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

Good afternoon. I'm Robert Winslow, Director of Investor Relations and Corporate Development at West Fraser. And I'd like to thank you for joining our inaugural analyst and investor event. While we are not able to host you in person due to the COVID pandemic, we are excited to have listeners from across North America and Europe registered for this live stream event, which is an important part of our Investor Relations outreach. We appreciate you spending time with us today as we socially distance in a production studio here in Vancouver, Canada. Over the next 2 hours or less, you'll hear from the CEO of West Fraser, Mr. Ray Ferris as well as a number of our senior executives, who will discuss our corporate strategy and how we think about growth, sustainability, the integration of Norbord; and finally, capital allocation. But before I hand the floor to Ray, I'd like to mention a few housekeeping items. First, during today's event, West Fraser's representatives will be making certain statements about potential future developments, which include forward-looking statements intended to provide reasonable guidance to investors. Their accuracy, however, depends on a number of assumptions and is subject to various risks and uncertainties. Listeners should exercise caution in relying on these statements and should refer to the forward-looking statement disclaimer in the presentation for this event available on our website at www.westfraser.com for a full description of the forward-looking statements and related assumptions, risks and uncertainties. In terms of today's format, we expect it to run a little under 2 hours in total. We will have about 35 minutes of presentations, followed by a 15-minute Q&A session. We will then break for 5 minutes before beginning a second set of presentations and another 15-minute Q&A session that will conclude our day. Regarding the Q&A sessions, you'll see you on today's webcast page a Slide section for submitting questions. You may submit your questions anonymously or provide your name or e-mail so that we can follow-up later if and as necessary. I will moderate the Q&A and will not disclose to the audience the names of those who submit questions to preserve confidentiality. If you experience technical difficulties during today's event, you may e-mail contact at oboy.ca for assistance. Lastly, today's slide materials are available on the Investors section of the West Fraser website and an archived version of today's webcast is expected to be available on the website within 24 hours. So with that, let's get today's event underway with some opening comments from our CEO. Over to you, Ray.

