Western Forest Products Inc.
2024 Annual Report
Management’s Discussion & Analysis
The following Management’s Discussion and Analysis (“MD&A”) reports and comments on the financial condition and results of operations of
Western Forest Products Inc. (the “Company”, “Western”, “us”, “we”, or “our”), on a consolidated basis, for the three months and year ended
December 31, 2024, to help security holders and other readers understand our Company and the key factors underlying our financial results. This
discussion and analysis should be read in conjunction with our audited annual consolidated financial statements and the notes thereto for the years
ended December 31, 2024 and 2023, which can be found on SEDAR+ at www.sedarplus.ca. Unless otherwise noted, the information in this MD&A
is updated to February 13, 2025.
The Company has prepared the consolidated financial statements for the years ended December 31, 2024 and 2023 in accordance with IFRS
Accounting Standards, as issued by the International Accounting Standards Board. Amounts discussed herein are based on our audited annual
consolidated financial statements and are presented in millions of Canadian dollars unless otherwise noted. Certain prior period comparative
figures have been reclassified to conform to the current period’s presentation.
Reference is made in this MD&A to Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (“Adjusted EBITDA”). Adjusted EBITDA
is defined as operating income prior to operating restructuring items and other income (expense), plus amortization of plant, equipment, right of
use and timber licence assets, impairment adjustments, and changes in fair value of biological assets. Adjusted EBITDA margin is Adjusted
EBITDA as a proportion of revenue. Western uses Adjusted EBITDA and Adjusted EBITDA margin as benchmark measurements of our own
operating results and as benchmarks relative to our competitors. We consider Adjusted EBITDA to be a meaningful supplement to operating
income as a performance measure primarily because amortization expense, impairment adjustments and changes in the fair value of biological
assets are non-cash costs, and vary widely from company to company in a manner that we consider largely independent of the underlying cost
efficiency of their operating facilities. Further, the inclusion of operating restructuring items which are unpredictable in nature and timing may make
comparisons of our operating results between periods more difficult. We also believe Adjusted EBITDA and Adjusted EBITDA margin are commonly
used by securities analysts, investors and other interested parties to evaluate our financial performance.
Adjusted EBITDA does not represent cash generated from operations as defined by IFRS and it is not necessarily indicative of cash available to
fund cash needs. Furthermore, Adjusted EBITDA does not reflect the impact of certain items that affect our net income. Adjusted EBITDA and
Adjusted EBITDA margin are not measures of financial performance under IFRS and should not be considered as alternatives to measures of
performance under IFRS. Moreover, because all companies do not calculate Adjusted EBITDA in the same manner, Adjusted EBITDA and Adjusted
EBITDA margin calculated by Western may differ from similar measures calculated by other companies. A reconciliation between the Company’s
net income as reported in accordance with IFRS and Adjusted EBITDA is included in the “Non-GAAP Financial Measures” section of this report.
Management uses key performance indicators such as net debt, net debt to capitalization and current assets to current liabilities. Net debt is
defined as long-term debt and bank indebtedness less cash and cash equivalents. Net debt to capitalization is a ratio defined as net debt divided
by capitalization, with capitalization being the sum of net debt and equity. Current assets to current liabilities ratio is defined as total current assets
divided by total current liabilities. These key performance indicators are non-GAAP financial measures that do not have a standardized meaning
and may not be comparable to similar measures used by other issuers. They are not recognized by IFRS, but are meaningful in that they indicate
the Company’s ability to meet its obligations on an ongoing basis and indicate whether the Company is more or less leveraged than in the past.
Return on capital employed (“ROCE”) is also used in this MD&A as a key performance measure. ROCE is defined as adjusted EBITDA as a
proportion of average capital employed. Average capital employed is defined as the average balance over a year of total assets less cash and
cash equivalents, income tax receivable, duty receivable and related interest, deferred income tax assets, accounts payable and accrued liabilities
and the current portions of lease liabilities, reforestation obligation and deferred revenue. ROCE is a non-GAAP financial measure that does not
have a standardized meaning and may not be comparable to similar measures used by other issuers. ROCE is not recognized by IFRS, but is
used to determine relative profitability after taking into account the amount of capital used.
This MD&A contains statements that may constitute forward-looking statements under the applicable securities laws. Readers are cautioned
against placing undue reliance on forward-looking statements. All statements herein, other than statements of historical fact, may be forward-
looking statements and can be identified by the use of words such as “will”, “commit”, “project”, “estimate”, “expect”, “anticipate”, “plan”, “target”,
“forecast”, “intend”, “believe”, “seek”, “could”, “should”, “may”, “likely”, “continue”, “pursue” and similar references to future periods. Forward-looking
statements in this MD&A include, but are not limited to, statements relating to our current intent, belief or expectations with respect to: domestic,
North American and international market conditions, prices, demands and growth, including demands for our cedar products; economic conditions;
legislative changes and policy initiatives; the softwood lumber dispute; the applicability and scope of tariffs and the expected timing thereof; our
growth, marketing, production, wholesale, operational and capital allocation plans, investments and strategies, fibre availability and regulatory
developments; changes to stumpage rates and the expected timing thereof; the impact of public health threats; the execution of our sales and
marketing strategy; the completion of the sale of the APD facility; the development, completion and implementation of integrated resource
management plans or forest landscape plan pilots by First Nations, including TFL 37 Forest Landscape Plan and Forest Operations Plan;
determinations of allowable annual cut (“AAC”) for the Company’s Forest Licences and TFLs, including TFL 44 and TFL 19, and the expected
timing thereof; the impact of the determination of a new AAC for North Island Timber Supply Area, the capacity of the Company’s facilities and
assets including its continuous dry kilns and the expected timing and cost of completion and commissioning of the Company’s announced capital
investments and capital expenditures, including the two new continuous dry kilns. Although such statements reflect management’s current
reasonable beliefs, expectations and assumptions as to, amongst other things, the future supply and demand of forest products, global and regional
economic activity and the consistency of the regulatory framework within which the Company currently operates, there can be no assurance that
forward-looking statements are accurate, and actual results and performance may materially vary.
Many factors could cause our actual results or performance to be materially different, including: economic and financial conditions including
inflation, international demand for forest products, the Company’s ability to export its products, cost and availability of shipping carrier capacity,
competition and selling prices, international trade disputes and sanctions, changes in foreign currency exchange rates, labour disputes and
disruptions, ability to recruit workers, natural disasters, the impact of climate change, relations with First Nations groups, First Nations’ claims and
settlements, the availability of fibre and AAC, the ability to obtain operational permits, development and changes in laws and regulations affecting
the forest industry, changes in the price of key materials for our products, changes in opportunities, information systems security and other factors
referenced under the “Risks and Uncertainties” section herein. The foregoing list is not exhaustive, as other factors could adversely affect our
actual results and performance. Forward-looking statements are based only on information currently available to us and refer only as of the date
hereof. Except as required by law, we undertake no obligation to update forward-looking statements.
2
Summary of Selected Quarterly and Annual Results (1)
(millions of Canadian dollars except per share amounts and where otherwise noted)
Summary Information
Q4
2024
Q4
2023
Q3
2024
Annual
2024
Annual
2023
Revenue
Lumber (2)
$ 214.3
$ 178.3
$ 189.9
$ 817.1
$ 781.6
Logs
46.5
51.1
39.9
188.0
180.9
By-products
9.7
9.9
9.1
41.7
39.8
Forestry services and other (3)
2.7
7.3
2.8
17.1
15.2
Total revenue
273.2
246.6
241.7
1,063.9
1,017.5
Freight
17.3
16.3
16.4
69.1
75.6
Export tax expense
8.9
4.1
6.2
25.5
20.2
Export tax recovery
-
-
(1.0)
(1.0)
(4.3)
Stumpage
8.2
8.7
7.8
27.9
44.4
Adjusted EBITDA (4)
$ 14.4
$
(1.2)
$ (10.7)
$
8.9
$ (29.9)
Adjusted EBITDA margin (4)
5%
(0%)
(4%)
1%
(3%)
Operating loss prior to restructuring and other items
$
(0.4)
$ (14.4)
$ (24.4)
$ (46.4)
$ (83.4)
Net loss
(1.2)
(14.3)
(19.6)
(34.5)
(70.1)
Loss per share, basic and diluted
$ per share
(0.00)
(0.04)
(0.06)
(0.10)
(0.22)
Operating Information (4)
Lumber shipments (2)(6)
mmfbm
146
136
138
588
588
Cedar
mmfbm
36
30
33
138
131
Japan Specialty
mmfbm
16
33
21
93
87
Industrial (2)
mmfbm
24
19
19
88
85
Commodity
mmfbm
71
54
65
270
285
Lumber production (2)
mmfbm
135
125
127
558
561
Lumber price, average (2)
$/mfbm
$ 1,467
$ 1,313
$ 1,378
$ 1,390
$ 1,329
Wholesale lumber shipments
mmfbm
6
4
8
30
19
Log shipments
000 m3
355
446
347
1,378
1,384
Domestic
000 m3
260
271
230
1,024
993
Export
000 m3
-
-
-
-
-
Pulp
000 m3
95
175
117
355
391
Net production (7)
000 m3
673
718
659
2,768
2,952
Saw log purchases
000 m3
234
200
215
750
675
Log price, average (8)
$/m3
$
121
$
112
$
113
$
129
$
122
Illustrative Lumber Average Price Data (9)
Price Basis
Grn WRC #2 Clear & Btr 4x6W RL ($C)
cif dest N Euro
$ 8,108
$ 8,550
$ 8,100
$ 8,217
$ 8,588
Grn WRC Deck Knotty 2x6 RL S4S
Net fob Mill
$ 1,431
$ 1,077
$ 1,368
$ 1,266
$ 1,264
Grn WRC #2 & Btr AG 6x6 RL
Net fob Mill
$ 3,434
$ 3,315
$ 3,391
$ 3,364
$ 3,315
Coast Grn WRC Std&Btr NH 3/4x4 RL S1S2E
Net fob Mill
$ 1,140
$ 1,138
$ 1,123
$ 1,116
$ 1,383
Grn Hem Baby Squares Merch 4-1/8x4-1/8 13’
c&f dest Japan
$
974
$
965
$
975
$
975
$ 1,078
Grn Dfir Baby Squares Merch 4-1/8x4-1/8 RL S4S
c&f dest Japan
$ 1,104
$ 1,125
$ 1,132
$ 1,127
$ 1,188
Grn Dfir (Portland) #1&Btr 100% FOHC 6x6 Rough
Net fob Mill
$ 1,181
$ 1,882
$ 1,626
$ 1,522
$ 1,937
Hemlock Lumber 2x4 (40x90) Metric RG Utility
cif dest Shanghai
$
373
$
366
$
389
$
390
$
399
Coast KD Hem-Fir #2 & Btr 2x4
Net fob Mill
$
477
$
404
$
411
$
449
$
422
Average exchange rate – CAD to USD (10)
0.715
0.735
0.733
0.730
0.741
Average exchange rate – CAD to JPY (10)
108.89
108.57
109.23
110.50
103.99
(1)
Included in Appendix A is a table of selected results from the last eight quarters. Figures in the table may not equal, sum or recalculate
to figures presented in the table or elsewhere due to rounding. Log data reflects BC business only.
(2)
Includes glue-laminated wood products.
(3)
Forestry services and other include harvesting, roadbuilding, reforestation, planning and other services.
(4)
Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. Refer to the Non-GAAP Financial Measures
section of this document for more information on each non-GAAP financial measure.
(5)
“mmfbm” = millions of board feet; “mfbm” = thousands of board feet.
(6)
Includes wholesale lumber shipments.
(7)
Net production is sorted log production, net of residuals and waste.
(8)
The average realized log price per cubic metre has been presented on a gross basis, which may include fee-in-lieu and shipping
charges incurred on behalf of customers to facilitate sales to export markets.
(9) Sourced from Random Lengths (USD/Mfbm), except Hem Metric RG Utility that is from Forest Economic Advisors LLC China Bulletin.
(10) Canadian Dollar (“CAD”), United States Dollar (“USD”), Japanese yen (“JPY”).
3
Summary of Fourth Quarter 2024 Results
We reported Adjusted EBITDA of $14.4 million in the fourth quarter of 2024, as compared to negative $1.2
million in the same period last year. Results in the fourth quarter of 2024 reflect higher lumber shipments and
prices, a stronger USD to CAD average exchange rate, partially offset by higher export duty rates compared
to the same period last year.
Net loss was $1.2 million in the fourth quarter of 2024, as compared to $14.3 million in the same period last
year. Operating loss prior to restructuring and other items was $0.4 million in the fourth quarter of 2024, as
compared to $14.4 million in the same period last year.
Sales
Lumber revenue was $214.3 million in the fourth quarter of 2024 as compared to $178.3 million in the same
period last year. The increase of 20% was due to higher lumber shipment volumes and lumber prices and a
stronger USD to CAD average exchange rate, partially offset by a weaker sales mix. Our average realized
lumber price increased by 12% to $1,467 per thousand board feet in the fourth quarter of 2024, as compared
to $1,313 per thousand board feet in the same period last year, due to improvement in prices in most lumber
markets.
Specialty lumber shipments represented 52% of total lumber shipment volumes in the fourth quarter of 2024,
as compared to 60% in the same period last year, primarily due to weaker Japanese market conditions.
Commodity lumber shipment volumes increased by 31% compared to the same period last year on the strength
of improved North American market demand.
Log revenue was $46.5 million in the fourth quarter of 2024, as compared to $51.1 million in the same period
last year. The decrease of 9% was due to lower shipment volumes given lower harvest, partially offset by
higher average domestic log prices and a stronger sales mix compared to the same period last year.
By-products revenue was $9.7 million, as compared to $9.9 million in the same period last year. The decrease
of 2% was due to lower chip sales volumes, which were partially offset by an increase in chip prices.
Forestry services and other revenue were $2.7 million, as compared to $7.3 million in the same period last
year. The decrease was due to reductions in harvesting and road building services provided to third parties as
a result of project timing.
Operations
Lumber production was 135 million board feet in the fourth quarter of 2024, as compared to 125 million board
feet in the same period last year. In both periods, we curtailed certain sawmill operations to match production
to market demand and manage inventory levels. Sawmill cash conversion costs per thousand board feet were
similar compared to the same period last year.
We harvested 673,000 cubic metres of logs from our BC coastal operations in the fourth quarter of 2024, as
compared to 718,000 cubic metres in the same period last year. Log harvest reductions were partly offset by
increased saw log purchases to match log volumes to our sawmill requirements.
Timberlands cash operating costs per cubic metre increased 2% compared to the same period last year
primarily due to higher helicopter harvesting costs and higher average stumpage per cubic metre compared to
the same period last year.
BC Coastal saw log purchases were 234,000 cubic metres in the fourth quarter of 2024, as compared to
200,000 cubic metres in the same period last year.
Freight expense was $17.3 million in the fourth quarter of 2024 as compared to $16.3 million in the same
period last year. The increase of 6% was primarily due to increased lumber shipments, partially offset by a
lower percentage of shipments to China and Japan.
We recorded $8.9 million of countervailing duty (“CV”) and anti-dumping duty (“AD”) expense in the fourth
quarter of 2024, as compared to $4.1 million in the same period of 2023. Export tax expense increased due to
higher duty rates, higher US-destined lumber shipments and a stronger USD.
Corporate and Other
Selling and administration expense was $10.0 million in the fourth quarter of 2024 as compared to $10.8 million
in the same period last year.
4
Restructuring costs were $2.1 million in the fourth quarter of 2024, consisting primarily of impairments and
curtailment costs at the Alberni Pacific Division (“APD”). Restructuring costs were $0.9 million in the fourth
quarter of 2023 for retirement and other benefits related to rightsizing of certain operational functions within
our business.
Other income was $4.8 million in the fourth quarter of 2024 as compared to an expense of $2.5 million in the
same period last year, resulting primarily from higher unrealized foreign exchange gains on revaluation of our
USD-denominated export tax receivable.
Finance costs were $1.8 million in the fourth quarter of 2024 as compared to $1.8 million in the same period
last year.
Income Taxes
Income tax expense was $1.7 million on a net income before tax of $0.5 million in the fourth quarter of 2024
as compared to income tax recovery of $5.3 million on loss before tax of $19.6 million in the same period last
year. The rate differential results primarily from tax basis differentials and changes in valuation allowances.
Net Loss
Net loss was $1.2 million in the fourth quarter of 2024, as compared to a net loss of $14.3 million for the same
period last year. Results in the fourth quarter of 2024 benefitted from improving lumber demand and prices in
certain markets, compared to the same period last year.
Summary of Annual 2024 Results
We reported Adjusted EBITDA of $8.9 million for 2024, which included $1.0 million in export tax recovery and
$2.6 million in costs at our curtailed APD facility, as compared to negative Adjusted EBITDA of $29.9 million
for the same period last year, which included $4.3 million in export tax recovery and $5.2 million in costs at
APD. Results in 2024 benefited from modest improvement in lumber demand and prices compared to the
same period last year.
Net loss was $34.5 million for 2024, as compared to net loss of $70.1 million for the same period last year.
Operating loss prior to restructuring and other items was $46.4 million in 2024, as compared to loss of $83.4
million in the same period last year.
Sales
Lumber revenue was $817.1 million in 2024 as compared to $781.6 million in the same period last year. The
increase of 5% was due to higher average lumber prices, a stronger sales mix and a stronger USD to CAD
average exchange rate. Our average realized lumber price increased by 5% to $1,390 per thousand board
feet in 2024, as compared to $1,329 per thousand board feet in the same period last year.
Speciality lumber shipments represented 54% of total lumber shipment volumes in 2024, as compared to 51%
in the same period last year. Cedar, Japan and Industrial lumber shipments all increased compared to the
same period last year. Commodity lumber shipments decreased 5% due to weaker market conditions at the
beginning of 2024, compared to the same period last year.
Log revenue was $188.0 million in 2024, as compared to $180.9 million in the same period last year. The
increase of 4% was due to higher log prices and a stronger sales mix, partially offset by a decline in shipments.
By-product revenue was $41.7 million in 2024 as compared to $39.8 million in the same period last year. The
increase of 5% was due to higher chip prices and chip volumes.
Forestry services and other revenue were $17.1 million, as compared to $15.2 million in the same period last
year. The increase was due to growth in harvesting and road building services provided to third parties as a
result of project timing.
Operations
Lumber production was 558 million board feet in 2024, as compared to 561 million board feet in the same
period last year. During 2024 and 2023, we took operating curtailments at certain sawmills to match production
to market demand and manage inventory. Sawmill cash conversation costs per thousand board feet were 7%
higher compared to the same period last year due to mix of production.
5
We harvested 2.8 million cubic metres of logs from our BC coastal operations in 2024, compared to 3.0 million
cubic metres harvested in the same period last year. The decline in harvest was due primarily to ongoing
harvest permitting delays and lack of economic log availability.
Timberlands cash operating costs per cubic metre were flat compared to the same period last year as lower
stumpage rates were offset by higher helicopter harvesting costs.
BC Coastal saw log purchases were 750,000 cubic metres in 2024, as compared to 675,000 cubic metres in
the same period last year. We managed saw log purchases to balance overall log inventory to market
conditions and match fibre requirements at our BC manufacturing facilities.
Freight expense was $69.1 million in 2024 as compared to $75.6 million in the same period last year. The
decrease of 9% was primarily due to lower container and trucking rates.
We recorded $25.5 million of CV and AD expense in 2024, as compared to $20.2 million in the same period
of 2023. Export tax expense increased due to higher average duty rates, higher lumber prices and the stronger
USD.
Corporate and Other
Selling and administration expense was $43.0 million in 2024 as compared to $42.8 million in the same period
last year.
Restructuring costs were $5.5 million in 2024 primarily for retirement and other benefits, curtailment costs and
asset impairments related to our APD facility. In 2023, the Company recognized $7.5 million for retirement and
other benefits related to our APD facility and rightsizing of various operational functions within our business.
Other income was $6.5 million in 2024 as compared to expense of $1.2 million in the same period last year,
primarily resulting from foreign currency revaluation of a higher USD-denominated export tax receivable.
Finance costs were $6.7 million in 2024 as compared to $3.0 million in the same period last year. Interest
expense on higher average borrowings and interest rates were partially offset by interest income on a higher
average export tax receivable.
Income Taxes
Income tax recovery was $17.6 million on a net loss before tax of $52.1 million for an effective tax rate of 34%
in 2024, as compared to a recovery of $25.0 million on net loss before tax of $95.1 million for an effective tax
rate of 26% in the same period last year. The rate differential results primarily from tax arising on the
Company’s sale of a 34% ownership interest in the La-kwa sa muqw Forestry Limited Partnership (“LFLP”) as
discussed below under “Indigenous Relationships”.
Net Loss
Net loss was $34.5 million in 2024 as compared to $70.1 million for the same period of last year, reflecting
modest improvement in lumber demand and prices compared to the same period last year.
Accelerating the Transition to Higher Value Products
In support of the Company’s key strategic priorities, including modernizing our primary manufacturing facilities,
through increasing our kiln drying and planing capacity and reducing our cost structure, with a goal of
accelerating the transition to higher value products, the Company continues to make progress on pre-
engineering and permitting activities. These pre-engineering and permitting activities are preliminary steps
taken to position the Company to be able to execute on a broader comprehensive strategy; however, any
actual future investment opportunity will be subject to considering the short-term and long-term operating
environment, our business and labour partnerships, and our financial condition, cash requirements and other
financial metrics that we may deem relevant.
Saltair Continuous Dry Kiln
The new Saltair continuous kiln continues to perform well and since commissioning in April 2024 has operated
at 99.2% of full capacity utilization and produced 42 million board feet of higher value kiln-dried lumber. The
continuous dry kiln has supported Western’s production of higher value products, given ongoing kiln drying
capacity constraints on the BC Coast.
6
Two New Continuous Dry Kilns
We continue to advance pre-engineering and permitting related to two previously announced continuous dry
kilns. Due to certain permitting delays, the kilns are now expected to be completed and commissioned in early
2026. As the projects are in their initial phase, costs expended to December 31, 2024 total $1.3 million,
relative to a total estimated budget of $35 million.
Alberni Pacific Division
On January 31, 2025, the Company entered into an asset purchase agreement for the sale of APD for $7.3
million. The sale is subject to certain customary closing conditions and is anticipated to close in the first
quarter of 2025.
Sale of Fee Simple Land and Private Timberlands
On February 10, 2025, the Company completed the sale of approximately 14,500 hectares of fee simple land,
biological assets and infrastructure on northern Vancouver Island, BC to a Canadian affiliate of the Eastwood
Climate Smart Forestry Fund I LP for $69.2 million.
Labour Relations
On January 17, 2025, the Company’s hourly employees that are represented by the United Steelworkers
Local 1-1937 (“USW”) ratified a new six-year collective bargaining agreement which expires on June 14,
2030.
Incremental US Tariff
On February 1, 2025, US President Donald Trump signed an executive order imposing a tariff of 25% (the
“incremental US tariff”) on imported goods from Canada to the US with an originally planned implementation
date of February 4, 2025. On February 3, 2025, the implementation date was delayed to March 4, 2025. The
incremental US tariff is in addition to the existing combined US Softwood Lumber CV and AD rates of 14.40%
which the Company is currently subject to.
We have informed customers of our intention to pass on the incremental US tariff. The potential
implementation and duration of the incremental US tariff is unknown and could have a material impact on our
operating earnings and cash flows. We are also working with all levels of governments across Canada to
advocate for programs and policies that will best enable the forestry sector to serve global markets and
manage through these uncertain times.
Indigenous Relationships
We respect the treaty and Aboriginal rights of Indigenous groups, and we are committed to open dialogue and
meaningful actions in support of reconciliation. Western continues to actively invest time and resources to
build and foster positive working relationships with Indigenous groups within whose traditional territories we
operate, including through First Nation-led integrated resource management plan (“IRMP”) initiatives across
five tree farm licence (“TFL”) areas, and limited partnership opportunities with First Nations with shared
governance and financial interests. Some milestone achievements in building mutually beneficial relationships
with First Nations during 2024 include:
On March 27, 2024, Western completed the sale of a 34% ownership interest in the LFLP to the Tlowitsis,
K’ómoks, Wei Wai Kum and We Wai Kai First Nations (the “Nations”), for gross proceeds of $35.9 million.
