board (IFRS Accounting
Standards). Also in our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2023, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated
financial statements and on the Company’s internal control over financial reporting based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of
material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806, ca_vancouver_main_fax@pwc.com
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
As described in Management’s Report on Internal Control over Financial Reporting, management has
excluded Spray Lake Sawmills (1980) Ltd. from its assessment of internal control over financial reporting
as of December 31, 2023 because it was acquired by the Company in a purchase business combination
during the year ended December 31, 2023. We have also excluded Spray Lake Sawmills (1980) Ltd. from
our audit of internal control over financial reporting. Spray Lake Sawmills (1980) Ltd. is a wholly owned
subsidiary whose total assets and total revenues excluded from management’s assessment and our audit
of internal control over financial reporting represent $134 million and $5 million, respectively, of the related
consolidated financial statement amounts as of and for the year ended December 31, 2023.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that (i) relates to accounts or disclosures that are material to the consolidated financial
statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing
a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill Impairment Assessments
As described in Note 9 to the consolidated financial statements, the Company’s goodwill balance was
$1,949 million as of December 31, 2023. Management conducts an impairment assessment as of
December 31 of each year, or more frequently if an indicator of impairment is identified. Management
2023 Annual Report | 81
2023 Annual Report | 81
2023 Annual Report | 81
assesses the recoverability of goodwill by comparing the carrying value of each cash generating unit
(CGU) or CGU group associated with the goodwill balance to its estimated recoverable amount, which is
the higher of its estimated fair value less costs of disposal and its value in use. An impairment loss is
recorded if the carrying value exceeds the estimated recoverable amount of a CGU or CGU group.
Management has determined the recoverable amount of each applicable CGU group based on their fair
value less cost of disposal through discounted cash flow models. The key assumptions used in the
discounted cash flow models include production volume, product pricing, raw material input cost,
production cost, terminal multiple and discount rate. The estimated recoverable amount of each applicable
CGU group exceeded its respective carrying amount in management’s goodwill impairment assessments,
and as such, no impairment losses were recorded by management.
The principal considerations for our determination that performing procedures relating to the goodwill
impairment assessments is a critical audit matter are (i) the significant judgment by management when
determining the recoverable amount of each applicable CGU group, including the development of key
assumptions; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and
evaluating management’s key assumptions in the discounted cash flow models related to production
volume, product pricing, raw material input cost, production cost, terminal multiple and discount rate; and
(iii) the audit effort involved the use of professionals with specialized skills and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with
forming our overall opinion on the consolidated financial statements. These procedures included testing
the effectiveness of controls relating to management’s goodwill impairment assessments, including
controls over the determination of the recoverable amount of each applicable CGU group. These
procedures also included, among others, testing management’s process for determining the recoverable
amount of each applicable CGU group, including evaluating the appropriateness of the discounted cash
flow models, testing the completeness and accuracy of underlying data used in the models and evaluating
the reasonableness of the key assumptions used by management. Evaluating the reasonableness of the
production volume, product pricing, raw material input cost and production cost involved considering the
current and past performance of each applicable CGU group, as well as economic and industry forecasts,
as applicable. Professionals with specialized skill and knowledge were used to assist in the evaluation of
the appropriateness of the discounted cash flow models, and the reasonableness of the terminal multiple
and the discount rate.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
February 14, 2024
We have served as the Company’s auditor since 1973.
West Fraser Timber Co. Ltd.
Consolidated Balance Sheets
(in millions of United States dollars, except where indicated)
Note
As at December
31, 2023
As at December
31, 2022
Assets
Current assets
Cash and cash equivalents
Receivables
Income taxes receivable
Inventories
Prepaid expenses
Assets held for sale
Property, plant and equipment
Timber licences
Goodwill and other intangible assets
Export duty deposits
Other assets
Deferred income tax assets
Liabilities
Current liabilities
Payables and accrued liabilities
Current portion of long-term debt
Current portion of reforestation and decommissioning obligations
Income taxes payable
Liabilities associated with assets held for sale
Long-term debt
Other liabilities
Deferred income tax liabilities
Shareholders’ Equity
Share capital
Retained earnings
Accumulated other comprehensive loss
$
4
23
$
$
5
6
7
8
9
26
10
20
11
13
12
6
13
12
20
15
900 $
311
93
851
40
182
2,377
3,835
376
2,307
377
137
6
1,162
350
145
1,032
60
—
2,749
3,982
351
2,358
354
175
4
9,415 $
9,973
620 $
300
60
7
63
1,050
199
260
683
722
—
58
12
—
792
499
268
795
2,193
2,354
2,607
4,913
(297)
7,223
$
9,415 $
2,667
5,284
(332)
7,619
9,973
The number of Common shares and Class B Common shares outstanding at February 13, 2024 was 81,709,092.
Approved by the Board of Directors
/s/ Gillian D. Winckler
Gillian D. Winckler
Director
/s/ Reid Carter
Reid Carter
Director
-6-
2023 Annual Report | 83
2023 Annual Report | 83
2023 Annual Report | 83
West Fraser Timber Co. Ltd.
Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)
(in millions of United States dollars, except where indicated)
Sales
Costs and expenses
Cost of products sold
Freight and other distribution costs
Export duties, net
Amortization
Selling, general and administration
Equity-based compensation
Restructuring and impairment charges
Operating earnings (loss)
Finance income (expense), net
Other income
Earnings (loss) before tax
Tax recovery (provision)
Earnings (loss)
Earnings (loss) per share (dollars)
Basic
Diluted
Comprehensive earnings (loss)
Earnings (loss)
Other comprehensive earnings (loss)
Items that may be reclassified to earnings
Translation gain (loss) on operations with different functional currencies
Items that will not be reclassified to earnings
Actuarial gain (loss) on retirement benefits, net of tax
Comprehensive earnings (loss)
-7-
Years Ended
December 31, December 31,
2023
2022
$
6,454 $
9,701
4,685
5,142
894
8
541
307
25
279
963
18
589
365
5
60
6,738
7,142
(284)
2,559
51
5
(228)
61
(167) $
(3)
37
2,593
(618)
1,975
(2.01) $
(2.01) $
21.06
20.86
(167) $
1,975
$
$
$
$
34
(83)
(35)
—
164
81
$
(167) $
2,056
26
16
17
18
19
20
22
22
14
l
a
t
o
T
y
t
i
u
q
E
l
d
e
t
a
u
m
u
c
c
A
r
e
h
t
O
e
v
i
s
n
e
h
e
r
p
m
o
C
s
s
o
L
i
d
e
n
a
t
e
R
i
s
g
n
n
r
a
E
l
a
t
i
p
a
C
e
r
a
h
S
t
n
u
o
m
A
s
e
r
a
h
s
f
o
r
e
b
m
u
N
e
t
o
N
y
t
i
u
q
E
l
'
s
r
e
d
o
h
e
r
a
h
S
n
i
s
e
g
n
a
h
C
f
o
s
t
n
e
m
e
t
a
t
S
d
e
t
a
d
i
l
o
s
n
o
C
)
d
e
t
a
c
i
d
n
i
e
r
e
h
w
t
p
e
c
x
e
,
s
r
a
l
l
o
d
s
e
t
a
t
S
d
e
t
i
n
U
f
o
s
n
o
i
l
l
i
m
n
i
(
.
d
t
L
.
i
o
C
r
e
b
m
T
r
e
s
a
r
F
t
s
e
W
6
5
6
7
,
5
7
9
1
,
)
3
8
(
4
6
1
)
0
9
9
1
(
,
)
3
0
1
(
)
7
6
1
(
9
1
6
7
,
4
3
)
5
3
(
—
)
9
2
1
(
)
0
0
1
(
3
2
2
7
,
$
)
9
4
2
(
—
)
3
8
(
—
—
—
$
)
2
3
3
(
—
4
3
—
—
—
—
$
)
7
9
2
(
$
3
0
5
4
,
5
7
9
1
,
—
4
6
1
$
4
8
2
5
,
)
7
6
1
(
)
3
0
1
(
)
5
5
2
1
(
,
—
)
5
3
(
—
)
9
6
(
)
0
0
1
(
$
3
1
9
4
,
$
2
0
4
3
,
$
—
—
—
—
)
5
3
7
(
$
7
6
6
2
,
$
—
—
—
—
)
0
6
(
—
$
7
0
6
2
,
$
—
—
—
,
4
3
7
8
2
9
5
0
1
,
,
)
0
2
3
3
7
3
2
2
(
,
—
,
4
1
4
5
5
5
3
8
,
—
—
—
3
8
3
,
)
1
0
8
4
3
8
1
(
,
—
,
6
9
9
0
2
7
1
8
,
5
1
5
1
5
1
l
a
n
o
i
t
c
n
u
f
t
n
e
r
e
f
f
i
d
h
t
i
w
s
n
o
i
t
a
r
e
p
o
n
o
s
s
o
l
n
o
i
t
a
l
s
n
a
r
T
s
e
i
c
n
e
r
r
u
c
x
a
t
f
o
t
e
n
,
s
t
i
f
e
n
e
b
t
n
e
m
e
r
i
t
e
r
n
o
n
a
g
i
l
a
i
r
a
u
t
c
A
:
)
s
s
o
l
(
i
s
g
n
n
r
a
e
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
1
2
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
a
B
l
r
a
e
y
e
h
t
r
o
f
i
s
g
n
n
r
a
E
n
o
i
t
a
l
l
e
c
n
a
c
r
o
f
s
e
r
a
h
s
n
o
m
m
o
C
f
o
e
s
a
h
c
r
u
p
e
R
1
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
2
2
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
a
B
l
r
a
e
y
e
h
t
r
o
f
s
s
o
L
l
a
n
o
i
t
c
n
u
f
t
n
e
r
e
f
f
i
d
h
t
i
w
s
n
o
i
t
a
r
e
p
o
n
o
n
a
g
n
o
i
t
a
l
s
n
a
r
T
i
x
a
t
f
o
t
e
n
,
s
t
i
f
e
n
e
b
t
n
e
m
e
r
i
t
e
r
n
o
s
s
o
l
l
a
i
r
a
u
t
c
A
s
e
i
c
n
e
r
r
u
c
:
)
s
s
o
l
(
i
s
g
n
n
r
a
e
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
n
o
i
t
a
l
l
e
c
n
a
c
r
o
f
s
e
r
a
h
s
n
o
m
m
o
C
f
o
e
s
a
h
c
r
u
p
e
R
s
e
r
a
h
s
n
o
m
m
o
C
f
o
e
c
n
a
u
s
s
I
1
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
D
3
2
0
2
,
1
3
r
e
b
m
e
c
e
D
t
a
e
c
n
a
a
B
l
.
e
r
a
h
s
.
r
e
p
0
2
1
$
e
r
e
w
3
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
r
a
e
y
e
h
t
g
n
i
r
u
d
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
d
h
s
a
C
.
e
r
a
h
s
.
r
e
p
5
1
1
$
e
r
e
w
2
2
0
2
,
1
3
r
e
b
m
e
c
e
D
d
e
d
n
e
r
a
e
y
e
h
t
g
n
i
r
u
d
d
e
r
a
l
c
e
d
s
d
n
e
d
i
v
i
d
h
s
a
C
.
1
-
8
-
2023 Annual Report | 85
2023 Annual Report | 85
2023 Annual Report | 85
West Fraser Timber Co. Ltd.
Consolidated Statements of Cash Flows
(in millions of United States dollars, except where indicated)
Cash provided by operating activities
Earnings (loss)
Adjustments
Amortization
Restructuring and impairment charges
Finance (income) expense, net
Foreign exchange loss (gain)
Export duty
Retirement benefit expense
Net contributions to retirement benefit plans
Tax (recovery) provision
Income taxes paid
Other
Changes in non-cash working capital
Receivables
Inventories
Prepaid expenses
Payables and accrued liabilities
Cash used for financing activities
Repayment of lease obligations
Finance expense paid
Repurchase of Common shares for cancellation
Dividends paid
Cash used for investing activities
Spray Lake Acquisition, net of cash acquired
Additions to capital assets
Interest received
Other
Change in cash and cash equivalents
Foreign exchange effect on cash and cash equivalents
Cash and cash equivalents - beginning of year
Cash and cash equivalents - end of year
-9-
Years Ended
December 31, December 31,
Note
2023
2022
$
(167) $
1,975
17
18
26
14
14
20
15
3
541
279
(51)
7
(45)
77
(37)
(61)
(24)
(4)
6
132
4
(131)
525
(15)
(24)
(129)
(100)
(268)
(100)
(477)
47
—
(530)
(273)
10
1,162
900 $
$
589
60
3
(28)
(99)
103
(76)
618
(982)
(11)
140
20
(6)
(99)
2,207
(14)
(23)
(1,990)
(99)
(2,126)
—
(477)
17
1
(459)
(378)
(28)
1,568
1,162
West Fraser Timber Co. Ltd.
Notes to Consolidated Financial Statements
For the years ended December 31, 2023 and December 31, 2022
(figures are in millions of United States dollars, except where indicated)
1.
