Western Forest Products Inc.

Second-quarter adjusted EBITDA was $0.4 million, compared with $0.5 million in the same period last year. Q2 EBITDA included $2.3 million in share-based compensation due to a 20% increase in the share price. Operating results benefited from improved lumber pricing, a strong specialty lumber sales mix, more favorable harvesting conditions, and a strong external log sale mix, but were primarily offset by a 25% reduction in lumber shipments, softer demand, loss of sales from Columbia Vista, and higher softwood lumber duties and tariffs at a combined 45% versus 14% a year ago. The quarter ended with approximately 67 million board feet of lumber inventory and 622,000 cubic meters of log inventory. Q2 ending net debt declined by $14.4 million, and net debt to capitalization improved to 6% from 9% at the end of Q1. Capital spending for 2026 is expected to be between $45 million and $50 million, including about $20 million for the kiln projects and the autograder. Management expects to finish 2026 in a net cash position if the remaining asset-sale items close, including the anticipated second-half 2026 sale of Stillwater Force operations for $80 million. Near-term guidance was cautious: third-quarter lumber markets are expected to be relatively stable, North American demand remains subdued, Japan is stable, China is expected to soften, the Q3 order file is about 118 million board feet, and Cowichan Bay will be curtailed for the remainder of 2026.

Steven Hofer said the company is making clear progress on strategic priorities while strengthening the balance sheet. He emphasized investments in low-cost continuous dry kilns, AI-enabled grading technology, and value-added manufacturing as steps to support higher-margin products and broader customer reach. He also said the company is being disciplined on growth capital, with priority on reducing its cost structure and addressing internal manufacturing challenges before pursuing larger expansion opportunities.

Glenn Nontell framed the quarter as modestly improved on pricing and mix but still pressured by lower shipments, Columbia Vista volume loss, and the 45% combined duty/tariff rate. He said Q2 adjusted EBITDA was $0.4 million, net debt fell by $14.4 million, liquidity improved, and the net debt-to-capitalization ratio moved to 6% from 9% in Q1. He also highlighted the 2026 CapEx range of $45 million to $50 million, the USD 22.8 million insurance proceeds collected in Q2, the USD 14.7 million Columbia Vista site sale completed after quarter-end, and an expected CAD 5 million tax impact payable in 2027.

Analysts focused on whether better permit approvals and weather-driven harvest gains are sustainable, and Hofer said the improvement reflects years of work on First Nations relations and integrated resource management, with a better forward permit outlook. Questions also centered on second-half shipment trends and he said lumber shipments should be fairly similar in Q3 and Q4 to the first half, with flexibility to restart or add hours if opportunities arise. On Cowichan Bay, management said a restart would require a meaningful reduction in duties and tariffs, and on capital allocation they said priority will be fixing the company’s high manufacturing cost structure, while still considering engineered wood and mass timber investments.