A favourable US duties adjustment paid nearly a third of West Fraser’s lumber earnings in the second quarter, as the producer reaffirmed all of its 2026 shipment targets while calling lumber demand stable and OSB somewhat softer through the year. That is according to President and Chief Executive Officer Sean McLaren, whose second-quarter results released on Wednesday put sales at US $1.434 billion, adjusted EBITDA at $59 million, and the net loss at $61 million, or 78 cents a diluted share.
“Europe remained a bright spot as market conditions improved relative to last year,” McLaren said, with lumber, North American engineered wood products, and the European panels business each posting positive adjusted earnings in the same quarter.
A $13 million favourable in-year duties adjustment supplied nearly a third of the lumber segment’s $41 million adjusted result, leaving underlying earnings at $28 million against an $84 million first-quarter adjusted loss.
Shipments of softwood lumber, OSB, and half the company’s MDF are excluded from the 50 per cent Section 338 tariffs taking effect on 19 August. West Fraser estimates the measures would have applied to 3 per cent of its plywood and 20 per cent of its LVL shipped to United States customers this year, with indirect exposure through downstream supply chains not yet determinable.
Henderson in Texas more than doubled its output in the first quarter and now operates at levels equivalent to the mill it replaced, while Canadian lumber production rose 13 per cent as Blue Ridge returned to normal rates and Southern Yellow Pine held year-to-date volumes despite Augusta closing late last year.
Softer demand continues to shadow the OSB projection, with the High Level wind-down in Alberta complete and North American shipments held at 5.9 to 6.3 billion square feet on a three-eighths-inch basis, a target that now concentrates production in the company’s most modern facilities. European panel demand is expected to remain stable or improve modestly, with OSB shipments there held at 1.0 billion to 1.25 billion square feet.
It comes as Canfor announced the permanent closure of its Fox Creek sawmill on Tuesday, taking 120 million board feet out of the same market, while benchmark lumber trades at a 12-month high of $650.06 on a wildfire-driven rally across Western Canada.
Global events pushed oil-linked inputs higher through the half, with resin and wax costs the company estimates at $13 million above the first quarter and every $10-a-barrel move in crude worth an estimated $15 million a year across the divisions. Transportation costs increased across the US South under the same pressures, with much of the increase recovered through customer surcharges.
Operations generated $192 million of cash and repaid $148 million of operating loans, though cash still ended the half at $74 million, down from $202 million in December, with $55 million drawn on the $1 billion facility and $159 million committed to capital works. Directors declared a 32-cent dividend for the third quarter, following $50 million paid this year and no repurchases under the current buyback program.
McLaren remains constructive on residential construction over the long term, backed by an ongoing US housing supply deficit and a housing stock with a median age of 44 years, and holds 2026 capital expenditure at $300 million to $350 million while the near-term call stands, lumber stable, OSB softer.