Welcome everyone, and thank you for joining us today. It's great to see the interest in our event, and we are all very pleased to be able to talk to you about our company. But before we do that, I just want to say thank you to Robert for doing such a great job and playing such a key role in pulling this event together for all of us. Thank you very much, Robert. My name is Ray Ferris, and I feel truly privileged to represent our team here today as President and CEO of West Fraser. Our culture and our values run very deep within our company and our leadership team. And these are the true drivers of both our past and our future success. For me, I've been in the wood products industry for roughly 34 years and directly with West Fraser for the past 24. In 2007, I became responsible for West Fraser's Wood Products Group and have since taken on various responsibilities within the company up to and including my current role. My and my team's objectives today are quite simple. One, that you get a better understanding of who West Fraser is, a bit of a feel of who we are as a leadership team and a sense of our West Fraser culture and values. And hopefully be able to answer at least 2 questions. The first one being why invest in wood-base wood products? And secondly, number two, if you believe in the wood products space as much as we do, then why invest in West Fraser? The company, West Fraser started humbly back in 1955 in Central British Columbia, with just 12 employees. Now 66 years later, has grown to approximately 11,000 people at more than 60 facilities in Canada, United States, United Kingdom and Europe. West Fraser is now arguably the world's leading wood-based building products manufacturer. With our acquisition of Norbord earlier this year, we are now the largest lumber and OSB producer in the world and have significant capacity of other engineered wood products, such as laminated veneer lumber, medium density fiberboard, plywood, particle board as well as pulp, newsprint and wood chips. Our largest businesses are lumber and -- is our lumber and panel groups. Our lumber production is spread amongst the U.S. South, about 50%, with another 25% in Alberta and the remainder in British Columbia. On the panel side, about 40% of our production is based in Canada, 40% in the United States, with the remaining 20% in Europe. Maybe it's obvious, but I need to state it, and you probably repeat it several times today, wood and wood products are the natural sustainable and reliable building material. And that all of our products are made from responsibly sourced, third-party certified, sustainably managed forest resources. A little bit about our values. At West Fraser, we strive to make sustainability more than just a statement. With our more than 65 years of history, which is central -- this is a central principle upon which our people and community values and businesses are predicated. With that, I'm pleased to share that this summer, we planted our 2 billionth tree in our company's history. This is in Canada, where we manage the forest, and we plant 2 trees for every tree that we harvest. And although we have grown far beyond our humble beginnings and entered new products and new regions, our strategy and our core values remain the same. We are very proud of our culture, which is founded on the principle that every single person is important to the success of the company and where we believe in teamwork, treating all people fairly and respectfully, and striving to create an environment of integrity and respect and hopefully, having some fun along the way. Safety is a key priority for us. We believe all accidents are preventable and that we can eliminate serious injuries and incidents and injuries in our company. Our strategy is simple. And since 1955 has proven to be durable and successful, be low-cost and high margin in the areas in which we operate, reinvest in your operations and in your people, maintain a strong and prudent balance sheet. We need to be important to our customer and deliver value. Our focus is to be the most valued, important and reliable supplier to our customers. Both our product and geographic diversity are key to supporting these strategies. We expect to be an innovator. Our roots are entrepreneurial and are underpinned by our strategy of investing in our operations, where the company has a long history of developing, implementing and promoting new technologies. So why the wood industry? And why should you own West Fraser? First, not going to spend a lot of time discussing what you would normally hear from any number of economists, but I believe it prudent to remind everyone of some fundamentals. First, we believe the market fundamentals of our business are strong. And although it can be very difficult to predict the ebbs and flows from quarter-to-quarter, the long-term trend provides a positive and constructive outlook. First, housing. U.S. starts are finally just approaching long-term levels required to meet formation needs. Not since 2006, frankly. This has led to a housing deficit of more than 4 million homes. Low mortgage rates and housing affordability remain positive and key demographics, such as the large cohort of millennials who are now looking to enter the housing market are expected to continue to support healthy demand for single family homes. And repair and renovation, used to support an aging housing stock and increased demand from remote working and other do-it-yourself projects is expected to remain robust. Although we see the demand picture is positive, Sean McLaren and Peter Wijnbergen, will both discuss why we see this as even more of a supply side story. So why should you own West Fraser shares? The answer to me is this. Now more than ever, the world needs sustainable renewable building materials. Frankly, we like wood. That's what we do, healthy growing force and renewable wood products are a key opportunity against the fight against climate change. The wood products and building materials we make are from sustainable and renewable for us and sequester carbon. When it comes to building, we believe wood is the best solution for society to meet its climate change objectives. West Fraser is strategically positioned to participate in this growing opportunity and to build on our track record of creating value for our shareholders. What are our competitive advantages? Diversification. We offer a wide range of home and building construction needs across multiple markets with operations in 5 countries. We talked about strong demand fundamentals. We offer significant exposure to U.S. housing, and this is an area where we remain optimistic. Financial resilience, our scale, our low-cost operations, our diversity of products and geography, including the end markets that we meet -- that we intend to meet, are well positioned to weather periods of volatility, backed up by a solid balance sheet. We are disciplined and balanced allocators of capital with a track record of reinvesting in our business. We are focused on continued growth, and we have the scope and the scale to unlock further opportunities. Finally and most importantly, our people. And yes, I do know that I am a bit biased, but I do believe we have the strongest team in the business. And the acquisition of the Norbord team earlier this year, the company immediately got stronger. Our proven execution and value track record underscores our enhanced capability to invest, to grow and execute, and our capability has never been stronger. We have an excited and an energized group that you're going to meet later, and we're all moving aggressively moving forward. So just as I wrap up and I turn the podium over to the team, James Gorman, our Vice President of Corporate Relations and Sustainability, will speak to you on our ESG progress and our ongoing commitment to diversity, equality and inclusion. Robin Lampard, our Senior Vice President of Finance, will shed light on our progress and key priorities with respect to the significant transformation we underwent this year as a result, requiring the world's largest OSB producer, Norbord. And Chris Virostek, our Chief Financial Officer, will walk you through our thinking on finance and capital allocation. And next up, the leaders of our 2 largest divisions, Sean McLaren, who runs our Lumber Wood Products Group; and Peter Wijnbergen, who runs our Engineered Wood Group, will talk about their key priorities and outlook for the business. In closing, I really want to thank you again for joining us, and I look forward to the time when we may hold events like today's analyst investor event in person. Thank you. Over to you, Sean.

