West Fraser Timber Co. Ltd. (WFG) Earnings Call Transcript & Summary

Good morning and afternoon, ladies and gentlemen. And welcome to the West Fraser Annual General Meeting. [Operator Instructions] I now would like to turn the conference over to Mr. Hank Ketcham. Please go ahead, sir.

Thank you, operator. Good morning, everyone. I'm Hank Ketcham, Chairman of the Board of West Fraser. I'll act as Chair of this meeting, and Tom Theodorakis will act as Secretary. I appoint AST Trust Company (Canada) to act as scrutineer for the meeting. On behalf of the Board of Directors, I'm pleased to welcome you to the 2020 Annual General Meeting of West Fraser, particularly those of you joining us by conference call. As you know, as part of our COVID-19 prevention plans, we encourage shareholders to participate in today's meeting by conference call to reduce the risks posed by in-person gatherings and to help protect the health and safety of our shareholders, directors and employees and comply with the orders of public health authorities. Thank you to all of you for your cooperation in this difficult time. We'll first deal with the formal items of business. At the end of the meeting, our President and Chief Executive Officer, Ray Ferris, will provide an update on the company's operations. AST has provided the preliminary scrutineer's report, and it shows that 72 shareholders are present in person or represented by proxy, holding a total of 54,728,962 common shares and Class B common shares. This confirms the presence of a quorum at the meeting. The Secretary of the company has also confirmed that notice calling the meeting was mailed to all shareholders of the company entitled to receive such notice, and AST has provided an affidavit of mailing. As a quorum is present and proper notice of this meeting has been given, I declare this meeting to be properly constituted. Now let's move to the business of the meeting. I'd like to start by reviewing the procedures for today's meeting. In order to expedite proceedings, I will propose all motions and no motion need to be seconded. Voting on the motion to appoint the auditor will be conducted by a show of hands unless a ballot is demanded. In order to have an accurate record of the votes for the election of each director for the purposes of our majority voting policy and to properly record the vote on the company's Say on Pay advisory resolute and the resolution approving the adoption of the shareholder rights plan, we will conduct the vote on each of these resolutions by ballot. Scrutineer has provided a form of ballot for these resolutions to each shareholder or authorized representative present in person and each proxy holder who is present and has not submitted a proxy. I now table and submit to you the report of the auditor, PricewaterhouseCoopers LLP, and the financial statements for the year ended December 31, 2019. We had mailed to shareholders a copy of the annual report containing the auditor's report and the financial statements with the notice of meeting originally scheduled for April 21, 2020. I declare that the financial statements and auditors' report have been received by the shareholders as submitted to this meeting. We will now proceed with the election of directors for the upcoming year. The number of directors to be elected is 10. The company has implemented an advanced notice policy requiring shareholders to provide advanced notice for any additional director nominations. The Secretary of the company has advised that no nomination has been received other than those persons named as Director nominees in the information circular for this meeting mailed to shareholders. I would now like to introduce and nominate the following individuals to hold office as directors of the company until the next Annual General Meeting: Reid Carter, Ray Ferris, John Floren; Brian Kenning, John Ketcham, Gerry Miller, Bob Phillips, Janice Rennie, Gillian Winckler, and myself, Hank Ketcham. These persons are management's nominees for election to the Board as stated in the information circular for this meeting. With there being no further nominations, I declare the nominations closed. Ballots on the election of directors have already been distributed and collected, and the scrutineer has reported that each nominee received the majority of yes votes, and I declare them duly elected to act as directors of the company for the ensuing year. Detailed results of the voting will be published shortly on SEDAR. PricewaterhouseCoopers LLP is currently the auditor of the company. I propose that PricewaterhouseCoopers LLP, chartered accountants, be appointed as auditors of the company at a remuneration to be fixed by the directors. Those in favor? [Voting]

Contrary? [Voting]