Nature of operations
West Fraser Timber Co. Ltd. ("West Fraser", the “Company”, "we", "us" or "our") is a diversified wood products company
with more than 60 facilities in Canada, the United States (“U.S.”), the United Kingdom (“U.K.”), and Europe. From
responsibly sourced and sustainably managed forest resources, the Company produces lumber, engineered wood
products (OSB, LVL, MDF, plywood, and particleboard), pulp, newsprint, wood chips, other residuals and renewable
energy. West Fraser’s products are used in home construction, repair and remodelling, industrial applications, papers,
tissue, and box materials. Our executive office is located at 885 West Georgia Street, Suite 1500, Vancouver, British
Columbia. West Fraser was formed by articles of amalgamation under the Business Corporations Act (British Columbia)
and is registered in British Columbia, Canada. Our Common shares are listed for trading on the Toronto Stock Exchange
(“TSX”) and on the New York Stock Exchange (“NYSE”) under the symbol WFG.
2.
Basis of presentation
These consolidated financial statements are prepared in accordance with International Financial Reporting Standards as
issued by the International Accounting Standards Board (“IFRS Accounting Standards”) and were approved by our Board
of Directors on February 14, 2024.
Figures have been rounded to millions of dollars to reflect the accuracy of the underlying balances and as a result certain
tables may not add due to rounding impacts.
Assets and liabilities subject to transfer as a result of the pending sales of the Hinton pulp mill, Quesnel River Pulp mill,
and Slave Lake Pulp mill have been presented as part of assets held for sale and liabilities held for sale respectively (see
note 6) and are not included in the other December 31, 2023 balance sheet amounts presented throughout.
Material accounting policies
Material accounting policies that relate to the consolidated financial statements as a whole are incorporated in this note.
Where a material accounting policy is applicable to a specific note disclosure, the policy is described within the respective
note.
Basis of consolidation
These consolidated financial statements include the accounts of West Fraser and its wholly-owned subsidiaries after the
elimination of intercompany transactions and balances.
Our material subsidiaries are West Fraser Mills Ltd. and Norbord Inc. Our 50%-owned joint operations, Alberta Newsprint
Company and Cariboo Pulp & Paper Company, are accounted for by recognizing our share of the assets, liabilities,
revenues, and expenses related to these joint operations.
Use of estimates and judgments
The preparation of these consolidated financial statements requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual amounts
could differ materially from these and other estimates, the impact of which would be recorded in future periods.
Management is also required to exercise judgment in the process of applying accounting policies. Information about the
significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most
significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:
•
•
•
Note 2 – Determination of functional currency
Note 3 – Fair value of PPE and intangible assets
acquired in business combinations
Note 5 – Valuation of inventories
•
•
Note 6 – Fair value less costs to sell of disposal group
held for sale
Note 7-9, 17 – Recoverability of PPE, timber licences,
and other intangible assets
-10-
2023 Annual Report | 87
2023 Annual Report | 87
2023 Annual Report | 87
•
•
•
Note 7 – Estimated useful lives of PPE
Note 9 – Recoverability of goodwill
Note 12 – Reforestation and decommissioning
obligations
Revenue recognition
•
•
•
Note 14 – Defined benefit pension plans
Note 20 – Income taxes
Note 26 – CVD and ADD duty dispute
Revenue is derived primarily from product sales and is recognized when a customer obtains control over the goods. The
timing of transfer of control to customers varies depending on the individual terms of the sales contract and typically
occurs when the product is loaded on a common carrier at our mill, loaded on an ocean carrier, or delivered to the
customer. The amount of revenue recognized is net of our estimate for early payment discounts and volume rebates.
Revenue includes charges for freight and handling. The costs related to these revenues are recorded in freight and other
distribution costs.
Reporting currency and foreign currency translation
The consolidated financial statements are presented in USD, which is determined to be the functional currency of our U.S.
operations and the majority of our Canadian operations.
For these entities, all transactions not denominated in our U.S. functional currency are considered to be foreign currency
transactions. Foreign currency denominated monetary assets and liabilities are translated using the rate of exchange
prevailing at the reporting date. Gains or losses on translation of these items are included in earnings and reported as
Other income (expense). Foreign currency denominated non-monetary assets and liabilities, measured at historic cost,
are translated at the rate of exchange at the transaction date.
Our European operations have British pound sterling and Euro functional currencies. Our Spray Lake lumber mill (note 3)
and jointly-owned newsprint operation have Canadian dollar functional currency. Assets and liabilities of these entities
are translated at the rate of exchange prevailing at the reporting date, and revenues and expenses at average rates
during the period. Gains or losses on translation are included as a component of shareholders’ equity in Accumulated
other comprehensive loss.
Impairment of capital assets
We assess property, plant and equipment, timber licences, and other definite-lived intangible assets for indicators of
impairment at each reporting date and whenever events or changes in circumstances indicate that the carrying amount
of the asset may not be recoverable.
Impairment testing is applied to individual assets or cash generating units (“CGUs”), the smallest group of assets that
generates cash inflows that are largely independent of the cash inflows of other assets or groups of assets. We have
identified each of our mills as a CGU for impairment testing unless there is economic interdependence of CGUs, in which
case they are grouped for impairment testing.
When a triggering event is identified, the recoverability of an asset or CGU is assessed by comparing the carrying amount
of the asset or CGU to the estimated recoverable amount, which is the higher of its estimated fair value less costs of
disposal and its value in use.
Fair value less costs of disposal is determined by ascertaining the price that would be received to sell an asset in an
orderly transaction between market participants under current market conditions, less incremental costs directly
attributable to the disposal. Value in use is determined using a discounted cash flow model by measuring the pre-tax cash
flows expected to be generated from the asset over its estimated useful life discounted by a pre-tax discount rate.
Where an impairment loss for an asset or CGU subsequently reverses, the carrying amount of the asset or CGU is
increased to the lesser of the revised estimate of its recoverable amount and the carrying amount that would have been
recorded had no impairment loss been previously recognized.
Fair value measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
-11-
estimated using another valuation technique. Fair value measurements are categorized into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurement are observable and the significance of the inputs.
The three levels of the fair value hierarchy are:
Level 1
Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical
assets or liabilities.
Level 2
Values based on inputs other than quoted prices that are observable for the asset or liability, directly or indirectly.
Level 3
Values based on valuation techniques that require inputs which are both unobservable and significant to the overall fair
value measurement.
Application of new and revised accounting standards
We have adopted the amendments to IAS 1 Presentation of Financial Statements regarding the disclosure of material
accounting policies, amendments to IAS 8 Changes in Accounting Estimates and Errors regarding the definition of
accounting estimates, and amendments to IAS 12 Income Taxes regarding deferred tax related to assets and liabilities
arising from a single transaction, which were effective for annual periods beginning on or after January 1, 2023. In
addition, we have adopted the amendments to IAS 12 Income Taxes regarding relief from deferred tax accounting for
top-up tax under Pillar Two, which was effective from May 23, 2023 onwards. These amendments did not have a material
impact on our consolidated financial statements.
Accounting standards issued but not yet applied
Amendments to IAS 1, Presentation of Financial Statements
In January 2020, the IASB issued Classification of Liabilities as Current or Non-current (Amendments to IAS 1). The
amendments clarify that the classification of liabilities as current or non-current should be based on rights that exist at
the end of the reporting period. The amendments also clarify the definition of a settlement and provide situations that
would be considered as a settlement of a liability. In October 2022, the IASB issued Non-current Liabilities with Covenants
(Amendments to IAS 1). These further amendments clarify how to address the effects on classification and disclosure of
covenants that an entity is required to comply with on or before the reporting date and covenants that an entity must
comply with only after the reporting date. These amendments are effective for reporting periods beginning on or after
January 1, 2024. These amendments are not expected to have a material impact on our consolidated financial
statements.
There are no other standards or amendments or interpretations to existing standards issued but not yet effective that are
expected to have a material impact on our consolidated financial statements.
3.
Business acquisition
Accounting policies
Business combinations are accounted for using the acquisition method. We measure goodwill at the acquisition date as
the fair value of the consideration transferred less the fair value of the identifiable assets acquired and liabilities
assumed. The determination of the fair value of the assets acquired and liabilities assumed requires management to use
estimates that contain uncertainty and critical judgments. Transaction costs in connection with business combinations are
expensed as incurred.
Valuation techniques utilized
We engaged a valuations expert to assist with the determination of estimated fair value for acquired working capital,
property, plant and equipment, and timber licenses.
We applied the market comparison approach and cost approach in determining the fair value of acquired property, plant,
and equipment. We considered market prices for similar assets when they were available, and depreciated replacement
cost in other circumstances. Depreciated replacement cost reflects adjustments for physical deterioration as well as
-12-
2023 Annual Report | 89
2023 Annual Report | 89
2023 Annual Report | 89
functional and economic obsolescence. The key assumptions used in the estimation of depreciated replacement cost are
the asset’s estimated replacement cost at the time of acquisition and estimated useful life.
The fair value of timber licenses acquired was determined by using a market comparison technique based on precedent
transactions in Western Canada.
Supporting information
On November 17, 2023, we acquired 100 percent of the shares in Spray Lake Sawmills (1980) Ltd., which operates a
lumber mill located in Cochrane, Alberta, and the associated timber licenses (“Spray Lake Acquisition”) for preliminary
cash consideration of $102 million (CAD$140 million). This acquisition has been accounted for as an acquisition of a
business in accordance with IFRS 3 Business Combinations. We have allocated the purchase price based on our
preliminary estimated fair value of the assets acquired and the liabilities assumed as follows:
West Fraser purchase consideration:
Cash consideration1
Fair value of net assets acquired:
Cash
Accounts receivable
Inventories
Prepaid expenses
Income taxes receivable
Property, plant and equipment
Timber licenses
Payables and accrued liabilities
Other liabilities
Deferred income tax liabilities
$
$
$
102
1
3
24
1
1
58
42
(8)
(3)
(18)
102
1.
A net outflow comprising the cash consideration of $102 million net of cash acquired of $1 million is presented in the consolidated statements of
cash flows.
Purchase consideration is preliminary as at December 31, 2023 and is subject to finalization of certain post-close working
capital adjustments. Our valuation of property, plant and equipment and intangible assets remains preliminary as at
December 31, 2023.
We have incorporated the mill into our Lumber segment. Acquisition costs were nominal and have been expensed in
selling, general, and administration.
The following table represents the actual results of Spray Lake included in our consolidated statements of earnings (loss)
from the date of acquisition to December 31, 2023.
($ millions)
Sales
Operating loss1
Loss1
$
$
$
5
(2)
(1)
1.
Operating loss and loss include a one-time charge of $2 million related to inventory purchase price accounting.
The following table represents the proforma results of operations for the year ended December 31, 2023 assuming the
Spray Lake Acquisition occurred on January 1, 2023 and that the fair value adjustments that arose on the date of
acquisition would have been the same if the acquisition occurred on January 1, 2023.
-13-
Proforma 2023 Results
($ millions)
Sales
Operating earnings (loss)
Earnings (loss)
West Fraser Actual
Results2
2023
Spray Lake
Proforma Results1
Jan-23 to Nov-23
West Fraser
Proforma Results1,2
2023
6,454
(284)
(167)
75 $
8 $
9 $
6,529
(276)
(158)
1.
2.
4.
These proforma results have been provided as required per IFRS 3 Business Combinations. West Fraser proforma 2023 results presents West
Fraser’s results as if the Spray Lake Acquisition were completed on January 1, 2023.
Operating earnings (loss) and earnings (loss) include a one-time charge of $2 million related to inventory purchase price accounting.
Cash and cash equivalents
Accounting policies
Cash and cash equivalents consist of cash on deposit and short-term interest-bearing securities maturing within three
months of the date of purchase.
Supporting information
As at
Cash
Cash equivalents
5.
Inventories
Accounting policies
$
December 31, December 31,
2022
706
456
1,162
2023
513 $
387
900 $
$
Inventories are valued at the lower of cost and net realizable value, with cost determined on an average cost basis. The
cost of finished goods inventories includes direct material, direct labour, and an allocation of overhead.
Supporting information
As at
Manufactured products
Logs and other raw materials
Materials and supplies
December 31,
2023
363 $
257
231
851 $
December 31,
2022
428
376
228
1,032
$
$
Inventories at December 31, 2023 were subject to a valuation reserve of $31 million (December 31, 2022 - $61 million) to
reflect net realizable value being lower than cost.
The carrying amount of inventory recorded at net realizable value was $118 million at December 31, 2023 (December 31,
2022 - $232 million), with the remaining inventory recorded at cost.
6.
Disposal groups held for sale
Accounting policies
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly
probable that they will be recovered primarily through sale rather than through continuing use. Such assets or disposal
groups are generally measured at the lower of their carrying amount and fair value less costs to sell.
-14-
2023 Annual Report | 91
2023 Annual Report | 91
2023 Annual Report | 91
Any excess of carrying value over fair value less costs to sell is recognized as impairment loss. Impairment loss on a
disposal group is allocated first to goodwill, if any, and then to the remaining non-current assets within the scope of the
measurement requirements of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations on a pro-rata basis.
Impairment losses on initial classification as held-for-sale and subsequent gains and losses on remeasurement are
recognized in earnings.
Once classified as held-for-sale, property, plant and equipment and timber licenses are no longer depreciated.
Supporting information
Sale of Hinton pulp mill
On July 10, 2023, we announced an agreement to sell our unbleached softwood kraft pulp mill in Hinton, Alberta to
Mondi Group plc (“Mondi”). The transaction closed on February 3, 2024 following the completion of regulatory reviews
and satisfaction of customary closing conditions. The facility is presented as a disposal group held for sale at
December 31, 2023.
