Western Forest Products Inc. reported a decreased net loss of CAD 8 million in the first quarter of 2024, a significant improvement from a CAD 17.7 million loss in Q1 of the previous year. Revenue declined to CAD 240 million from CAD 264 million in Q1 2023, reflecting lower lumber prices and decreased shipments.
The company's lumber shipments fell to 131 million board feet from 170 million in the same quarter last year, while specialty lumber mix increased to 61% from 40%, indicating a strategic shift towards higher-value products. Japan's lumber shipments nearly doubled, reaching 29 million board feet. Despite these positives, the average lumber selling price was CAD 1,351 per mfbm, slightly up from CAD 1,241 per mfbm in Q1 2023, affected by fluctuating lumber prices.
Western announced a new partnership with First Nations, selling a 34% stake in La-kwa sa muqw Forestry Limited Partnership for CAD 36 million, enhancing indigenous collaboration and securing a stable long-term fiber supply. Additionally, the company completed its first continuous dry kiln on the BC Coast, aiming to boost production of high-value products while aligning with environmental goals.
The market outlook for Western Forest Products reflects cautious optimism amid fluctuating global market conditions. In North America, demand and prices for commodity lumber products are expected to improve marginally in Q2 2024, though volatility is anticipated to persist through the second half of the year due to economic uncertainties and supply chain adjustments. Cedar timber and premium appearance products are projected to maintain stable demand and prices, bolstered by consistent quality and brand reputation. Demand for Cedar decking products is firming up as the season progresses, contrasting with the softer demand for Cedar trim and fencing products, which may see adjustments once market inventories rebalance.
Internationally, the Japanese market presents a stable outlook with lumber volumes expected to mirror those seen in the first quarter. Prices are likely to hold steady, although they could face downward pressure from further weakening of the Japanese yen against the USD. In China, the demand for lumber and corresponding prices are anticipated to exhibit a slight decline throughout 2024, influenced by broader economic slowdowns and cautious consumer spending.
The company's strategic focus on high-value product diversification and operational efficiency underpins its resilience against these market challenges, aiming to capitalize on emergent opportunities as global conditions evolve.
Western continues to focus on financial resilience, ending the quarter with CAD 142 million in liquidity and maintaining a net debt to capitalization ratio of 13%. The company plans to moderate its capital expenditures to CAD 50 million in 2024, prioritizing strategic investments and operational efficiency.