LFLP is comprised of certain assets and liabilities of the Company’s former Mid-Island Forest Operation,
including TFL 64, which was created through the subdivision of Block 2 from TFL 39. The Company has a
long-term fibre supply agreement in place with LFLP to support our BC manufacturing facilities. The current
allowable annual cut (“AAC”) of TFL 64 represents approximately 16% of Western’s total current AAC.
On May 2, 2024, Western and Tseshaht First Nation (“Tseshaht”) announced the completion of the sale of a
parcel of Western’s private land located in Port Alberni to Tseshaht for residential development. The purchase
of the 3.2 hectare property supports Tseshaht’s vision to build housing within the City of Port Alberni for its
members and the broader community. The parcel of land was formerly used as a parking lot by Western’s
APD facility.
7
On May 14, 2024, the public review period closed for the draft TFL 37 Forest Landscape Plan and Forest
Operations Plan, jointly developed by Western and ‘Namgis First Nation (“‘Namgis”) under the TFL 37 Forest
Landscape Plan Pilot, a project supported by the Province of BC (“the Province”) through the Office of the
Chief Forester. The draft plans are the first in British Columbia to reach this milestone and chart a new path in
forest planning with a detailed view for how key values and ecosystem integrity will be managed on the
landscape. ‘Namgis and Western continue to work on finalizing the pilot deliverables.
Regulatory Environment
The Province has introduced various policy initiatives and regulatory changes in recent years that impact the
BC forest sector, including: fibre recovery, lumber remanufacturing, old growth forest management, forest
stewardship and the exportation of logs. For additional details on these policy initiatives, regulatory changes
and risks, please see “Regulatory Risks” under the heading “Risks and Uncertainties”.
Current provincial policy requires that forest management and operating plans take into account and not
unreasonably infringe on Aboriginal rights and title, proven or unproven, and provide for First Nations
consultation. First Nation opposition to a forest tenure or other operating authorization may delay the Province
from granting the permits necessary for our timberlands operations.
For additional details on these policy requirements and regulatory aspects in relation to First Nations see “Land
Claims by Indigenous Groups” and “Regulatory Risks” under the heading “Risks and Uncertainties”. The
Company may manage risks associated with delays in the Province granting operating authorizations by
fostering positive working relationships with the First Nations, as discussed above. The Company may partly
mitigate the operating impacts of permit delays by increasing permitted harvest in other areas and by
purchasing more logs on the open market.
Old-Growth Logging Deferral
On November 2, 2021, the Province announced its intention to work in partnership with First Nations on the
proposed, temporary deferral of harvesting in 2.6 million hectares of BC forests. The proposed, temporary
deferrals, if implemented, are subject to First Nations engagement. The Province has stated that final decisions
on proposed, temporary deferral areas will be based on discussions between the Province and First Nations
governments.
At this time, determination of potential impacts will be subject to further dialogue with the First Nations on
whose territories the Company operates and their government-to-government discussions. Should the
proposed measures impact Western’s business, the Company will seek support from the Province for its
workers and full compensation for investments.
Western has entered into joint planning processes with multiple First Nations across the majority of our tenures
with the objective to develop IRMPs. These IRMPs will address Old Growth as well as other values on the
landbase where Western operates in a comprehensive way. Substantial progress was made in 2024 on several
of these plans.
Timber Tenure Replacements and Reduction
Approximately 89% of Western’s and its affiliates 5,753,000 cubic metre AAC is in the form of TFLs. TFLs are
granted for 25-year terms and the Province is required to offer a replacement TFL every five to ten years with
a new 25-year term. This replaceable AAC comes from seven TFLs, five held by the Company (TFL 6, TFL
19, TFL 25, TFL 37 and TFL 39) and two held by its affiliates (TFL 44 and TFL 64 (created from the subdivision
of Block 2 from TFL 39)). TFL 6 was replaced in March 2020, TFL 25 was replaced in May 2019, and TFL 37
was replaced in March 2017. TFL 44 was replaced in August 2019. TFL 64 was replaced in January 2025.
TFL 19 and TFL 39 are due to be replaced but have not yet been replaced by the Ministry of Forests (“MFOR”).
MFOR continues to consult with potentially affected First Nations regarding the replacement of these TFLs.
Provincial legislation requires the Chief Forester to routinely review sustainable harvesting levels of individual
tenures at least every 10 years and to issue a determination which may result in an increase or decrease to
AAC. The AAC determination reflects tree growth, ecology, regional and local economic and social interests,
water and other environmental considerations that define how forests can be managed.
8
TFL 44
In June, 2023, the Province set a new AAC for TFL 44, reducing the AAC from 793,600 cubic metres to 642,800
cubic metres. The new AAC was effective immediately and reflects harvest reductions associated with forest
resources and socio-economic objectives of the Province, including the reallocation of previously unharvested
volume to new forest licences.
The TFL 44 licence is held by Tsawak-qin Forestry Limited Partnership (“TFLP”), a limited partnership between
Western and Huumiis Ventures Limited Partnership. The Company and TFLP engaged with the Province on
the issues identified as part of the AAC determination. We expect the Province to update the AAC
determination in 2025, thus the Company is unable to assess the potential impact of this on the Company’s
business at this time.
TFL 19
In 2024, the Province issued a decision on unharvested volume in TFL 19, awarding 303,500 cubic metres of
unharvested volume to new forest licences. The Provincial Chief Forester has not yet made a determination
on the new AAC for TFL 19; however, we expect this to occur in 2025. While we cannot predict the outcome
of the determination, nor the impact any unharvested volume decision may have, the Management Plan that
we submitted in 2020, recommended an 18% lower AAC (approximately 130,000 cubic metres), consistent
with the timber supply forecasts from previous Management Plans. Since the draft Management Plan was
submitted, a number of policy and landbase changes have come into effect, including the declaration of a new
protected area, referred to as “Salmon Parks”, by the Mowachaht/Muchalaht First Nation. The Company is
unable to determine the potential impact of these changes on the Company’s business at this time.
North Island Timber Supply Area
In June 2024, the Chief Forester determined a new AAC for the North Island Timber Supply Area ("TSA"),
reducing the allowable annual log harvest from 1,248,100 cubic metres to 1,096,000 cubic metres. Western
holds Forest Licence A19231 and A94737 (the "Forest Licences") in the TSA, which have a current AAC of
303,283 m3, and 5,443 m3, respectively. The Company expects the AAC of the Forest Licences to be reduced
proportionally; however, the Province has not yet made a decision on the apportionment of the AAC reduction
to each timber tenure in the TSA. Accordingly, the Company is unable to assess the potential impact of this
AAC determination on the Company’s business at this time.
Other BC Government Forest Policies and Initiatives
In September 2024, the BC Ministry of Water, Land and Resource Stewardship advised that it is developing a
Wildlife Habitat Features (”WHF”) Order for the West Coast Region pursuant to the Forest and Range Practices
Act. The West Coast Region includes a majority of the forest tenures within which the Company operates. The
intent of a WHF Order is to identify species which require special management and thus are protected from
being damaged or rendered ineffective. As the Ministry of Water, Land and Resource Stewardship is in the
early stages of engaging on and developing a WHF Order for the West Coast Region, the potential impact of
any order made on the Company’s business is not ascertainable at this time.
9
Financial Position and Liquidity (1)
(millions of Canadian dollars except where otherwise noted)
Selected Cash Flow Items
Q4
2024
Q4
2023
Q3
2024
Annual
2024
Annual
2023
Operating activities
Net loss
$
(1.2)
$ (14.3)
$ (19.6)
$ (34.5)
$ (70.1)
Amortization
14.3
13.3
13.6
54.7
53.7
Impairment of assets held for sale
1.5
-
1.3
2.8
-
Loss on disposal of property, plant and equipment
0.7
0.5
0.1
0.6
0.2
Income tax recovery
1.7
(5.3)
(8.6)
(17.6)
(25.0)
Income tax receipts
-
0.4
22.6
22.5
15.4
Share-based compensation, including mark-to-market adjustment
(0.4)
(0.6)
0.8
0.4
(1.2)
Export tax receivable
-
-
(1.0)
(1.0)
(4.3)
Finance costs
1.8
1.8
1.2
6.7
3.0
Foreign exchange and other
(5.2)
-
(0.9)
(10.5)
(1.8)
13.2
(4.2)
9.5
24.1
(30.1)
Change in non-cash working capital
11.2
3.4
1.4
(4.0)
(3.7)
Cash provided by (used in) operating activities
24.4
(0.8)
10.9
20.1
(33.8)
Investing activities
Additions to property, plant and equipment
(8.2)
(14.9)
(7.3)
(25.1)
(34.1)
Additions to capital logging roads
(2.2)
(2.3)
(2.2)
(8.3)
(10.3)
Proceeds on disposal of property, plant and equipment
-
-
0.1
1.0
2.2
Insurance proceeds
-
-
-
-
4.7
Advances and loans
0.1
0.1
0.1
0.3
(1.1)
Deposits
-
-
(0.2)
-
-
Proceeds from disposition of minority interest in subsidiary
-
-
-
35.1
-
Cash used in investing activities
(10.3)
(17.1)
(9.5)
3.0
(38.6)
Financing activities
Net drawings on credit facility
(4.5)
21.8
2.6
2.0
84.0
Bank indebtedness
(1.4)
0.4
0.9
(0.9)
0.9
Equipment loan
-
-
-
-
0.1
Interest payments
(2.4)
(2.6)
(1.8)
(8.6)
(4.7)
Debt refinancing costs
(0.5)
-
-
(0.5)
-
Dividends
-
-
-
-
(11.9)
Lease payments
(2.4)
(2.4)
(2.4)
(9.5)
(9.5)
Cash provided by (used in) financing activities
(11.2)
17.2
(0.7)
(17.5)
58.9
Increase (decrease) in cash
$
2.9
$ (0.7)
$
0.7
$
5.6
$ (13.5)
Summary of Financial Position
Cash and cash equivalents
$
7.9
$
2.3
$
5.0
Current assets
334.1
334.9
318.2
Current liabilities
127.0
121.0
104.8
Bank indebtedness
-
0.9
1.4
Long-term debt
85.5
83.8
90.0
Net debt (2)
77.6
82.4
86.4
Equity, excluding non-controlling interest
558.2
565.0
555.4
Total liquidity (3)(6)
144.6
147.8
137.3
Financial ratios
Current assets to current liabilities (4)
2.63
2.77
3.04
Net debt to capitalization (5)(6)
12%
13%
13%
(1)
Figures in the table above may not equal or sum to figures presented in the table and elsewhere due to rounding.
(2)
Net debt is defined as the sum of long-term debt and bank indebtedness, less cash and cash equivalents.
(3)
Total liquidity comprises cash and cash equivalents, and available credit under the Company’s credit facility.
(4)
Current assets to current liabilities is a supplementary measure and defined as current assets divided by current liabilities.
(5)
Capitalization comprises net debt and shareholders’ equity.
(6)
Total liquidity and net debt to capitalization are non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures”
section of this document for more information on each non-GAAP financial measure.
10
Cash provided by operating activities was $20.1 million in 2024, as compared to cash used of $33.8 million
in the same period last year due to modest improvement in lumber demand and prices compared to the same
period last year. In 2024, we received an income tax refund of $22.5 million, as compared to $15.4 million in
the comparative period.
Cash provided by investing activities was $3.0 million in 2024, as compared to cash used of $38.6 million in
the same period last year. In 2024, the Company received $35.1 million from the sale of a 34% ownership
interest in the LFLP and reduced its capital spending to maintain balance sheet strength. The comparative
period included receipt of $4.7 million in life insurance proceeds, arising from a predecessor company
arrangement.
Cash used in financing activities was $17.5 million in 2024 as compared to cash provided of $58.9 million in
the same period last year which included higher credit facility drawings and dividend payments.
Liquidity and Capital Resources
Total liquidity was $144.6 million at December 31, 2024, as compared to $147.8 million at the end of the prior
year. As at December 31, 2024, liquidity is comprised of cash and cash equivalents of $7.9 million, and
unused availability under the credit facility of $136.7 million.
On July 26, 2024, the Company’s syndicated credit facility (the “Credit Facility”) was amended, with the
maturity date extended to July 21, 2026 from July 21, 2025. The Credit Facility provides for a maximum
borrowing amount of $250 million, with advances in excess of $215 million subject to a leverage metric. The
Credit Facility is subject to certain financial covenants, including a maximum debt to total capitalization ratio,
and in limited circumstances a reduction to the maximum facility size related to certain material dispositions.
A copy of the Credit Facility agreement is filed under the Company’s profile on SEDAR+ at www.sedarplus.ca.
Based on our current forecasts, we expect sufficient liquidity will be available to meet any commitments as
well as our other obligations through 2025. The Company was in compliance with its financial covenants as
at December 31, 2024.
Summary of Contractual Obligations
The following table summarizes our contractual and legal obligations at December 31, 2024, and our
payments due for each of the next five years and thereafter, including estimated interest payments:
(millions of Canadian dollars)
Total
2025
2026
2027
2028
2029
Thereafter
Accounts payable and accrued
liabilities (1)
109.0
109.0
-
-
-
-
-
Purchase commitments
23.4
23.4
-
-
-
-
-
Long-term debt
95.3
6.0
89.3
-
-
-
-
Lease liabilities (2)
21.5
7.7
5.8
4.2
1.3
0.7
1.8
Reforestation obligation
24.1
7.4
4.2
2.7
1.8
1.4
6.6
Defined benefit pension plan
funding payments
4.9
0.7
0.7
0.7
0.7
0.7
1.4
Other (1)
8.6
1.7
1.6
1.2
1.0
0.1
3.0
$
286.8
$
155.9
$
101.6
$
8.8
$
4.8
$
2.9
$
12.8
(1)
Accounts payable and accrued liabilities presented net of current portion of Other
(2)
Includes liabilities directly associated with assets held for sale
Dividend and Capital Allocation
Quarterly Dividend
The Company suspended its quarterly dividend payments in the fourth quarter of 2023. Thus, no dividends
were paid during 2024, as compared to $11.9 million paid in 2023.
Normal Course Issuer Bid (“NCIB”)
No shares were purchased under our NCIB in 2024 or in 2023. The Company’s NCIB expired on August 10,
2024 and was not renewed.
11
Capital Expenditures
We currently anticipate 2025 capital expenditure spending of between $60 and $65 million, which includes
approximately $30 million of planned spending on the two previously announced continuous dry kilns. The
Company will continue to review capital expenditure spending with a near-term priority of maintaining a strong
balance sheet and financial flexibility.
Market Outlook
Demand and pricing for our North American Cedar product lines are expected to improve in the first quarter
of 2025, with most of our business already booked with major distributors. The overall North American cedar
market is expected to experience shortages in most products in the second quarter of 2025 which is expected
to lead to further price increases.
In Japan, consumption is expected to remain moderate as housing starts and overall construction activities
are low. Pricing continues to remain more challenged due to a weaker Japanese yen to USD exchange rate.
Demand for our Industrial lumber products have been strong and is expected to continue to gain momentum
in the first quarter of 2025, with decreased supply across all species. For commodity lumber, North American
demand and pricing in the first quarter of 2025 is anticipated to benefit from industry-wide curtailments
experienced late in 2024. In China, despite a continued slowdown in housing and real estate, softwood lumber
markets are performing above expectations. Inventories are low and prices have risen as a result. Going
forward, volatility is expected as the incremental US tariff threat may impact exports to the US and result in
lower demand for lumber.
Softwood Lumber Dispute
The US application of duties continues a long-standing pattern of US protectionist action against Canadian
lumber producers. For a comprehensive history of the softwood lumber trade dispute and related North
American Free Trade Agreement (“NAFTA”) challenge proceedings, please see “Risks and Uncertainties –
Softwood Lumber Dispute”.
During 2024, Western expensed $25.5 million of export duties at a combined duty rate of 8.05% on its lumber
shipments into the US until August 18, 2024, and at 14.40% thereafter as compared to an expense of $20.2
million of export duties at a combined rate 8.59% until July 31, 2023, and at 8.05% thereafter for the same
period last year.
On August 12, 2024, the Department of Commerce (“DoC”) released its final determination for CV and AD
rates from its fifth administrative review (“AR”) for shipments in 2022, amended on September 24, 2024 for
ministerial calculation errors in the AD rate. The Company recognized an additional export tax recovery of
USD$0.8 million (CAD$1.0 million) and related long-term interest-bearing duty receivable in 2024. Effective
August 19, 2024, cash deposits will continue at the revised combined duty rate of 14.40% until publication of
final rates of the sixth AR in the federal register.
As at December 31, 2024, Western had $264 million (USD$184 million) of cash on deposit with the US
Department of Treasury (2023: $219 million; USD$165 million) in respect of these softwood lumber duties, of
which $68.1 million (USD $47.3 million) is recognized in the Company’s consolidated statement of financial
position arising from final rate determinations for Canadian shipments made to the US in 2017 through 2022.
Including wholesale lumber shipments, our sales from Canadian operations to the US market represented
approximately 25% of our total lumber shipments during 2024.
For a summary of cash deposit and final CV and AD rates applicable to lumber shipment dates, please see
“Risks and Uncertainties – Softwood Lumber Dispute”.
The final amount and effective date of CV and AD duties that may be assessed on Canadian softwood lumber
exports to the US cannot be determined at this time and will depend on decisions yet to be made by any
reviewing courts or panels to which the DoC and ITC determinations may be appealed.
12
Summary of Selected Annual Information (1)
(millions of Canadian dollars except per share amounts and where otherwise noted)
2024
2023
2022
Total revenue
$ 1,063.9
$ 1,017.5
$ 1,444.0
Operating income (loss) prior to restructuring and other items
(46.4)
(83.4)
86.7
Net income (loss)
(34.5)
(70.1)
61.8
Adjusted EBITDA (2)
$ 8.9
$
(29.9)
$
136.9
Adjusted EBITDA margin (2)
1%
(3%)
9%
Return on Capital Employed (2)
1.3%
(4.3%)
20.0%
Diluted earnings (loss), dollars per share
$
(0.10)
$
(0.22)
$
0.19
Cash dividends, dollars per share
-
0.0375
0.0475
Total assets
$
915.5
$
915.4
$
932.8
Net debt (cash) (3)
77.6
82.4
(15.8)
(1)
Included in Appendix A is a table of selected results for the last eight quarters.
(2)
Adjusted EBITDA, Adjusted EBITDA margin, and ROCE are non-GAAP financial measures. Refer to the Non-GAAP Financial
Measures section of this document for more information on each non-GAAP financial measure.
(3)
Net debt (cash), a supplemental measure, is defined as long-term debt and bank indebtedness less cash and cash equivalents.
Non-GAAP Financial Measures
Reference is made in this MD&A to the following non-GAAP measures: Adjusted EBITDA, Adjusted EBITDA
margin, net debt to capitalization, total liquidity and ROCE, which are used as benchmark measurements of
our operating results and as benchmarks relative to our competitors. These non-GAAP measures are
commonly used by securities analysts, investors and other interested parties to evaluate our financial
performance. These non-GAAP measures do not have any standardized meaning prescribed by IFRS and
may not be comparable to similar measures presented by other issuers. The following table provides a
reconciliation of these non-GAAP measures to figures as reported in our audited annual consolidated financial
statements:
(millions of Canadian dollars except where otherwise noted)
Adjusted EBITDA
Q4
2024
Q4
2023
Q3
2024
Annual
2024
Annual
2023
Annual
2022
Net income (loss)
$
(1.2)
$
(14.3)
$
(19.6)
$
(34.5)
$
(70.1)
$
61.8
Add:
Amortization
14.3
13.3
13.6
54.7
53.7
50.2
Changes in fair value of biological assets
0.6
-
0.1
0.7
(0.2)
0.1
Operating restructuring items
2.1
0.9
1.9
5.5
7.5
4.5
Other expense (income)
(4.8)
2.5
0.7
(6.5)
1.2
(2.1)
Finance costs (income)
1.8
1.8
1.2
6.7
3.0
(0.1)
Income tax expense (recovery)
1.7
(5.3)
(8.6)
(17.6)
(25.0)
22.6
Adjusted EBITDA
$
14.4
$
(1.2)
$
(10.7)
$
8.9
$
(29.9)
$ 136.9
Adjusted EBITDA margin
Total revenue
$ 273.2
$ 246.6
$ 241.7
$ 1,063.9
$ 1,017.5
$ 1,444.0
Adjusted EBITDA
14.4
(1.2)
(10.7)
8.9
(29.9)
136.9
Adjusted EBITDA margin
5%
(0%)
(4%)
1%
(3%)
9%
Net debt to capitalization
Dec. 31,
2024
Dec. 31,
2023
Dec. 31,
2022
Net debt
Total debt
$
85.5
$
83.8
$
-
Bank indebtedness
-
0.9
-
Cash and cash equivalents
(7.9)
(2.3)
(15.8)
$
77.6
$
82.4
$
(15.8)
Capitalization
Net debt (cash)
$
77.6
$
82.4
$
(15.8)
Total equity attributable to equity shareholders of the Company
558.2
565.0
647.2
$ 635.8
$ 647.4
$ 631.4
Net debt to capitalization
12%
13%
-
Figures in the table above may not equal or sum to figures presented in the table and elsewhere due to rounding.
13
(millions of Canadian dollars except where otherwise noted)
Total liquidity
Dec. 31,
2024
Dec. 31,
2023
Dec. 31,
2022
Cash and cash equivalents
$
7.9
$
2.3
$
15.8
Available credit facility
250.0
250.0
250.0
Bank indebtedness
-
(0.9)
-
Credit facility drawings
(86.0)
(84.0)
-
Outstanding letters of credit
(27.3)
(19.6)
(16.0)
$ 144.6
$ 147.8
$ 249.8
Return on capital employed
2024
2023
2022
Trade and other receivables
$
60.1
$
50.9
$
60.5
Inventory
217.1
213.5
224.8
Prepaid expenses and other assets
35.0
33.9
21.3
Property, plant and equipment
349.6
354.4
364.7
Timber licences
88.2
92.3
96.3
Biological assets
48.6
49.3
49.1
Other assets
87.4
77.4
75.7
Goodwill
7.5
6.9
7.0
893.5
878.6
899.4
Less:
Duty receivable and related interest
82.7
70.8
63.7
Accounts payable and accrued liabilities
110.7
102.8
108.5
Current portion of lease liabilities
6.7
6.9
6.8
Current portion of reforestation obligation
7.3
7.9
8.3
Current portion of deferred revenue
2.0
2.0
2.0
209.4
190.4
189.3
Net capital employed as at December 31
684.1
688.2
710.1
Net capital employed as at January 1
688.2
710.1
658.2
Average capital employed
$ 686.2
$ 699.2
$ 684.2
Adjusted EBITDA divided by average capital employed
1.3%
(4.3%)
20.0%
Figures in the table above may not equal or sum to figures presented in the table and elsewhere due to rounding.
Critical Accounting Estimates
Reforestation Obligation
Under BC law, we are responsible for reforesting areas that we harvest. These obligations are referred to as
reforestation obligations. We accrue our reforestation obligations based on estimates of future costs at the
time the timber is harvested. The estimate of future reforestation costs is based on a detailed analysis for all
areas that have been logged and includes estimates for the extent of reforestation versus natural regeneration,
the cost of planting including the cost of seedlings, the extent and cost of site preparation, brushing, weeding,
thinning and replanting and the cost of conducting surveys. Our registered professional foresters conduct the
analysis that is used to estimate these costs. However, these costs are difficult to estimate and can be affected
by weather patterns, climate change, forest fires and wildlife issues that could impact the actual future costs
incurred and thus result in material adjustments.
Costing and Valuation of Inventory
We cost our inventory using complex models that are required due to our integrated supply chain and the
variability in the species and grades of log, lumber and engineered wood products inventory. We cost our
inventory at the average cost of production by facility, species and product for lumber and by species and end
sort for each operation for logs. We value our log and lumber inventories at the lower of cost and net realizable
value. We estimate net realizable value by reviewing current market prices for the specific inventory items
based on current sales orders and recent sales prices. If the net realizable value is less than the cost amount,
we will record a provision. The determination of net realizable value at a point in time is generally both objective
and verifiable. However, changes in product prices can occur suddenly, which could result in a material
provision in inventories in future periods.
14
Pension and Other Post Retirement Benefits
Western has various defined benefit and defined contribution plans, a group Registered Retirement Savings
Plan (“RRSP”), and Supplemental Executive Retirement Plan that provide retirement benefits to its eligible
salaried employees. A group RRSP is provided to certain hourly employees not covered by forest industry
union plans. The Company also provides other post-retirement benefits and pension bridging benefits to
eligible retired employees. Our defined benefit plans were closed to new entrants effective June 30, 2006. No
further benefits accrue under these plans for years of service after December 31, 2010, and no further benefits
accrue under these plans for compensation increases effective December 31, 2016.