Under the terms of the agreement, Mondi purchased specified assets, including property, plant and equipment and
working capital, and assumed certain liabilities related to the Hinton pulp mill in exchange for a base purchase price of $5
million prior to working capital and other adjustments specified in the asset purchase agreement. Pursuant to the
transaction, we will continue to supply fibre to the Hinton pulp mill under long-term contract, via residuals from our
Alberta lumber mills.
An impairment loss of $121 million in relation to the sale of the Hinton pulp mill has been included in Restructuring and
impairment charges in the year ended December 31, 2023 (see note 17). The impairment loss includes remeasurements
of estimated working capital adjustments specified in the asset purchase agreement.
Sale of Quesnel River Pulp mill and Slave Lake Pulp mill
On September 22, 2023, we announced an agreement to sell our two bleached chemithermomechanical pulp (“BCTMP”)
mills, Quesnel River Pulp mill in Quesnel, B.C. and Slave Lake Pulp mill in Slave Lake, Alberta to an affiliate of Atlas
Holdings (“Atlas”). The transaction is anticipated to close following successful completion of customary regulatory
reviews and customary closing conditions. Activities in respect of the closing conditions are proceeding and we anticipate
closing the transaction in early 2024. The facilities are presented as a disposal group held for sale at December 31, 2023.
Under the terms of the agreement, Atlas will purchase specified assets, including property, plant and equipment, working
capital, certain timber licenses in Alberta, and assume certain liabilities related to the mills and timber licenses in
exchange for a base purchase price of $120 million prior to working capital adjustments specified in the asset purchase
agreement. Pursuant to the transaction, we will continue to supply fibre to the Quesnel River Pulp mill under long-term
contract.
An impairment loss of $20 million in relation to the sale of the Quesnel River Pulp mill and Slave Lake Pulp mill has been
included in Restructuring and impairment charges in the year ended December 31, 2023 (see note 17).
-15-
Carrying values of disposal groups
As at December 31, 2023, the disposal group comprised the following assets and liabilities:
Receivables
Inventories
Prepaid expenses
Property, plant and equipment
Timber licenses
Retirement assets
Assets held for sale
Payables and accrued liabilities
Reforestation and decommissioning obligations
Retirement liabilities
Liabilities associated with assets held for sale
7.
Property, plant and equipment
Accounting policies
$
$
$
$
49
72
2
54
3
3
182
58
2
3
63
Property, plant and equipment are recorded at historical cost, less accumulated amortization and impairment losses.
Expenditures for additions and improvements are capitalized. Borrowing costs are capitalized when the asset
construction period exceeds 12 months and the borrowing costs are directly attributable to the asset. Expenditures for
maintenance and repairs are charged to earnings. Upon retirement, disposal, or destruction of an asset, the cost and
related amortization are derecognized and any resulting gain or loss is included in earnings.
Property, plant and equipment are amortized on a straight-line basis over their estimated useful lives as follows:
Buildings
Manufacturing plant, equipment and machinery
Fixtures, mobile and other equipment
Roads and bridges
Major maintenance shutdowns
10 - 30 years
6 - 25 years
3 - 10 years
Not exceeding 40 years
1 - 2 years
Construction-in-progress includes the purchase price and any costs directly attributable to bringing the asset to the
location and condition necessary for its intended use. Construction-in-progress is not depreciated. Once the asset is
complete and available for use, the construction-in-progress balance is transferred to the appropriate category of
property, plant and equipment and depreciation commences.
-16-
2023 Annual Report | 93
2023 Annual Report | 93
2023 Annual Report | 93
Supporting Information
As at December 31, 2021
Additions
Amortization1
Impairment (note 17)
Foreign exchange
Disposals
Transfers
As at December 31, 2022
As at December 31, 2022
Cost
Accumulated amortization
Net
As at December 31, 2022
Acquisition (note 3)
Additions
Amortization1
Impairment (note 17)
Transfer to disposal groups held for
sale (note 6)
Foreign exchange
Disposals
Transfers
As at December 31, 2023
As at December 31, 2023
Cost
Accumulated amortization
Net
Manufacturing
plant,
equipment and
machinery
Construction-
in-progress
Roads
and
bridges
Other
Total
$
$
$
$
$
$
$
$
3,751 $
117
(494)
(43)
(37)
(3)
229
3,520 $
6,702 $
(3,182)
3,520 $
3,520 $
23
257
(451)
(202)
(50)
17
(8)
217
3,319 $
6,524 $
(3,205)
3,319 $
252 $
343
—
(3)
(2)
(2)
(229)
359 $
359 $
—
359 $
359 $
—
244
—
(7)
—
1
—
(222)
376 $
376 $
—
376 $
41 $
16
(13)
—
—
—
—
44 $
157 $
(113)
44 $
44 $
—
13
(11)
—
(3)
—
—
2
46 $
156 $
(110)
46 $
56 $
6
—
(2)
(1)
—
—
59 $
65 $
(6)
59 $
59 $
36
1
(1)
—
(1)
2
(1)
(1)
94 $
95 $
(1)
94 $
4,100
482
(507)
(48)
(40)
(5)
—
3,982
7,283
(3,301)
3,982
3,982
58
516
(462)
(209)
(54)
19
(9)
(4)
3,835
7,151
(3,316)
3,835
1.
8.
Amortization of $451 million relates to cost of products sold and $11 million relates to selling, general and administration expense (2022 -
$499 million and $8 million, respectively).
Timber licenses
Accounting policies
Timber licences, which are renewable or replaceable, are recorded at historical cost, less accumulated amortization and
impairment losses. Timber licences are amortized on a straight-line basis over their estimated useful lives of 40 years.
-17-
Supporting information
As at December 31, 2021
Amortization1
As at December 31, 2022
As at December 31, 2022
Cost
Accumulated amortization
Net
As at December 31, 2022
Acquisition (note 3)
Additions
Amortization1
Transfer to disposal groups held for sale (note 6)
Foreign exchange
As at December 31, 2023
As at December 31, 2023
Cost
Accumulated amortization
Net
1.
Amortization relates to cost of products sold.
9.
Goodwill and other intangibles
Accounting policies
Timber licences
368
$
(17)
351
$
$
$
$
$
$
$
641
(290)
351
351
42
—
(16)
(3)
2
376
673
(297)
376
Goodwill represents the excess purchase price paid for a business acquisition over the fair value of the net assets
acquired. Goodwill is tested annually for impairment at December 31, or more frequently if an indicator of impairment is
identified.
The customer relationship intangible assets relate to the Norbord and Angelina Forest Products acquisitions and are
amortized straight-line over 3 to 10 years.
Other intangibles are recorded at historical cost less accumulated amortization and impairment losses. Other intangibles
include software which is amortized over periods of up to five years and non-replaceable finite term timber rights which
are amortized as the related timber volumes are logged.
Goodwill is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the business
combination from which it arose. The allocation is based on the lowest level at which goodwill is monitored internally.
Recoverability of goodwill is assessed by comparing the carrying value of the CGU or group of CGUs associated with the
goodwill balance to its estimated recoverable amount, which is the higher of its estimated fair value less costs of disposal
and its value in use.
An impairment loss is recorded if the carrying value exceeds the estimated recoverable amount. Goodwill impairment
losses cannot be reversed.
-18-
2023 Annual Report | 95
2023 Annual Report | 95
2023 Annual Report | 95
Supporting information
As at December 31, 2021
Amortization1
Foreign exchange
Finalization of purchase price allocation on Angelina
acquisition
Other
As at December 31, 2022
As at December 31, 2022
Cost
Accumulated amortization
Net
As at December 31, 2022
Additions
Amortization1
Foreign exchange
Transfers
Other
As at December 31, 2023
As at December 31, 2023
Cost
Accumulated amortization
Net
Goodwill
Customer
Relationship
Intangible
Other
Total
$
$
$
$
$
$
$
$
1,975 $
—
(11)
(20)
—
1,944 $
1,944 $
—
1,944 $
1,944 $
—
—
5
—
—
1,949 $
426 $
(54)
(3)
21
—
390 $
486 $
(96)
390 $
390 $
—
(53)
2
—
—
339 $
1,949 $
—
1,949 $
489 $
(150)
339 $
39 $
(11)
(1)
—
(3)
24 $
74 $
(50)
24 $
24 $
3
(9)
—
4
(2)
20 $
80 $
(60)
20 $
2,440
(65)
(15)
1
(3)
2,358
2,504
(146)
2,358
2,358
3
(62)
6
4
(2)
2,307
2,518
(211)
2,307
1.
Amortization of $62 million (2022 - $65 million) relates to selling, general and administration expense.
Goodwill
For the purposes of impairment testing, goodwill has been allocated to the following CGU groups:
As at
Canadian lumber
US lumber
North America EWP
Europe EWP
Total
$
December 31, December 31,
2022
171
409
1,280
84
1,944
2023
171 $
409
1,280
89
1,949 $
$
The recoverable amounts of the above CGU groups as at December 31, 2023 were determined based on their fair value
less costs of disposal using discounted cash flow models. Cash flow forecasts were based on internal estimates for 2024
and 2025 and estimated mid-cycle earnings for subsequent years. Key assumptions include production volume, product
pricing, raw material input cost, production cost, terminal multiple, and discount rate. Key assumptions were determined
using external sources and historical data from internal sources. Specifically, product pricing has been estimated by
reference to average historical prices as well as third-party analyst projections of long-term product pricing. The post-tax
discount rate used was 10.2%.
-19-
As it relates to the North America EWP and Europe EWP CGU groups, a prolonged downturn in product pricing with an
extended recovery could cause their carrying amounts to exceed their recoverable amounts. For North America EWP, an
OSB pricing assumption of $289 to $320 per Msf 7/16” was used in determining the recoverable amount and a decrease
of 4% in the pricing assumption, assuming all other variables remain constant, could cause the carrying amount to exceed
the recoverable amount. For Europe EWP, a decrease of 1% in the pricing assumptions used, assuming all other variables
remain constant, could cause the carrying amount to exceed the recoverable amount.
The estimated recoverable amounts of all CGU groups exceeded their respective carrying amounts and as such, no
impairment losses were recognized for the year ended December 31, 2023 (2022 - nil).
10.
Other assets
As at
Retirement assets
Interest rate swap contracts
Electricity swaps
Other
11.
Payables and accrued liabilities
As at
Trade accounts
Accrued equity-based compensation
Compensation
Accrued export duties
Accrued dividends
Accrued interest
Current portion of lease obligations
Restructuring provision
Other
Note
14
13
23
Note
16
26
2023
December 31, December 31,
2022
132
12
—
31
175
83 $
—
18
36
137 $
$
$
December 31, December 31,
2022
430
45
152
4
25
5
11
10
40
722
2023
417 $
53
66
5
25
5
13
3
33
620 $
$
$
-20-
2023 Annual Report | 97
2023 Annual Report | 97
2023 Annual Report | 97
12.
Other liabilities
As at
Retirement liabilities
Long-term portion of reforestation obligations
Long-term portion of decommissioning obligations
Long-term portion of lease obligations
Export duties
Electricity swaps
Other
Reforestation and decommissioning obligations
Note
14
26
23
December 31,
2023
106 $
53
16
26
24
12
22
260 $
December 31,
2022
77
55
15
26
73
4
18
268
$
$
Reforestation and decommissioning obligations relate to our responsibility for reforestation under various timber licences
and our obligations related to landfill closure and other site remediation costs.
Accounting policies
Reforestation obligations are measured at the present value of the expected expenditures required to settle the
obligations and are accrued and charged to earnings when timber is harvested. The reforestation obligation is accreted
over time through charges to finance expense and reduced by silviculture expenditures. Changes to estimates are
credited or charged to earnings.
We record a liability for decommissioning obligations in the period a reasonable estimate can be made. The liability is
determined using estimated closure and/or remediation costs and discounted using an appropriate discount rate. On
initial recognition, the carrying value of the liability is added to the carrying amount of the associated asset and amortized
over its useful life, or expensed when there is no related asset. The liability is accreted over time through charges to
finance expense and reduced by actual costs of settlement. Changes to estimates result in an adjustment of the carrying
amount of the associated asset or, where there is no asset, they are credited or charged to earnings.
Reforestation and decommissioning obligations are discounted at the risk-free rate at the balance sheet date.
Supporting information
Beginning of year
Acquisition
Transfer to disposal groups held for sale
Liabilities recognized
Liabilities settled
Foreign exchange
End of year
Less: current portion
Note
$
3
6
$
Reforestation
2023
Decommissioning
2022
2023
93 $
3
—
46
(52)
2
92
(39)
53 $
97 $
—
—
51
(49)
(6)
93
(38)
55 $
35 $
1
(2)
3
(1)
1
37
(21)
16 $
2022
33
—
—
5
(1)
(2)
35
(20)
15
The total undiscounted amount of the estimated cash flows required to satisfy these obligations is $137 million
(December 31, 2022 - $159 million). The cash flows have been discounted using risk-free rates ranging from 2.50% to
3.88% (2022 - 3.27% to 5.51%).
-21-
The timing of reforestation expenditures is based on the estimated period required to ensure the associated areas are
well established and attain free to grow status, which is generally between 12 to 15 years. Payments relating to landfill
closures and site remediation are expected to occur over periods ranging up to 50 years.