Thank you, Ray, and good afternoon, everyone. My name is Sean McLaren, and I'm our President of Solid Wood. I've been with the company for 33 years. The first half of my career, I spent working in Western Canada at many of our lumber and pulp mills. In 2007, with the acquisition of the International Paper Sawmills, I moved to Memphis to lead our U.S. lumber manufacturing. Since 2010, I've had overall responsibility for our U.S. lumber business, and this February moved into my current role. Ray has described our company, our culture and our strategy. My role today is to provide a lens into our lumber business and how our Solid Wood team thinks about people, growth and capital investment. Ray spoke about the demand fundamentals of our business. Let me speak more specifically to the supply side in the lumber business and how that landscape frames and has framed our growth and investment decisions. Since 2005, Canadian lumber supply has been reduced by 11 billion board feet. That represents 20% of current North American lumber supply. This reduction in supply is a direct result of reduced sawlog availability in British Columbia. Today, the U.S. South is the only North American region with excess log supply that will support significant growth. Let me draw your attention to the last 5 years. During this period, we have experienced robust product pricing with U.S. New home construction, growing from 1.2 million starts to over 1.5 million housing starts. Despite these high prices and steadily growing demand, overall North American lumber capacity has remained flat, with additional capacity in the U.S. South, offset by continued reduction in British Columbia. No other major North American producing region has added any material amount of capacity, despite high prices. Here are the 4 major regional supply areas broken into U.S. housing start equivalent. You can see the industry is currently sized for 1.5 million housing starts, with the U.S. South now supporting over one third of North American lumber supply. In order to support 100,000 additional U.S. housing starts, approximately 10 brand-new sawmills need to be built. The last time the industry had to respond and scaled up to meet this growing lumber demand was heading into the last U.S. housing peak in 2005. The industry was in a very different place then. British Columbia was in the early stages of the Mountain pine beetle epidemic, and there was a large supply of timber available to be harvested. And after decades of steady growth and stable operating conditions, the Western Canadian industry had infrastructure to support this rapid growth with an established workforce, large, well-capitalized contractors, residual integration and a sizable equipment industry and vendor capacity. Due to available timber, today, this expansion is happening in the U.S. South. I will speak later to the ecosystem needed to scale up a U.S. South sawmill, but the employee, contractor, equipment challenges are all barriers to be able to grow capacity quickly. Let me now shift to West Fraser's lumber business. We began making decisions against this long-term supply challenged backdrop 20 years ago with our initial expansion to the U.S. South with the purchase of 2 lumber mills. Since then, we have systematically grown and more importantly, geographically repositioned our lumber business. In Alberta, through acquisition and reinvestment, we expanded from 1 mill in 2004 to 6 large modern mills today. In the U.S. South, from those initial 2 mills, we have completed 4 additional acquisitions and today have 21 mills operating in 8 southern states. Today, we are the largest producer in both Alberta and the U.S. South, the 2 lowest cost regions in North America. Over the same period, we have shrunk our BC footprint by more than 1/3, and today, it represents 25% of our lumber capacity. Let me now speak to our journey in the U.S. South. 21 mills acquired from 5 different companies, built our operating base to support our customers across the entire region. From this space, we have systematically and consistently modernized our facilities and reinforced our West Fraser operating culture. This was the opportunity we saw 20 years ago and continue to see today, to build out a world-class lumber manufacturing footprint where the fiber supply and the market is. We have invested over $1 billion in the last 10 years. These investments, first and foremost, begin with, investing in our people and our teams, strengthening our culture of a place people want to join and develop their careers, continually improving the safety and cleanliness of our plants, designing better jobs and improving work conditions; secondly, investing in the state-of-the-art technology that drives the most value and product flexibility out of every log with the tools to achieve best-in-class productivity. Finally, from that strong base growth. Here is an outline of the ecosystem of a new southern Yellow Pine sawmill. These large investments have inherent execution risk around people, contractor support and residual outlets. With 40,000 inbound log trucks per year, 50,000 outbound lumber and residual trucks per year, a foundation of employees, contractors and residual outlets is a critical part of our derisking strategy. Fundamental to West Fraser is investing in our teams. Teams that can consistently operate safely, build a work environment that attracts and retains people and demonstrate the ability to run what they have well is the primary advantage we see building brownfield and modernizing our existing footprint. Dudley is our most recent full-scale modernization. The Dudley mill is located in Central Georgia, approximately 2.5 hours, southeast of Atlanta, in the middle of a strong timber Basin with 2 other West Fraser facilities, Fitzgerald lumber and Cordial OSB within 60 miles and well positioned to support growing demand from our customers. This mill replaced the mill that was built in the early 1970s with the latest scale and technology. An investment of this size, we expect payback between 5 to 6 years at mid-cycle pricing. This is a world-class lumber mill with several things that I would like you to watch for during the video we're going to show. The clean and bright work environment. The state-of-the-art safety systems and job design to minimize the potential for injury, high-speed equipment with the latest technology that will deliver the most value from every log, a single climate control building that houses our sawmill and planer and an energy system that continuously drives lumber using our bark and our sawdust. Let's run the Dudley video. [Presentation]