We retain independent actuarial consultants to perform actuarial valuations of plan obligations and asset
values, and advise on the amounts to be recorded in the financial statements. Actuarial valuations include
certain assumptions that directly affect the fair value of the assets and obligations and expenses recorded in
the financial statements. These assumptions include the discount rate used to determine the net present value
of obligations, the return on plan assets used to estimate the increase in the plan assets available to fund
obligations, and medical and health care costs used to estimate obligations. Actual experience can vary
materially from the estimates and impact the cost of our pension and post-retirement medical and health plans
and future cash flow requirements.
Environmental Provisions
We disclose environmental obligations when known and accrue costs associated with the obligations when
they are known and can be reasonably estimated. The Company owns a number of sites that have been in
existence for significant periods of time and, as a result, we may have unknown environmental obligations.
Until the sites are decommissioned, and the plant and equipment are removed, a complete environmental
review cannot be undertaken.
Contingencies
Provisions for liabilities relating to legal actions and claims require judgements using management’s best
estimates regarding projected outcomes and the range of loss, based on such factors as historical experience
and recommendations of legal counsel. Actual results may vary from estimates and the differences are
recorded when known.
Valuation of Biological Assets
The Company values its biological assets at fair value less costs to sell. Valuation analysis includes recent
comparatives of standing timber sales, direct and indirect costs of sustainable forest management, net present
value of future cash flows for standing timber and log pricing assumptions. Significant assumptions are used
in the preparation of the valuation and actual results may vary materially from estimates. The Company’s
Registered Professional Foresters review the significant assumptions including standing timber inventories
and annual harvest levels.
Impairments
Assets that are subject to amortization are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Goodwill is evaluated annually regardless of whether
there is a triggering event. Impairment losses are recognized in net income for the period for the amount by
which the asset’s carrying amount exceeds its recoverable amount. An impairment analysis requires the use
of significant assumptions, including management and independent third-party input.
Income Tax Assets and Liabilities
Estimations in the recognition of tax assets or liabilities require assessments to be made based on the potential
tax treatment of certain items that will only be resolved once finally agreed with the relevant tax authorities.
Significant judgment is required as income tax laws and regulations can be complex and are potentially subject
to different interpretation between the Company and the respective tax authority. Net income in subsequent
periods may be impacted by the amount that estimates differ from the final tax return.
Deferred Income Taxes
Deferred tax assets and liabilities comprise the tax effect of temporary differences between the carrying
amount and tax basis of assets and liabilities, as well as the tax effect of unused tax losses. Assumptions
underlying the composition of deferred tax assets and liabilities include estimates of future results of operations
15
and the timing of reversal of temporary differences as well as the substantively enacted tax rates and laws at
the time of the expected reversal. The composition of deferred tax assets and liabilities is reasonably likely to
change from period to period due to the number of variables associated with the differing tax laws and
regulations across the jurisdictions in which the Company operates. As a result, the precision and reliability of
the resulting estimates are subject to uncertainties and may change as additional information becomes known.
Uncertainties surrounding these assumptions and changes in tax rates or tax policy could have a material
effect on expected results.
Accounting Policies and Standards
Several new and amended IFRS standards are not yet effective for the year ended December 31, 2024 and
have not been applied in preparing these financial statements. We are currently evaluating the impact of IFRS
18, Presentation and Disclosure in Financial Statements, which will replace IAS 1, Presentation of Financial
Statements, for the year ending December 31, 2027. No other standards are currently considered by the
Company to be significant or likely to have a material impact on future financial statements.
Financial and Other Instruments
The Company utilizes derivative financial instruments in the normal course of its operations as a means to
manage its foreign exchange risk and may purchase foreign exchange forward contracts or similar instruments
to hedge anticipated USD and JPY sales. The Company does not utilize derivative financial instruments for
trading or speculative purposes. Accordingly, the instrument is adjusted to fair value and marked to market
each accounting period, with changes recorded in net income.
During 2024, the Company entered into foreign exchange forward contracts to sell USD and JPY in order to
partially mitigate its foreign currency risk. At December 31, 2024, the Company had forward contracts in place
to sell an aggregate USD $12.0 million (2023: USD $13.0 million). A related asset of negligible amount (2023:
negligible amount) was recognized in trade and other receivables at December 31, 2024. The Company
recognized $1.9 million in losses on contracts that matured during the year (2023: $1.2 million gain), which is
included in revenue in the consolidated statement of comprehensive loss.
Off-Balance Sheet Arrangements
The Company has off-balance sheet arrangements which include letters of credit and surety performance and
payment bonds, primarily for timber purchases and CV and AD duty deposits. At December 31, 2024, surety
performance and payment bonds aggregated $48.2 million (December 31, 2023: $49.7 million), of which $24.5
million (December 31, 2023: $18.6 million) are secured by letters of credit. Off-balance sheet arrangements
have not had, and are not reasonably likely to have, any material impact on the Company’s current or future
financial condition, results of operations or cash flows.
Related Party Transactions
Key personnel of the Company include the executive management team and members of the Board of
Directors. The compensation paid or payable to key personnel is shown below:
Years ended December 31,
2024
2023
Salaries, directors’ fees and short-term benefits
$
6.3
$
6.2
Post-employment benefits
0.8
0.9
Share-based compensation, including mark-to-market adjustment
0.3
(0.4)
$
7.4
$
6.7
Reduced net loss and a lesser decrease in our share price in 2024 resulted in the increase in related party
share-based compensation expense compared to 2023.
16
Risks and Uncertainties
The following risks and uncertainties may have a material adverse effect on our operations or our financial
condition:
Regulatory Risks
Our forestry and sawmill operations are subject to extensive federal, provincial, state, municipal and other local
laws and regulations, including those governing forestry, exports, taxes, labour standards, occupational health,
safety, waste disposal, building structures/systems, environmental protection and remediation, protection of
endangered and protected species and land use and expropriation. Under certain laws and regulations, we
are also required to obtain permits, licences and other authorizations to conduct our operations, which permits,
licences and authorizations may impose additional conditions that must be satisfied. Although we budget for
expenditures to maintain compliance with such laws, permits and authorizations, there can be no assurance
that these laws and regulations or government policy will not change in the future in a manner that could have
an adverse effect on our financial condition or results of operations or the manner in which we operate. Nor
can there be any assurance that administrative interpretation of existing laws and regulation will not change or
more stringent enforcement of existing laws will not occur, in response to changes in the political or social
environment in which we operate or otherwise, in a manner that could have an adverse effect on our financial
condition or results of operations or the manner in which we operate.
Log exports from our timber operations are subject to federal and provincial regulations. An export permit must
be obtained from the Canadian Federal Government to export any logs harvested in BC with the requirement
that the logs must be surplus to the supply required for domestic manufacturers.
The Company did not export any logs in 2024 or 2023 and does not expect to export logs in 2025.
There have been significant legislative reforms in the BC Forest Industry over the last 40 years. There can be
no assurance that the Province will not implement further policy changes, or that such changes will not have
a material adverse effect on our operations or our financial position.
In 2019, BC became the first province in Canada to adopt the principles of the United Nations Declaration on
the Rights of Indigenous Peoples (“UNDRIP”) through the bringing into force of Bill 41, Declaration on the
Rights of Indigenous Peoples Act. The Act requires the Province to align all laws with UNDRIP, to develop an
action plan to achieve this, and regularly report to the legislature to monitor progress. The Canadian federal
government has also pledged to implement UNDRIP and the Calls to Action of the Truth and Reconciliation
Commission. Significant expectation has been raised among Aboriginal groups in BC and across the country
as to the impact that this Act and the federal government’s commitments may have on efforts to achieve true
reconciliation with Aboriginal groups. At this time, the Company is unable to predict the outcome of the Act and
the implementation of these commitments on Western’s ongoing operations or assets.
Notable legislative changes and policy initiatives undertaken in recent years which may have a material
adverse effect on the Company are as follows:
In January 2020, the Province announced changes to the Manufactured Forest Products Regulation
(“MFPR”). The amendments to the MFPR require wood products made from Western Red Cedar (“WRC”)
or cypress (yellow cedar) on the BC Coast and exported within 3,000 miles of BC to be fully manufactured
to be eligible for export or be subject to export tax. Fully manufactured is defined as timber that will not be
kiln-dried, planed or re-sawn at a facility outside of BC.
On November 2, 2021, the Province announced proposed incremental, temporary harvest deferrals as
recommended through its Old Growth Technical Advisory Panel, subject to engagement with and
agreement from First Nations. Across BC, an incremental 2.6 million hectares classified as old growth
forest were identified for deferrals. The thirty-day response period initially provided to First Nations was
extended.
On November 16, 2021, the Province introduced Bill 28, Forest Amendment Act, 2021, which is considered
enabling legislation for the redistribution of harvest rights and, subject to further regulation, includes
changes to how tenure holders may be compensated under the Forest Act for tenures. Included in the
amendments arising from this Bill were requirements for area-based tenure holders to maintain and
provide forest inventories. In June 2023, the Province passed regulations pertaining to compensation for
lost harvesting rights as a result of such redistribution.
17
On November 25, 2021, the Province’s Bill 23, Forests Statutes Amendment Act, 2021, amendment to the
Forest and Range Practices Act received Royal Assent bringing into legislation forest planning and related
changes including changing the model for forest stewardship through replacing Forest Stewardship Plans
approved by Forest Districts with Forest Landscape Plans which are to be established by the Provincial
Chief Forester.
On January 25, 2022, the Province announced that it was developing BC’s first Watershed Security
Strategy and Fund, with details outlined in its published Discussion Paper: Watershed Security Strategy
and Fund, including a commitment to develop and implement it with Indigenous peoples and in
collaboration with local and federal governments.
In February 2023, the Province announced eight new regional FLP tables throughout BC with the
participation of approximately 50 First Nations. The Province’s stated objective of these FLP tables is to
provide greater clarity around the long-term, sustainable harvesting activities in the areas identified.
In November 2023, the Province’s Bill 41, Forests Statutes Amendment Act, 2024 received Royal Assent
amending certainty forestry legislation to, among other things, modify the existing mechanism for applying
for and obtaining cutting permits and road permits and amending the provisions governing the Minister of
Forest’s obligation to offer replacements for replaceable forest tenures.
On November 3, 2023, the Government of Canada, the Province and the First Nations Leadership Council
announced the signing of the Nature Agreement, which extends through March 2030, and is intended to
further conserve and protect land and water, species and biodiversity in BC. The Nature Agreement
includes up to $1 billion in government funding in support of the Government of Canada’s goal to protect
30% of Canada’s terrestrial and aquatic ecosystems by 2030.
In November 2023, the Province released a draft “BC Biodiversity and Ecosystem Health Framework”.
The document outlines a high-level description of proposed outcomes, principles and coordination
between various processes and initiatives. It proposes the establishment of an Office of Biodiversity and
Ecosystem Health to lead development of objectives and standards.
In September 2024, the BC Ministry of Water, Land and Resource Stewardship advised that it is
developing a WHF Order for the West Coast Region pursuant to the Forest and Range Practices Act.
The majority of the forest tenures within which the Company operates are included in the West Coast
Region. The intent of a WHF Order is to identify species which require special management and thus are
protected from being damaged or rendered ineffective.
The impact that these regulatory changes and policy initiatives may have on our operations cannot be
determined at this time.
Availability of Fibre and Dependency on Fibre Obtained from Government Timber Tenures
Substantially all of the timberlands in BC in which we operate are owned by the Province and administered by
MFOR. The Forest Act (British Columbia) (the “Forest Act”) empowers the MFOR to grant timber tenures,
including TFLs, Forest Licences (“FLs”) and Timber Licences (“TLs”), to producers, although no new TLs can
be issued and the availability of extensions to expiring TLs is not assured. The Provincial Chief Forester must
conduct a review of the AAC for each Timber Supply Area and each TFL in the Province on a periodic basis,
at least once every ten years. This review is then used to determine the AAC for licences issued by the Province
under the Forest Act. Many factors affect the AAC including timber inventory, the amount of operable forest
land, growth estimates of young forests, regulation changes and environmental and social changes. Such
assessments have in the past resulted and may in the future result in reductions or increases to the AAC
attributable to licences held by BC forest companies (without compensation), including the licences that we
hold.
TFLs and FLs held by the Company have cut control periods, which are generally five years. Under the Forest
Act, if the volume of timber harvested during a cut control period is less than the total AAC for the TFL or FL
in that period, the licence holder loses the right to harvest the unharvested volume in any subsequent period.
Furthermore, for TFLs such unharvested volume can be allocated to third parties. The Company may not
harvest its full AAC during a cut control period due to, among other things, market conditions, labour disputes,
labour and contractor shortages, permitting delays, severe weather conditions, and changes in government
policy. We are unable to predict the potential impact of an uncut decision.
18
In addition, our AAC can be temporarily reduced (without compensation for the first four years) in areas where
logging has been suspended under Part 13 of the Forest Act pending government decisions regarding the
public interest in designated areas.
Land use planning, including critical habitat designations, stand age restrictions, as well as new harvesting
regulations, can constrain access to timber and new parks can permanently remove land from the timber
harvesting land base. There can be no assurance that the amounts of such future reductions on our licences,
if any, will not be material or the amounts of compensation, if any, for such reductions will be fair and adequate.
Our fibre supply requirements in the US are currently met from a broad range of sources, including Federal
and State lands, from private landowners and open market purchases, which are subject to log availability and
based on market prices.
Changes in the log markets in which we operate, including the price, quality or availability of log supply, may
increase the costs of log purchases which could adversely affect our results. In addition, weather-related issues
can restrict timely access to log supply.
Land Claims by Indigenous Groups
Indigenous groups have made claims of rights and title to substantial portions of land in BC, including areas
where our timber tenures and operations are situated. These claims have created uncertainty as to the status
of competing property rights and of legislation and Crown decisions that may adversely affect such rights and
title. The Supreme Court of Canada (the “Court”) has held that Aboriginal groups may have a spectrum of
constitutionally recognized and affirmed Aboriginal rights, including title, in lands that have been traditionally
used or occupied by their ancestors; however, such rights are not absolute, and may be infringed by
government in furtherance of a valid legislative objective, including forestry, subject to meeting a justification
test. The effect on any particular area will not be determinable until the nature of historical use, occupancy and
rights in any particular piece of property have been clarified. The Court has also held that even before claims
of rights and title are proven, where the Crown has knowledge, real or constructive, of the potential existence
of an Aboriginal right or title and contemplates conduct that might adversely impact it, the Crown has a legal
duty to consult with Indigenous groups, which may include a duty to provide accommodation. During the period
before asserted claims are proven, the Crown is required to consult in good faith with the intention of
substantially addressing concerns raised by the Indigenous groups.
From time to time, Indigenous groups seek compensation from governments (and in some instances, from
forest tenure holders) with respect to their claims, and the effect of these claims on tenure rights, including our
timber tenures, cannot be estimated at this time. The Federal and Provincial governments continue to negotiate
treaty and/or other reconciliation agreements with Indigenous groups in BC in order to resolve these claims.
This section provides an overview of recent developments in Indigenous land claims and settlements that have
or may affect the Company.
In the June 2014 Tsilhqot’in decision, the Court recognized Tsilhqot’in title to a portion of the area in dispute,
including rights to decide how the land will be used, occupancy and economic benefits of the land. The Court
held that while the Province had the constitutional authority to regulate forest activity on Aboriginal title lands,
it had not adequately consulted with the Tsilhqot’in. While the decision does not directly impact Western’s
business as we do not have tenure in this area, we do operate on Crown tenures elsewhere that are subject
to claims of Aboriginal title. The potential impact on Western’s tenure holdings is not ascertainable at this time.
The following litigation is currently outstanding in relation to forest tenures held by the Company:
In January 2017, the Nuchatlaht First Nation (“Nuchatlaht”) filed a Notice of Civil Claim with the British
Columbia Supreme Court (“BCSC”) against Canada, the Province and the Company, seeking a
declaration of Aboriginal title to a claim area that encompasses approximately 201 square kilometres of
the northern half of Nootka Island (the “Nuchatlaht Claim Area”) and a declaration that the Forest Act
and Park Act are no longer applicable to the Nuchatlaht Claim Area. The Nuchatlaht Claim Area
encompasses a portion of the harvesting area of the Company’s Forest Licence A19231 and certain
timber licences also held by the Company. In April 2023, shortly after the trial began, Nuchatlaht filed a
Notice of Discontinuance, ending the proceedings against Western. On August 7, 2024, the BCSC
made a formal declaration of Aboriginal title over specific sites encompassing approximately 11.33
square kilometres within the Nuchatlaht Claim Area, while also declaring that the effect of such
declaration be suspended for 24 months to allow for the continued application of the relevant forest
legislation. Nuchatlaht has filed for an appeal of the BCSC decision with the British Columbia Court of
Appeal seeking a declaration of Aboriginal title with respect to the entire Nuchatlaht Claim Area. Given
19
the foregoing, the potential impact of the Nuchatlaht decision on Western’s tenure holdings is not
ascertainable at this time.
In May 2018, the Dzawada’enuxw First Nation filed a Notice of Civil Claim against, among others,
Canada, the Province, and the Company. The Dzawada’enuxw First Nation, located at Kingcome Inlet
on the mainland coast, is seeking a declaration of Aboriginal title over an area that includes a portion of
two of Western timber licenses and TFL 39 (Block 3) and a declaration that the Forest Act and Park Act
are no longer applicable to the claim area. This matter has not yet proceeded to trial.
On December 12, 2024, the Mowachaht/Muchalaht First Nation (“MMFN”) filed an Amended Notice of
Civil Claim with the BCSC against the Province, seeking a declaration of Aboriginal title to a claim area
encompassing approximately 430,000 hectares of Nootka Sound (the “MMFN Claim Area”) and a
declaration that the Forest Act and Land Act (British Columbia) are no longer applicable to the MMFN
Claim Area. The MMFN Claim Area encompasses a portion of the harvesting area of the Company’s
Forest Licence A19231, TFL 37 and TFL 19. The potential impact of the MMFN claim on Western’s
tenure holdings is not ascertainable at this time.
Government-to-government negotiation processes involving several First Nations, with territories that
Western’s operating areas overlap, are well advanced and may lead to agreements impacting the Company
in 2025. It is expected that through these processes, the Province may seek to remove areas from the
Company’s forest tenures or amend existing permitting processes to incorporate shared decision making
contemplated by the Declaration on the Rights of Indigenous Peoples Act (“DRIPA”).
The Company is currently unable to predict the outcome of these legal proceedings and negotiations on
Western’s ongoing operations, including operational delays, access to harvesting rights or impact on the
Company’s assets. An unfavourable result in any of the consultation or litigation in which the Company is a
party or which involves assets of the Company could have a material adverse effect on our financial condition
or results of operations.
In addition to the implementation of DRIPA (see “Risks and Uncertainties – Regulatory Risks”), current
provincial policy requires that forest management and operating plans take into account and not unreasonably
infringe on Aboriginal rights and title, claimed or determined, and provides for consultation with Indigenous
groups. This policy is reflected in the terms of our timber tenures, which provide that the Province may vary or
refuse to issue cutting permits in respect of a timber tenure if it is determined by a court that the forestry
operation would unjustifiably infringe an Aboriginal right, including Aboriginal title. Indigenous groups have, at
times, sought to restrict the Province from granting or replacing forest tenures and other operating
authorizations or from approving forest management plans on Crown lands without full consultation and
accommodation or their consent if these decisions could affect lands claimed by them. There can be no
assurance that denial of required approvals for, or changes to the terms of our timber tenures, other operating
authorizations or forest management plans as a consequence of such consultation or action will not have an
adverse effect on our financial condition or results of operations.
Stumpage Fees
Stumpage is the fee that the Province charges forest companies for timber harvested from Crown land in BC.
Approximately 95% of the timber we harvest is from Crown land. Stumpage is set using the Coast version of
the Market Pricing System (“MPS”). MPS uses the winning bids and stand characteristics of timber sold through
British Columbia Timber Sales (“BCTS”) auctions to develop regression equations that predict the market, or
auction value of Crown timber harvested under long-term tenures. The auction value is then adjusted to reflect
costs that tenure holders incur that auction bidders do not incur as BCTS covers these costs. These costs
typically include road development, road maintenance, forest planning and administration, and silviculture.
There are also other harvesting costs not represented in the auction dataset that are also deducted from the
auction value including Tree Crown Modification, Barging, Ecosystem-Based Management, and Inland Water
Transportation. The Coastal MPS equations are updated yearly to reflect recent sale data and costs, most
recently on January 1, 2025. Stumpage rates are also adjusted monthly to reflect changes in inflation and
market variables including lumber prices, housing starts in Canada, the US, and Japan, and BC Coast harvest
levels.
There can be no assurance that future changes to the stumpage system or the Province’s administrative policy
will not have a material impact on the stumpage fees payable by us and consequently affect our financial
condition and results of operations.
20
International Business and Risks of Exchange Rate Fluctuations
Western’s products are sold in international markets. Economic conditions in those markets, the strength of
the housing starts in the US and Japan, the rate of development in China, fluctuations in foreign exchange
rates and international sensitivity to interest rates, can all have a significant effect on our financial condition
and results of operations. In general, our sales are subject to the risks of international business, including:
fluctuations in foreign currencies;
changes in the economic strength of the countries in which we conduct business;
trade disputes, tariffs and other barriers;
changes in regulatory requirements;
quotas, duties, taxes and other charges or restrictions upon exports or imports;
transportation costs and the availability of carriers of any kind including those by land or sea;
availability of substitute wood products;
availability of fibre supply for domestic manufacture of lumber in foreign country; and
strikes or labour disputes in the transportation industry or related dock or container service industries.
Depending on product mix, destination and exchange rates, generally between 45% and 55% of our total
product sales are denominated in USD and between 1% and 5% in JPY. While the Canadian operations also
incur some USD–denominated expenses, primarily for ocean freight and other transportation, and for CV and
AD duties, most expenses are incurred in CAD. The Company’s operations in the US transact primarily in
USD. The Company’s functional currency is the CAD and financial results are reported in CAD. Significant
variations in relative currency values, particularly significant changes in the value of the CAD relative to the
USD, have had, and in the future could have, a material impact on our operating earnings and cash flows.
Long-Term Competition
The markets for our products are highly competitive and some of our competitors have substantially greater
financial resources than Western. We also compete indirectly with firms that manufacture substitutes for solid
wood products, including non-wood and engineered wood products. While the principal basis for competition
is price, we also compete to a lesser extent on the basis of quality and customer service. In addition, market
acceptance of the environmental sustainability of our products as compared with substitutes could be a
challenge in the future. Changes in the level of competition, industry capacity and the global economy have
had, and are expected to continue to have, a significant impact on the selling prices of the Company’s products
and the overall profitability of the Company. Our competitive position will be influenced by factors including the
availability, quality and cost of fibre, energy and labour, plant efficiencies and productivity in relation to our
competitors, and applicability of duties, tariffs or other charges. Our competitive position could be affected by
fluctuations in the value of the CAD relative to the USD and/or the JPY, and by changes in the treatment of
softwood lumber shipments to the US.
Variable Operating Performance, Product Pricing and Demand Levels
A key factor affecting Western’s operating and financial performance is the price received for lumber, logs and
other products. Prices for these products are highly cyclical and have fluctuated significantly in the past and
may fluctuate significantly in the future. The markets for our products are also highly cyclical and are
characterized by periods of excess product supply due to many factors, including:
Additions/curtailments to industry capacity and production;
Periods of insufficient demand due to weak economic activity or other causes, including weather;
Customers experiencing reduced access to credit; and
Inventory de-stocking by customers.
Product demand is influenced to a significant degree by economic activity at the global level. Additionally,
although costs may increase, customers may not accept related price increases for those products. We are
not able to predict with certainty market conditions and prices for our products. Western’s results of operations
depend upon the prices we receive for lumber, logs and chips, and deterioration in prices of, or demand for,
21
these products could have a material adverse effect on our financial condition or results of operations. We
cannot provide any assurance or prediction as to the timing and extent of any price changes.
Western’s financial performance is also dependent on the rate at which production capacity is utilized. In times
of challenging conditions in any of our major markets the Company maintains inventory control by aligning log
supply and lumber production with anticipated sales volumes. When capacity utilization is reduced in response
to weak demand for products, the cost per unit of production may increase and profitability decrease.