13. Operating loans and long-term debt
Accounting policies
Transaction costs related to debt financing or refinancing are deferred and amortized over the life of the associated debt.
When our operating loan is undrawn, the related deferred financing costs are recorded in other assets.
Supporting information
Operating loans
As at December 31, 2023, our credit facilities consisted of a $1 billion committed revolving credit facility which matures
July 2028, $35 million of uncommitted revolving credit facilities available to our U.S. subsidiaries, a $19 million
(£15 million) credit facility dedicated to our European operations, and a $11 million (CAD$15 million) demand line of
credit dedicated to our jointly-owned newsprint operation.
As at December 31, 2023, our revolving credit facilities were undrawn (December 31, 2022 - undrawn) and the associated
deferred financing costs of $2 million (December 31, 2022 - $1 million) were recorded in other assets. Interest on the
facilities is payable at floating rates based on Prime Rate Advances, Base Rate Advances, Bankers’ Acceptances, or
Secured Overnight Financing Rate (“SOFR”) Advances at our option. On July 25, 2023, we amended and restated the
revolving credit facilities agreement to extend its maturity to July 2028 and replaced the previous London Inter-Bank
Offered Rate (“LIBOR”) floating rate option with SOFR.
In addition, we have credit facilities totalling $133 million (December 31, 2022 - $131 million) dedicated to letters of
credit. Letters of credit in the amount of $43 million (December 31, 2022 - $61 million) were supported by these facilities.
All debt is unsecured except the $11 million (CAD$15 million) jointly-owned newsprint operation demand line of credit,
which is secured by that joint operation’s current assets.
As at December 31, 2023, we were in compliance with the requirements of our credit facilities.
Long-term debt
As at
Senior notes due October 2024; interest at 4.35%
Term loan due July 2025; floating interest rate
Less: deferred financing costs
Less: current portion
December 31,
2023
300 $
200
500
(1)
(300)
199 $
December 31,
2022
300
200
500
(1)
—
499
$
$
On July 25, 2023, we amended and restated the term loan agreement to extend its maturity to July 2025 and replaced the
LIBOR floating rate option with SOFR.
Required principal repayments are disclosed in note 23.
Interest rate swap contracts
We have interest rate swap contracts that have the effect of fixing the interest rate on the $200 million term loan
disclosed in the long-term debt table above. In June 2023, these interest rate swaps were amended to reference 3-month
-22-
2023 Annual Report | 99
2023 Annual Report | 99
2023 Annual Report | 99
SOFR (previously 3-month LIBOR) effective August 2023. The weighted average fixed interest rate payable under the
contracts was 0.91% following the amendment (previously 1.14%).
In January 2024, these interest rate swaps were further amended to extend their maturity from August 2024 to July 2025.
Following this amendment, the weighted average fixed interest rate payable under the contract is 2.61%.
The interest rate swap contracts are accounted for as a derivative, with the related changes in the fair value included in
Other income in our consolidated statements of earnings (loss). For the year ended December 31, 2023, a loss of $6
million (year ended December 31, 2022 - a gain of $13 million) was recognized in relation to the interest rate swap
contracts. The fair value of the interest rate swap contracts at December 31, 2023 was an asset of $6 million (December
31, 2022 - asset of $12 million).
14.
Retirement benefits
We maintain defined benefit and defined contribution pension plans covering most of our employees. The defined
benefit plans generally do not require employee contributions and provide a guaranteed level of pension payable for life
based either on length of service or on earnings and length of service, and in most cases do not increase after
commencement of retirement. We also provide group life insurance, medical and extended health benefits to certain
employee groups.
The defined benefit pension plans are operated in Canada, the U.S., and Europe under broadly similar regulatory
frameworks. The majority are funded arrangements where benefit payments are made from plan assets that are held in
trust. Responsibility for the governance of certain of the plans, including investment and contribution decisions, resides
with our Retirement Committees, Human Resources & Compensation Committee of the Board of Directors, and Board of
Directors. For the registered defined benefit pension plans, regulations set minimum requirements for contributions for
benefit accruals and the funding of deficits.
Starting January 1, 2022, defined benefit pension plans for certain employee groups were closed to new entrants and
were replaced by defined contribution plans.
Accounting policies
We record a retirement asset or liability for our employee defined benefit pension and other retirement benefit plans by
netting our plan assets with our plan obligations, on a plan-by-plan basis.
The cost of defined benefit pensions and other retirement benefits earned by employees is actuarially determined using
the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using market yields from high quality corporate bonds with cash flows that approximate
expected benefit payments at the balance sheet date. Plan assets are valued at fair value at each balance sheet date.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are credited or
charged to equity through other comprehensive earnings in the period in which they arise.
Past service costs arising from plan amendments are recognized immediately. The finance amount on net retirement
balances is included in Finance income (expense), net in our consolidated statements of earnings (loss).
A gain or loss on settlement is recognized in earnings, calculated as the difference between the present value of the
defined benefit obligation being settled, as determined on the date of settlement, and the settlement amount.
For defined contribution plans, pension expense is the amount of contributions we are required to make in respect of
services rendered by employees.
Supporting information
The actual return on plan assets for 2023 was a gain of $78 million (2022 - loss of $138 million). The total pension expense
for the defined benefit pension plans was $32 million (2022 - $71 million). In 2023, we made nominal net contributions to
our defined benefit pension plans (2022 - $39 million). We expect to make cash contributions of approximately
$19 million to our defined benefit pension plans during 2024 based on the most recent valuation report for each pension
-23-
plan. We also provide group life insurance, medical and extended health benefits to certain employee groups, for which
we contributed $1 million in 2023 (2022 - $1 million).
In 2023, we entered into buy-out annuity purchase agreements to settle $120 million of our defined benefit obligations
by purchasing annuities using our plan assets. The agreements transfer the pension obligations of retired employees
under certain pension plans to financial institutions. The difference between the cost of the annuity purchases and the
liabilities held for these pension plans was reflected as a settlement gain of $6 million in Other income (see note 19).
In 2022, we entered into buy-out annuity purchase agreements to settle $82 million of our defined benefit obligations by
purchasing annuities using our plan assets. These agreements transferred the pension obligations of retired employees
under certain pension plans to financial institutions. The difference between the cost of the annuity purchases and the
liabilities held for these pension plans was reflected as a settlement cost of $5 million in Other income.
In 2022, as part of the process related to the annuitization of our U.K. defined benefit pension plan, we entered into a
$15 million (£13 million) investment contract with an insurer. Future cash inflows from the investment contract will
match the cash flows of the outgoing benefit payments made by the pension plan, substantially mitigating the exposure
to future volatility in the related pension obligations. The completion of the buy-out of the defined benefit obligations is
expected upon completion of certain normal-course administrative processes.
-24-
2023 Annual Report | 101
2023 Annual Report | 101
2023 Annual Report | 101
The status of the defined benefit pension plans and other retirement benefit plans, in aggregate, is as follows:
Defined benefit
pension plans
Other retirement
benefit plans
2023
2022
2023
2022
Accrued benefit obligations
Benefit obligations - opening
Transfer to disposal groups held for sale (note 6)
Service cost
Finance cost on obligation
Benefits paid
Actuarial (gain) loss due to change in financial
assumptions
Actuarial loss due to demography/experience
Settlement
Foreign exchange1
Benefit obligations - ending
Plan assets
Plan assets - opening
Transfer to disposal groups held for sale (note 6)
Finance income on plan assets
Actual return on plan assets, net of finance income
Employer contributions
Benefits paid
Settlement
Other
Refund of excess contributions
Foreign exchange1
Plan assets - ending
Funded status2
Retirement assets
Impact of minimum funding requirement3
Retirement assets (note 10)
Retirement liabilities (note 12)
$
$
$
$
$
$
838 $
(77)
37
42
(42)
63
31
(120)
17
791 $
927 $
(79)
46
32
14
(42)
(115)
(2)
(15)
20
786 $
84 $
(1)
83
(89)
(6) $
1,355 $
—
59
41
(56)
(408)
3
(82)
(74)
838 $
1,239 $
—
36
(174)
39
(56)
(87)
(2)
—
(68)
927 $
148 $
(16)
132
(59)
73 $
18 $
(2)
—
1
(1)
1
—
—
—
17 $
— $
—
—
—
1
(1)
—
—
—
—
— $
— $
—
—
(17)
(17) $
23
—
—
1
(1)
(4)
—
—
(1)
18
—
—
—
—
1
(1)
—
—
—
—
—
—
—
—
(18)
(18)
1.
2.
3.
Foreign currency translation relates to the foreign exchange impact of translating assets and liabilities of certain plans to U.S. dollars.
Plans in a surplus position are presented as assets and plans in a deficit position are presented as liabilities on our consolidated balance sheets.
Certain of our plans have a surplus that is not recognized on the basis that future economic benefits may not be available to us in the form of a
reduction in future contributions or a cash refund.
Expense
Service cost
Administration fees
Settlement loss (gain)
Finance expense (income), net
Defined benefit
pension plans
Other retirement
benefit plans
2023
2022
2023
2022
37 $
4
(6)
(3)
32 $
59 $
3
5
4
71 $
— $
—
—
1
1 $
—
—
—
1
1
$
$
-25-
Assumptions and sensitivities
At December 31, 2023, the weighted average duration of the defined benefit pension obligations is 18 years (December
31, 2022 - 17 years). The projected future benefit payments for the defined benefit pension plans at December 31, 2023
are as follows:
Defined benefit pension plans
2024
$28
2025
$28
2026 to 2028
$101
Thereafter
$1,830
Total
$1,987
Key assumptions used in determining defined benefit pension and other retirement pension benefit obligations include
assumed rates of increase for future employee compensation and discount rates. These estimates are determined with
the assistance of independent actuarial specialists.
The significant actuarial assumptions used to determine our balance sheet date retirement assets and liabilities and our
retirement benefit plan expenses are as follows:
Benefit obligations:
Discount rate
Future compensation rate increase
Benefit expense:
Discount rate - beginning of year
Future compensation rate increase
Defined benefit
pension plans
2023
2022
Other retirement
benefit plans
2023
2022
4.69%
3.62%
5.17%
3.53%
5.17%
3.53%
3.03%
3.60%
4.69%
n/a
5.10%
n/a
5.10%
n/a
3.08%
n/a
Health-care benefit costs, shown under other retirement benefit plans, are funded on a pay-as-you-go basis.
The impact of a change in these assumptions on our retirement obligations as at December 31, 2023 is as follows:
Discount rate - 0.50% change
Compensation rate - 0.50% change
Increase
Decrease
$
$
(64) $
14 $
75
(13)
The sensitivities have been calculated on the basis that all other variables remain constant. When calculating the
sensitivity of the defined benefit obligation, the same methodology is applied as was used to determine the retirement
assets and liabilities.
Plan assets
The assets of the defined benefit pension plans are invested predominantly in a diversified range of equities, pooled
funds and bonds. The weighted average asset allocations of the defined benefit plans at December 31, by asset category,
are as follows:
Canadian equities
Foreign equities
Fixed income investments
Other investments
Target range
2% - 30%
15% - 57%
20% - 55%
0% - 34%
-26-
2023
2022
28 %
17 %
42 %
13 %
100 %
26 %
30 %
30 %
14 %
100 %
2023 Annual Report | 103
2023 Annual Report | 103
2023 Annual Report | 103
Risk management practices
We are exposed to various risks related to our defined benefit pension and other retirement benefit plans:
•
•
•
Uncertainty in benefit payments: The value of the liability for retirement benefits will ultimately depend on the
amount of benefits paid and this in turn will depend on the level of future compensation increase and life
expectancy.
Volatility in asset value: We are exposed to changes in the market value of pension plan investments which are
required to fund future benefit payments.
Uncertainty in cash funding: Movement in the value of the assets and obligations may result in increased levels
of cash funding, although changes in the level of cash funding required can be spread over several years. We are
also exposed to changes in pension regulation and legislation.
Our Retirement Committees manage these risks in accordance with a Statement of Investment Policies and Procedures
for each pension plan or group of plans administered under master trust agreements. The following are some specific risk
management practices employed:
•
Retaining and monitoring professional advisors including an outsourced chief investment officer (“OCIO”).
• Monitoring our OCIO’s adherence to asset allocation guidelines and permitted categories of investments.
• Monitoring investment decisions and performance of the OCIO and asset performance against benchmarks.
Defined contribution plans
The total pension expense and funding contributions for the defined contribution pension plans for 2023 was $35 million
(2022 - $36 million).
15.
Share capital
Authorized
400,000,000 Common shares, without par value
20,000,000 Class B Common shares, without par value
10,000,000 Preferred shares, issuable in series, without par value
Issued
As at
Common
Class B Common
Total Common
December 31, 2023
December 31, 2022
Number
79,439,518
2,281,478
81,720,996
$
$
Amount
2,607
—
2,607
Number
81,273,936
2,281,478
83,555,414
$
$
Amount
2,667
—
2,667
For the year ended December 31, 2023, we issued 383 Common shares under our share option plans (2022 - no Common
shares) and no Common shares under our employee share purchase plan (2022 - no Common shares).