I hope you all enjoyed the video of our new Dudley mill, which started up in April of this year. I am proud of our entire Dudley team. The team completed the construction on time and the early stages of start-up safely, all done in a very challenging time of COVID. Today, as the mill ramps up, the team is driving a culture of continuous improvement in safety, reliability and striving to make the mill and West Fraser a better place to work. This is our report card for the last 10 years. This speaks to not only the positioning of the previous 10 years, but the ongoing reinvestment in our culture, our people and our mills. In closing, we believe our lumber business not only has excellent fundamentals, but we are well positioned regionally in North America. Our culture of building strong teams and reinvesting in those teams with the latest technology will continue to differentiate West Fraser and deliver strong returns into the future. Thank you very much. And over to you, Peter.

Thank you, Sean. I'm Peter Wijnbergen, and I've worked with the company and its predecessor since 1987, approaching 35 years now. During that time, I've had the opportunity to have responsibilities for sales, logistics and marketing, strategic planning and corporate development, operations and since 2014 until the acquisition in February of this year as CEO of Norbord. Sean provided you a lens into our lumber business and I'll now do the same for our Engineered Wood Products business. I realize that some of you are focused on the North American OSB supply situation. Our industry is, as best as we can tell, running pretty much flat out. We're just one of the 47 of the mills of the total installed capacity remaining idled at the moment. Now as you can see on the slide, overall industry capacity remains largely unchanged since the previous peak demand period in the housing boom of 2005. Our OSB mill in 100 Mile House was permanently curtailed in 2019, due largely, due to the lack of available fiber. Demand today is quite different than back in 2005. Back then, more than 70% of total OSB consumption came from the new home construction segment. During the past 15 years, demand from industrial and do-it-yourself end users has grown. So that today, only about 50% of our sales volume is available to support growing new housing demand. In response to this growing demand, we started our Chambord mill earlier this year, and we expect to ramp it up over the -- to its full capacity over the next 18 months. Now I'll spend a bit more time addressing that operation later on in my presentation. Now as you can see on this slide, the top 4 producers in the North American OSB industry represent more than 70% of installed capacity. We estimate that the industry is sized to support about 1.45 million housing starts. So you can understand the tension we have seen in the OSB markets over the past year, given the housing market that has finally returned to underlying demand numbers. We estimate that for each additional 100,000 starts, the industry will need to add about 1 billion square feet of capacity. On this slide, you can see how West Fraser's OSB capacity has grown over the years. It is relevant in the current context to understand that step change doesn't come easy. Prior to 2002, while substitution demand growth was strong, we were able to justify a number of greenfield investments. Our first preference is to grow through M&A, but these opportunities don't come around often. We were able to do so in 2002, 2004 and again, more recently, in 2015, when we completed our merger with Ainsworth. Since then, our focus has been on realizing brownfield redevelopment, growing capacity incrementally, while at the same time, modernizing our assets at each one of our facilities. Each one of those steps required -- requires and required significant capital and is often made in the face of a lot of market uncertainty. I am very pleased with our track record of value creation over that entire period. In North America, the past 14 years, housing starts have been well below long-term underlying demand. And this has made it difficult to grow our capacity in a meaningful way. This recent history is responsible for the current situation where supply is largely aligned with current