From time to time and in accordance with market influences, the Company will reduce production with
temporary logging and/or sawmilling curtailments. In extreme cases, such curtailments may become
permanent closures. When Western undertakes significant market-related curtailments of sawmills, the volume
of chips produced is reduced and accordingly there is greater risk that the Company may not meet minimum
contractual obligations under long-term chip supply agreements without incurring additional cost.
Softwood Lumber Dispute
The SLA, under which the Company’s exports to the US could be assessed an export tax by the Canadian
Government, expired on October 12, 2015, eliminating export tax measures on Canadian softwood lumber
shipments to the US.
The twelve-month standstill period of the SLA, which precluded the US from bringing trade action against
Canadian softwood lumber producers, expired October 12, 2016. On November 25, 2016, the US Lumber
Coalition petitioned the DoC and the ITC seeking CV and AD on Canadian softwood lumber shipments to the
US. On January 6, 2017, the ITC concluded that there was “reasonable indication” that softwood lumber
products from Canada materially injured US producers; and, as a result, the DoC imposed duties on Canadian
shipments of softwood lumber into the US.
From 2017 onward, as a result of petitions filed by the US Lumber Coalition, and others, and determinations
made by the ITC, the DoC imposed CV and AD on shipments to the US from Canada. As a result of these
actions, cash deposits for CV were required for Canadian lumber imports to the US effective April 28, 2017
through August 25, 2017, and from December 28, 2017 onwards; and cash deposits for AD were required for
Canadian lumber imports to the US effective June 30, 2017 until December 26, 2017, and from December 28,
2017 onwards.
As each DoC AR of a shipment year is completed, final rates are published in the federal register and a revised
cash deposit rate is established until publication of final rates of the next AR.
The Company expenses export taxes at the cash duty deposit rate as lumber shipments are made. Where
final duty rates differed from cash deposit rates, the Company recognized revisions to its export tax expense.
As cash deposit rates exceeded final duty rates for lumber shipments made in 2017 through 2022, the
Company recognized a long-term interest-bearing duty receivable totalling USD$47.3 million (CAD$68.1
million), of which USD$0.8 million (CAD$1.0 million) was recognized as an export tax recovery in 2024. This
recovery was netted against export tax expense of $25.5 million, resulting in a net export tax of $24.5 million.
Under US law, the DoC and US International Trade Commission (“USITC”) are required to conduct a sunset
review no later than five years after an AD or CV order is issued. The DoC review determines whether revoking
the orders would be likely to lead to a continuation or recurrence of dumping or subsidies. The USITC review
determines whether revoking the orders would be likely to lead to a continuation or recurrence of material
injury to the US industry. If both determinations are negative, the orders will be revoked.
On March 27 and April 3, 2023, the DoC issued the final results of its first sunset review of the CV and AD
orders, respectively, concluding that if duties on Canadian softwood lumber products were revoked, there
would likely be a continuation or recurrence of countervailable subsidies and dumping.
On October 5, 2023, the NAFTA Chapter 19 panel determined that the DoC erred in how it calculated
important aspects of the anti-dumping duties applied to Canadian softwood lumber exports and directed the
DoC to revisit key elements of its dumping determination.
On November 30, 2023, the USITC issued its final determination under the sunset review, concurring with the
DoC conclusion. The USITC filed its final determination in the Federal Register on December 21, 2023,
resulting in a continuation of the CV and AD orders.
On January 17, 2024, the Government of Canada filed a notice of intent to challenge the ITC decision to
maintain duties on Canadian softwood lumber products, under Chapter 10 of the Canada-United States-
Mexico Agreement.
22
On March 5, 2024, the DoC initiated its sixth AR of CV and AD for shipments in 2023. On January 17, 2025,
the DoC announced that it would issue the preliminary results for sixth AR AD by February 20, 2025, but has
not
yet
announced
a
timeline
for
the
CV
preliminary
results.
As
a
result,
the
final
AD rates for 2023 shipments are now expected in late August 2025, and CV final rates are anticipated in early
November 2025.
On August 12, 2024, the DoC released its final determination for CV and AD rates from its fifth AR for
shipments in 2022, and on September 24, 2024 amended the AD rate to correct a ministerial calculation error.
Accordingly, the Company recognized an additional export tax recovery of USD$0.8 million (CAD$1.0 million)
in 2024. Effective August 19, 2024, cash deposits will continue at the revised combined duty rate of 14.40%
until publication of final rates of the sixth AR in the federal register, after which time the new rates will apply.
The following table summarizes the cash deposit rates in effect and the final rates applicable to Canadian
lumber shipments to the US in 2017 through 2022:
Aug. 1,
Aug. 9,
Jan. 10,
Dec. 1,
Dec. 1,
Jan. 1,
2023
2022
2022
2021
2020
2020
Lumber shipment date Aug. 19,
through
through
through
through
throug
through
2024
Aug. 18,
Jul. 31,
Aug. 8,
Jan. 9,
Nov.
Nov.
Year
onward
2024
2023
2022
2022
2021
2020
2019
2018
2017
Cash deposit rate
CV
6.74%
1.79%
3.83%
6.32%
6.31%
7.42%
14.19%
14.19%
14.19%
14.19%
AD
7.66%
6.26%
4.76%
11.59%
11.59%
1.57%
6.04%
6.04%
6.04%
6.04%
Combined
14.40%
8.05%
8.59%
17.91%
17.90%
8.99%
20.23%
20.23%
20.23%
20.23%
Lumber shipment year
AR5
2022
Final
AR4
2021
Final
AR3
2020
Final
AR2
2019
Final
AR1
2018
Final
AR1
2017
Final
Duty rate
CV
6.74%
1.79%
3.83%
6.32%
7.42%
7.26%
AD
7.66%
6.26%
4.76%
11.59%
1.57%
1.57%
Combined
14.40%
8.05%
8.59%
17.91%
8.99%
8.83%
At December 31, 2024, including interest of USD$10.2 million (2023: USD$6.8 million), the duty receivable of
USD$57.5 million (2023: USD$53.4 million) was revalued at the year-end exchange rate to CAD$82.7 million
(2023: CAD$70.8 million).
As at December 31, 2024, the Company had paid $264 million (USD$184 million) of duties, all of which remain
held in trust by US Department of Treasury (2023: $219 million (USD$165 million)). With the exception of
USD$47.3 million (CAD$68.1) of duty deposits recognized as a receivable, all duty deposits have been
expensed at the cash deposit rates in effect at the date of payment.
This dispute may have an adverse impact on our financial condition and could also result in increased costs
resulting from the administrative burden of such proceedings. The Canadian Federal Government is appealing
the US findings and, as in previous trade cases, the softwood lumber dispute may take years to resolve through
the legal process and remains open to a negotiated settlement at any time. Based on the foregoing, it is unclear
at this time when any duty amounts paid will be recovered or if amounts paid in excess of the amended final
rates will be refunded.
Incremental US Tariffs
On February 1, 2025, US President Donald Trump signed an executive order imposing a tariff of 25% on
imported goods from Canada to the US with an originally planned implementation date of February 4, 2025.
On February 3, 2025, the implementation date was delayed to March 4, 2025. The incremental US tariff is in
addition to the existing combined US Softwood Lumber CV and AD rates of 14.40% which the Company is
currently subject to.
Pulp and Paper Market Variability
The selling price in CAD of our residual wood chips is tied by formula to published indices that reflect the USD
selling price of NBSK pulp. Fluctuations in pulp prices and foreign currencies will accordingly impact the selling
price of our residual wood chips. The price and demand for the pulp logs and other logs sold to pulp and paper
companies is also dependent on the market conditions for pulp and paper. If there is a contraction in the coastal
23
pulp and paper industry, we may need to find alternative customers for the pulp logs and residual chips and
hog fuel from our sawmills.
Reliance on Management and Other Key Personnel
Western relies upon the experience and expertise of our personnel. No assurance can be given that we will
be able to retain our current personnel and attract additional personnel as necessary for the development and
operation of our business. Loss of or failure to attract and retain key personnel could have a material adverse
effect on Western’s business.
Information Technology Security
Western relies on information technology systems to facilitate harvesting, log purchasing and reforestation
activities, operation of our manufacturing facilities, interactions with banks, vendors, customers and employees
and reporting on our business. Interruption or failure of these systems due to cyber-based attacks, vandalism,
theft, power quality, data corruption, internal disaster such as water or fire damage, natural disaster or failure
to recognize and action hardware or software life-cycling may result in operational disruption or failure, and/or
the misappropriation of sensitive or proprietary data. Such events could have a negative impact on Western’s
reputation or subject the Company to potential liability, proceedings by affected parties, civil or criminal
penalties. Interruption or failure of these systems could result in material adverse effect on Western’s business.
While the Company believes current security measures and disaster recovery plans to be adequate, we
monitor, develop, test and enhance our security measures, life-cycling process, internal controls, policies,
training and procedures designed to protect information technology systems from attack, damage or
unauthorized access and restore systems, in the event of a breach.
Environmental Regulation
We are subject to extensive federal and provincial environmental laws and regulations. These laws and
regulations impose stringent standards on our operations and impose liability to remedy environmental issues
that we are legally responsible regarding, among other things:
air emissions, effluent discharges, and land disposal;
operations or activities affecting watercourses or the natural environment;
operations or activities affecting species at risk and critical habitats;
use and handling of hazardous materials;
use, handling, and disposal of waste; and
remediation of environmental contamination.
We may incur substantial costs to comply with current or future requirements, to respond to orders or directives
issued by regulators, to remedy or to compensate others for the cost to remedy environmental issues for which
we are legally responsible or to comply with new or updated environmental laws. In addition, we may discover
currently unknown environmental issues or conditions affecting our operations or activities or for which we are
otherwise legally responsible. Western has closed certain operations and although we have engaged
specialists to advise of environmental issues and conditions, normal site clean-up may identify additional
issues or conditions that required further investigations. Any such event could have a material adverse effect
on our financial condition and results of operations.
Safety
The Company’s safety policy reflects its values and commitment to providing a healthy and safe workplace for
its people, while at the same time ensuring compliance with our regulatory requirements under WorkSafeBC
and other applicable regulations. Workplace safety laws and regulations change over time and may involve
new methodologies and additional costs necessary to bring the Company into compliance. We are unable to
assess the potential implication of such changes.
Forest Resource Risk, Natural Catastrophes and Climate Change
Our timber tenures are subject to the risks associated with all standing forests, in particular wildfires,
windstorms, insect infestations and disease. Procedures and controls are in place to try and mitigate such risk
through prevention and early detection. Our insurance coverage is maintained only for loss of logs following
24
harvesting due to fire and other occurrences. This coverage does not extend to standing timber, and there is
no assurance that this coverage would be adequate to provide protection against all eventualities, including
natural catastrophes. In 2016, Western entered into a cost-sharing agreement with the Crown for our private
timberlands to share individual incident costs of mobilizing helicopters and aerial water tankers in the event of
a fire on those lands.
In addition, our operations may be adversely affected by severe weather including wind, snow and rain that
may result in our operations being unable to harvest or transport logs to our manufacturing facilities for
extended periods of time. Although we anticipate and factor in a certain period of down-time due to weather,
extended periods of severe or unusual weather may adversely impact our financial results due to higher costs
and missed sales opportunities arising from fibre shortages or the deterioration of logs remaining on the ground
or in the water for extended periods of time.
Other than the sales office in Japan, our business operations are located on the BC coast and the US Pacific
Northwest, which are geologically active and considered to be at risk from earthquakes.
Climate change over time is predicted to lead to changes in the frequency of storm events as well as their
severity.
We may also see changes in the occurrence of wildfires and forest pest outbreaks. This may impact our
operations, our timber supply or the operations of our customers. Long-term climatic models are predicting
that the optimum ranges of many species, including those of our major tree species, may shift over time. While
we are unable to predict the impact of all of these potential factors on our tenures or on forest practices, we
have incorporated considerations for climate change in our reforestation practices as facilitated through
Provincial policy and legislation.
While the Company maintains insurance coverage to the extent deemed prudent by us, we cannot guarantee
that all potential insurable risks have been foreseen or that adequate coverage is maintained against known
risks.
Transportation
The Company depends on third parties for transportation of its products and raw materials, a significant portion
of which are transported by tugs and barges, trucks, railways, and ships. If any of Western’s third-party
transportation providers were to fail to deliver the raw materials or products or distribute them in a timely
manner, including due to seasonal factors, Western may not be able to manufacture its products or sell those
products at full value, which could have a material adverse effect on the Company’s financial condition and
operating results. In addition, if any of these third parties were to cease operations, suffer labour-related or
route disruptions, or cease doing business with Western, the Company’s operations or cost structure may be
adversely impacted.
Employees and Labour Relations
Hourly paid employees at our Canadian manufacturing facilities and timber harvesting operations are
unionized. The majority of the unionized employees are represented by the USW. 944 Western employees
represented by the USW are covered by a six-year collective agreement that expires on June 14, 2030.
The Public and Private Workers of Canada (“PPWC”) represents the remaining unionized employees. PPWC
members of our Ladysmith Sawmill are covered by an eight-year collective agreement that was ratified in
February 2021 and expires in December 2028. The PPWC also represents the unionized employees at our
Value-Added Remanufacturing operation with whom we have a collective agreement that runs through October
2029.
Long-term Fibre Supply Agreements
The Company has long-term commitments to supply chip fibre, saw logs and pulp logs to third parties. Certain
of these fibre supply agreements have minimum volume requirements. A failure to supply the minimum
volumes may result in additional costs or deferred obligations. If the Company is unable to produce the
minimum volume, we may need to conduct whole log chipping, sell saw logs, purchase chips or pulp logs or
incur a penalty under these fibre supply agreements.
Dividends
Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors,
after taking into account our operating results, financial condition, cash requirements, financing agreement
25
restrictions and other factors our Board may deem relevant. We may be unable or may elect not to declare
and pay dividends, even if necessary financial conditions are met and sufficient cash is available for
distribution.
Evaluation of Disclosure Controls and Procedures
As required by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings,
Western conducted an evaluation of the effectiveness of the disclosure controls and procedures and the
system of internal control over financial reporting based on the “Internal Control – Integrated Framework”
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
management concluded that the Company’s system of internal control over financial reporting was effective
as at December 31, 2024.
The evaluation was carried out under the supervision and with the participation of the Chief Executive Officer
(“CEO”) and the Chief Financial Officer (“CFO”). Based on the evaluation, Western’s CEO and CFO concluded
that the Company’s disclosure controls and procedures are effective in providing reasonable assurance that
material information relating to Western and its consolidated subsidiaries is made known to them by others
within those entities, particularly during the period in which the annual filings are being prepared. In addition,
Western’s CEO and CFO concluded that the Company’s internal controls over financial reporting are effective
in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for Western and its consolidated subsidiaries for the period in which the annual filings are being
prepared.
The CEO and CFO confirm that there have been no changes or material weaknesses in the design or operating
effectiveness of the Company's internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company's internal controls over financial reporting during the year
ended December 31, 2024.
Outstanding Share Data
As of February 13, 2025, there were 316,745,557 Common Shares of the Company issued and outstanding.
We have reserved 30,000,000 of our Shares for issuance upon the exercise of options granted under our
incentive stock option plan. During the year ended December 31, 2024, no options were granted, exercised,
or forfeited and 1,248,000 options expired. As of February 13, 2025, 10,238,679 options were outstanding
under our incentive stock option plan.
Additional Information
Additional information relating to the Company and its operations, including the Company’s Annual Information
Form, can be found on SEDAR+ at www.sedarplus.ca.
26
Appendix A – Summary of Selected Results of the Last Eight Quarters
(millions of Canadian dollars except per share amounts and where otherwise noted)
2024
2023
2024
Q4
Q3
Q2
Q1
2023
Q4
Q3
Q2
Q1
Avg. exchange rate – USD to CAD
1.370
1.399
1.364
1.368
1.348
1.350
1.361
1.341
1.343
1.352
Avg. exchange rate – CAD to USD
0.730
0.715
0.733
0.731
0.742
0.741
0.734
0.746
0.745
0.740
Financial Performance
Revenue
Lumber
$ 817.1
$ 214.3
$ 189.9
$ 235.3
$ 177.6
$ 781.6
$ 178.3
$ 179.9
$ 212.4
$ 211.0
Logs
188.0
46.5
39.9
56.5
45.1
180.9
51.1
38.4
52.8
38.6
By-products
41.7
9.7
9.1
12.4
10.5
39.8
9.9
7.2
9.4
13.3
Forestry services and other
17.1
2.7
2.8
5.3
6.3
15.2
7.3
5.6
1.4
0.9
Total revenue
$ 1,063.9
$ 273.2
$ 241.7
$ 309.5
$ 239.5
$ 1,017.5
$ 246.6
$ 231.1
$ 276.0
$ 263.8
Adjusted EBITDA
$
8.9
$ 14.4
$ (10.7)
$
9.4
$ (4.2)
$ (29.9)
$ (1.2)
$ (11.6)
$ (12.0)
$ (5.0)
Adjusted EBITDA margin
1%
5%
(4%)
3%
(2%)
(3%)
(0%)
(5%)
(4%)
(2%)
Net loss
$ (34.5)
$ (1.2)
$ (19.6)
$ (5.7)
$ (8.0)
$ (70.1)
$ (14.3)
$ (17.4)
$ (20.7)
$ (17.7)
Loss per share, basic and diluted
$ (0.10)
$ (0.00)
$ (0.06)
$ (0.01)
$ (0.02)
$ (0.22)
$ (0.04)
$ (0.05)
$ (0.07)
$ (0.05)
Operating Statistics
Lumber (1)(2)
Production
mmfbm
558
135
127
151
145
561
125
126
148
162
Shipments
mmfbm
588
146
138
173
131
588
136
130
153
170
Price
$/mfbm
$ 1,390
$ 1,467
$ 1,378
$ 1,363
$ 1,351
$ 1,329
$ 1,313
$ 1,388
$ 1,392
$ 1,241
Logs (3)
Net production
000 m3
2,768
673
659
820
617
2,952
718
678
935
621
Saw log purchases
000 m3
750
234
215
172
129
675
200
116
167
192
Log availability
000 m3
3,518
906
874
992
746
3,627
918
794
1,102
813
Shipments
000 m3
1,378
355
347
339
337
1,384
446
324
370
245
Price (4)
$/m3
$
129
$
121
$
113
$
155
$
129
$
122
$
112
$
118
$
129
$
135
Dividends
Dividends paid
$ millions
$
-
$
-
$
-
$
-
$
-
$
11.9
$
-
$
4.0
$
3.9
$
4.0
Non-GAAP Financial Measures
Net loss
$ (34.5)
$
(1.2)
$ (19.6)
$
(5.7)
$
(8.0)
$ (70.1)
$ (14.3)
$ (17.4)
$ (20.7)
$ (17.7)
Add:
Amortization
54.7
14.3
13.6
13.6
13.2
53.7
13.3
14.1
13.2
13.1
Changes in fair value of
biological assets
0.7
0.6
0.1
(0.1)
-
(0.2)
-
-
(0.1)
-
Operating restructuring items
5.5
2.1
1.9
1.7
(0.2)
7.5
0.9
(0.2)
1.6
5.2
Other expense (income)
(6.5)
(4.8)
0.7
(0.6)
(1.8)
1.2
2.5
(2.2)
0.8
0.1
Finance costs
6.7
1.8
1.2
1.6
2.1
3.0
1.8
0.5
0.5
0.2
Income tax expense (recovery)
(17.6)
1.7
(8.6)
(1.3)
(9.4)
(25.0)
(5.3)
(6.5)
(7.3)
(5.9)
Adjusted EBITDA
$ 8.9
$ 14.4
$ (10.7)
$
9.4
$ (4.2)
$ (29.9)
$ (1.2)
$ (11.6)
$ (12.0)
$
(5.0)
Divided by total revenue
1,063.9
273.2
241.7
309.5
239.5
1,017.5
246.6
231.1
276.0
263.8
Adjusted EBITDA margin
1%
5%
(4%)
3%
(2%)
(3%)
(0%)
(5%)
(4%)
(2%)
Figures in the table above may not equal or sum to figures presented in the table or elsewhere due to rounding.
(1)
"mmfbm" = millions of board feet; "mfbm" = thousands of board feet.
(2)
Includes glue-laminated wood products.
(3)
Coastal BC business only. Net production is sorted log production, net of residuals and waste. Log availability is net production
plus saw log purchases.
(4)
The average realized log price per cubic metre has been presented on a gross basis, which may include fee-in-lieu and shipping
charges incurred on behalf of customers to facilitate sales to export markets.
27
In a normal operating year there is seasonality to the Company’s operations with higher lumber sales in the
second and third quarters when construction and renovation and repair activity, particularly in the US, has
historically tended to be higher. Log production is greater in that same period as longer daylight permits more
hours of operations. Logging activity may also vary depending on weather conditions such as rain, snow and
ice in the winter and the threat of forest fire in the summer. This seasonality generally results in the Company
increasing working capital utilization through its third quarter as it builds log inventory during optimal harvest
conditions and builds lumber inventory in advance of seasonally high lumber demand.
The Company’s quarterly financial trends are most impacted by typical industry-wide seasonality, levels of
lumber production, log costs, market prices for lumber, labour disputes, the USD/CAD exchange rate, long
term asset impairments and restructuring charges, and disposals of non-core properties.
In late 2023 and in 2024, certain BC manufacturing facilities were curtailed and log production was lowered to
match fibre requirements in our manufacturing facilities.
28
CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Management of Western Forest Products Inc. (“Western” or the “Company”) is responsible for the
accompanying Consolidated Financial Statements and all other information in the Management’s Discussion and
Analysis. The Consolidated Financial Statements have been prepared by Management in accordance with IFRS
Accounting Standards as issued by the International Accounting Standards Board and, where necessary, reflect
Management’s best estimates and judgements at this time. The financial information presented throughout the
Management’s Discussion and Analysis dated February 13, 2025, is consistent with that contained in the
Consolidated Financial Statements.
Western maintains systems of internal accounting controls, policies and procedures which it believes provides
reasonable assurance as to the reliability of the financial records and the safeguarding of its assets. The internal
accounting control process includes the prudent hiring and training of personnel, adoption and communication of
appropriate policies, procedures and controls, and employment of an internal audit program.
The Board of Directors is responsible for ensuring that Management fulfills its responsibilities for financial
reporting and internal controls. The Board exercises this responsibility primarily through its Audit Committee,
which is composed solely of independent directors of the Company. The Audit Committee meets periodically with
Management and the Company’s independent Auditors to satisfy itself that each group is properly discharging
its responsibilities and to review the consolidated financial statements and the independent Auditors’ report
thereon. The Company’s independent Auditors have full and free access to the Audit Committee. The Audit
Committee reports its findings to the Board of Directors for consideration in approving the consolidated financial
statements for issuance to the shareholders. The Committee also makes recommendations to the Board with
respect to the appointment and remuneration of the independent Auditors.
The Consolidated Financial Statements have been audited by KPMG LLP, who were appointed by the
shareholders at the annual shareholders’ meeting. The Auditors’ Report follows.
“Steven Hofer”
“Glen Nontell”
Steven Hofer
Glen Nontell
President & Chief Executive Officer
Chief Financial Officer
February 13, 2025
29
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. KPMG Canada provides services to KPMG LLP.
KPMG LLP
PO Box 10426 777 Dunsmuir Street
Vancouver BC V7Y 1K3
Canada
Telephone (604) 691-3000
Fax (604) 691-3031
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Western Forest Products Inc.
Opinion
We have audited the consolidated financial statements of Western Forest Products Inc. (the Entity), which
comprise:
the consolidated statements of financial position as at December 31, 2024 and December 31, 2023
the consolidated statements of comprehensive loss for the years then ended
the consolidated statements of changes in equity for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of material accounting policies
(Hereinafter referred to as the “financial statements”).
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated financial position of the Entity as at December 31, 2024 and December 31, 2023, and its
consolidated financial performance and its consolidated cash flows for the years then ended in accordance with
IFRS Accounting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit
of the Financial Statements” section of our auditor’s report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of
the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
30
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. KPMG Canada provides services to KPMG LLP.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements for the year ended December 31, 2024. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
We have determined the matter described below to be the key audit matter to be communicated in our
auditor’s report.