Carried. I now declare that PricewaterhouseCoopers LLP, chartered accountants, have been appointed as auditors of the company at a remuneration to be fixed by the directors. The next item of business is for shareholders to vote on the company's approach to executive compensation known as the Say on Pay advisory resolution. Our executive compensation philosophy, policies and programs are based on the fundamental principle of pay-for-performance to align the interest of our executives with those of our shareholders. This compensation approach allows us to attract and retain high-performing executives who will be strongly incentivized to create value for our shareholders on a sustainable basis. The company's shareholders are being asked to approve the company's Say on Pay advisory resolution, as more fully described in the information circular. Ballots on this resolution have already been distributed and collected, and the scrutineer has reported that the Say on Pay advisory resolution has been approved. Details of the vote will be published on SEDAR. The next item of business is the adoption of the company's shareholder rights plan as detailed in the information circular. On April 9, 2020, the Board approved the adoption of the shareholders right plan, which has been conditionally accepted by Toronto Stock Exchange, subject to shareholder approval. Given that the shareholders rights plan is described in detail in the information circular, I do not propose to speak about the rights plan. Ballots on this matter have already been distributed and collected, and the scrutineer has reported that the company's shareholder rights plan has been approved by the shareholders. Details of the vote will be published on SEDAR. As there is no further formal business to be brought before the meeting, I propose a motion that this meeting terminate. Those in favor? [Voting]

Contrary? [Voting]

I declare the motion carried and the formal portion of the meeting concluded. I now call on Ray Ferris, President and Chief Executive Officer of the company, to provide an update on the company's operations.

Thank you, Hank, and good morning, everyone, and good afternoon. I want to thank all of our shareholders who have voted by proxy to reduce the number of in-person attendees at the meeting and to thank everyone for your cooperation and understanding during these challenging times. I'll provide a few brief comments and then a short business update on our operations for those listening in. I recently briefed our investors and analysts on our first quarter results, but I believe it is important to further reinforce what our priorities are at West Fraser. Our first priority is the health and safety of our employees and the communities that we operate in. In response to COVID-19 and without delay, we aggressively eliminated travel, imposed physical distancing measures, improved cleaning and hygiene regimes, and in collaboration with our industry competitors and regulatory bodies, developed and implemented industry-leading exposure control protocols. We also adjusted our production schedules to accommodate both safety and the needs of our employees and successfully executed on having almost all of our entire corporate personnel group working from home. These measures, coupled with strictly following the health authorities' direction, have kept our employees and communities safe. Being designated an essential industry is not something that we take for granted, and we take our community responsibilities very seriously. Our next priority is to ensure that we are operating our businesses responsibly. In that regard, it is important to remember that 2019 was a significant year of transition for West Fraser. We made difficult but important decisions in British Columbia that resulted in the permanent capacity elimination of over 600 million board feet of British Columbia lumber production, including the closure of our Chasm sawmill. These decisions, although difficult, were necessary in order to better align our capacity with the available timber supply. In contrast, in the U.S. South, we completed a number of significant growth, modernization and margin improvement projects late in 2019 and in early 2020. These changes and others continue to further reinforce our operating platform. I'm proud to inform you that our employees were able to accomplish all of this while attaining our best safety performance in the history of the company, both for the year of 2019 as well as for the first quarter of 2020. With respect to current operations today, since the middle of March and throughout April, in response to the rapidly changing market demand, we significantly reduced lumber and plywood production. As we entered May, we have substantially resumed both lumber and plywood production, with only a few facilities operating at less than full schedules. Our previously announced downtime at Cariboo Pulp was slightly extended to bring forward planned maintenance from the fall. This will allow Cariboo Pulp to forgo a previously scheduled fall maintenance outage. Cariboo Pulp is in the process of resolving the operations this week. And we will continue to adjust our operating schedules in both the U.S. and Canada as necessary in order to meet the available demand. Our final priority must be to ensure that our balance sheet remains strong. As we look forward into the coming quarters and the impacts of COVID-19 become more clear, we will adjust as necessary to maintain a strong balance sheet and ensure ample liquidity. And then finally, I want to recognize our employees that delivered strong health, safety and operational performance across our entire platform at West Fraser. We are proud of their accomplishments. And we are pleased to see the results of our capital and margin improvement programs coming online. It's our employees that I must thank for being so resilient and dedicated in making the business stronger while adapting to a rapidly and constantly changing environment. Thank you. And Hank, that concludes my update.

Okay. Thank you, Ray. And thank you again to our shareholders and directors for participating in this meeting by conference call and your understanding during these challenging circumstances. We look forward to seeing you and barring any similar unusual circumstances, we anticipate holding our usual in-person Annual General Meeting in 2021. With that, operator, we can now end the call. Thank you.

Thank you, sir. Ladies and gentlemen, this does indeed conclude your call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Enjoy the rest of your day.