demand estimates, with little to no ability to flex up to meet additional demand levels. While we expect there will be a supply response, given the strong demand expectations going forward, we also believe that such a response will not be quick to development. There are considerable constraints to new greenfield supply, including escalating capital costs, a lack of skills or even any labor, good, sustainable fiber sources and equipment and contractor availability, given the consolidation that that industry has seen over the past 15 difficult years. Even when these constraints are overcome, we estimate it will take 3 to 4 years to bring on new supply to get to first panel, followed by an 18 or more month ramp-up. Not an easy decision to make and while we do expect an industry response, it is unlikely to be meaningful for the next 3 to 5 years. As for our contribution to growth, we were in a position to restart and ramp-up our Chambord mill after completing a reinvestment there of more than $70 million. We expect this mill will be a low-cost producer due to its scale, its access to a strong wood basket, a strong labor force and close proximity to markets in the Northeast. In Europe, we see continued demand growth for OSB, driven in part by a substitution for imported plywood. Similar to North America, there are meaningful constraints when it comes to adding OSB capacity, primarily due to limited fiber baskets available to support a scale OSB mill. Our team has focused on redeveloping our Inverness OSB mill. We recently completed this 2-stage investment of about $200 million. And I'm pleased with the progress the team has made in ramping up capacity, so that we can continue to satisfy growing demand from our customers. On this slide, you can see some additional metrics related to our investment in Inverness. This investment was made at approximately 50% of an equivalent greenfield investment in North America. And we estimate a 5-year payback, a pretty attractive return for such a large capital project. Now our timing couldn't have been better, and we're tracking well ahead of our return estimates. Now I will show you 2 brief videos of our completed projects in both Inverness and Chambord. You should be able to see the large-scale of these 2 operations, the high degree of automation and our focus on integrating new technology in the process. I'm very proud of the teams in Inverness and Chambord. They have implemented a complex project safely and delivered state-of-the-art facilities that come on stream at the right time. So let's now stream the Inverness video, please. [Presentation]

Well, I hope that gave you some perspective of what a large-scale modern OSB mill looks like. Once fully ramped up, our Inverness mill will be one of the largest OSB lines in the world and is very well positioned to support growing demand in both the U.K. and on the continent. Now let's stream the Chambord Video, please. [Presentation]

Well, we fondly refer to these 2 mills as our OSB spas, with a beautiful backdrop of the North Sea and [ Lex Angan ], respectively. But all joking aside, I think you were able to get a good perspective on how highly automated these mills are and the extensive and growing use of robotics to eliminate repetitive work. In closing, I want to say that in addition to large projects such as Inverness and Chambord, we have a strong track record of continued investment in all of our operations, to make sure that they remain current, safe, low-cost and state-of-the-art. Our focus is to apply technology to eliminate repetitive work, improve productivity through automation and improve safety. That's why West Fraser Engineered Wood Products division will continue to bring strong returns in the future. And with that, I'll hand it back to Robert, and we look forward to answering your questions.

Thank you, Peter. And now let's shift to the first Q&A session with Ray, Sean and Peter. [Operator Instructions] While the questions are queuing up, let me start with a question for Ray. Ray, with the Norbord acquisition just 8 months old, how should we think about your appetite and ability to tackle further acquisitions? In other words, does the current Norbord integration preclude West Fraser from further M&A in the near term?