Assessment of log and lumber inventory net carrying value
Description of the matter
We draw attention to Note 4 to the financial statements. The inventory net carrying value is $217.1 million, of
which $196.3 million relates to log and lumber inventory. The Entity records inventory at the lower of cost and
net realizable value. The determination of cost involves the use of complex models. The Entity determines the
cost of lumber inventory using the average cost of production based on the species and facility where they
were produced and the cost of log inventory by end sort using the average cost of production by operation
based on the operational area in which the logs were produced. Net realizable value is the estimated selling
price in the ordinary course of business, less estimated costs of completion and selling expenses.
Why the matter is a key audit matter
We identified the assessment of the log and lumber inventory net carrying value as a key audit matter. This
matter represented an area of significant risk given the magnitude of log and lumber inventory and the
complexity of the models. In addition, significant auditor judgment was required to evaluate the Entity’s selling
prices used to estimate net realizable value.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
We evaluated the design and tested the operating effectiveness of certain controls over the Entity’s
inventory models including controls over log and lumber production volumes which were an input into
the models
We assessed the logic used in the models in calculating the average cost of log and lumber inventory
by testing the accuracy of calculations in the models for a selection of logging operations and lumber
facilities
For a selection of logging operations and lumber facilities, we compared the models’ inputs for
volumes and costs to production and cost reports. We assessed the models’ outputs by comparing the
average cost of lumber by species and facility and logs by operation to the prior year average cost
We compared the Entity’s estimated selling prices used in the determination of net realizable value to
actual sales prices for sales made subsequent to year end and to market price publications by third
party industry analysts.
Other Information
Management is responsible for the other information. Other information comprises:
the information included in Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions.
the information, other than the financial statements and the auditor’s report thereon, included in a
document likely to be entitled “Annual Report”.
Our opinion on the financial statements does not cover the other information and we do not and will not express
any form of assurance conclusion thereon.
31
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. KPMG Canada provides services to KPMG LLP.
In connection with our audit of the financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit and remain alert for indications that the other
information appears to be materially misstated.
We obtained the information included in Management’s Discussion and Analysis filed with the relevant
Canadian Securities Commissions and the information included in the “Annual Report”, as at the date of this
auditors’ report. If, based on the work we have performed on this other information, we conclude that there is a
material misstatement of this other information, we are required to report that fact in the auditors’ report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance
for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such
internal control as management determines is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement
when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit.
We also:
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Entity's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
32
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of
independent member firms affiliated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. KPMG Canada provides services to KPMG LLP.
Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Entity to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business units within the group as a basis for forming an opinion on the group
financial statements. We are responsible for the direction, supervision and review of the audit work
performed for the purposes of the group audit. We remain solely responsible for our audit opinion.
Determine, from the matters communicated with those charged with governance, those matters that were
of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our auditor’s report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Chartered Professional Accountants
The engagement partner on the audit resulting in this auditor’s report is John Milne.
Vancouver, Canada
February 13, 2025
33
Western Forest Products Inc.
Consolidated Statements of Financial Position
(Expressed in millions of Canadian dollars)
December 31,
2024
December 31,
2023
Assets
Current assets:
Cash and cash equivalents
$
7.9
$
2.3
Trade and other receivables
60.1
50.9
Inventory (Note 4)
217.1
213.5
Prepaid expenses and other assets
35.0
33.9
Assets held for sale (Note 5)
7.4
10.8
Income taxes receivable (Note 15)
6.6
23.5
334.1
334.9
Non-current assets:
Property, plant and equipment (Note 6)
349.6
354.4
Timber licenses (Note 7)
88.2
92.3
Biological assets (Note 8)
48.6
49.3
Other assets (Note 9)
87.4
77.4
Goodwill (Note 10)
7.5
6.9
Deferred income tax assets (Note 15)
0.1
0.2
$
915.5
$
915.4
Liabilities and Equity
Current liabilities:
Bank indebtedness
$
-
$
0.9
Accounts payable and accrued liabilities
110.7
102.8
Liabilities directly associated with assets held for sale (Note 5)
0.3
0.3
Income taxes payable (Note 15)
-
0.2
Lease liabilities (Note 12)
6.7
6.9
Reforestation obligation (Note 13)
7.3
7.9
Deferred revenue (Notes 21, 24)
2.0
2.0
127.0
121.0
Non-current liabilities:
Long-term debt (Note 11)
85.5
83.8
Lease liabilities (Note 12)
12.8
13.0
Reforestation obligation (Note 13)
14.6
14.2
Other liabilities (Note 14)
11.8
11.4
Deferred revenue (Notes 21, 24)
40.5
42.5
Deferred income tax liabilities (Note 15)
57.0
61.6
349.2
347.5
Equity:
Share capital (Note 16)
405.4
405.4
Contributed surplus
8.9
8.8
Translation reserve
8.1
1.9
Retained earnings
135.8
148.9
Total equity attributable to equity shareholders of the Company
558.2
565.0
Non-controlling interest (Note 17)
8.1
2.9
566.3
567.9
$
915.5
$
915.4
Commitments and contingencies (Note 21)
Subsequent events (Note 31)
See accompanying notes to these consolidated financial statements.
Approved on behalf of the Board:
“Daniel Nocente”
“Steven Hofer”
Chair
President & Chief Executive Officer
34
Western Forest Products Inc.
Consolidated Statements of Comprehensive Loss
(Expressed in millions of Canadian dollars except for per share amounts)
Year ended December 31,
2024
2023
Revenue (Note 24)
$ 1,063.9
$ 1,017.5
Costs and expenses:
Cost of goods sold
973.7
966.6
Freight
69.1
75.6
Export tax (Note 21(a))
24.5
15.9
Selling and administration
43.0
42.8
1,110.3
1,100.9
Operating loss prior to restructuring and other items
(46.4)
(83.4)
Operating restructuring items (Note 25)
(5.5)
(7.5)
Other income (expense) (Note 26)
6.5
(1.2)
Operating loss
(45.4)
(92.1)
Finance costs (Note 27)
(6.7)
(3.0)
Loss before income taxes
(52.1)
(95.1)
Income tax recovery (Note 15)
Current
(5.8)
(21.5)
Deferred
(11.8)
(3.5)
(17.6)
(25.0)
Net loss
(34.5)
(70.1)
Net loss attributable to equity shareholders of the Company
(30.4)
(68.5)
Net loss attributable to non-controlling interest
(4.1)
(1.6)
(34.5)
(70.1)
Other comprehensive loss
Items that will not be reclassified to profit or loss:
Employee future benefits actuarial loss (Note 22)
(1.2)
(0.3)
Income tax recovery (Note 15)
0.3
0.1
Total items that will not be reclassified to profit or loss
(0.9)
(0.2)
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences for foreign operations
6.2
(1.7)
Total comprehensive loss
$
(29.2)
$
(72.0)
Loss per share (in dollars) (Note 19)
Basic and diluted
$
(0.10)
$
(0.22)
See accompanying notes to these consolidated financial statements.
35
Western Forest Products Inc.
Consolidated Statements of Changes in Equity
(Expressed in millions of Canadian dollars)
Share
Capital
Contributed
Surplus
Translation
Reserve
Retained
Earnings
Non-
controlling
Interest
Total
Equity
Balance as at December 31, 2022
$
405.4
$
9.1
$
3.6
$
229.1
$
4.5
$
651.7
Net loss
-
-
-
(68.5)
(1.6)
(70.1)
Other comprehensive income (loss):
Employee future benefits actuarial loss (Note 22(c))
-
-
-
(0.3)
-
(0.3)
Income tax recovery on actuarial loss (Note 15)
-
-
-
0.1
-
0.1
Foreign currency translation differences for foreign operations
-
-
(1.7)
-
-
(1.7)
Total comprehensive loss
-
-
(1.7)
(68.7)
(1.6)
(72.0)
Stock options recognized in equity (Note 18(a))
-
-
-
-
-
-
Exercise of stock options (Notes 18(a))
-
(0.3)
-
0.4
-
0.1
Dividends
-
-
-
(11.9)
-
(11.9)
Total transactions with owners, recorded directly in equity
-
(0.3)
-
(11.5)
-
(11.8)
Balance as at December 31, 2023
405.4
8.8
1.9
148.9
2.9
567.9
Net loss
-
-
-
(30.4)
(4.1)
(34.5)
Other comprehensive income (loss):
Employee future benefits actuarial loss (Note 22(c))
-
-
-
(1.2)
-
(1.2)
Income tax recovery on actuarial loss (Note 15)
-
-
-
0.3
-
0.3
Foreign currency translation differences for foreign operations
-
-
6.2
-
-
6.2
Total comprehensive income (loss)
-
-
6.2
(31.3)
(4.1)
(29.2)
Stock options recognized in equity (Note 18(a))
-
0.1
-
-
-
0.1
Non-controlling interest
-
-
-
18.2
9.3
27.5
Total transactions with owners, recorded directly in equity
-
0.1
-
18.2
9.3
27.6
Balance as at December 31, 2024
$
405.4
$
8.9
$
8.1
$
135.8
$
8.1
$
566.3
See accompanying notes to these consolidated financial statements.
36
Western Forest Products Inc.
Consolidated Statements of Cash Flows
(Expressed in millions of Canadian dollars)
Year ended December 31,
2024
2023
Cash provided by (used in):
Operating activities
Net loss
$
(34.5)
$
(70.1)
Items not involving cash:
Amortization of plant and equipment (Note 6)
50.6
49.7
Amortization of timber licenses (Note 7)
4.1
4.0
Impairment of assets held for sale (Notes 5, 25)
2.8
-
Loss on disposal of property, plant and equipment (Notes 5, 6)
0.6
0.2
Amortization of deferred revenue (Note 24(b))
(2.0)
(2.0)
Finance costs (Note 27)
6.7
3.0
Income tax recovery (Note 15)
(17.6)
(25.0)
Change in fair value of biological assets (Note 8)
0.7
(0.2)
Change in reforestation obligation (Note 13)
(0.7)
(0.5)
Share-based compensation, including mark-to-market adjustment (Note 18)
0.4
(1.2)
Change in employee future benefits obligation (Note 22)
(1.2)
(0.9)
Export tax receivable (Notes 9, 21)
(1.0)
(4.3)
Foreign exchange and other
(7.3)
1.8
Income taxes received
22.5
15.4
24.1
(30.1)
Changes in non-cash working capital items:
Trade and other receivables
(6.8)
6.7
Inventory
(3.6)
8.8
Prepaid expenses and other assets
(0.6)
(12.1)
Accounts payable and accrued liabilities
7.0
(7.1)
(4.0)
(3.7)
20.1
(33.8)
Investing activities
Additions to property, plant and equipment (Note 6)
(33.4)
(44.4)
Proceeds from disposal of property and equipment
1.0
2.2
Advances and loans
0.3
(1.1)
Insurance proceeds
-
4.7
Proceeds on disposition of minority interest in subsidiary
35.1
-
3.0
(38.6)
Financing activities
Net drawings on credit facility (Note 11)
2.0
84.0
Bank indebtedness
(0.9)
0.9
Equipment loan
-
0.1
Debt refinancing costs
(0.5)
-
Interest payments
(8.6)
(4.7)
Lease payments (Note 12)
(9.5)
(9.5)
Dividends
-
(11.9)
(17.5)
58.9
Increase (decrease) in cash and cash equivalents
5.6
(13.5)
Cash and cash equivalents, beginning of the year
2.3
15.8
Cash and cash equivalents, December 31
$
7.9
$
2.3
Supplementary information on non-cash transactions:
The Company had no non-cash transactions in 2024 or 2023 which require disclosure.
See accompanying notes to these consolidated financial statements.
37
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
1. Reporting entity
Western Forest Products Inc. (“Western” or the “Company”) is an integrated softwood forest products
company, incorporated and domiciled in Canada, operating in the coastal region of British Columbia (“BC”)
and Washington State, United States (“US”). The address of the Company’s head office is Suite 800 –
1055 West Georgia Street, Vancouver, BC, Canada. The consolidated financial statements as at and for
the years ended December 31, 2024 and 2023 comprise the financial results of the Company and its
subsidiaries. The Company’s primary business is the sale of lumber and logs, which includes timber
harvesting, sawmilling logs into specialty lumber, value-added lumber and glue-laminated timber (“glulam”)
remanufacturing, and lumber purchase and wholesaling activities. The Company is listed on the Toronto
Stock Exchange (“TSX”), under the symbol WEF.
2. Basis of preparation
(a) Statement of compliance
The consolidated financial statements of the Company have been prepared in accordance with IFRS
Accounting Standards as issued by the International Accounting Standards Board. Certain
comparative prior year figures have been reclassified to conform to the current year’s presentation.
The consolidated financial statements were authorized for issue by the Board of Directors on February
13, 2025.
(b) Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis except for the
following material items in the consolidated statements of financial position:
Biological assets are measured at fair value less costs to sell;
Liabilities for cash-settled share-based payment transactions are measured at fair value at each
reporting date;
Derivative financial instruments are measured at fair value at each reporting date;
The defined benefit pension liability is recognized as the net of the fair value of the plan assets,
less the present value of the defined benefit obligation; and
Reforestation obligations and lease liabilities are measured at the discounted value of expected
future cash flows.
(c) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars (“CAD”) which is the
Company’s functional currency. Certain of the Company’s subsidiaries have a functional currency of
the US Dollar (“USD”) and are translated to CAD. All amounts are presented in millions of CAD, unless
otherwise indicated.
(d) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by Western and to which it has rights to variable returns and
the ability to affect those returns through its power over the entity. These consolidated financial
statements include the accounts of the Company’s subsidiaries from their respective dates of
acquisition or incorporation.
The principal wholly-owned subsidiaries of the Company at December 31, 2024 are Western
Lumber Sales Limited which sells into the US, Western Forest Products Japan Ltd., which sells
into Japan, and WFP Partnerships Ltd., which holds assets of the Company’s US operations
through indirect US subsidiaries, including Western Specialty Lumber Sales US LLC, and
operating companies, Western Forest Products US LLC and WFP Engineered Products LLC.
38
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
2.
Basis of preparation (continued)
(d) Basis of consolidation (continued)
(ii) Interests in equity-accounted investees
Western’s interests in equity-accounted investees comprise interests in joint ventures. A joint
venture is an arrangement in which Western has joint control and has rights to the net assets of
the arrangement, rather than rights to all assets and obligations for all liabilities.
Interests in the joint venture are accounted for using the equity method and are recognized initially
at cost, including transaction costs. Subsequent to initial recognition, the consolidated financial
statements include Western’s share of profit and loss and other comprehensive income of equity
accounted investees, until the date on which significant influence or joint control ceases.
(iii) Transactions eliminated on consolidation
Inter-company balances and transactions including any unrealized income and expenses arising
from inter-company transactions are eliminated upon consolidation. Unrealized gains arising from
transactions with equity accounted investees are eliminated against the investment to the extent of
Western’s interest in the investee. Unrealized losses are eliminated in the same way, except to the
extent that there is evidence of impairment.
(e) Foreign currency transactions
Foreign currency transactions are translated into CAD at the transaction date exchange rate. Monetary
assets and liabilities denominated in foreign currencies are revalued to CAD using the exchange rate
at the reporting date. Foreign currency differences arising on revaluation are recognized in net income.
(f)
Foreign operations
Certain subsidiaries of the Company operate with the USD as their functional currency. On
consolidation, revenues and expenses from these foreign operations are translated into CAD using the
exchange rate at the transaction date, or at average rates for the period which approximate the
transaction date, as applicable. Assets and liabilities are translated into CAD at exchange rates in
effect at the reporting date. Resulting foreign currency translation differences are recognized in other
comprehensive income (“OCI”) and recorded to the translation reserve within equity. Upon the disposal
of a foreign operation, the related cumulative foreign currency translation differences in the translation
reserve will be recognized in net income.
Monetary receivables from a foreign operation, the settlement of which are neither planned nor likely in
the foreseeable future are considered to form part of the net investment in the foreign operation.
Related foreign exchange translation differences are recognized in OCI and presented in the
translation reserve in equity.
(g) Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRS requires Management
to make judgements, estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates. Estimates and assumptions are reviewed on an ongoing basis. Revisions to estimates are
recognized prospectively.
(i)
Judgements
The determination of appropriate cash generating units (“CGU”) as described in Note 3(a) is a
judgement made in applying an accounting policy that has a significant effect on the amounts
recognized in the consolidated financial statements.
39
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
2. Basis of preparation (continued)
(g) Use of estimates and judgements (continued)
(ii) Assumptions and estimation uncertainties
Information about the use of management estimates and judgements and estimation uncertainties
that have a significant effect on the amounts recognized in the consolidated financial statements is
included in the following notes:
Note 4
Measurement of net realizable value of inventories;
Note 5
Measurement of fair value less costs to sell of assets held for sale;
Note 8
Measurement of fair value less costs to sell of standing timber (biological
assets);
Note 10
Measurement of recoverable amount of goodwill utilizing the present value of
projected cash flows generated from the continuing use of the related CGU:
key assumptions about likelihood and quantum of cash flows and discount rate
used;
Note 12
Measurement of the present value of lease liabilities: key assumptions about
the future lease payments and the discount rate used;
Note 13
Measurement of the present value of reforestation obligations: key
assumptions on the likelihood and quantum of outflow of resources;
Note 15
Measurement of tax provisions and recoveries resulting from assessments of
tax treatments and interpretations of income tax laws and regulations.
Note 18
Measurement of share-based payment transactions;
Note 21
Recognition and measurement of provisions and contingencies: key
assumptions about the likelihood and quantum of outflow of resources; and
Note 22
Measurement of defined benefit obligations: key actuarial assumptions and
recognition of termination benefits.
Measurement of fair values – certain accounting policies and disclosures require financial and
non-financial assets and liabilities to be measured at fair value. Fair value measurements,
including Level 3 fair values, are defined in an established framework with regular review of
significant unobservable inputs and valuation adjustments. Management obtains third party
information to measure fair values and assesses the resulting valuations to ensure they meet
IFRS requirements, including the level in the fair value hierarchy in which such valuations would
be classified. To the extent possible, Western uses market observable data to establish the fair
value of a financial instrument. Refer to Note 28 for more details.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used
in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included in Level 1 that are observable for the assets
or liability, either directly or indirectly
Level 3: inputs for the asset or liability that are not based on observable market data
If the inputs to measure the fair value of the asset or liability might be categorized in different
levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in
the same level of the hierarchy as the lowest level input that is significant to the entire
measurement. Transfers between levels of the fair value hierarchy are recognized at the end of
the period in which the change occurred.
40
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
3. Material accounting policies
Material accounting policies not described elsewhere in these consolidated financial statements include:
(a) Impairment of non-financial assets
The Company reviews its non-financial assets for impairment whenever events or circumstances
indicate that the carrying amount may not be recoverable. Should such an indicator exist, the non-
financial asset’s recoverable amount is estimated and assessed against its carrying value. The
recoverable amount of CGUs to which goodwill has been allocated is estimated annually or whenever
events or circumstances indicate the carrying amount may not be recoverable.
For impairment testing, assets that cannot be tested individually are grouped together into a CGU, at
the lowest level for which there are separately identifiable cash inflows that are largely independent of
the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is
the greater of its value in use and its fair value less costs to sell. Value in use is based on the
estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects
current market assessments of time value of money and risks specific to the CGU.
Impairment losses are recognized in net income. Impairment losses in respect of CGUs are allocated
first to reduce the carrying amount of goodwill (if any) assigned to the CGU, and then to reduce the
carrying amounts of the other assets in the CGU on a pro-rata basis to the extent the carrying value of
an asset exceeds the higher of its fair value and value in use.
Non-financial assets, other than goodwill, for which an impairment was previously recognized, are
reviewed for possible reversal of the impairment at each reporting date. When an impairment loss is
reversed, the increased carrying amount of the asset cannot exceed the carrying amount that would
have been determined, net of amortization, had the impairment never been recognized.
An impairment loss recorded against goodwill is not reversed.
(b) Application of new and revised accounting standards
The Company has adopted Classification of Liabilities as Current or Non-current and Non-current
Liabilities with Covenants – Amendments to IAS 1, as issued in 2020 and 2022. The amendments
apply retrospectively for annual reporting periods beginning on or after January 1, 2024. They clarify
certain requirements for determining whether a liability should be classified as current or non-current
and require new disclosures for non-current liabilities that are subject to covenants within twelve
months after the reporting period. Adoption of these changes in accounting policy and amendments
had no impact on the Company’s consolidated financial statements.
(c) New standards and interpretations not yet adopted
In April 2024, the IASB issued IFRS 18, Presentation and Disclosure in Financial Statements (IFRS
18), which replaces IAS 1, Presentation of Financial Statements. IFRS 18 introduces a specified
structure for the income statement by requiring income and expenses to be presented into the three
defined categories of operating, investing, and financing, and by specifying certain defined totals and
subtotals. Where company-specific measures related to the income statement are provided, IFRS 18
requires companies to disclose explanations around these measures, which are referred to as
management-defined performance measures. IFRS 18 also provides additional guidance on principles
of aggregation and disaggregation which apply to the primary financial statements and the notes. IFRS
18 will not affect the recognition and measurement of items in the financial statements, nor will it affect
which items are classified in other comprehensive income and how these items are classified. The
standard is effective for reporting periods beginning on or after January 1, 2027 with retrospective
application required The Company is currently assessing the effect of this new standard on our
financial statement presentation.
No other standards or amendments or interpretations to existing standards issued but not yet adopted
are currently considered by the Company to be significant or likely to have a material impact on future
financial statements.
41
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
4. Inventory
Accounting policy
Inventory, other than supplies which are valued at specific cost, are valued at the lower of cost and net
realizable value (“NRV”) as described below:
(i) Lumber by species (hemlock and balsam, Douglas fir, and yellow and western red cedar) and facility; and
(ii) Logs by sort by end use (saw logs and pulp logs).
Inventory cost includes purchase, production or conversion costs and other costs incurred in bringing them
to their existing location and condition on a product-by-product basis. Lumber inventories produced are
costed at an average cost of production based on the species and facility where they were produced.
Lumber inventories purchased from external sources are costed at purchase cost. NRV is the estimated
selling price in the ordinary course of business, less the estimated costs of completion and selling
expenses. Engineered wood products are categorized with lumber inventory.
Log inventories produced are costed at an average cost of production based on the operational area in
which the logs were produced. Log inventories purchased from external sources are costed at purchase
cost. NRV of logs designated for lumber processing is based on the estimated selling price of the lumber
which will be produced less estimated costs of completion and selling expenses, and on market
replacement cost for logs held for sale.
Logs transferred from biological assets (standing timber) are costed at fair value less costs to sell at the
date of harvest.
Supporting information
December 31, 2024
December 31, 2023
Gross
carrying
value
Provisions
Lower of
cost and
net
realizable
value
Gross
carrying
value
Provisions
Lower of
cost and
net
realizable
value
Logs
$
138.0
$
(13.2)
$
124.8
$
146.6
$
(20.8)
$
125.8
Lumber
82.8
(11.3)
71.5
86.1
(18.5)
67.6
Supplies and other
20.8
-
20.8
20.1
-
20.1
$
241.6
$
(24.5)
$
217.1
$
252.8
$
(39.3)
$
213.5
The carrying amount of inventory recorded at net realizable value was $61.9 million at December 31, 2024
(2023: $89.3 million), with the remaining inventory recorded at cost.
For the year ended December 31, 2024, the Company recognized a decrease in the provision for write-
down to net realizable value of $14.8 million (2023: $13.8 million).
5. Assets held for sale
Accounting policy
Assets that form a disposal group held for sale are measured at the lower of their carrying value or fair
value less costs to sell and are not depreciated while classified as held for sale. Although the disposal
group as a whole is measured at the lower of carrying value and fair value less costs to sell, some
individual assets and liabilities within the disposal group fall outside the measurement scope of IFRS 5,
Non-current Assets Held for Sale and Discontinued Operations, and may be assessed under other
standards. Interest and other expenses and related liabilities attributable to assets classified as held for
sale continue to be recognized as incurred.
Supporting information
Management intends to sell its Alberni Pacific Division (“APD”). Accordingly, the APD assets are presented
as assets held for sale. Fair value, less costs to sell, is expected to equal the carrying amount of this
disposal group.
42
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
5. Assets held for sale (continued)
Supporting information (continued)
The assets held for sale comprised the following assets and liabilities:
December 31,
2024
December 31,
2023
Supplies and other
$
-
$
2.5
Property, plant and equipment
7.4
8.3
Assets held for sale
$
7.4
$
10.8
Lease liabilities directly associated with assets held for sale
$
0.3
$
0.3
In February, 2024, the Company sold a parcel of land previously classified as held for sale and recognized
a gain of $0.4 million recorded in other income (expense).