Rights and restrictions of Common shares
The Common shares and Class B Common shares are equal in all respects, including the right to dividends, rights upon
dissolution or winding up and the right to vote, except that each Class B Common share may at any time be exchanged
for one Common share. Our Common shares are listed for trading on the TSX and NYSE under the symbol WFG, while our
Class B Common shares are not. Certain circumstances or corporate transactions may require the approval of the holders
of our Common shares and Class B Common shares on a separate class by class basis.
-27-
Share repurchases
Normal Course Issuer Bids
On February 22, 2023, we renewed our normal course issuer bid (“2023 NCIB”) allowing us to acquire up to 4,063,696
Common shares for cancellation until the expiry of the bid on February 26, 2024. For the year ended December 31, 2023,
we repurchased for cancellation 1,834,801 Common shares at an average price of $70.24 per share under our normal
course issuer bids.
For the year ended December 31, 2022, we repurchased for cancellation 10,475,115 Common shares at an average price
of $82.01 per share under our normal course issuer bids.
2022 Substantial Issuer Bid
During the year ended December 31, 2022, we repurchased for cancellation a total of 11,898,205 Common shares at a
price of $95.00 per share for an aggregate purchase price of $1.13 billion under the 2022 Substantial Issuer Bid (“2022
SIB”). The Common shares repurchased represented approximately 11.7% of the total number of our issued and
outstanding Common shares and Class B Common shares at the time the 2022 SIB was announced in April 2022.
16.
Equity-based compensation
We have share option, phantom share unit (“PSU”) and directors’ deferred share unit (“DSU”) plans. The equity-based
compensation expense for the year ended December 31, 2023 was $25 million (2022 - expense of $5 million).
Accounting policies
We estimate the fair value of outstanding share options using the Black-Scholes option-pricing model and the fair value of
our PSU plan and directors’ DSU plan using an intrinsic valuation model at each balance sheet date. We record the
resulting charge or recovery to earnings over the related vesting period.
If a share option holder elects to acquire Common shares, both the exercise price and the accrued liability are credited to
shareholders’ equity.
Supporting information
Share option plan
Under our share option plan, officers and employees may be granted options to purchase up to 8,295,940 Common
shares, of which 777,255 remain available for issuance.
The exercise price of a share option is determined in accordance with the plan and is generally the closing price of a
Common share on the trading day immediately preceding the grant date. Our share option plans give the share option
holders the right to elect to receive a cash payment in lieu of exercising an option to purchase Common shares. Options
vest at 20% per year from the grant date and expire after 10 years.
In 2023, we have recorded an expense of $11 million (2022 – recovery of $4 million) related to the share option plans.
The liability associated with the share option plan is tracked in Canadian dollars and is based on prices published by the
TSX. A summary of the activity in the share option plans based on Canadian dollar prices is presented below:
-28-
2023 Annual Report | 105
2023 Annual Report | 105
2023 Annual Report | 105
Outstanding - beginning of year
Granted
Exercised
Expired / Cancelled
Outstanding - end of year
Exercisable - end of year
2023
2022
Number
Weighted
average price
(CAD$)
Number
Weighted
average price
(CAD$)
841,305 $
137,115
(123,781)
(4,969)
849,670 $
568,481 $
76.19
109.42
59.81
85.54
83.59
75.63
1,077,840 $
124,566
(351,448)
(9,653)
841,305 $
408,115 $
66.64
123.63
62.83
108.40
76.19
62.71
The following table summarizes information about the share options outstanding and exercisable at December 31, 2023
in Canadian dollars:
Exercise price range
(CAD$)
$40.97 - $56.00
$64.50 - $73.99
$85.40 - $92.79
$109.42 - $123.63
Number of
outstanding
options
(number)
167,737
241,690
185,836
254,407
849,670
Weighted average
remaining
contractual life
(years)
4.4
6.0
7.3
9.1
6.3
Weighted average
exercise price
Number of
exercisable options
Weighted average
exercise price
(CAD$)
(number)
(CAD$)
$
$
49.15
67.87
90.75
116.02
83.59
152,212
198,029
127,636
90,604
568,481
$
$
48.45
68.20
89.82
117.56
75.63
The weighted average share price at the date of exercise for share options exercised during the year was CAD$107.45 per
share (2022 - CAD$120.95 per share).
The accrued liability related to the share option plan was $30 million at December 31, 2023 (December 31, 2022 - $23
million). The weighted average fair value of the options used in the calculation was CAD$46.17 per option or USD$34.21
per option at December 31, 2023 (December 31, 2022 - CAD$35.59 per option or USD$27.34 per option).
The inputs to the Black-Scholes option-pricing model were as follows:
As at
Weighted-average share price on balance sheet date
Weighted average exercise price
Expected dividend
Expected volatility
Weighted average interest rate
Weighted average expected remaining life in years
December 31,
2023
CAD$113.45
CAD$83.59
CAD$1.59
42.22%
3.57%
4.07
December 31,
2022
CAD$98.20
CAD$76.19
CAD$1.63
45.15%
3.77%
4.14
The expected dividend on our shares was based on the annualized dividend rate at each period-end. Expected volatility
was based on five years of historical data. The interest rate for the life of the options was based on the implied yield
available on government bonds with an equivalent remaining term at each period-end. Historical data was used to
estimate the expected life of the options and forfeiture rates.
The intrinsic value of options issued under the share option plans at December 31, 2023 was CAD$22 million or
USD$16 million (December 31, 2022 - CAD$14 million or USD$11 million). The intrinsic value is determined based on the
difference between the weighted-average share price on the last business day of the month and the exercise price,
multiplied by the number of vested options.
-29-
Phantom share unit plan
Our PSU plan is intended to supplement, in whole or in part, or replace the granting of share options as long-term
incentives for officers and employees. The plan provides for two types of units which vest on the third anniversary of the
grant date. A restricted share unit pays out based on the volume weighted average price per Common share on the
trading day immediately preceding its vesting date (the “vesting date value”). A performance share unit pays out at a
value between 0% and 200% of its vesting date value contingent upon our performance relative to a peer group of
companies over the three-year performance period. Officers and employees granted units under the plan are also
entitled to additional units to reflect cash dividends paid on Common shares from the applicable grant date until payout.
We have recorded an expense of $12 million (2022 - expense of $10 million) related to the PSU plan. The number of units
outstanding as at December 31, 2023 was 179,757 (December 31, 2022 – 184,207), including performance share units
totalling 179,757 (December 31, 2022 – 167,156).
Directors’ deferred share unit plans
We have DSU plans which provide a structure for directors, who are not our employees, to accumulate an equity-like
holding in West Fraser. The DSU plans allow directors to participate in our growth by providing a deferred payment based
on market pricing of our Common shares at the time of redemption. Each director receives deferred share units in
payment of an annual equity retainer until a minimum equity holding is reached and may elect to receive units in
payment of up to 100% of other fees earned. After a minimum equity holding is reached, directors may elect to receive
the equity retainer in units or cash. The units are issued based on the market price of our Common shares at the time of
issue. Additional units are issued to take into account the value of dividends paid on Common shares from the date of
issue to the date of redemption. Units are redeemable only after a director retires, resigns or otherwise leaves the board.
The redemption value is equal to the market price of our Common shares at the date of redemption. A holder of units
may elect to redeem units in cash or receive Common shares having an equivalent value.
We have recorded an expense of $2 million (2022 - recovery of $1 million) related to the DSU plan. The number of units
outstanding as at December 31, 2023 was 78,895 (December 31, 2022 - 97,884).
17.
Restructuring and impairment charges
Impairment related to Hinton pulp mill
Impairment related to Quesnel River Pulp mill and Slave Lake Pulp mill
Restructuring and impairment related to Canadian lumber operations
Impairment related to US lumber operations
Impairment related to South Molton mill
Impairment related to equity accounted investment
Other restructuring charges
2023
121 $
20
81
47
—
7
3
279 $
2022
13
—
—
29
9
—
9
60
$
$
-30-
2023 Annual Report | 107
2023 Annual Report | 107
2023 Annual Report | 107
In the year ended December 31, 2023, we recorded restructuring and impairment charges of $279 million.
We recorded an impairment loss of $121 million in relation to the sale of the Hinton pulp mill (see note 6). In addition, we
recorded an impairment loss of $20 million in relation to the sale of the Quesnel River Pulp mill and Slave Lake Pulp mill
(see note 6).
We recorded restructuring and impairment charges of $81 million related to facility closures and curtailments due to
availability of economic fibre sources in B.C.
We recorded restructuring and impairment charges of $47 million associated with the announcement of the permanent
closure of our lumber mill in Maxville, Florida and the indefinite curtailment of operations at our lumber mill in Huttig,
Arkansas.
We estimated the recoverable amount of the impaired assets based on their value in use. The recoverable amount of the
property, plant and equipment subject to impairment, other than the disposal group discussed above, was $36 million.
An impairment loss of $7 million was recorded in the year ended December 31, 2023 in relation to an equity accounted
investment in our lumber segment that produces and distributes wood pellets. Restructuring charges of $3 million were
recorded in the year ended December 31, 2023 relating to the closure of a regional corporate office in our lumber
segment and the closure of a distribution centre in our pulp & paper segment.
18.
Finance income (expense), net
Interest expense
Interest income on cash and cash equivalents
Net interest income on export duty deposits (note 26)
Finance income (expense) on employee future benefits
19. Other income
Foreign exchange gain (loss)
Settlement gain (loss) on defined benefit pension plan annuity purchases
Gain on electricity swaps
Gain (loss) on interest rate swap contracts
Other
2023
(24) $
47
27
1
51 $
2023
(7) $
6
17
(6)
(5)
5 $
2022
(24)
18
9
(6)
(3)
2022
28
(5)
—
13
1
37
$
$
$
$
-31-
20.
Tax recovery (provision)
Accounting policies
Tax recovery (provision) for the year is comprised of current and deferred tax. Tax recovery (provision) is recognized in
earnings, except to the extent that it relates to items recognized in other comprehensive earnings in which case it is
recognized in other comprehensive earnings.
Deferred taxes are provided for using the liability method. Under this method, deferred taxes are recognized for
temporary differences between the tax and financial statement basis of assets, liabilities and certain carry-forward items.
Deferred tax assets are recognized only to the extent that it is probable that they will be realized. Deferred income tax
assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of substantive enactment.
International Tax Reform - Pillar Two Model Rules
The Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and
Profit Shifting published the Pillar Two model rules designed to address the tax challenges arising from the digitalisation
of the global economy. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which
we operate, although some countries may have varying responses or adjustments to the initial model rules. We are in the
process of evaluating the potential impact that these changes will have on our long-term financial position.
Supporting information
Certain 2022 figures within this note have been reclassified to conform with the current year’s presentation, including as
it relates to amendments to IAS 12 Income Taxes regarding deferred tax related to assets and liabilities arising from a
single transaction, which were effective for annual periods beginning on or after January 1, 2023.
The major components of income tax included in comprehensive earnings are as follows:
Earnings:
Current tax
Deferred tax recovery (provision)
Tax recovery (provision) on earnings
Other comprehensive earnings:
Deferred tax recovery (provision) on retirement benefit actuarial loss (gain)
Tax recovery (provision) on comprehensive earnings
2023
(61) $
122
61 $
12 $
73 $
2022
(581)
(37)
(618)
(56)
(674)
$
$
$
$
The tax provision differs from the amount that would have resulted from applying the British Columbia statutory income
tax rate to earnings before tax as follows:
Income tax recovery (expense) at statutory rate of 27%
Non-taxable amounts
Rate differentials between jurisdictions and on specified activities
Other
Tax recovery (provision)
2023
2022
62 $
—
(3)
2
61 $
(700)
10
81
(9)
(618)
$
$
-32-
2023 Annual Report | 109
2023 Annual Report | 109
2023 Annual Report | 109
Deferred income tax liabilities (assets) are made up of the following components:
Property, plant, equipment and intangibles
Reforestation and decommissioning obligations
Employee benefits
Export duties
Tax loss carry-forwards1
Inventory
Other
Represented by:
Deferred income tax assets
Deferred income tax liabilities
2023
2022
737 $
(30)
(22)
90
(47)
(12)
(39)
677 $
(6) $
683
677 $
796
(30)
(12)
72
(11)
(4)
(20)
791
(4)
795
791
$
$
$
$
1. We have $241 million of net operating loss carry-forwards in various jurisdictions (December 31, 2022 - $61 million), $306 million of U.S. state net
operating loss carry-forwards (December 31, 2022 - $345 million), and $83 million of capital loss carry-forwards (December 31, 2022 - $56 million).
A portion of these losses expire over various periods starting in 2024. The net operating losses that have not been recognized as of December 31,
2023 are $32 million in various jurisdictions (December 31, 2022 - $35 million) and $270 million for U.S. states (December 31, 2022 - $272 million).
Capital losses that have not been recognized as of December 31, 2023 are $83 million (December 31, 2022 - $56 million).
21.
Employee compensation
Our employee compensation expense includes salaries and wages, employee future benefits, bonuses and termination
costs, but excludes restructuring charges. Total compensation expense for the year ended December 31, 2023 was
$989 million (2022 - $1,133 million).
Key management includes directors and officers, and their compensation expense and balance sheet date payables are as
follows:
Expense
Salary and short-term employee benefits
Retirement benefits
Equity-based compensation1
1.
Amounts do not necessarily represent the actual value which will ultimately be paid.