Thank you, Robert. First, I would say, just to kind of go backwards a little bit and I know we've talked about this, and I talked about it earlier, but I mean -- but I have to say the fit with OSB with West Fraser was -- to us, was very natural. It's something that we've been excited about for some time. When the opportunity came up, it was very complementary to the suite of products that we have and just allowed us to be strategically more value to our customers, quite frankly. But more than that, over the last few years, as we've got to know Peter and his team realized that the OSB team was very much like West Fraser is that -- and what they were committed to around safety and operational excellence and so that just was a key part. But I'll say the same thing that I said to our Board as we went into this transaction, is that, often, when we're looking at M&A, it often is one that has comes with challenges. One is that they need a lot of management help, they don't need a lot of investment, and it will take us time to kind of work through those challenges. That was different with the OSB team. Peter, Robin and the OSB team have built a very strong business, a very well capitalized business, and more importantly, a very strong management team. And so when we looked at this, we immediately could see that by adding this on, it was immediately going to make West Fraser stronger, and even building on a good critical mass of people, adding to that critical mass of people so that we can continue to execute on our key strategies. So Robert, frankly, I always have to say kudos to Chris Virostek and Robin. Corporately, it takes a while to digest finance and IT and those types of systems. And I don't want to minimize the amount of work that goes in to do those. But operationally, I think we're -- we've been ready to go since we did the acquisition, and it's just made West Fraser stronger.

Excellent. Thank you, Ray. I've got one here for Sean. Sean, what do you see is your biggest challenge to growth in the U.S. South? That's a big question.

Thank you, Robert. I think the biggest challenge that I see for our team in the U.S. South for all of us is we have so many opportunities in front of us for growth and for modernization. It's really our people strategy and building out our depth, our talent across every one of our mill teams. As we transition from older technology to state-of-the-art technology and the ability to not only operate that technology at a high level, but continually look to use it to make our workplace safer, to make it more productive, to better work environment where we can recruit and retain people from within the community and become the primary employer in every community that we're in. The other piece that we're very proud of with our culture is we have such a team-based culture that is based on continuity of culture and long service employees that we've had tremendous success as we brought other companies into West Fraser, whether it's International Paper Sawmills, Travis Lumber, Bibler Forest Products, Gilman, we've -- the retention level, the fit with our West Fraser culture has been perfectly aligned, and we've been able to grow stronger together and continue to transform the sawmilling culture in the U.S. South. So that's our biggest challenge, but I'm very proud of the progress we've made on that, Robert.

Excellent, excellent. And I'm going to go with a follow-up question for you, Sean, since we're on the lumber topic. It's let's see, we estimate OSB greenfield costs at $500-plus per 1,000 square feet and a 7-year payback. What are the equivalent numbers for lumber greenfield today?

The equivalent numbers for lumber today, of course, there's been a number of announcements this year and in the previous several years around new capacity in the U.S. South. It's in -- our cost is similar in that $550 to $650 per 1,000 board feet of production. Our payback expectations, again, at mid-cycle pricing is 5 to 7 years, so very similar. I would say we have been very aggressive with our modernization and have been at this now for 10 years, continually modernizing. So we've been able to enjoy above mid-cycle pricing with a lot of capital behind us, but those are the economics that we look at as we look forward.

Excellent. I'm going to transition now to a couple for Peter. So Peter, West Fraser is already North America's largest OSB producer. How do you think about growth opportunities in your segment?

Great question. Thank you. Well, as I mentioned earlier in my comments, our first preference is always to grow through M&A. But opportunities there are slim and probably are difficult at the moment, given the sort of high price expectations as a result of the strong market we're in. Having said that, we are -- we believe that there is significant opportunity to bring incremental capacity into the business as we renovate and renew some of our older assets, which we will continue to do as timing allows. Those investments are a little bit more difficult because you're trying to do them on the fly. Value continue to operate at the same time. But nonetheless, I think that there is -- that is where we're focused at the moment. At the same time, if I switch over to Europe, Europe is still very much in the high-growth phase. And so, our focus in Europe really is to realize the significant opportunity we have given our team there with a big reinvestment in inverness, we can, over the next couple of years, continue to ramp up to more than double the original capacity of that operation, and as well as realize some smaller growth opportunities in our Genk operation in Belgium to continue to satisfy the growing amount of customers in Europe.