On April 16, 2024, the Company announced the indefinite curtailment of its APD site. In 2024, the
Company recorded related severance of $2.2 million (2023: $5.7 million), impairment charges of $2.8
million in respect of supplies and other inventories, property, plant and equipment, and incremental
curtailment costs of $0.9 million in operating restructuring items.
6. Property, plant and equipment
Accounting policy
Property, plant and equipment are measured at cost, less accumulated depreciation and any accumulated
impairment losses. Cost includes all expenditures directly attributable to bringing the asset to the location
and condition necessary for its intended use. When major individual components of an item of property,
plant or equipment have different useful lives, they are accounted for as separate items. Subsequent
expenditures on an item of property, plant and equipment are capitalized only when it is probable that
future economic benefits associated with the item will flow to the Company and the cost can be measured
reliably.
Maintenance costs are recorded as expenses as incurred, except for programs that extend the useful life of
an asset or increase its value, for which costs are capitalized.
Depreciation is provided on a straight-line basis over the estimated useful lives of the related asset and
after considering salvage values. Useful lives range from:
Buildings and equipment
5 - 20 years
Long-term logging roads and bridges
9 - 20 years
Certain roads are amortized on the basis of timber cut relative to available timber. Logging roads with an
economic life of one year or less are expensed to cost of goods sold.
Depreciation methods, useful lives and residual values are reviewed annually.
For Right of use assets (“ROU asset”), see Note 12.
43
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
6. Property, plant and equipment (continued)
Supporting information
Land
Buildings and
equipment
Projects
Logging roads
Total,
excluding right
of use assets
Right of use
assets
Total
Cost
Balance as at December 31, 2022
$
59.5
$
483.5
$
16.2
$
245.5
$
804.7
$
43.6
$
848.3
Additions
-
0.1
36.4
8.1
44.6
5.9
50.5
Reclassification to asset held for sale
(2.1)
(17.0)
-
-
(19.1)
(0.5)
(19.6)
Disposals
(0.1)
(5.3)
(0.7)
-
(6.1)
(2.9)
(9.0)
Transfers
-
25.5
(27.2)
1.7
-
-
-
Effect of movements in exchange rates
(0.3)
(1.3)
(0.1)
-
(1.7)
(0.2)
(1.9)
Balance as at December 31, 2023
57.0
485.5
24.6
255.3
822.4
45.9
868.3
Additions
-
0.5
26.8
6.1
33.4
7.9
41.3
Reclassification from asset held for sale
-
0.7
-
-
0.7
-
0.7
Disposals
-
(12.8)
-
(0.1)
(12.9)
(3.9)
(16.8)
Transfers
-
30.3
(33.5)
3.2
-
-
-
Effect of movements in exchange rates
1.2
5.4
0.2
-
6.8
0.8
7.6
Balance as at December 31, 2024
$
58.2
$
509.6
$
18.1
$
264.5
$
850.4
$
50.7
$
901.1
Accumulated amortization
Balance as at December 31, 2022
$
250.8
212.1
462.9
20.7
483.6
Amortization
31.0
10.2
41.2
8.5
49.7
Reclassification to asset held for sale
(11.1)
-
(11.1)
(0.2)
(11.3)
Disposals
(5.2)
-
(5.2)
(2.5)
(7.7)
Effect of movements in exchange rates
(0.3)
-
(0.3)
(0.1)
(0.4)
Balance as at December 31, 2023
265.2
222.3
487.5
26.4
513.9
Amortization
32.7
9.7
42.4
8.2
50.6
Reclassification from asset held for sale
0.4
-
0.4
-
0.4
Disposals
(11.7)
-
(11.7)
(3.7)
(15.4)
Effect of movements in exchange rates
1.5
-
1.5
0.5
2.0
Balance as at December 31, 2024
$
288.1
$
232.0
$
520.1
$
31.4
$
551.5
Carrying amounts
As at December 31, 2023
$
57.0
$
220.3
$
24.6
$
33.0
$
334.9
$
19.5
$
354.4
As at December 31, 2024
$
58.2
$
221.5
$
18.1
$
32.5
$
330.3
$
19.3
$
349.6
The Company did not utilize any cash deposits during the year ended December 31, 2024 (2023: $0.2 million as equipment was delivered).
44
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
7. Timber licences
Accounting policy
Crown timber tenures are renewable contractual arrangements with the BC provincial government (“the
Province”) whereby the Company gains the right to harvest timber. The Company’s timber licences are
accounted for as acquired finite lived timber licences and accordingly are valued at acquisition cost less
accumulated amortization and any accumulated impairment losses. Amortization is recognized on a
straight-line basis over 40 years. Amortization methods, useful lives and residual values are reviewed, and
adjusted if appropriate, at each reporting date.
Renewal costs associated with timber tenures are expensed as incurred.
December 31,
2024
December 31,
2023
Cost
Balance at beginning of year and December 31
$
169.4
$
169.4
Accumulated amortization
Balance at beginning of year
$
77.1
$
73.1
Amortization
4.1
4.0
Balance at December 31
$
81.2
$
77.1
Carrying amount at December 31
$
88.2
$
92.3
8. Biological assets
Accounting policy
Under IAS 41, Agriculture, the Company's private timberlands, managed for timber production, are
classified as a growing forest, with the standing timber on this privately held forest land recorded and
characterized as a biological asset. Accordingly, at each reporting date, the biological asset is valued at its
fair value less costs to sell with any change therein, including the impact of growth and harvest, recognized
in net income. Land underlying the standing timber is measured at cost and included in property, plant and
equipment. Long-term roads and bridges on the land underlying the standing timber are recorded at cost
less accumulated depreciation and included in property, plant and equipment.
The Company performs a comprehensive valuation every three years and assesses key assumptions in
intervening years for material changes. A comprehensive valuation was performed in 2022.
Supporting information
(a) Reconciliation of carrying amount
Years ended December 31,
2024
2023
Carrying value at beginning of year
$
49.3
$
49.1
Change in fair value due to growth and pricing
0.3
0.3
Harvested timber transferred to inventory
(1.0)
(0.1)
Carrying value at December 31
$
48.6
$
49.3
At December 31, 2024, private timberlands comprised an area of approximately 22,693 hectares
(2023: 22,693 hectares) of land owned by the Company. Standing timber on private timberlands range
from newly planted areas to mature forest available for harvest.
During the year ended December 31, 2024, the Company harvested and scaled 21,979 cubic metres
(“m3”) of logs from its private timberlands, which had a fair value less costs to sell of $135 per m3 at the
date of harvest (2023: 33,961 m3 and $131 per m3, respectively).
45
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
8. Biological assets (continued)
Supporting information (continued)
(b) Measurement of fair values
The change in fair value resulting from price and growth is reflected in cost of goods sold. The fair
value measurements for the Company’s standing timber of $48.6 million has been categorized as
Level 3 fair value based on the inputs to the valuation technique used as discussed in the following
table.
Valuation technique
Significant unobservable inputs
Inter-relationship between key
unobservable inputs and fair value
measurement
Discounted cash flows: the valuation model
considers the present value of the net cash
flows expected to be generated by the
individual private timberlands utilizing a
harvest optimization approach. The cash
flow projections include specific estimates
for 25 years. The expected net cash flows
are discounted using a risk-adjusted
discount rate.
Estimated future log prices per m3 ($95 -
$298, weighted average $136).
Estimated harvest costs per m3 ($89 -
$110, weighted average $95).
Estimated harvest annual volume
(100,000 - 200,000 m3, weighted
average 116,000 m3).
Risk-adjusted discount rate (weighted
average 7.50%).
The estimated fair value would increase
(decrease) if:
The estimated log prices per m3
were higher (lower);
The estimated harvest costs per m3
were lower (higher);
The estimated harvest volumes were
higher (lower); or
The risk-adjusted discount rates
were lower (higher).
(c) Risk management strategies related to biological assets
Western is exposed to the following risks relating to its private timberlands:
The Company is exposed to risks arising from fluctuations in log prices and sales volumes. When
possible, Western aligns its harvest volumes to market supply and demand and performs regular
industry trend analyses for projected harvest volumes and pricing in order to manage this risk.
The standing timber is exposed to risk of damage as a result of severe weather conditions, forest
fires, insect infestation and disease. Western has processes and procedures in place to monitor
and mitigate these risks, including fire management strategies and regular inspection for pest
infestation.
9. Other assets
December 31,
2024
December 31,
2023
Export tax receivable and related interest (Note 21)
$
82.7
$
70.8
Investments and advances
4.0
3.1
Note receivable
2.6
2.6
Long-term loans
0.7
0.9
Other
0.3
0.3
90.3
77.7
Current portion
2.9
0.3
$
87.4
$
77.4
10. Goodwill
Accounting policy
The Company measures goodwill in business acquisitions at the acquisition date as the fair value of the
consideration transferred including any non-controlling interest less the fair value of the identifiable assets
acquired and liabilities assumed, all measured as of the acquisition date. When the excess is negative, a
gain is recognized immediately in net income. Goodwill is measured at cost less accumulated impairment
losses and is tested annually for impairment as described in Note 3 (a).
46
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
10. Goodwill (continued)
Supporting information
For the purpose of impairment testing at December 31, 2024, goodwill is attributable to the Company’s
glulam manufacturing CGU. The recoverable amount for the goodwill impairment assessment was based
on the CGU’s value in use determined by discounting the future cash flows generated from its continuing
use. The cashflows were projected based on past experience, actual operating results and the annual
business plan.
The values assigned to key assumptions represent management’s assessment of future trends in the
forest industry and are based on both external sources and historical data. A post-tax discount rate of 13%
(2023: 13%) was applied in determining the recoverable amount of the CGU.
The recoverable amount as at December 31, 2024 was determined to be higher than the related carrying
value, with no impairment of goodwill required.
11. Long-term debt
Accounting policy
Long-term debt is recognized initially at fair value, net of transaction costs incurred. Long-term debt is
subsequently carried at amortized cost; any difference between the proceeds and the redemption value is
recognized in net income over the term of the long-term debt using the effective interest method.
Transaction costs are deferred and amortized straight line to finance costs over the term of the long-term
debt.
Supporting information
The Company’s syndicated Credit Facility (the “Credit Facility”) provides for a maximum borrowing amount
of $250 million, with advances in excess of $215 million subject to a leverage metric. On July 26, 2024, the
maturity date of the Credit Facility was extended to July 21, 2026 from July 21, 2025, and certain financial
covenants were amended.
The Credit Facility is available in CAD by way of Prime Rate Advances, Canadian Overnight Repo Rate
Average Advances or Letters of Credit and in USD by way of Secured Overnight Financing Rate US Base
Rate Advances, US Prime Rate Advances, or Letters of Credit. Interest on the Credit Facility is indexed to
benchmark rates and varies depending on the nature of each draw and certain financial benchmarks.
December 31,
2024
December 31,
2023
Cost
Opening balance
$
6.9
$
7.0
Effective of movement in exchange rates
0.6
(0.1)
Balance at December 31
$
7.5
$
6.9
December 31,
2024
December 31,
2023
Available Credit Facility
$
250.0
$
250.0
Net drawings on Credit Facility
(86.0)
(84.0)
Outstanding letters of credit included in line utilization
(27.3)
(19.6)
Unused portion of Credit Facility
$
136.7
$
146.4
Credit Facility drawings
$
86.0
$
84.0
Equipment loan
-
0.1
86.0
84.1
Less transaction costs
(0.5)
(0.3)
Long-term debt at December 31
$
85.5
$
83.8
47
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
11. Long-term debt (continued)
Supporting information (continued)
The Credit Facility is secured by a general security agreement, excluding certain specified properties and
their related assets, and is subject to certain financial covenants, including a maximum debt to total
capitalization ratio.
The Company was in compliance with its financial covenants as at December 31, 2024 and expects to
comply for at least twelve months thereafter. Accordingly, the loan is classified a non-current at December
31, 2024.
12. Lease liabilities
Accounting policy
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is
or contains a lease if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration.
As a lessee, the Company recognizes a ROU asset and lease liability at the lease commencement date. At
this date, the ROU asset is measured at cost. Cost includes the initial amount of the lease liability, adjusted
for lease payments made before this date as well as any initial direct costs incurred. Cost also includes an
estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset and
restoring the site on which it is located, less any lease incentives received. Any leasehold improvements
are added to the related ROU asset.
The ROU asset is subsequently amortized using the straight-line method from the commencement date to
the earlier of the end of the lease term or the useful life of the underlying asset. The ROU asset is reduced
by any impairment losses, if any, and adjusted for remeasurements of the lease liability. The Company
presents ROU assets in property, plant and equipment in its consolidated statements of financial position
(see Note 6).
The lease liability is initially measured at the present value of the lease payments discounted using the
interest rate implicit in the lease if readily determinable, or the Company’s incremental borrowing rate. The
lease payments include fixed payments, variable payments that depend on an index or rate, residual value
guarantees, and the exercise price under a purchase option that the Company is reasonably certain to
exercise.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when
there is a change in the expected future lease payments as in the case of a revision to the lease term.
Remeasurements to the lease liability are reflected in the ROU asset to the extent that the carrying value of
the ROU asset exceeds the adjustment, and to other income (expense) in net income otherwise.
The Company elected not to recognize ROU assets and corresponding lease liabilities for contracts with a
term of one year or less and low value leases, including office fixtures and information technology
equipment. The Company recognizes these payments as an expense on a straight-line basis over the term
of the agreement.
48
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
12. Lease liabilities (continued)
Supporting information
Changes in the lease liabilities are as follows:
December 31,
2024
December 31,
2023
Lease liabilities, beginning of year
$
19.9
$
23.2
New leases and modifications
7.9
6.0
Terminations
(0.2)
(0.7)
Finance costs (Note 27)
1.1
1.3
Lease payments
(9.5)
(9.5)
Reclassification to liabilities directly associated with assets held for sale (Note 5)
-
(0.3)
Effect of movements in exchange rates
0.3
(0.1)
Lease liabilities at December 31
$
19.5
$
19.9
Current
$
6.7
$
6.9
Long term
12.8
13.0
$
19.5
$
19.9
The weighted average incremental borrowing rate used to establish lease obligations in 2024 was
approximately 8.28% (2023: 7.75%).
In addition to the above, the Company recognized an expense of $3.3 million during the year ended
December 31, 2024 (2023: $3.1 million), relating to short term and low value lease payments.
13. Reforestation obligation
Accounting policy
The Company’s provision for reforestation results from a legal obligation to reforest timber harvested from
Crown land and arises as timber is harvested. Accordingly, the Company records the fair value of the costs
of reforestation in the period in which the associated timber is harvested. The provision is measured at the
expected value of future cash flows, discounted to their present value and determined according to the
probability of alternative estimates of cash flows. Cash flows reflect the risks specific to the provision. As
such, the discount rate reflects the current risk-free rate given that risks are incorporated into the future
cash flow estimates and reflects current market assessments of the time value of money. Adjustments are
made to the provision each reporting period for changes in the estimated timing or amount of cash flows,
changes in the discount rate and the unwinding of the discount.
In periods subsequent to the initial measurement, changes in the liability resulting from revisions to
estimated future costs are recognized in cost of goods sold in net income as they occur and revisions
resulting from the passage of time, or accretion cost, are included in finance costs.
Reforestation on private timberlands is expensed as incurred.
Supporting information
Changes in the reforestation obligation were as follows:
Years ended December 31,
2024
2023
Reforestation obligation, beginning of year
$
22.1
$
22.1
Provision charged
6.4
7.3
Expenditures
(7.1)
(7.8)
Unwind of discount (Note 27)
0.5
0.5
21.9
22.1
Less current portion
7.3
7.9
Long-term reforestation obligation, end of year
$
14.6
$
14.2
49
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
13. Reforestation obligation (continued)
Supporting information (continued)
The reforestation expenditures are expected to occur over the next one to ten years and have been
discounted at risk-free rates of 2.90% to 3.23% (2023: 3.10% to 4.73%). The total undiscounted amount of
the estimated future expenditures required to settle the reforestation obligation at December 31, 2024 is
$24.1 million (2023: $24.5 million).
14. Other liabilities
Current
Non-current
Total
As at December 31, 2024
Defined benefit employee future benefits obligation (Note 22)
$
-
$
4.9
$
4.9
Defined contribution employee future benefits obligation
-
2.7
2.7
Environmental provision
0.1
2.4
2.5
Deferred share unit plan liabilities (Note 18(b))
1.0
-
1.0
Restricted share unit plan liabilities (Note 18(d))
0.6
1.4
2.0
Other
-
0.4
0.4
$
1.7
$
11.8
$
13.5
As at December 31, 2023
Defined benefit employee future benefits obligation (Note 22)
$
-
$
4.7
$
4.7
Defined contribution employee future benefits obligation
-
2.1
2.1
Environmental provision
0.1
2.7
2.8
Deferred share unit plan liabilities (Note 18(b))
1.8
-
1.8
Performance share unit plan liabilities (Note 18(c))
1.4
-
1.4
Restricted share unit plan liabilities (Note 18(d))
0.8
1.2
2.0
Other
-
0.7
0.7
$
4.1
$
11.4
$
15.5
The current portion of other liabilities is recognized in accounts payable and accrued liabilities in the
consolidated statements of financial position.
15. Income taxes
Accounting policy
Income tax expense comprises current and deferred income taxes. Current and deferred income taxes are
recognized in net income except to the extent that they relate to items recognized directly in equity or in
OCI.
Current and deferred income tax assets and liabilities are offset if there is a legally enforceable right to
offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different taxable entities. The intention is to settle current tax liabilities and
assets on a net basis or tax assets and liabilities will be realized simultaneously.
(a) Current income tax
Current income tax is the expected tax payable or receivable on the taxable income or loss for the
year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to
income tax in respect of previous years.
(b) Deferred income tax
Deferred income tax is recognized in respect of temporary differences between the carrying amounts
of assets and liabilities for accounting purposes and the amounts used for taxation purposes. Deferred
income tax is not recognized if it arises on initial recognition of an asset or liability in a transaction,
other than a business combination that at the time of the transaction affects neither accounting profit
nor taxable profit.
Deferred income tax assets are recognized for unused tax losses, unused tax credits and deductible
temporary differences to the extent that it is probable that future taxable profits will be generated
against which they can be applied. Deferred income tax assets are reviewed at each reporting date
and are recognized to the extent that it is probable that the related tax benefit will be realized.
50
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
15. Income taxes (continued)
Accounting policy (continued)
(b) Deferred income tax (continued)
Unrecognized deferred income tax assets are reassessed at each reporting date and recognized to the
extent that it is probable that future taxable profits will be available against which they can be applied.
Deferred income tax is measured at the rates that are expected to be applied to temporary differences
when they reverse, using rates enacted or substantively enacted at the reporting date.
Supporting information
Years ended December 31,
2024
2023
Income tax recovery
Current
$
(5.8)
$
(21.5)
Deferred
(11.8)
(3.5)
$
(17.6)
$
(25.0)
Income tax recovery differs from the amount that would be computed by applying the Company’s combined
Federal and Provincial statutory rate as follows:
Years ended December 31,
2024
2023
Income tax recovery at the statutory rate of 27.0% (2023: 27.0%)
$
(14.1)
$
(25.7)
Difference in tax rates
0.8
0.4
Realization of previously unrecognized valuation allowance
(6.1)
(0.1)
Other permanent differences
1.5
0.9
Other
0.3
(0.5)
Total tax recovery at effective rate of 33.8% (2023: 26.3%)
$
(17.6)
$
(25.0)
The components of recognized deferred income tax assets and liabilities are as follows:
Opening
balance
Recognized
in income tax
recovery
(expense)
Recognized
in retained
earnings
through
other
comprehensive
loss (income)
Recognized
directly to
retained
earnings
(Note 17)
Ending
balance
For the year ended December 31, 2024
Deferred income tax assets
Tax loss carry-forwards
$
2.4
$
9.8
$
-
$
(7.6)
$
4.6
Employee future benefits obligation
1.2
(0.3)
0.3
-
1.2
Provisions and other
8.0
(3.2)
-
-
4.8
11.6
6.3
0.3
(7.6)
10.6
Deferred income tax liabilities
Intangible assets
(23.9)
2.3
-
-
(21.6)
Property, plant and equipment
(49.1)
3.2
-
-
(45.9)
(73.0)
5.5
-
-
(67.5)
$
(61.4)
$
11.8
$
0.3
$
(7.6)
$
(56.9)
For the year ended December 31, 2023
Deferred income tax assets
Tax loss carry-forwards
$
1.6
$
0.8
$
-
$
-
$
2.4
Employee future benefits obligation
1.4
(0.3)
0.1
-
1.2
Provisions and other
9.6
(1.6)
-
-
8.0
12.6
(1.1)
0.1
-
11.6
Deferred income tax liabilities
Intangible assets
(24.9)
1.0
-
-
(23.9)
Property, plant and equipment
(52.7)
3.6
-
-
(49.1)
(77.6)
4.6
-
-
(73.0)
$
(65.0)
$
3.5
$
0.1
$
-
$
(61.4)
51
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
15. Income taxes (continued)
Supporting information (continued)
As recorded in the consolidated statements of financial position as follows:
December 31,
2024
December 31,
2023
Deferred income tax assets
$
0.1
$
0.2
Deferred income tax liabilities
(57.0)
(61.6)
$
(56.9)
$
(61.4)
The Company has recognized deferred income tax assets in relation to unused tax losses that are
available to carry forward against future taxable income. At December 31, 2024, the Company and its
subsidiaries have unused non-capital tax losses carried forward totalling $18.5 million in the US (2023:
$7.0 million) and $2.5 million in Canada (2023: $3.4 million), which can be used to reduce taxable income.
The US non-capital tax losses can be carried forward indefinitely, and the Canadian non-capital loss carry
forwards expire in 2041. The Company has unused capital losses carried forward of approximately $0.1
million (2023: $46.8 million) available to be utilized against future capital gains indefinitely.
Deferred income tax assets have not been recognized in respect of the following loss carry-forwards and
other deductible temporary differences:
December 31,
2024
December 31,
2023
Temporary deductible differences
$
32.1
$
31.4
Capital loss carry-forwards
0.1
46.8
$
32.2
$
78.2
16. Share capital
Accounting policy
The Company’s authorized capital consists of an unlimited number of common shares and preferred
shares. Incremental costs directly attributable to the issuance of shares and share options are recognized
as a deduction from equity, net of any tax effects.
Supporting information
The Company has no outstanding preferred shares. The common shares entitle shareholders to one vote
per share. Issued and outstanding common shares are as follows:
Number of
common
shares
Amount
Balance as at December 31, 2022
316,742,746
$
405.4
Exercise of stock options
2,811
-
Balance as at December 31, 2023
316,745,557
405.4
Exercise of stock options
-
-
Balance as at December 31, 2024
316,745,557
$
405.4
On August 3, 2023, the Western renewed its Normal Course Issuer Bid (“NCIB”) effective August 11, 2023,
permitting the purchase and cancellation of up to 15,837,277 of the Company’s common shares,
representing 5% of the Company’s common shares outstanding as of August 3, 2023. The NCIB expired
August 10, 2024 and was not renewed.
No shares were repurchased under the NCIB in 2024 or 2023.
No stock options were exercised for the year ended December 31, 2024 (2023: 400,000 stock options
exercised with 2,811 common shares issued on a cashless basis resulting in a $0.4 million charge against
retained earnings).
52
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
17. Non-controlling interest
On March 27, 2024, the Company completed the sale of a 34% ownership interest in its newly formed La-
kwa sa muqw Forestry Limited Partnership (“LFLP”) to four Vancouver Island First Nations: K’ómoks First
Nation, Tlowitsis First Nation, We Wai Kai First Nation, and Wei Wai Kum First Nation, collectively referred
to as the Nations, for gross proceeds of $35.9 million. The LFLP is comprised of certain assets and
liabilities of the Company’s former Mid-Island Forest Operation, including TFL 64, which was created
through the subdivision of Block 2 of TFL 39. This is considered a transaction with owners in their capacity
as owners, and because it did not result in a loss of control, the gain on disposal of $25.8 million and
related deferred tax expense of $7.6 million was recognized directly to retained earnings.