Payables and accrued liabilities
Compensation
Equity-based compensation1
1.
Amounts do not necessarily represent the actual value which will ultimately be paid.
22.
Earnings (loss) per share
2023
2022
8 $
2
19
29 $
2023
2022
— $
39
39 $
13
2
4
19
6
35
41
$
$
$
$
Basic earnings (loss) per share is calculated based on earnings (loss) available to Common shareholders, as set out below,
using the weighted average number of Common shares and Class B Common shares outstanding.
Certain of our equity-based compensation plans may be settled in cash or Common shares at the holder’s option and for
the purposes of calculating diluted earnings (loss) per share, the more dilutive of the cash-settled and equity-settled
method is used, regardless of how the plan is accounted for. Plans that are accounted for using the cash-settled method
-33-
will require adjustments to the numerator and denominator if the equity-settled method is determined to have a dilutive
effect as compared to the cash-settled method.
The numerator under the equity-settled method is calculated based on earnings (loss) available to Common shareholders
adjusted to remove the cash-settled equity-based compensation expense or recovery that has been charged or credited
to earnings (loss) and deducting a notional charge using the equity-settled method, as set out below. Adjustments to
earnings (loss) are tax-effected as applicable. The denominator under the equity-settled method is calculated using the
treasury stock method. Share options under the equity-settled method are considered dilutive when the average market
price of our Common shares for the period exceeds the exercise price of the share option.
The cash-settled method was more dilutive for the year ended December 31, 2023. The equity-settled method was more
dilutive for the year ended December 31, 2022 and an adjustment was required for both the numerator and
denominator.
A reconciliation of the numerator and denominator used for the purposes of calculating diluted earnings (loss) per share
is as follows:
Earnings (loss)
Numerator for basic EPS
Cash-settled (recovery) expense included in earnings
Equity-settled expense adjustment
Numerator for diluted EPS
Weighted average number of shares (thousands)
Denominator for basic EPS
Effect of dilutive equity-based compensation
Denominator for diluted EPS
Earnings (loss) per share (dollars)
Basic
Diluted
23.
Financial instruments
Accounting policies
2023
2022
$
$
(167) $
—
—
(167) $
83,199
—
83,199
1,975
(5)
(5)
1,965
93,760
413
94,173
$
$
(2.01) $
(2.01) $
21.06
20.86
All financial assets and liabilities, except for derivatives, are initially measured at fair value and subsequently measured at
amortized cost using the effective interest rate method. Derivatives are measured at fair value through profit or loss
(“FVTPL”).
Supporting information
The following tables provide the carrying values and fair values of our financial instruments by category, as well as the
associated fair value hierarchy levels as defined in note 2 under “Fair value measurements”. The carrying value is a
reasonable approximation of fair value for cash and cash equivalents, receivables, and payables and accrued liabilities
-34-
2023 Annual Report | 111
2023 Annual Report | 111
2023 Annual Report | 111
due to their short-term nature. The carrying values of long-term debt include any current portions and exclude deferred
financing costs.
December 31, 2023
Financial assets
Cash and cash equivalents
Receivables
Interest rate swaps2
Electricity swaps2
Financial liabilities
Payables and accrued
liabilities
Long-term debt1
Electricity swaps
Level
Financial assets
at amortized
cost
Financial assets
or financial
liabilities at
FVTPL
Financial
liabilities at
amortized cost
Carrying value
Fair value
2
3
2
3
3
2
3
$
$
$
$
900 $
302
—
—
1,202 $
— $
—
—
— $
— $
—
6
22
28 $
— $
—
12
12 $
— $
—
—
—
— $
900 $
302
6
22
1,230 $
620 $
620 $
500
—
1,120 $
500
12
1,132 $
900
302
6
22
1,230
620
494
12
1,126
1.
2.
The fair value of long-term debt is based on rates available to us at December 31, 2023 for long-term debt with similar terms and remaining
maturities.
The value of our interest rate swap contracts and the current portion of our electricity swap contracts are included in receivables in our
consolidated balance sheet at December 31, 2023. The value of the non-current portion of our electricity swap contracts are included in other
assets in our consolidated balance sheet at December 31, 2023.
December 31, 2022
Financial assets
Cash and cash equivalents
Receivables
Interest rate swaps2
Financial liabilities
Payables and accrued liabilities
Long-term debt1
Electricity swaps
Financial assets
at amortized
cost
Level
Financial assets
or financial
liabilities at
FVTPL
Financial
liabilities at
amortized cost Carrying value
Fair value
2
3
2
3
2
2
$
$
$
$
1,162 $
350
—
1,512 $
— $
—
—
— $
— $
—
12
12 $
— $
—
4
4 $
— $
—
—
— $
1,162 $
350
12
1,524 $
722 $
500
—
1,222 $
722 $
500
4
1,226 $
1,162
350
12
1,524
722
491
4
1,217
1.
2.
The fair value of long-term debt is based on rates available to us at December 31, 2022 for long-term debt with similar terms and remaining
maturities.
The value of our interest rate swap contracts are included in other assets in our consolidated balance sheet at December 31, 2022.
Financial risk management
Our activities result in exposure to a variety of financial risks, and the main objectives of our risk management process are
to ensure risks are properly identified and analyzed and to establish appropriate risk limits and controls. Risk
management policies and systems are reviewed regularly to reflect changes in market conditions and our activities. We
are exposed to credit risk, liquidity risk, and market risk. A description of these risks and policies for managing these risks
are summarized below.
-35-
The sensitivities provided in this section give the effect of possible changes in the relevant prices and rates on earnings.
The sensitivities are hypothetical and should not be considered to be predictive of future performance or earnings.
Changes in fair values or cash flows based on fluctuations in market variables cannot be extrapolated since the
relationship between the change in the market variable and the change in fair value or cash flows may not be linear.
Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. We are exposed to credit risk with respect to cash and cash equivalents and receivables. The carrying
amounts of these accounts represent the maximum credit exposure. We manage credit risk by holding cash and cash
equivalents with major banks of high creditworthiness. Credit risk for trade and other receivables is managed through
established credit monitoring activities such as:
•
•
•
Establishing and monitoring customer credit limits;
Performing ongoing evaluations of the financial conditions of key customers; and
In certain market areas, undertaking additional measures to reduce credit risk including credit insurance, letters
of credit and prepayments. At December 31, 2023, approximately 26% of trade accounts receivable was covered
by at least some of these additional measures (December 31, 2022 - 45%).
Given our credit monitoring activities, the low percentage of overdue accounts and our history of minimal customer
defaults, we consider the credit quality of our trade accounts receivable at December 31, 2023 to be high and have
recorded nominal expected credit losses on our trade accounts receivable. The aging analysis of trade accounts receivable
is presented below:
As at
Trade accounts receivable
Current
Past due 1 to 30 days
Past due 31 to 60 days
Past due over 60 days
Trade accounts receivable
Insurance receivable
Sales taxes receivable
Other
Receivables
Liquidity risk
December
31, 2023
December
31, 2022
$
$
215 $
28
4
3
250
—
26
35
311 $
256
19
9
2
286
3
22
39
350
Liquidity risk is the risk we will encounter difficulty in meeting obligations associated with financial liabilities. We manage
liquidity risk by maintaining adequate cash and cash equivalents balances and having lines of credit available. In addition,
we regularly monitor forecasted and actual cash flows. Refinancing risks are managed by extending maturities through
regular renewals and refinancing when market conditions are supportive.
-36-
2023 Annual Report | 113
2023 Annual Report | 113
2023 Annual Report | 113
The following table summarizes the maturity profile of our financial liabilities based on contractual undiscounted
payments:
December 31, 2023
Long-term debt
Interest on long-term debt1
Lease obligations
Payables and accrued liabilities
Total
Carrying
value
$
$
499 $
—
39
620
1,158 $
Total
2024
2025
2026
2027
500 $
25
45
620
1,190 $
300 $
18
13
620
951 $
200 $
7
8
—
215 $
— $
—
5
—
5 $
Thereafter
—
—
16
—
16
— $
—
3
—
3 $
1.
Assumes debt remains at December 31, 2023 levels and includes the impact of interest rate swaps terminating August 2024.
In addition, we have contractual commitments for the acquisition of property, plant and equipment in the amount of
$265 million in 2024.
Market risk
Market risk is the risk of loss that might arise from changes in market factors such as interest rates, foreign exchange
rates, commodity, and energy prices. We aim to manage market risk within acceptable parameters and may, from time to
time, use derivatives to manage market risk.
Interest rates
Interest rate risk relates mainly to floating interest rate debt. By maintaining a mix of fixed and floating rate debt along
with interest rate swap contracts, we mitigate the exposure to interest rate changes.
As at December 31, 2023, we had the following floating rate financial instruments:
Financial instrument
Financial liability: Term loan
Financial asset: Interest rate swap contracts
Carrying
value
$
$
200
6
We maintain a $200 million term loan due July 2025 where the interest is payable at floating rates based on Prime, Base
Rate Advances, Bankers’ Acceptances or SOFR Advances at our option.
We have interest rate swap agreements to pay fixed interest rates and receive variable interest rates equal to 3-month
SOFR on $200 million notional principal amount of indebtedness. These agreements have the effect of fixing the interest
rate on the $200 million term loan floating rate debt. In January 2024, these interest rate swaps were amended to extend
their maturity from August 2024 to July 2025.
In addition, interest on certain of our credit facilities is payable at floating rates including Prime Rate Advances, Base Rate
Advances, Bankers’ Acceptances, or SOFR Advances at our option.
At December 31, 2023, the impact of a 100-basis point change in interest rate affecting our floating rate debt would not
result in a change in annual interest expense (December 31, 2022 - no change).
Energy
We are party to arrangements with renewable power generators to purchase environmental attributes and receive
settlements by reference to generation volumes and the spot price for electricity and pay settlements by reference to
generation volumes and a fixed contractual price. These agreements act as a partial hedge against future electricity price
increases in Alberta and will provide us with access to renewable energy credits that we may surrender to achieve a
reduction in our greenhouse gas emissions. While these arrangements economically hedge the risk of changes in cash
flows due to fluctuations in Alberta electricity prices, hedge accounting has not been applied to these instruments.
-37-
A contract to receive renewable energy credits and the associated floating-for-fixed electricity swap are distinct units of
account. We have selected this method as we believe the receipt of the renewable energy credits is an executory contract
and the electricity swap meets the definition of an embedded derivative.
The electricity swaps are valued based on a discounted cash flow model, with the related changes in fair value included in
Other income on our consolidated statements of earnings (loss). The valuation requires management to make certain
assumptions about the model inputs, including future electricity prices, discount rates, and expected generation volumes
associated with the contracts.
For the year ended December 31, 2023, a gain of $17 million was recognized in relation to the electricity swaps (2022 -
nominal gain). The fair value of the electricity swaps at December 31, 2023 was an asset of $10 million (December 31,
2022 - a liability of $4 million). At December 31, 2023, the impact of a 10% increase (decrease) in future electricity prices
would result in a gain (loss) of $20 million.
The following table summarizes the maturity profile of our net derivative asset based on contractual undiscounted
payments:
Carrying
value -
asset
(liability)
$
$
10 $
10 $
Total
2024
2025
2026
2027
14 $
14 $
3 $
3 $
— $
— $
— $
— $
Thereafter
10
10
1 $
1 $
December 31, 2023
Electricity swaps
Total
Currency risk
We are exposed to foreign currency risk because our Canadian operations incur a portion of their operating expenses in
Canadian dollars. Therefore, an increase in the value of the CAD relative to the USD increases the value of expenses in
USD terms incurred by our Canadian operations, which reduces operating margin and the cash flow available to fund
operations.
In addition, foreign currency exposure arises from our net investment in our European operations, which have British
pound sterling and Euro functional currencies, and from our Spray Lake lumber mill (note 3) and jointly-owned newsprint
operation, which have Canadian dollar functional currency. The risk arises from the fluctuation in spot rates between
these currencies and the U.S. dollar, which causes the amount of the net investment to vary with the resulting translation
gains or losses being reported in other comprehensive earnings.
A $0.01 strengthening (weakening) of the USD against the CAD would increase (decrease) earnings by approximately
$2 million. A $0.01 strengthening (weakening) of the USD against the CAD, British pound and Euro would result in an
approximate $8 million translation loss (gain) on operations with different functional currencies included in other
comprehensive earnings. These sensitivities assume that all other variables remain constant and ignores any impact of
forecast sales and purchases.
24.
Capital disclosures
Our business is cyclical and is subject to significant changes in cash flow over the business cycle. In addition, financial
performance can be materially influenced by changes in product prices and the relative values of the Canadian and U.S.
dollars. Our objective in managing capital is to ensure adequate liquidity and financial flexibility at all times, particularly at
the lower points in the business cycle.
Our main policy relating to capital management is to maintain a strong balance sheet and otherwise meet financial tests
that rating agencies commonly apply for investment-grade issuers of public debt. Our debt is currently rated as
investment grade by three major rating agencies.
