West Fraser Timber Co. WFG has announced that it has entered into an agreement to acquire Spray Lake Sawmills for CAD $140 million ($103 million). This move will help WFG to grow its footprint in Southern Alberta and expand its Canadian treated wood business, while providing access to a high-quality timber supply.

Located in Cochrane, Alberta, Spray Lake Sawmills produces treated wood products, dimensional lumber and a variety of innovative wood residuals and biproducts. It has an annual lumber capacity of 155 million board feet. It holds two forest management agreements granted by the Government of Alberta with a total annual allowable cut of approximately 500,000 cubic meters.

The transaction is expected to close later this year following the completion of Canadian regulatory reviews and the satisfaction of customary conditions.

In the second quarter of 2023, WFG reported a 1.2% year-over-year decline in revenues to $1.61 billion. The company witnessed challenging demand markets, particularly in the Pulp & Paper segment. Unscheduled downtime events at its mills, including an extended maintenance shutdown at Hinton Pulp, and the curtailment of Cariboo Pulp mill owing to fiber supply constraints also impacted results. In the backdrop of declining pulp prices, which led to a significant inventory write-down, the Pulp & Paper segment experienced higher losses than expected.

The company, however, noted some improvement in demand for some of its key wood-building products. There was a marked improvement in the North America Engineered Wood Products segment’s performance with recovering demand in the OSB business. Backed by this momentum, West Fraser raised the guidance for OSB shipments to 6.1- 6.4 billion square feet from the prior-stated range of 5.9-6.2 billion square feet.

Total lumber shipments in 2023 will be similar to 2022 levels as the transportation challenges seen last year have abated somewhat.

The company, however, does not expect an improvement in the Pulp & Paper segment’s shipments in 2023. Near-term supply and demand fundamentals remain challenging as low global demand and new South American capacity have boosted global pulp inventories.
 
Source:  nasdaq.com