18. Share-based compensation plans
Accounting policy
Stock options
The Company has an incentive stock option plan (the “Option Plan”) for eligible directors, officers and
employees, accounting for these plans using the fair value method. The grant-date fair value of options is
recognized as compensation expense over the vesting period, with a corresponding increase in contributed
surplus. Cash consideration received when an option is exercised is credited to share capital together with
the related compensation expense previously recognized in contributed surplus.
Determining the fair value of share-based compensation awards at the grant date requires judgement. The
fair value of the options is determined using the Hull-White option pricing model which considers, as of the
grant date, the exercise price, the expected life of the options, the current price of the underlying stock and
its expected volatility, expected dividends on the shares, and the risk-free interest rate over the expected
life of the option. The Company bases its estimates of volatility on historical share prices of the Company
itself as well as those of comparable companies with longer trading histories.
Share units
The Company has a Deferred Share Unit (“DSU”) Plan for non-executive directors, Performance Share
Unit (“PSU”) Plan for designated officers and certain other eligible employees and Restricted Share Unit
(“RSU”) plan for officers and eligible employees. The Company uses the fair value method of accounting
for obligations under these Plans, which are cash-settled.
Compensation expense is recorded for DSUs and RSUs over the vesting period based on the fair value at
the date of the grant. Compensation expense is recorded for PSUs over a three-year performance period,
based on the fair value of the PSUs at the date of the grant.
The liabilities under the Plans are re-measured at fair value at each reporting date and at settlement date.
For the PSU Plan, this includes re-measurement as the Company’s performance tracks against the
performance vesting targets. Any changes in the fair value of the liabilities are recognized in cost of goods
sold and selling and administration expense.
(a) Stock-option plan
The Option Plan permits the granting of options to eligible participants to purchase up to an aggregate
of 30,000,000 common shares, of which 9,565,475 remain available for future issuance. Each option is
exercisable, subject to vesting terms of 20% per year and immediately upon a change in control of the
Company, into one common share, subject to adjustments, at a price of not less than the closing price
of the common shares on the TSX on the day immediately preceding the grant date. Options are
exercisable only when the share price exceeds $0.70 for a period of 60 consecutive days on a volume
weighted average price basis. Options granted under the Option Plan expire a maximum of ten years
from the date of the grant.
No options were granted under the plan in 2024 or 2023.
53
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
18. Share-based compensation plans (continued)
Supporting information
(a) Stock-option plan (continued)
The following table summarizes the change in options outstanding:
Year ended December 31, 2024
Year ended December 31, 2023
Number of
options
Weighted
average
exercise
price
Number of
options
Weighted
average
exercise
price
Outstanding at beginning of year
11,486,679
$
1.79
15,133,457
$
1.72
Exercised
-
-
(400,000)
1.27
Expired
(1,248,000)
2.54
(1,000,000)
1.27
Forfeited
-
-
(2,246,778)
1.64
Outstanding at December 31
10,238,679
$
1.70
11,486,679
$
1.79
Details of options outstanding under the Option Plan as at December 31, 2024 were as follows:
Exercise
Price
Number
outstanding
Dec. 31, 2024
Weighted
average
remaining
option life
(years)
Weighted
average
exercise price
Number
exercisable
Dec. 31, 2024
Weighted
average
exercise price
$1.05 – 1.05
3,790,382
5.2
$
1.05
3,032,306
$
1.05
$1.47 – 1.97
3,333,906
3.8
1.88
3,033,906
1.92
$2.09 – 2.74
3,114,391
1.7
2.31
3,114,391
2.31
10,238,679
3.7
$
1.70
9,180,603
$
1.76
During 2024, the Company recorded a $0.1 million equity-based compensation expense for these
options (2023: negligible expense), with a corresponding change to contributed surplus.
(b) Deferred share unit plan
The Company has a DSU Plan for equity-based fees to non-executive directors who receive a portion
of their fees in DSUs and may elect to receive a portion of their cash fees in the form of DSUs. The
number of DSUs allotted is determined by dividing the dollar portion of the quarterly fees a director
elects to receive in DSUs by the share price value on the fifth day following each quarter end. DSU
holders are entitled to DSU dividends, equivalent to the dividend they would have received had they
held their DSUs as common shares. For dividends, the number of DSUs allotted is determined by
dividing the total dollar value of the dividend each DSU holder would have received, by the closing
share price on the dividend payment date.
Prior to January 1, 2015, DSUs were also granted to designated executive officers.
Year ended December 31, 2024
Year ended December 31, 2023
Number of
DSUs
Weighted
average
unit value1
Number of
DSUs
Weighted
average
unit value1
Outstanding at beginning of year
2,567,991
$
1.21
2,067,371
$
1.45
Granted1
1,411,235
0.51
886,800
0.90
Redeemed
(1,599,389)
1.36
(386,180)
1.77
Outstanding at December 31
2,379,837
$
0.70
2,567,991
$
1.21
¹Fair value at the date of the grants. Grants included notional dividends.
During 2024, the Company recorded compensation recovery for these DSUs of $0.7 million (2023:
$1.0 million), with a corresponding decrease to accounts payable and accrued liabilities (Note 14).
54
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
18. Share-based compensation plans (continued)
Supporting information (continued)
(c) Performance share unit plan
The Company has established a PSU Plan for designated officers and certain other eligible employees
of the Company. Under the terms of the PSU Plan, participants are granted a number of PSUs based
on a target award divided by the value of the Company’s common shares at the effective date of grant.
All PSU holders are entitled to PSU dividends, equivalent to the dividend they would have received
had they held their PSUs as common shares.
Performance targets are set by the Company’s Board of Directors. The number of PSUs which will
ultimately vest will be the original number of PSUs granted plus PSUs equal to the value of accrued
notional dividends over the performance period. For dividends, the number of PSUs allotted is
determined by dividing the total dollar value of the dividend each PSU holder would have received, by
the closing share price on the trading day immediately after the dividend date of record. The
redemption value of vested PSUs will range from 0% to 200% based on return on capital employed
over a three-year performance period.
Year ended December 31, 2024
Year ended December 31, 2023
Number of
PSUs
Weighted
average
unit value1
Number of
PSUs
Weighted
average
unit value1
Outstanding at beginning of year
3,574,946
$
1.55
3,591,951
$
1.46
Granted1
3,621,608
0.64
1,638,257
1.29
Redeemed
(1,130,621)
1.54
(1,655,262)
1.08
Forfeited
-
-
-
-
Outstanding at December 31
6,065,933
$
1.01
3,574,946
$
1.55
¹Fair value at the date of the grants. Grants included notional dividends.
During 2024, the Company recorded a negligible compensation expense for these PSUs (2023: $0.7
million recovery), with a corresponding change to accounts payable and accrued liabilities (Note 14).
(d) Restricted share unit plan
In 2020, the Company established an RSU Plan for designated officers and employees of the
Company. Under the terms of the RSU Plan, participants are granted a number of RSUs based on a
target award divided by the value of the Company’s common shares at the effective date of grant. All
RSU holders are entitled to RSU dividends equivalent to the dividend they would have received if they
held their RSUs as common shares.
The number of RSUs which will ultimately vest will be the original number of RSUs granted plus RSUs
equal to the value of accrued notional dividends over the three-year vesting period. For dividends, the
number of RSUs allotted is determined by dividing the total dollar value of the dividend each RSU holder
would have received, by the closing share price on the trading day immediately after the dividend date
of record.
Year ended December 31, 2024
Year ended December 31, 2023
Number of
RSUs
Weighted
average
unit value1
Number of
RSUs
Weighted
average
unit value1
Outstanding at beginning of year
4,665,771
$
1.54
3,438,775
$
1.61
Granted1
8,464,859
0.65
1,568,231
1.28
Redeemed
(1,678,940)
1.59
(341,235)
1.08
Forfeited
-
-
-
-
Outstanding at December 31
11,451,690
$
0.87
4,665,771
$
1.54
¹Fair value at the date of the grants. Grants included notional dividends.
During 2024, the Company recorded compensation expense for these RSUs of $1.0 million (2023:
$0.5 million) with a corresponding increase to accounts payable and accrued liabilities and other
liabilities (Note 14).
55
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
19. Loss per share
Loss per share is calculated utilizing the treasury stock method for determining the dilutive effect of options
issued. The reconciliation of the numerator and denominator is determined as follows:
Year ended December 31, 2024
Year ended December 31, 2023
Net loss
attributable to
equity
shareholders
Weighted
average
number of
shares
Per
share
Net loss
attributable to
equity
shareholders
Weighted
average
number of
shares
Per
share
Issued shares, beginning of year
316,745,557
316,742,746
Effect of shares:
Issued
-
2,441
Repurchased
-
-
Basic loss per share
$
(30.4)
316,745,557
$ (0.10)
$
(68.5)
316,745,187
$ (0.22)
Effect of dilutive securities:
Stock options
-
-
Diluted loss per share
$
(30.4)
316,745,557
$ (0.10)
$
(68.5)
316,745,187
$ (0.22)
20. Capital management
The Company’s strategy for managing capital is to maintain a capital position that provides financial
flexibility, maintains investor, creditor and market confidence and sustains future development of the
business. The Company manages its capital structure through robust planning, budgeting and forecasting
processes and ongoing management of operations and capital expenditures.
Changes to the capital structure may be made as strategic opportunities arise. To maintain or adjust its
capital structure, the Company may buy back shares, issue new shares, source new debt, or sell assets,
including through the establishment of limited partnerships. The Company has internal controls to ensure
changes to the capital structure are properly reviewed and approved.
In support of the Company’s key strategic priorities, including optimizing our business platform and growing
our value-added, specialty and engineered wood products business, the Company continues to make
investments to support accelerating the transition to higher value products. The Company incurs annual
expenditures for the maintenance of capital assets, as well as to fund roads and bridges to access timber
stands for harvesting purposes. The Company also evaluates various strategic and discretionary capital
expenditures against internal return hurdles, with the objective of maximizing long-term shareholder value.
From time to time, the Company purchases its own common shares on the market under a defined NCIB,
and depending upon market prices. All repurchased common shares are cancelled. The NCIB was not
renewed after its expiry on August 10, 2024.
Payment of dividends on the Company’s common shares is at the discretion of the Board of Directors and
depends on the Company’s financial condition, capital expenditure funding requirements, credit agreement
financial covenants and other factors. The quarterly dividend was suspended in late 2023.
The Company monitors capital using a ratio of net debt to capitalization. Net debt is calculated as total
long-term debt and bank indebtedness less cash and cash equivalents. Capitalization comprises net debt
and equity attributable to equity shareholders. Under the Credit Facility agreement, the Company is subject
to certain financial covenants, including a total debt to total capitalization ratio of less than 32.5%, with
calculations based on defined terms under the Credit Facility.
The Company is not subject to any statutory capital requirements. Under the Company’s Option Plan,
commitments exist to issue common shares.
56
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Commitments and contingencies
(a) Softwood lumber duty dispute
On October 12, 2015, the softwood lumber agreement between Canada and the US, under which
Canadian softwood lumber shipments to the US (“shipments”) were assessed an export tax by the
Canadian government, expired.
From 2017 onward, as a result of petitions filed by the US Lumber Coalition, and others, and
determinations made by the US International Trade Commission, the US Department of Commerce
(“DoC”) imposed Countervailing (“CV”) and Anti-dumping duties (“AD”) on shipments to the US from
Canada. As a result of these actions, cash deposits for CV were required for Canadian lumber imports
to the US effective April 28, 2017 through August 25, 2017, and from December 28, 2017 onwards;
and cash deposits for AD were required for Canadian lumber imports to the US effective June 30,
2017 until December 26, 2017, and from December 28, 2017 onwards.
As each DoC Administrative Review (“AR”) of a shipment year is completed, final rates are published
in the federal register and a revised cash deposit rate is established until publication of final rates of
the next AR.
The Company expenses export taxes at the cash duty deposit rate as lumber shipments are made.
Where final duty rates differed from cash deposit rates, the Company recognized revisions to its export
tax expense.
As cash deposit rates exceeded final duty rates for lumber shipments made in 2017 through 2022, the
Company recognized a long-term interest-bearing duty receivable totalling USD$47.3 million
(CAD$68.1 million) in its consolidated statement of financial position (2023: USD$46.6 million;
CAD$61.7 million), of which USD$0.8 million (CAD$1.0 million) was recognized as an export tax
recovery in 2024 (2023: USD$3.5 million; CAD$4.3 million). This recovery was netted against export
tax expense of $25.5 million (2023: $20.2 million), resulting in a net export tax expense of $24.5 million
(2023: $15.9 million) as recorded in the statement of comprehensive loss.
Under US law, the DoC and US International Trade Commission (“USITC”) are required to conduct a
sunset review no later than five years after an AD or CV order is issued. The DoC review determines
whether revoking the orders would be likely to lead to a continuation or recurrence of dumping or
subsidies. The USITC review determines whether revoking the orders would be likely to lead to a
continuation or recurrence of material injury to the US industry. If both determinations are negative, the
orders will be revoked.
On March 27 and April 3, 2023, the DoC issued the final results of its first sunset review of the CV and
AD orders, respectively, concluding that if duties on Canadian softwood lumber products were
revoked, there would likely be a continuation or recurrence of countervailable subsidies and dumping.
On November 30, 2023, the USITC issued its final determination under the sunset review, concurring
with the DoC conclusion.
On January 17, 2024, the Government of Canada filed a notice of intent to challenge the USITC
decision to maintain duties on Canadian softwood lumber products, under Chapter 10 of the Canada-
United States-Mexico Agreement.
On March 5, 2024, the DoC initiated its sixth AR of CV and AD for shipments in 2023. On January
17, 2025, the DoC announced that it would issue the preliminary results for the sixth AR AD by
February 20, 2025, but has not yet announced a timeline for the issue of the CV preliminary
results.
On August 12, 2024, the DoC released its final determination for CV and AD rates from its fifth AR for
shipments in 2022, and on September 24, 2024 amended the AD rate to correct a ministerial
calculation error. The Company recognized an additional export tax recovery of USD$0.8 million
(CAD$1.0 million) in 2024. Effective August 19, 2024, cash deposits will continue at the revised
combined duty rate of 14.4% until publication of final rates of the sixth AR in the federal register.
57
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Commitments and contingencies (continued)
(a) Softwood lumber duty dispute (continued)
The following table summarizes the cash deposit rates in effect and the final rates applicable to
Canadian lumber shipments to the US in 2017 through 2022:
Aug. 1, Aug. 9,
Jan. 10,
Dec. 1, Dec. 1,
Jan. 1,
2023
2022
2022
2021
2020
2020
Lumber shipment date
Aug. 19, through
throug
through
throug
through
through
2024
Aug. 18, Jul. 31,
Aug. 8,
Jan. 9, Nov. 30, Nov. 30,
Year
onward
2024
2023
2022
2022
2021
2020
2019
2018
2017
Cash deposit rate
CV
6.74%
1.79%
3.83%
6.32%
6.31%
7.42%
14.19%
14.19%
14.19%
14.19%
AD
7.66%
6.26%
4.76%
11.59%
11.59
1.57%
6.04%
6.04%
6.04%
6.04%
Combined
14.40%
8.05%
8.59%
17.91%
17.90
8.99%
20.23%
20.23%
20.23%
20.23%
AR5
AR4
AR3
AR2
AR1
AR1
Lumber shipment year
2022
Final
2021
Final
2020
Final
2019
Final
2018
Final
2017
Final
Duty rate
CV
6.74%
1.79%
3.83%
6.32%
7.42%
7.26%
AD
7.66%
6.26%
4.76%
11.59%
1.57%
1.57%
14.40%
8.05%
8.59%
17.91%
8.99%
8.83%
As at December 31, 2024, including interest of USD$10.2 million (2023: USD$6.8 million), the duty
receivable of USD$57.5 million (2023: USD$53.4 million) was revalued at the year-end exchange rate
to CAD$82.7 million (2023: CAD$70.8 million).
Interest revenue of $4.6 million was recorded in finance costs for the year ended December 31, 2024
(2023: $3.8 million). A foreign exchange gain of $6.4 million was recorded in other income (loss) for
the year ended December 31, 2024 (2023: foreign exchange loss of $1.1 million).
As at December 31, 2024, the Company had paid $264 million (USD$184 million) of duties, all of
which remain held in trust by US Department of Treasury (2023: $219 million (USD$165 million)). With
the exception of USD$47.3 million (CAD$68.1 million) of duty deposits recognized as a receivable, all
duty deposits have been expensed at the cash deposit rates in effect at the date of payment.
(b) Manufactured Forest Products Regulation
In 2020, the Province amended the Manufactured Forest Products Regulation (the “Regulation”) to
require lumber made from Western Red Cedar (“WRC”) and cypress (“yellow cedar”) be fully
manufactured to be eligible for export, with the application of a tax on WRC and yellow cedar exported
from the BC Coast to any location within 3,000 miles. The Regulation set a variable tax rate dependent
upon the extent of processing applied to the lumber before it is exported and based on the cash
deposit rate levied set by the DoC for Canadian lumber imports to the US (see Note 21(a)).
During 2024, the Company recorded export tax expense of $2.8 million (2023: $2.4 million) in cost of
goods sold in respect of this Regulation.
(c) Litigation and claims
In the normal course of business, the Company may be subject to claims and legal actions that may be
made by customers, unions, suppliers and others in respect of which either provision has been made
or for which no material liability is expected. Where the Company is unable to determine the outcome
of these disputes no amounts have been accrued in these consolidated financial statements.
58
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Commitments and contingencies (continued)
(d) Long-term fibre supply agreements
Accounting policy
Deferred revenue is the result of the contractual obligations incurred upon the acquisition of the
Englewood Logging Operation in March 2006 and calls for Western to deliver a specified volume of
fibre (chips and pulp logs) over the term of the contract. Accordingly, the deferred revenue is amortized
into net income for the period on a straight-line basis over 40 years, being the term of the related fibre
supply contract.
Supporting information
The Company has long-term commitments to supply fibre to third parties including a 40-year
agreement, entered into on March 17, 2006 in conjunction with its acquisition of the Englewood
Logging Division (“Englewood”). As consideration for entering into this agreement, the Company
received a price premium of $80.0 million earned as wood chips are delivered over the contract term,
of which $45.0 million was set-off against the consideration due by the Company on its acquisition of
the Englewood assets. The Company recorded the price premium as deferred revenue (Note 24(b))
and granted a first charge over the acquired assets to secure certain of these obligations.
In addition, certain of the Company’s long-term fibre supply agreements with third parties have
minimum volume requirements and may, in the case of a failure to produce the minimum annual
volume, require the Company to conduct whole log chipping or sell saw logs, which could reduce log
availability for our sawmills, source the deficiency from third parties at additional cost or incur a penalty
under the fibre supply agreements. If the Company takes any significant curtailments in its sawmills its
chip production would decline, increasing the risk that the Company would not meet its contractual
obligations where it is not possible to secure replacement chips on the open market. Based on chip
and pulp log volumes supplied in 2024 and 2023, and the exercise of force majeure provisions the
Company believes it has satisfied annual fibre commitments for those years.
(e) Bond obligations
As at December 31, 2024 the Company posted $10.8 million in bid bonds (2023: $11.9 million) for
purchases under timber sales agreements, with expiry dates extending through January 2026 and
$37.4 million in customs bonds (2023: $37.8 million) for softwood lumber duties. The customs bonds,
which are partially secured by letters of credit of $24.5 million (2023: $18.6 million) at December 31,
2024, remain outstanding until the related softwood lumber duties are liquidated.
(f) Purchase commitments
As at December 31, 2024, the Company had contracts to acquire equipment totalling $12.2 million
(2023: $7.5 million) and contractual commitments of $11.2 million (2023: $9.6 million) for purchases of
lumber for wholesale programs.
(g) Allowable Annual Cut Reductions
In June, 2023, British Columbia’s (“the Province’) deputy chief forester set a new allowable annual cut
(“AAC”) for Tree Farm Licence (“TFL”) 44, reducing the allowable annual log harvest from 793,600
cubic metres (“m3”) to 642,800 m3. The lowered AAC was effective immediately and reflects harvest
reductions associated with forest resources and socio-economic objectives of the Crown including the
reallocation of previously unharvested volume to new forest licences.
The TFL 44 licence is held by the Tsawak-qin Forestry Limited Partnership (“TFLP”), a partnership
between Western and Huumiis Ventures Limited Partnership, a limited partnership beneficially owned
by the Huu-ay-aht First Nations (“HFN”). The Company, TFLP and the HFN engaged with the Province
on the issues identified as part of the AAC determination. We expect the Province to update the AAC
determination, thus the Company is unable to assess the potential impact of this AAC determination on
the business at this time.
59
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
21. Commitments and contingencies (continued)
(g) Allowable Annual Cut Reductions (continued)
In June 2024, the Province determined a new AAC for the North Island Timber Supply Area ("TSA"),
reducing the allowable annual log harvest from 1,248,100 m3 to 1,096,000 m3. Western holds Forest
Licence A19231 and A94737 (the "Forest Licences") in the TSA, which have a current AAC of 303,283
m3, and 5,443 m3, respectively. The Company expects the AAC of the Forest Licences to be reduced
proportionally, however the Province has not yet made a decision on the apportionment of the AAC
reduction to each timber tenure in the TSA. Accordingly, the Company is unable to assess the
potential impact of this AAC determination on the business at this time.
(h) Pension funding commitments
The Company has funding requirements under its defined benefit pension plans of $0.7 million for
2025 and an estimated $0.7 million per year on average for 2026 to 2031, or until such time as a new
funding valuation may lead to a change in the payments required.
22. Employee future benefits
Accounting policy
(a) Termination benefits
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the
offer of those benefits and when the Company recognizes a cost for restructuring that includes the
payment of termination benefits.
(b) Short-term employee benefits
Short-term employee benefit obligations, including bonus plans, are measured on an undiscounted
basis and are expensed as the related service is provided. A liability is recognized for expected
payments if the Company has a present legal or constructive obligation to pay this amount as a result
of past service provided by the employee and the obligation can be reliably estimated.
(c) Employee future benefits
The Company has various defined benefit and defined contribution plans that provide pension or other
retirement benefits to most of its salaried employees and certain hourly employees not covered by
forest industry union plans. The Company also provides other post-employment benefits and pension
bridging benefits to eligible retired employees.
The defined benefit plan provides a specified pension benefit to be received by an employee after
retirement, usually dependent on one or more factors such as age, years of service and compensation.
The Company’s net obligation in respect of its defined benefit plans is calculated separately for each
plan by estimating the amount of future benefit that employees have earned in return for their service
in the current and prior periods discounted to present value, and offset by the fair value of the plan
assets. The calculation is performed annually by a qualified actuary using the actuarial cost projected
unit credit method.
When the calculation gives rise to a pension asset, the recognized asset is limited to the present value
of economic benefits available in the form of any future refunds from the defined benefit plan or
reductions in future contributions to the defined benefit plan. In order to calculate the present value of
economic benefits, consideration is given to any minimum funding requirements that apply to any
defined benefit plan.
Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the
return on plan assets and the effect of the asset ceiling test are recognized immediately in other
comprehensive income. The Company calculates the net interest expense (income) on the liability by
applying the discount rate used to measure the defined benefit obligation at the beginning of the year
to the liability, considering any changes in the net defined benefit liability over the year as a result of
contributions and benefit payments. Net interest and other expenses related to defined benefit plans
are recognized in net income.
60
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
22. Employee future benefits (continued)
Accounting policy (continued)
(c) Employee future benefits (continued)
Where a defined benefit plan’s benefits are altered or curtailed, the resulting change in benefit that
relates to past service or the gain or loss on curtailment is recognized immediately in net income. The
Company recognizes gains and losses on settlement of a defined benefit plan when the settlement
occurs.
Western also makes fixed contributions to privately administered investment funds on behalf of defined
contribution plan members. The Company has no further payment obligations once the contributions
have been paid.
The contributions are recognized as employee benefit expense in net income as services are rendered
by employees. Prepaid contributions are recognized as an asset to the extent that a cash refund or a
reduction in the future payments is available.
For hourly employees covered by forest industry union defined benefit pension plans, the Company’s
contributions as required under the collective agreements are charged to net income as services are
rendered by employees. The Company has no further payment obligations once the contributions have
been paid.