We monitor and assess our financial performance to ensure that debt levels are prudent, taking into account the
anticipated direction of the business cycle. When financing acquisitions, we combine cash on hand, debt, and equity
financing in a proportion that is intended to maintain an investment-grade rating for debt throughout the cycle. Debt
repayments are arranged, where possible, on a staggered basis that takes into account the uneven nature of anticipated
-38-
2023 Annual Report | 115
2023 Annual Report | 115
2023 Annual Report | 115
cash flows. We have established committed revolving lines of credit that provide liquidity and flexibility when capital
markets are restricted. In addition, as a normal part of our business, we have in the past and may from time to time seek
to repurchase our outstanding securities through issuer bids or tender offers, open market purchases, privately
negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity
requirements, contractual and legal restrictions and other factors.
A strong balance sheet and liquidity profile, along with our investment-grade debt rating, are key elements of our goal to
maintain a balanced capital allocation strategy. Priorities within this strategy include: reinvesting in our operations across
all market cycles to strategically enhance productivity, product mix, and capacity; maintaining a leading cost position;
maintaining financial flexibility to capitalize on growth opportunities, including the pursuit of acquisitions and larger-scale
strategic growth initiatives; and returning capital to shareholders through dividends and share repurchases.
Two key measurements used to monitor our capital position are total debt to total capital and net debt to total capital,
calculated as follows:
As at
Debt
Operating loans
Current and long-term lease obligation
Current and long-term debt
Derivative liabilities1
Open letters of credit1
Total debt
Shareholders’ equity
Total capital
Total debt to capital
Total debt
Cash and cash equivalents
Open letters of credit
Derivative liabilities
Cheques issued in excess of funds on deposit
Net debt
Shareholders’ equity
Total capital
Net debt to capital
December 31,
2023
December 31,
2022
$
$
$
$
— $
39
500
—
43
582
7,223
7,805 $
7%
582 $
(900)
(43)
—
—
(361)
7,223
6,862 $
(5%)
—
37
500
—
61
598
7,619
8,217
7%
598
(1,162)
(61)
—
—
(625)
7,619
6,994
(9%)
1.
Letters of credit facilities and the fair value of derivative liabilities are part of our bank covenants’ total debt calculation.
-39-
25.
Segment and geographical information
The segmentation of manufacturing operations into lumber, NA EWP, pulp and paper and Europe EWP is based on a
number of factors, including similarities in products, production processes and economic characteristics. The EWP
segments have been separated due to differences in the operating region, customer base, profit margins and sales
volumes. Transactions between segments are at market prices and on standard business terms. The segments follow the
accounting policies described in these consolidated financial statement notes, where applicable.
During the first quarter of 2023, the Company changed its measure of profit or loss for each reportable segment from
earnings before tax to operating earnings, as this is now the measure most used by the chief operating decision maker
when evaluating segment operating performance. Prior year comparatives have been updated to conform to current year
presentation.
Year ended December 31, 2023
Sales
To external customers
To other segments
Cost of products sold
Freight and other distribution costs
Export duties, net
Amortization
Selling, general and administration
Equity-based compensation
Restructuring and impairment charges
Operating earnings (loss)
Total assets
Total liabilities
Capital expenditures
Year ended December 31, 2022
Sales
To external customers
To other segments
Cost of products sold
Freight and other distribution costs
Export duties, net
Amortization
Selling, general and administration
Equity-based compensation
Restructuring and impairment charges
Operating earnings (loss)
$
$
$
$
$
$
Total assets
Total liabilities
Capital expenditures
Lumber
NA EWP
Pulp &
Paper
Europe
EWP
Corporate
& Other
Total
2,722 $
72
2,794
(2,215)
(405)
(8)
(185)
(164)
—
(137)
(319) $
2,602 $
6
2,608
(1,594)
(329)
—
(273)
(96)
—
—
316 $
3,606
507
253
4,338
551
156
612 $
11
623
(555)
(120)
—
(24)
(25)
—
(142)
(242) $
333
125
32
517 $
—
517
(409)
(40)
—
(49)
(21)
—
—
(3) $
691
149
30
— $
(89)
(89)
89
—
—
(10)
—
(25)
—
(35) $
6,454
—
6,454
(4,685)
(894)
(8)
(541)
(307)
(25)
(279)
(284)
446 $
861 $
7 $
9,415
2,193
477
Lumber
NA EWP
Pulp &
Paper
Europe
EWP
Corporate
& Other
Total
802 $
5
807 $
(596)
(153)
—
(35)
(32)
—
(13)
(22) $
456
90
29
738 $
—
738 $
(479)
(46)
—
(53)
(28)
—
(15)
117 $
730
170
20
— $
(98)
(98) $
98
—
—
(9)
(5)
(5)
—
(18) $
9,701
—
9,701
(5,142)
(963)
(18)
(589)
(365)
(5)
(60)
2,559
465 $
919 $
9 $
9,973
2,354
477
4,381 $
84
4,465 $
(2,489)
(435)
(18)
(186)
(194)
—
(31)
1,111 $
3,780 $
9
3,789 $
(1,677)
(329)
—
(306)
(106)
—
—
1,371 $
3,685
553
184
4,637
622
235
-40-
2023 Annual Report | 117
2023 Annual Report | 117
2023 Annual Report | 117
The geographic distribution of non-current assets and external sales based on the location of product delivery is as
follows:
United States
Canada
U.K and Europe
Asia
Other
Non-current assets
Sales by geographic area
2023
2022
2023
2022
$
$
2,689 $
3,883
466
—
—
7,038 $
2,625 $
4,139
460
—
—
7,224 $
4,251 $
1,118
524
557
4
6,454 $
6,659
1,531
733
767
11
9,701
26.
Countervailing (“CVD”) and antidumping (“ADD”) duty dispute
On November 25, 2016, a coalition of U.S. lumber producers petitioned the U.S. Department of Commerce (“USDOC”)
and the U.S. International Trade Commission (“USITC”) to investigate alleged subsidies to Canadian softwood lumber
producers and levy CVD and ADD duties against Canadian softwood lumber imports. The USDOC chose us as a
“mandatory respondent” to both the countervailing and antidumping investigations, and as a result, we have received
unique company-specific rates.
Accounting policies
The CVD and ADD rates apply retroactively for each period of investigation (“POI”). We record CVD as export duty
expense at the cash deposit rate until an Administrative Review (“AR”) finalizes a new applicable rate for each POI. We
record ADD as export duty expense by estimating the rate to be applied for each POI by using our actual results and a
similar calculation methodology as the USDOC and adjust when an AR finalizes a new applicable rate for each POI. The
difference between the cumulative cash deposits paid and cumulative export duty expense recognized for each POI is
recorded on our balance sheet as export duty deposits receivable or payable.
The difference between the cash deposit amount and the amount that would have been due based on the final AR rate
will incur interest based on the U.S. federally published interest rate. We record interest income on our duty deposits
receivable, net of any interest expense on our duty deposits payable, based on this rate.
Developments in CVD and ADD rates
We began paying CVD and ADD duties in 2017 based on the determination of duties payable by the USDOC. The CVD and
ADD cash deposit rates are updated upon the finalization of the USDOC’s Administrative Review (“AR”) process for each
Period of Inquiry (“POI”), as summarized in the tables below.
On March 14, 2023, the USDOC initiated AR5 POI covering the 2022 calendar year. West Fraser was selected as a
mandatory respondent, which will result in West Fraser continuing to be subject to a company-specific rate.
On September 7, 2023, the USDOC finalized the duty rate for AR4, resulting in the recognition of an export duty recovery
of $62 million plus interest income in earnings and a decrease in export duty deposits payable.
On February 1, 2024, the USDOC released the preliminary results from AR5 POI covering the 2022 calendar year, which
indicated a rate of 6.74% for CVD and 5.33% for ADD for West Fraser. The duty rates are subject to an appeal process,
and we will record an adjustment once the rates are finalized. If the AR5 rates were to be confirmed, it would result in an
expense of $35 million before the impact of interest for the POI covered by AR5. This adjustment would be in addition to
the amounts already recorded on our balance sheet. If these rates were finalized, our combined cash deposit rate would
be 12.07%.
-41-
The respective Cash Deposit Rates, the AR POI Final Rate and the West Fraser Estimated ADD Rate for each period are as
follows:
Effective dates for CVD
AR1 POI1,2
April 28, 2017 - August 24, 2017
August 25, 2017 - December 27, 2017
December 28, 2017 - December 31, 2017
January 1, 2018 - December 31, 2018
AR2 POI3
January 1, 2019 - December 31, 2019
AR3 POI4
January 1, 2020 - November 30, 2020
December 1, 2020 - December 31, 2020
AR4 POI5
January 1, 2021 - December 1, 2021
December 2, 2021 - December 31, 2021
AR5 POI6
January 1, 2022 – January 9, 2022
January 10, 2022 – August 8, 2022
August 9, 2022 - December 31, 2022
AR6 POI7
January 1, 2023 - July 31, 2023
August 1, 2023 - December 31, 2023
Cash Deposit
Rate
AR POI Final
Rate
24.12 %
— %
17.99 %
17.99 %
6.76 %
— %
6.76 %
7.57 %
17.99 %
5.08 %
17.99 %
7.57 %
7.57 %
5.06 %
5.06 %
5.08 %
3.62 %
3.62 %
2.19 %
3.62 %
3.62 %
2.19 %
2.19 %
n/a
n/a
n/a
n/a
n/a
1.
2.
3.
4.
5.
6.
7.
On April 24, 2017, the USDOC issued its preliminary rate in the CVD investigation. The requirement that we make cash deposits for CVD was
suspended on August 24, 2017, until the USDOC published the revised rate.
On November 24, 2020, the USDOC issued the final CVD rate for the AR1 POI.
On November 24, 2021, the USDOC issued the final CVD rate for the AR2 POI. On January 10, 2022, the USDOC amended the final CVD rate for the
AR2 POI from 5.06% to 5.08% for ministerial errors. This table only reflects the final rate.
On August 4, 2022, the USDOC issued the final CVD rate for the AR3 POI.
On August 1, 2023, the USDOC issued the final CVD rate for the AR4 POI.
The CVD rate for the AR5 POI will be adjusted when AR5 is complete and the USDOC finalizes the rate, which is not expected until 2024.
The CVD rate for the AR6 POI will be adjusted when AR6 is complete and the USDOC finalizes the rate, which is not expected until 2025.
-42-
2023 Annual Report | 119
2023 Annual Report | 119
2023 Annual Report | 119
Effective dates for ADD
AR1 POI1,2
June 30, 2017 - December 3, 2017
December 4, 2017 - December 31, 2017
January 1, 2018 - December 31, 2018
AR2 POI3
Cash Deposit
Rate
AR POI Final
Rate
West Fraser
Estimated
Rate
6.76 %
5.57 %
5.57 %
1.40 %
1.40 %
1.40 %
1.46 %
1.46 %
1.46 %
January 1, 2019 - December 31, 2019
5.57 %
6.06 %
4.65 %
AR3 POI4
January 1, 2020 - November 29, 2020
November 30, 2020 - December 31, 2020
AR4 POI5
January 1, 2021 - December 1, 2021
December 2, 2021 - December 31, 2021
AR5 POI6
January 1, 2022 - August 8, 2022
August 9, 2022 - December 31, 2022
AR6 POI7
January 1, 2023 - July 31, 2023
August 1, 2023 - December 31, 2023
5.57 %
1.40 %
1.40 %
6.06 %
6.06 %
4.63 %
4.63 %
7.06 %
4.63 %
4.63 %
7.06 %
7.06 %
n/a
n/a
n/a
n/a
3.40 %
3.40 %
6.80 %
6.80 %
4.52 %
4.52 %
8.84 %
8.84 %
1.
2.
3.
4.
5.
6.
7.
On June 26, 2017, the USDOC issued its preliminary rate in the ADD investigation effective June 30, 2017.
On November 24, 2020, the USDOC issued the final ADD rate for the AR1 POI.
On November 24, 2021, the USDOC issued the final ADD rate for the AR2 POI.
On August 4, 2022, the USDOC issued the final ADD rate for the AR3 POI.
On July 31, 2023, the USDOC issued the final ADD rate for the AR4 POI. On September 7, 2023, the USDOC amended the final ADD rate for the AR4
POI from 6.96% to 7.06% for ministerial errors. This table only reflects the final rate.
The ADD rate for the AR5 POI will be adjusted when AR5 is complete and the USDOC finalizes the rate, which is not expected until 2024.
The ADD rate for the AR6 POI will be adjusted when AR6 is complete and the USDOC finalizes the rate, which is not expected until 2025.
.
Impact on results
The following table reconciles our cash deposits paid during the year to the amount recorded in our statements of
earnings:
($ millions)
Cash deposits1
Adjust to West Fraser Estimated ADD rate2
Export duties, net
Duty recovery attributable to AR33
Duty recovery attributable to AR44
Export duty (expense) recovery
Net interest income on export duty deposits
2023
(53)
(17)
(70)
—
62
(8)
27
2022
(117)
18
(99)
81
—
(18)
9
1.
2.
3.
4.
Represents combined CVD and ADD cash deposit rate of 11.12% from January 1, 2022 to January 9, 2022, 11.14% from January 10, 2022 to August
8, 2022, 8.25% from August 9, 2022 to July 31, 2023 and 9.25% from August 1, 2023 to December 31, 2023.
Represents adjustment to West Fraser Estimated ADD rate of 8.84% for 2023 and 4.52% for 2022.
$81 million represents the duty recovery attributable to the finalization of the AR3 duty rates for the 2020 POI. The final CVD rate was 3.62% and
the final ADD rate was 4.63% for AR3.
