VANCOUVER, British Columbia (News release) -- Western Forest Products Inc. (TSX: WEF) ("Western" or the "Company") reported Adjusted EBITDA of $0.4 million in the second quarter of 2026, as compared to $0.5 million in the same period last year. Adjusted EBITDA in the second quarter of 2026 included a $2.3 million expense related to share-based compensation due to a 20% increase in the Company's share price, compared to a $0.3 million expense in the same period last year.
Net income was $10.5 million in the second quarter of 2026, as compared to a net loss of $17.4 million for the same period last year. Results in the second quarter of 2026 included a $31.3 million property insurance recovery from our Columbia Vista sawmill.
|
(millions of Canadian dollars except per share amounts |
Q2 |
Q2 |
Q1 |
YTD |
YTD |
|||||||||||||||
|
Revenue |
$ |
239.6 |
$ |
289.1 |
$ |
201.5 |
$ |
441.1 |
$ |
551.6 |
||||||||||
|
Adjusted EBITDA (1) |
0.4 |
0.5 |
(13.6 |
) |
(13.2 |
) |
4.0 |
|||||||||||||
|
Adjusted EBITDA margin (1) |
0% |
0% |
(7% |
) |
(3% |
) |
1% |
|||||||||||||
|
Operating loss prior to restructuring and other items |
$ |
(11.9 |
) |
$ |
(12.3 |
) |
$ |
(25.5 |
) |
$ |
(37.4 |
) |
$ |
(21.5 |
) |
|||||
|
Net income (loss) |
10.5 |
(17.4 |
) |
(19.9 |
) |
(9.4 |
) |
(3.6 |
) |
|||||||||||
|
Earnings (loss) per share, diluted |
1.10 |
(1.62 |
) |
(1.83 |
) |
(0.73 |
) |
(0.29 |
) |
|||||||||||
|
Net debt (1), end of period |
32.2 |
27.3 |
46.6 |
|||||||||||||||||
|
Liquidity (1), end of period |
243.6 |
189.7 |
229.4 |
|||||||||||||||||
|
Net debt to capitalization (1) |
6% |
5% |
9% |
|||||||||||||||||
|
(1) Refer to Adjusted EBITDA, Adjusted EBITDA margin, Liquidity and Net debt to capitalization in the Non-GAAP Financial Measures section. |
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Second Quarter 2026 Financial and Operational Summary
-
Lumber production of 130 million board feet (versus 172 million board feet in Q2 2025).
-
Lumber shipments of 132 million board feet (versus 176 million board feet in Q2 2025).
-
Cedar lumber shipments of 28 million board feet (versus 32 million board feet in Q2 2025).
-
Specialty lumber mix of 57% (versus 52% in Q2 2025).
-
Average lumber selling price of $1,390 per mfbm (versus $1,243 per mfbm in Q2 2025).
-
Average BC log sales price of $148 per m3 (versus $139 per m3 in Q2 2025).
-
Strategic investments in kiln drying completed with commissioning of the second of our two continuous dry kilns at our Value-Added Division in June 2026 and commissioning of a new thermal kiln at our Value-Added Division in July 2026.
-
Received $1.5 million from Fortis BC under the Efficiency Incentive Program related to our previously commissioned first continuous dry kiln at our Value-Added Division.
-
Upgrading of an autograder with AI technology at Duke Point is underway, with anticipated completion in early 2027.
Columbia Vista Property Sale and Insurance
-
In April 2026, we finalized the property insurance claim related to the Columbia Vista Division ("CVD") sawmill fire for USD$28.8 million ($40.1 million). After considering the insurance deductible and USD$5.0 million ($6.9 million) that was received in 2025, the Company received proceeds of USD$22.8 million ($31.3 million) in the second quarter of 2026.
-
On June 15, 2026, the Company reached an agreement with a third party to sell the CVD sawmill site and certain assets for USD$14.7 million ($20.8 million). The sale was completed on July 31, 2026.
-
The Company is working with its insurance adjuster to finalize its claim for business interruption related to the fire, which has a maximum coverage of USD$7.9 million ($11.2 million).
Balance Sheet and Cash Flow
-
Net debt decreased $14.4 million from the end of the first quarter of 2026.
-
Ended the quarter with liquidity of $243.6 million and a net debt to capitalization ratio of 6%, compared to $229.4 million of liquidity and a net debt to capitalization ratio of 9% as at March 31, 2026.
-
Sale of Stillwater Forest Operations for $80.0 million anticipated to close in the second half of 2026.
-
Income tax refund of $8.9 million anticipated to be received in the second half of 2026.
-
2026 capital expenditure spending is anticipated to be between $45 and $50 million, which includes approximately $20 million of planned spending on the two continuous dry kilns and one thermal kiln at our Value-Added Division and the autograder at Duke Point.
Operating Curtailments
In the second quarter of 2026, we took operating curtailments at our Duke Point sawmill for two weeks, our Ladysmith sawmill for one week, and our Cowichan Bay sawmill for seven weeks. Curtailments are in response to persistently weak market conditions, high softwood lumber duties and tariffs and factors relating to the BC operating environment. As management expects these conditions to persist, Cowichan Bay employees were notified that the mill will remain curtailed for the remainder of the year.
On April 9, 2026, the DoC announced its preliminary determination for AD and countervailing duty ("CV") rates resulting from its seventh AR for shipments in 2024, which was subsequently amended on June 30, 2026, indicating an AD rate of 10.66% and a CV rate of 14.52%, compared to the current rates of 20.53% and 14.63%, respectively, applicable to the Company. Shipments in 2024 were subject to weighted average rates of 3.62% and 6.78% for CV and AD, respectively. The DoC may revise these rates between the preliminary and the final determination, which is expected to be released in the second half of 2026.
If the final seventh AR rates are unchanged from the preliminary seventh AR rates, Western will record a non-cash export tax expense of USD$26.6 million ($37.8 million), plus accrued interest of approximately USD$5.5 million ($7.8 million), when the final seventh AR rates are published. Cash deposits continue at the combined duty rate of 35.16% until the final determinations are published, after which the final AR7 rate will apply.
Market Outlook
North American lumber markets are expected to be relatively stable through most of the third quarter of 2026. Housing affordability continues to be the most significant issue leading to reduced housing demand. Elevated interest rates, higher fuel costs, and broader economic uncertainty are contributing to subdued consumer confidence. Despite these headwinds, reduced lumber supply across North America has helped to offset weaker demand and support price stability across key product categories and market segments.
Lumber demand in Japan has improved as housing starts gained momentum through the second quarter of 2026 while lumber inventories at the ports decreased. The Japanese lumber market is expected to be stable through the third quarter of 2026. Demand for softwood lumber in China is anticipated to soften in the third quarter of 2026, as seasonal weather and high temperatures reduce construction activities.