Supporting information
Information about the Company's defined benefit salaried pension plans and other non-pension
benefits, in aggregate, is as follows:
December 31, 2024
December 31, 2023
Salaried
pension
plans
Non-
pension
plans
Salaried
pension
plans
Non-
pension
plans
Accrued benefit obligation:
Balance, beginning of year
$
90.6
$
2.3
$
90.8
$
2.3
Current service costs and administrative expenses
0.3
-
0.3
-
Benefits and administrative expenses paid
(8.0)
(0.2)
(8.0)
(0.2)
Interest cost
4.0
0.1
4.5
0.1
Actuarial loss
0.7
-
3.0
0.1
Balance, end of year
$
87.6
$
2.2
$
90.6
$
2.3
Plan assets:
Fair value, beginning of year
$
88.2
$
-
$
88.0
$
-
Company’s contributions
1.2
0.2
0.8
0.2
Benefits and administrative expenses paid
(7.9)
(0.2)
(7.8)
(0.2)
Interest on plan assets
3.9
-
4.4
-
Actuarial gain (loss)
(0.5)
-
2.8
-
Fair value, end of year
$
84.9
$
-
$
88.2
$
-
Net employee future benefits recognized in
consolidated statements of financial position (Note 14)
$
2.7
$
2.2
$
2.4
$
2.3
Cumulative actuarial gains (losses), beginning of year
$
(30.8)
$
3.1
$
(30.6)
$
3.2
Actuarial loss recognized directly in OCI
(1.2)
-
(0.2)
(0.1)
Cumulative actuarial gains (losses), end of year
$
(32.0)
$
3.1
$
(30.8)
$
3.1
Experience gains (losses):
Experience gains (losses) on plan assets:
Amount
$
(0.4)
n/a
$
2.8
n/a
Percentage of plan assets
(0.44%)
n/a
3.21%
n/a
Experience gains (losses) on plan liabilities:
Amount
$
(0.1)
$
-
$
1.0
$
(0.2)
Percentage of plan liabilities
(0.07%)
0.00%
1.12%
(8.21%)
61
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
22. Employee future benefits (continued)
Supporting information (continued)
(c) Employee future benefits (continued)
The Company has several funded and unfunded defined benefit plans, a defined contribution pension
plan and a group registered retirement savings plan which provide retirement benefits to substantially
all salaried employees and certain hourly employees. In addition, the Company provides other
unfunded post-employment benefits to certain former salaried and hourly employees.
The funded and unfunded defined benefit pension plans were closed to new entrants effective June
30, 2006. No further benefits accrue under these plans for years of service after December 31, 2010,
and no further benefits accrue under these plans for compensation increases effective December 31,
2016. The Company’s other post-employment benefit plans are non-contributory and include a range
of health care and other benefits.
Total cash payments for employee future benefits for the year ended December 31, 2024 were $12.6
million (2023: $12.4 million), consisting of cash contributed by the Company to its funded pension
plans, cash payments directly to beneficiaries for its unfunded other benefit plans, and cash
contributed to the forest industry union defined benefit plans.
The Company measures the fair value of plan assets and the accrued benefit obligations for its defined
benefit plans for accounting purposes annually at December 31. The most recent actuarial valuations
of the funded defined benefit pension plans were performed at December 31, 2021. The next actuarial
valuation for both the funded and unfunded defined benefit plans and other unfunded post-
employment benefit plans is scheduled in 2025 for December 31, 2024. Included in the accrued benefit
obligations and plan assets for salaried pension plans, are accrued benefit obligations of $85.4 million
at December 31, 2024 (2023: $87.9 million) in respect of plans that are wholly or partially funded.
The following is a breakdown of the defined benefit pension plan assets by nature of investment
categories:
December 31,
2024
December 31,
2023
Equity securities
5%
5%
Debt securities
92%
92%
Other
3%
3%
100%
100%
The significant actuarial assumptions adopted in measuring the Company's accrued benefit obligations
(expressed as weighted averages) are as follows:
December 31,
2024
December 31,
2023
December 31, 2024
Increase (decrease) of
accrued benefit
obligation with change
assumption
1%
Increase
1%
Decrease
Discount rate, beginning of year for:
Pension plans
4.63%
5.17%
n/a
n/a
Non-pension plans
4.65%
5.20%
n/a
n/a
Discount rate, end of year for:
Pension plans
4.54%
4.63%
$
(7.4)
$
8.7
Non-pension plans
4.50%
4.65%
(0.2)
0.2
Rate of compensation increase for all plans
0.00%
0.01%
-
-
62
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
22. Employee future benefits (continued)
Supporting information (continued)
(c) Employee future benefits (continued)
The Company's salaried employees’ pension and non-pension benefits expense is as follows:
December 31, 2024
December 31, 2023
Salaried
pension
plans
Non-
pension
plans
Salaried
pension
plans
Non-
pension
plans
Defined benefit plans:
Current service costs and administrative expenses
$
0.3
$
-
$
0.3
$
-
Net interest cost (Note 27)
0.1
0.1
0.1
0.1
Total cost of employee post-retirement benefits
$
0.4
$
0.1
$
0.4
$
0.1
The Company is committed to making funding contributions to its defined benefit plans of $1.2 million
during 2025.
The Company’s unionized employees are members of industry-wide pension plans to which the
Company contributes a predetermined amount per hour worked by an employee. The Company’s
liability is limited to its contributions. The pension expense for these plans is equal to the Company’s
contributions. For 2024, such contributions amounted to $6.3 million (2023: $6.0 million).
23. Segmented information
Accounting policy
A business segment is a group of assets and operations engaged in providing products or services subject
to risks and returns that are different from those of other business segments. The Company is an
integrated forest products company operating in one business segment comprised of timber harvesting,
lumber manufacturing and log and lumber sales in world-wide markets.
A geographical segment is engaged in providing products or services within a particular economic
environment subject to risks and returns that are different from those of segments operating in other
economic environments.
The Company manages its business as a single operating segment, with the majority of Western’s
property, plant and equipment, biological assets and timber licences located in BC, Canada. The Company
harvests and purchases logs which it manufactures into lumber at the Company’s sawmills and
remanufacturing facilities, and sells its logs and lumber in world-wide markets. Supporting information is
included in Note 24.
24. Revenue
Accounting policy
Revenue from the sale of goods or provision of services is measured based on the consideration specified
in a customer contract, net of rebates and discounts. Revenue is recognized when control over a product
transfers from the Company to the customer. The timing of transfer of control varies dependent upon the
individual terms of the sales contract.
Amounts charged to customers for shipping and handling are recognized as revenue and shipping and
handling costs and export taxes incurred by the Company are recorded in costs and expenses.
The following is a description of principal activities from which the Company generates its revenue.
Lumber
Revenue is recognized when control over lumber and engineered wood products is transferred to the
customer. The timing of transfer of control varies depending on the individual terms of the sales contract,
but is typically when lumber is loaded onto the mode of transportation. The revenue recognized is adjusted
for discounts related to early payment at the point in time control is transferred, based on historical
experience.
63
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
24. Revenue (continued)
Accounting policy (continued)
Logs
Revenue is recognized when control over logs is transferred to the customer. The timing of transfer of
control varies depending on the individual terms of the sales contract, but is typically at the time logs are
loaded onto the vessel or delivered to the transfer point, and payment is secured. No early payment
discounts are offered for log sales.
By-products
Revenue is recognized when control over by-products is transferred to the customer, the timing of this
transfer of control varies depending on the individual terms of the sales contract, but is typically at the time
by-products leave the Company’s facilities or are scaled at the pick-up location. No early payment
discounts are offered for by-product sales.
Forestry services and other
Revenue is recognized for harvesting, road building and other services as performance obligations under
the contractual arrangement are met and services are delivered. No early payment discounts are offered
for forestry and other services performed.
Supporting information
(a) Disaggregation of revenue
In the following table, revenue is disaggregated by primary geographical market, based on the known
origin of the customer, and by major product.
Years ended December 31,
2024
2023
Primary geographic markets
Canada
$
391.5
$
392.9
United States
381.0
351.5
Japan
125.0
129.8
China
79.4
72.2
Other
73.7
57.4
Europe
13.3
13.7
$ 1,063.9
$ 1,017.5
Major products
Lumber
$
817.1
$
781.6
Logs
188.0
180.9
By-products
41.7
39.8
Forestry services and other
17.1
15.2
$ 1,063.9
$ 1,017.5
(b) Contract balances
The following table provides information about receivables and contract liabilities from contracts with
customers.
Years ended December 31,
2024
2023
Trade and other receivables
$
57.5
$
50.9
Long-term loan receivable (Note 9)
0.7
0.9
Contract liabilities
42.5
44.5
The contract liabilities relate to the consideration received from a customer for a long-term fibre supply
contract and are recognized as deferred revenue, for which revenue is recognized straight-line over
the term of the contract (see Note 21(d)). The Company recognized related revenue of $2.0 million in
2024 (2023: $2.0 million).
64
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
25. Operating restructuring items
Years ended December 31,
2024
2023
Retirement and other benefits (Note 5)
$
1.3
$
7.1
Impairment of assets held for sale (Note 5)
2.8
-
Curtailment costs (Note 5)
0.9
-
Other
0.5
0.4
$
5.5
$
7.5
In 2024, the Company reversed $0.9 million in retirement and other benefits previously recognized,
offsetting $2.2 million recognized on the indefinite curtailment of APD. In 2023, the Company recognized
$5.7 million in retirement and other benefits on the indefinite curtailment of APD, and $1.4 million as a
result of rightsizing of various operational functions within the business.
26. Other income (expense)
Years ended December 31,
2024
2023
Loss on disposal of property, plant and equipment (Notes 5, 6)
$
(0.6)
$
(0.2)
Foreign exchange gains (losses)
7.0
(1.5)
Other
0.1
0.5
$
6.5
$
(1.2)
27. Finance costs
Accounting policy
Finance costs comprise interest expense on long-term debt and lease liabilities, amortization of deferred
financing costs, unwinding of the discount on the reforestation obligation, net interest on the defined benefit
plan obligation, offset by interest revenue accrued on the export tax receivable and other notes receivable.
All finance costs (income) are recognized in net income during the period using the effective interest
method with the exception of the net interest on the net defined benefit obligation, which is recognized as
described in Note 22.
Supporting information
Years ended December 31,
2024
2023
Long-term debt
$
8.8
$
4.3
Lease liabilities (Note 12)
1.1
1.3
Employee future benefits obligation (Note 22)
0.2
0.2
Unwind of discount on provisions (Note 13)
0.5
0.5
Interest revenue on export tax receivable (Note 21(a))
(4.6)
(3.8)
Amortization of deferred financing costs
0.3
0.2
Other
0.4
0.3
$
6.7
$
3.0
28. Financial instruments – fair values and risk management
Accounting policy
IFRS 9, Financial Instruments sets out requirements for recognizing and measuring financial assets,
financial liabilities and some contracts to buy or sell non-financial items, as described below.
(a) Financial assets
The Company classifies its financial assets in the following categories: amortized cost, fair value
through other comprehensive income (“FVOCI”) – debt investment; FVOCI – equity investment; or fair
value through profit and loss (“FVTPL”), depending upon the business model in which a financial asset
is managed and its contractual cash flow characteristics.
65
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
28. Financial instruments – fair values and risk management (continued)
Accounting policy (continued)
(a) Financial assets (continued)
A financial asset is measured at amortized cost if it meets both of the following conditions:
it is held within a business model whose objective is to hold assets to collect contractual cash
flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
All financial assets not measured at amortized cost or FVOCI are measured at FVTPL. This includes
all derivative financial assets including foreign currency forward contracts and export tax receivable.
Cash and cash equivalents, short-term investments expected to be held to maturity, and trade and
other receivables are categorized as amortized cost and are initially measured at fair value plus any
direct transaction costs and thereafter at amortized cost using the effective interest rate method, less
any impairment losses. The Company applies an “expected credit loss” (“ECL”) model to calculate the
impairment of financial assets.
The Company does not currently have any debt or equity investments classified as measured at
FVOCI.
(b) Financial liabilities
Financial liabilities are recognized for contractual obligations to deliver cash or other financial assets or
exchange financial assets or financial liabilities under potentially unfavourable conditions.
Trade payables and provisions, lease liabilities, and loans and borrowings including long-term debt are
categorized as other financial liabilities and are initially measured at fair value on the transaction or
origination date less any related transaction costs and thereafter at amortized cost using the effective
interest rate method. The Company derecognizes a financial liability when its contractual obligations
are discharged, cancelled, or expire. The Company’s non-derivative financial liabilities are measured
at amortized cost using the effective interest method.
The Company may enter into derivative financial instruments (foreign currency forward contracts) in
order to mitigate its exposure to foreign exchange risk. The Company’s policy is not to use derivative
financial instruments for trading or speculative purposes and has not designated these instruments as
hedges for accounting purposes. Measured at FVTPL, the Company records these contracts at fair
value on the consolidated statements of financial position with changes in value recognized as gains or
losses within sales in net income.
(c) Derivative financial instruments
Financial assets and liabilities are offset, and the net amount presented in the consolidated statements
of financial position when, and only when, the Company has a legal right to offset the amounts and
intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.
Supporting information
(d) Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial assets and financial
liabilities, including their levels in the fair valuation hierarchy. It does not include fair value information
for financial assets or liabilities not measured at fair value if the carrying amount is a reasonable
approximation of fair value. Fair value level categorizations remain unchanged between 2024 and
2023.
66
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
28. Financial instruments – fair values and risk management (continued)
Supporting information (continued)
(d) Accounting classifications and fair values (continued)
December 31, 2024
December 31, 2023
Level
Mandatory
at FVTPL
Amortized
cost
Total
Mandatory
at FVTPL
Amortized
cost
Total
Financial assets
Cash and cash equivalents
2
$
-
$
7.9
$
7.9
$
-
$
2.3
$
2.3
Trade and other receivables
3
-
57.5
57.5
-
50.9
50.9
Note receivable (Note 9)
3
-
2.6
2.6
-
2.6
2.6
Long-term receivable (Note 9)
3
-
0.3
0.3
-
0.6
0.6
Other advances
3
-
1.2
1.2
-
1.0
1.0
Export tax and related interest
receivable (Note 21(a))
3
82.7
-
82.7
70.8
-
70.8
Total financial assets
$
82.7
$
69.5
$
152.2
$
70.8
$
57.4
$
128.2
Level
Mandatory
at FVTPL
Other
financial
liabilities
Total
Mandatory
at FVTPL
Other
financial
liabilities
Total
Financial liabilities
Bank indebtedness
2
$
-
$
-
$
-
$
-
$
0.9
$
0.9
Accounts payable and accrued
liabilities
2
-
110.7
110.7
-
102.8
102.8
Liabilities directly associated with
assets held for sale (Note 5)
2
-
0.3
0.3
-
0.3
0.3
Long-term debt (Note 11)
2
-
86.0
86.0
-
84.1
84.1
Lease liabilities (Note 12)
2
-
19.5
19.5
-
19.9
19.9
Total financial liabilities
$
-
$
216.5
$
216.5
$
-
$
208.0
$
208.0
(e) Financial risk management
The use of financial instruments exposes the Company to credit risk, liquidity risk, and market risk.
Other than as described below, Management does not consider the risks to be significant.
The Board of Directors has oversight responsibility for the Company’s risk management framework.
The Company identifies, analyzes and actively manages the financial market risks associated with
changes in foreign exchange rates, interest rates and commodity prices. Western has established risk
management policies and controls to identify and analyze the risks faced by the Company, to set
appropriate risk limits and to monitor risks and adherence to limits. Currently, the Company only
engages in foreign exchange forward contract trading activities to mitigate exposure to foreign
currency fluctuations.
(i) Credit risk
Credit risk is the risk of financial loss to the Company should a customer or counterparty to a
financial instrument fail to meet its contractual obligations and arises primarily from the Company’s
receivables from customers. The carrying amount of the Company’s financial assets represents its
maximum credit exposure.
The Company held cash and cash equivalents of $7.9 million at December 31, 2024 (2023: $2.3
million), which represents its maximum credit exposure on these assets. The cash and cash
equivalents are held at highly rated financial institutions and as such, the Company does not
believe that these are exposed to significant credit risk.
67
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
28. Financial instruments – fair values and risk management (continued)
Supporting information (continued)
(e) Financial risk management (continued)
(i) Credit risk (continued)
Accounts receivable
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of
each customer. The Company has established policies and controls to review the creditworthiness
of new customers, including review of external credit ratings, and bank and other references.
Purchase limits are established for each customer and are regularly reviewed. In some cases,
where customers fail to meet the Company’s benchmark creditworthiness, the Company may
choose to transact with the customer based on terms which are secured by a guarantee or cash
deposit or alternatively by insuring the accounts receivable.
The Company’s general practice is to insure substantially all lumber receivables for 90% of value
with the Export Development Canada or Coface Canada, with the exception of China and Japan
which are sold on either a cash basis or secured by irrevocable letters of credit, which limits the
Company’s credit exposure.
Management also considers the demographics of the Company’s customer base, including the
default risk of the industry and country in which customers operate, as these factors may influence
credit risk. The Company has determined that there is no concentration of credit risk either
geographically or by counterparty.
The Company regularly reviews the collectability of its accounts receivable and establishes an
allowance for doubtful accounts based on its best estimate of any potentially uncollectible
accounts. The allowance for doubtful accounts was negligible as at December 31, 2024 and 2023.
The aging of trade and other receivables as at December 31 was as follows:
December 31,
2024
December 31,
2023
Not past due
$
58.6
$
49.1
Past due 0-30 days
1.5
1.8
Greater than 30 days past due
-
-
$
60.1
$
50.9
Other assets
The Company has recognized a long-term receivable from the DoC for recovery of export tax and
accrued interest thereon totalling $82.7 million (see Note 21(a)).
Although the timing of receipt of the refund remains uncertain, the collectability has minimal risk as
the amounts are supported by published rates and established calculation methodology published
in the US Federal Register, and responsibility for payment lies with the US Department of
Treasury, considered to be creditworthy.
Guarantees
The Company did not provide any guarantees in 2024 and 2023.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations
associated with its financial liabilities that are settled by delivering cash or another financial asset.
Management mitigates any liquidity risk associated with the subsequent payment of liabilities
through the continual monitoring of expenditures and forecasting of liquidity resources. The
Company maintains a revolving credit facility that can be drawn down to meet short-term financing
and liquidity needs.
68
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
28. Financial instruments – fair values and risk management (continued)
Supporting information (continued)
(e) Financial risk management (continued)
(ii) Liquidity risk (continued)
As at December 31, 2024, the Company had $136.7 million (2023: $146.4 million) unutilized
drawings available under its Credit Facility. The following are the contractual maturities of financial
liabilities, including estimated interest payments:
Carrying
amount
Contractual
cash flows
1 year or
less
2 – 3
years
4 – 5
Years
More than 5
years
Accounts payable and accrued
liabilities
$
110.7
$
110.7
$
110.7
$
-
$
-
$
-
Lease liabilities1
19.8
21.2
7.7
8.5
2.2
2.8
Long-term debt
86.0
95.3
6.0
89.3
-
-
$ 216.5
$ 227.2
$
124.4
$
97.8
$
2.2
$
2.8
1 Includes liabilities directly associated with assets held for sale
(iii) Market risk
Interest rate risk
The Company is exposed to interest rate risk through its current financial assets and financial
obligations bearing variable interest rates. Based on the Company’s debt structure at December
31, 2024, an increase of 1% in interest rates would result in a decrease of $0.9 million to annual
net income (2023: $0.9 million). The Company does not currently use derivative instruments to
reduce its exposure to interest rate risk.
Currency risk
The Company is exposed to currency risk on cash and cash equivalents, accounts receivable,
duty deposits and recoveries, accounts payable and provisions and intercompany loans that are
denominated in a currency other than the respective functional currencies of the Company’s
domestic and foreign operations.
Most of the Company’s sales transactions are denominated in foreign currencies, primarily, the USD
and Japanese Yen (“JPY”), exposing the Company to currency risk associated with changes in
foreign exchange rates. The Company routinely assesses its foreign exchange exposure and may
use foreign currency exchange forward, collar and option contracts to manage its currency risk. The
Company does not consider the credit risk associated with the counterparty risk to be significant.
During 2024, the Company entered into forward contracts to sell USD and JPY in order to mitigate
a portion of the foreign currency risk. At December 31, 2024, the Company had outstanding
obligations to sell an aggregate USD$12.0 million at an average exchange rate of CAD$1.4369
per USD with maturities through January 2, 2025 (2023: USD$13.0 million at an average
exchange rate of CAD$1.3279 per USD) and recorded a negligible fair value asset (2023: $0.1
million asset) in its consolidated statement of financial position. In 2024, the Company recorded
$1.9 million in losses on forward contracts (2023: $1.1 million gain) in revenue in its statement of
profit and loss.
Forward contracts in a liability position are included in accounts payable and accrued liabilities on
the consolidated statements of financial position and assets are included in trade and other
receivables.
An increase of 1% in the value of the CAD relative to the USD would result in a loss of
approximately $0.2 million in relation to the USD foreign exchange contracts held at December 31,
2024 (2023: $0.1 million loss).
69
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
28. Financial instruments – fair values and risk management (continued)
Supporting information (continued)
(e) Financial risk management (continued)
(iii) Market risk (continued)
Currency risk (continued)
As at December 31, 2024, the Company held USD$1.8 million (2023: USD$1.8 million) in cash
and cash equivalents. An increase of 1% in the value of the Canadian dollar relative to the USD
would result in a negligible decrease to cash and cash equivalents (2023: negligible decrease).
Certain receivable balances at December 31, 2024 are denominated in foreign currencies,
principally, the USD. Accordingly, fluctuations in foreign exchange rates may affect the carrying
value of the underlying accounts receivable. As at December 31, 2024, the Company’s USD
denominated accounts and other receivables totaled USD$17.6 million (2023: USD$17.2 million).
An increase of 1% in the value of the Canadian dollar relative to the USD would result in a
decrease of $0.4 million to accounts and other receivables (2023: $0.3 million decrease).
As at December 31, 2024, the Company’s export tax receivable and related interest totaled
USD$57.5 million (2023: USD$53.4 million). An increase of 1% in the value of the Canadian dollar
relative to the USD would result in a decrease of $0.8 million to accounts and other receivables
(2023: $0.7 million decrease).
Commodity price risk
The Company does not enter into commodity contracts other than to meet the Company’s
expected usage and sale requirements and such contracts are not settled net.
29. Related parties
Accounting policy
Key management personnel are the Company’s directors and executive officers as disclosed in its 2024
and 2023 Annual Reports
Supporting information
Compensation of key management personnel
The key management personnel of the Company include the executive management team and members
of the Board of Directors. Key management personnel compensation comprised:
Years ended December 31,
2024
2023
Salaries, directors’ fees and short-term benefits
$
6.3
$
6.2
Post-employment benefits
0.8
0.9
Share-based compensation, including mark-to-market adjustment
0.3
(0.4)
$
7.4
$
6.7
As at December 31, 2024, $6.2 million of key management compensation costs were included in accounts
payable and accrued liabilities and other liabilities (2023: $6.2 million).
70
Western Forest Products Inc.
Notes to the Consolidated Financial Statements
Years ended December 31, 2024 and 2023
(Tabular amounts expressed in millions of Canadian dollars except number of shares and per share amounts)
30. Expense categorization
Expenses by function:
Years ended December 31,
2024
2023
Administration
$
30.6
$
30.9
Distribution expenses
106.0
103.4
Cost of goods sold
973.7
966.6
$ 1,110.3
$ 1,100.9
Distribution expenses include $24.5 million of export taxes net of recoveries of $1.0 million (2023: $15.9
million net of recoveries of $4.3 million) on finalization of duty rates (see Note 21(a)).
Selected costs by nature:
Years ended December 31,
2024
2023
Compensation costs
$
207.4
$
200.2
Amortization in costs of goods sold
52.5
51.5
Amortization in selling and administration
2.2
2.2
Compensation costs are included in cost of goods sold and selling and administration.
31. Subsequent events
Asset sales
On January 31, 2025, the Company entered into an asset purchase agreement for the sale of our APD
site, currently classified as an asset held for sale (Note 5), for $7.3 million. The sale is subject to customary
closing conditions and is anticipated to close in the first quarter of 2025.
On February 10, 2025, the Company completed the sale of approximately 14,500 hectares of fee simple
land, biological assets and infrastructure on northern Vancouver Island, BC for $69.2 million to a Canadian
affiliate of the Eastwood Climate Smart Forestry Fund I.
71
Suite 800
1055 West Georgia Street
Royal Centre, PO Box 11122
Vancouver, British Columbia
Canada V6E 3P3
Telephone: (604) 648-4500
www.westernforest.com
info@westernforest.com
Trading on the TSX as “WEF”