$62 million represents the duty recovery attributable to the finalization of AR4 duty rates for the 2021 POI. The final CVD rate was 2.19% and the
final ADD rate was 7.06% for AR4.
As of December 31, 2023, export duties paid and payable on deposit with the USDOC were $836 million (December 31,
2022 - $784 million).
-43-
Impact on balance sheet
Each POI is subject to independent administrative review by the USDOC, and the results of each POI may not be offset but
the results within a POI in respect of ADD and CVD may be offset.
Export duty deposits receivable is represented by:
Export duty deposits receivable
Beginning of year
Export duties recognized as duty deposits receivable
Interest income recognized on duty deposits receivable
End of year
Export duties payable is represented by:
Export duties payable
Beginning of year
Export duties recognized as long-term payable
Interest expense (income) recognized on export duties payable
End of year
Appeals
$
$
$
$
2023
354 $
—
23
377 $
2023
73 $
(45)
(4)
24 $
2022
242
97
15
354
2022
69
(2)
6
73
On May 22, 2020, the North American Free Trade Agreement (“NAFTA”) panel issued its final decision on “Injury”. The
NAFTA panel rejected the Canadian parties’ arguments and upheld the USITC remand determination in its entirety.
On August 28, 2020, the World Trade Organization’s (“WTO”) dispute-resolution panel ruled unanimously that U.S.
countervailing duties against Canadian softwood lumber are inconsistent with the WTO obligations of the United States.
The decision confirmed that Canada does not subsidize its softwood lumber industry. On September 28, 2020, the U.S.
announced that it would appeal the WTO panel’s decision.
Under U.S. trade law, the International Trade Commission (“ITC”) must review antidumping and countervailing orders
every 5 years from the date of issuance. This process is referred to as a "Sunset Review". On November 30, 2023, the ITC
voted to maintain the ADD and CVD orders on softwood lumber from Canada on the grounds that the revocation would
likely lead to the continuation or recurrence of material injury to the U.S. domestic industry within a reasonably
foreseeable time.
The softwood lumber case will continue to be subject to NAFTA or the new Canada-United States-Mexico Agreement
(“CUSMA”), WTO dispute resolution processes, and litigation in the U.S. In the past, long periods of litigation have led to
negotiated settlements and duty deposit refunds. In the interim, duties remain subject to the USDOC AR process, which
results in an annual adjustment of duty deposit rates.
Notwithstanding the deposit rates assigned under the investigations, our final liability for CVD and ADD will not be
determined until each annual administrative review process is complete and related appeal processes are concluded.
27.
Contingencies
We are subject to various investigations, claims and legal, regulatory and tax proceedings covering matters that arise in
the ordinary course of business activities, including civil claims and lawsuits, regulatory examinations, investigations,
audits and requests for information by governmental regulatory agencies and law enforcement authorities in various
jurisdictions. Each of these matters is subject to uncertainties and it is possible that some of these matters may be
resolved unfavourably. Certain conditions may exist as of the date the financial statements are issued, which may result
in an additional loss. In the opinion of management none of these matters are expected to have a material effect on our
results of operations or financial condition.
28.
Subsequent events
-44-
On February 3, 2024, the sale of our unbleached softwood kraft pulp mill in Hinton, Alberta to Mondi closed following the
successful completion of regulatory reviews and satisfaction of customary closing conditions.
2023 Annual Report | 121
2023 Annual Report | 121
2023 Annual Report | 121
-45-
Appendix
Directors and Officers
Effective February 14, 2024
Directors and Principal Occupation
Senior Executive Officers and Office Held
Henry H. (Hank) Ketcham
Chair of the Board
Sean P. McLaren
President and Chief Executive Officer
Sean P. McLaren
President and Chief Executive Officer
Kevin J. Burke
Executive Vice-President, North American Operations
Doyle N. Beneby
Corporate Director
Eric L. Butler
Corporate Director
Reid E. Carter
Corporate Director
John N. Floren
Corporate Director
Keith D. Carter
Senior Vice-President, Western Canada
James W. Gorman
Senior Vice-President, Corporate Services
Robin A. Lampard
Senior Vice-President, Finance
Alan G. McMeekin
Senior Vice-President, Europe
Ellis Ketcham Johnson
President, Private Philanthropic Foundation
Matthew V. Tobin
Senior Vice-President, Sales and Marketing
Christopher A. Virostek
Senior Vice-President, Finance and
Chief Financial Officer
Brian G. Kenning
Corporate Director
Marian Lawson
Corporate Director
Colleen M. McMorrow
Corporate Director
Janice G. Rennie
Corporate Director
Gillian D. Winckler
Corporate Director
2023 Annual Report | 123
Glossary of Key Terms
This Annual Report uses capitalized terms, abbreviations and acronyms that unless otherwise defined are defined under
“Glossary of Key Terms” on page 74 of our Management’s Discussion and Analysis for the year ended December 31,
2023 incorporated into this Annual Report. The following key terms are included below for ease of reference:
AAC
Annual allowable cut.
The volume of timber that may
be harvested annually from a
specific timber tenure.
Adjusted EBITDA
Non‑GAAP financial measure
defined in the “Non‑GAAP
and Other Specified Financial
Measures” section of the
2023 MD&A included in this
Annual Report
B.C.
British Columbia
CAD or CAD$
Canadian dollars
Crown timber
Timber harvested from
lands owned by a provincial
government
EBITDA
Earnings before interest, taxes,
depreciation and amortization
EDGAR
Electronic Data Gathering,
Analysis and Retrieval system
EPS
Earnings per share
EU
Europe
EU OSB
Oriented strand board from
the U.K. and Europe
EWP
Engineered wood products
GHG
Greenhouse gas
LIBOR
London interbank offered rate
M3
A solid cubic metre. A unit of
measure for timber, equal to
approximately 35 cubic feet.
Mcf
One thousand cubic feet.
A unit of measure for
laminated veneer lumber.
2023 MD&A
Management’s Discussion &
Analysis for the year ended
December 31, 2023
Mfbm
One thousand board feet
equivalent to one thousand
square feet of lumber, one
inch thick
MMfbm
One thousand board feet
(equivalent to one thousand
square feet of lumber, one
inch thick)
Msf
One thousand square feet.
A unit of measure for Panel
products (such as OSB, MDF
and plywood) equal to one
thousand square feet on a
3/4-inch basis for MDF, on a
3/8-inch basis for plywood
and on either a 3/8-inch or
7/16-inch thick basis for OSB.
MMsf
One million square feet
Mtonne
One thousand tonnes
NA
North America
NA EWP
North America engineered
wood products
NA OSB
Oriented strand board from
Canada and the U.S.
OSB
Oriented strand board.
An engineered structural wood
panel produced by chemically
bonding wood strands in a
uniform direction under heat
and pressure.
SEDAR+
System for Electronic
Document Analysis and
Retrieval+
SPF
Spruce/Pine/Fir lumber
SYP
Southern yellow pine lumber
Tonne
A unit of weight in the metric
system equal to one thousand
kilograms or approximately
2,204 pounds
TSX
Toronto Stock Exchange
NCIB
Normal course issuer bid
U.K.
United Kingdom
Norbord
Norbord Inc.
U.S.
United States
NYSE
New York Stock Exchange
USD or $ or US$
United States dollars
Forward-Looking Statements
This Annual Report contains forward‑looking information or forward‑looking statements (collectively, “forward‑looking statements”) within the
meaning of applicable securities laws, including those relating to our outlook for our markets, our business strategy and our ability to execute on
such strategy, including positioning ourselves to invest in our company, improve productivity and our environmental footprint, and take advantage
of opportunities, outlook for demand for our products and our ability to meet such demand, timing of Henderson start-up, expectations for
Allendale’s performance, our SBTi commitments and our ability to maintain financial flexibility. Any such forward‑looking statements are based
on information currently available to us and are based on assumptions and analyses made by us considering our experience and our perception
of historical trends and current conditions and are subject to inherent risks and uncertainties. Readers should also refer to the “Forward‑Looking
Statements” and “Risks and Uncertainties” section set forth in West Fraser’s 2023 MD&A included in this Annual Report. There can be no
assurance that the plans, intentions, or expectations upon which forward‑looking statements are based will be realized. Actual results may differ,
and the difference may be material and adverse to West Fraser and its shareholders. Except as may be required by law, West Fraser undertakes no
obligation to publicly update or revise any forward-looking statements.
Corporate Information
Effective February 14, 2024
Corporate Offices
Annual General Meeting
The Annual General Meeting of
the shareholders of the Company
will be held on April 24, 2024, at
11:00 a.m. at 1250 Brownmiller
Road, Quesnel, British Columbia
Canada V2J 6P5.
Auditors
PricewaterhouseCoopers LLP
Vancouver, British Columbia
Canada
Legal Counsel
McMillan LLP Vancouver,
British Columbia Canada
Transfer Agent
Computershare Investor
Services Inc.
Tel: 1 (800) 564-6253 Canada/USA
Tel: (514) 982-7555 International
Filings
www.sedar.com
www.sec.gov/edgar
Shares are listed on the TSX and
NYSE under the symbol: WFG
Investor Contact
Robert B. Winslow, CFA
Director, Investor Relations &
Corporate Development
Tel: (416) 777-4426
E: shareholder@westfraser.com
Website
WestFraser.com
Corporate Headquarters
885 West Georgia Street, Suite 1500
Vancouver, British Columbia
Canada V6C 3E8
Tel: (604) 895-2700
US Operations Office
57 Germantown Ct., Suite 300
Cordova, Tennessee, USA, 38018
Tel: (901) 620-4200
Fax: (901) 620-4204
Canadian Operations Office
1250 Brownmiller Road, Quesnel
British Columbia Canada V2J 6P5
Tel: (250) 992-9244
Fax: (250) 992-9233
Cowie Regional Office
Station Road
Cowie, Stirlingshire
Scotland FK7 7BQ
Tel: +44 (0) 1786-812921
Fax: +44 (0) 1786-817143
Toronto Corporate Office
One Toronto Street, Suite 600
Toronto, Ontario Canada M5C 2W4
Tel: (416) 365-0705
West Fraser Technology Centre
4960 Levy Street
Ville St. Laurent, Quebec
Canada H4R 2P1
Tel: (514) 832-3360
Fax: (514) 832-3388
Sales Offices
SPF Lumber, MDF, LVL
1250 Brownmiller Road, Quesnel
British Columbia Canada V2J 6P5
Tel: (250) 992-9254
Fax: (250) 992-3034
SPF Export Lumber & Pulp
885 West Georgia Street, Suite 1500
Vancouver, British Columbia
Canada V6C 3E8
Tel: (604) 895-2700
Fax: (604) 895-2976
SYP Lumber
57 Germantown Ct., Suite 300
Cordova, Tennessee, USA, 38018
Tel: (901) 620-4200
Fax: (901) 620-4204
OSB & Plywood
One Toronto Street, Suite 600
Toronto, Ontario Canada M5C 2W4
Tel: (416) 365-0705
Operations
Canadian Operations
SPF Lumber, Pulp, Plywood,
MDF & LVL
1250 Brownmiller Road, Quesnel
British Columbia Canada V2J 6P5
Tel: (250) 992-9244
Fax: (250) 992-9233
OSB
One Toronto Street, Suite 600
Toronto, Ontario Canada M5C 2W4
Tel: (416) 365-0705
Fax: (416) 365-3292
US Operations
SYP Lumber & OSB
57 Germantown Ct., Suite 300
Cordova, Tennessee, USA, 38018
Tel: (901) 620-4200
Fax: (901) 620-4204
European Operations
Station Road
Cowie, Stirlingshire
Scotland FK7 7BQ
Tel: +44 (0) 1786 812921
2023 Annual Report | 125
Memberships and Partner Organizations
West Fraser believes in a layered approach to
engagement. We actively participate in numerous
forestry sector associations and external initiatives.
We also belong to many local business organizations,
such as the chambers of commerce, across our
operating communities.
Product Circularity
West Fraser supports the circular economy, which is
designed to eliminate waste and pollution and keep
products and materials in use. The trees we harvest
and the products we make are balanced by conserving
and regenerating the ecosystems where we work.
Resource Utilization
We use 99% of every log we process.
Lumber accounts for the largest use, but
we also make products from wood chips
and sawdust. Other applications include
mulch, animal bedding, road base,
fertilizer, energy and soil improvement.
Beneficial-Use
Products
Versatile and durable, wood
can be disassembled and
reassembled into other
products or buildings.
Carbon Capture
Trees naturally capture
carbon and that carbon
can also be stored
in wood products.
Energy Efficient
Of all major building
materials, wood requires
less energy to harvest,
transport, manufacture,
install, maintain
and recycle.
Sustainable Harvest
We manage 8.2 million
hectares of forests and
harvest less than 1% of this
area annually.
Growing Forests,
Forever
Through planting and
natural regeneration,
we reforest areas that
we harvest on managed
forestlands.
Renewable Energy
Most of our mills generate
renewable energy, which is
used on-site, from biomass
material recovered from our
manufacturing.
Climate-Smart
Construction
Wood products are a
natural, renewable and
sustainable building
material that stores carbon
throughout its lifetime.
2023 Annual Report | 127
West Fraser Timber Co. Ltd.
604.895.2700
WestFraser.com