Excellent. So let me just follow up. As I said, 2 questions on your speed. This is a little bit granular, but the question is, can you talk about the growth potential for your specialty OSB business? And then a question around what size might that grow to in terms of percentage of the business?

Well, gladly. As those of you who have been following the OSB side of the story for some time know that our focus has been on trying to implement or trying to focus our growth in North America on the specialty side of the business. It's been representing something north now of 25% of our total sales volume. And our focus there is because there is significant growth opportunities still available to the OSB business in the industrial and specialty side of what we're doing. And at the same time, it is a business that is much more focused on long term, stable supply relationships where we can excel based on our broad footprint. We can make sure that industrial customers are assured of supply because if something happens in one of our operations temporarily, we can switch over to another nearby operation and continue to make sure that those industrial customers where OSB is used as an input to a further manufacturing process, don't end up with production problems with their own. So that brings with that our focus on stable quality, stable supplies, stable pricing. And those are kind of things that we also like over the long term, so not only taking advantage of a growing market opportunity, but at the same time, bringing some more stability to our earnings and to our margins and predictability to the volume that we can ship base load some of our operations that. So I'm very pleased with the progress we have continued to make there. It's been a bit difficult this last year since the demand from the new housing segment has been so strong. And with that, pricing has been so strong. But we think it's in our long-term interest to continue to support that part of the business.

Excellent. Thank you. Ray, you're up. Mr. Ferris, 2 questions for you. Now that you have a toehold in Europe with the Norbord acquisition, how should we think about West Fraser's growth potential there?

Well, I mean, I think Peter covered it quite well here just a minute ago. So I don't think I can add much to that. I think it was an exciting part of the opportunity in the acquisition that as the company continues to grow that this gave us not only a toehold in Europe, but also a toehold in Eastern Canada. And so just that visibility to different markets, different things creates more long-term opportunities. I think I've said this before, I'll say it again, I mean, you never drive by a customer in the way to the market. North America remains still the world's largest market in consumer, particularly for the products that we make. And that needs to be our primary focus, but I have to tell you, I mean, I recently got back from a trip, Europe with Peter and his team, it's a high-quality business. It's a well-run, well-managed business, and we're very excited about the success we're having over there, Ray and look forward to more success. So I mean, our job is to go out and find value, create value. So I think we're quite optimistic about the options that we have at West Razor.

Excellent. And as a promised second question here, following up on that, how important to management is lowering the volatility in the earnings stream? Are you able to achieve this via current product diversification? Or is it contingent on developing new products and accessing new markets?

Well, it sounds like a Chris Virostek question and I usually defer to, but a great question. For us, our focus is really about making sure that our operations are in the top quartiles. And look, do we want to even out and have a strong steady margins? Absolutely, we do. And a big part of our strategy, whether it be lumber, OSB or to search out those markets on the industrial and specialty products that may give us more balance through the cycle. But at the end of the day, we're going to chase what we think makes us more money over the long haul. And so, I think we do have a strategy to continue to be able to sell our products consistently throughout the cycle. But look, we like housing. We know there are ebbs and flows to it. And so, the world is a -- can be a bit volatile. But I think we're well -- the key for us is how are we positioned to manage through that volatility. And I really do like our product and geographic diversity. And I think we're well positioned to do the best we can in a challenging market at times.

Very good. Thank you. I'm going to transition back to Sean now. Sean, how many more Dudley brownfield opportunities are there in your current portfolio of lumber mills?

That's a great question, Robert. We do have still several opportunities that we are developing. We've got great relationships with our equipment vendors, our contractors. So we've got capacity to do more. Our main focus, though, is to make sure that when we take on one of these Dudley-type projects that we stage them in a way that we can support those teams to have successful, safe builds and then successful and safe startups. And so, we've -- that's really been our strategy over the last number of years, and we'll continue to be that. So we do have several opportunities, but I'd say we'll be very deliberate.

Very good. Thank you. I think we'll squeeze one more in here for Peter. Peter, you mentioned debottlenecking as a growth option in OSB. Are there many of these capacity growth opportunities in your current OSB mill portfolio? So it's a little bit like the question for Sean a moment ago.

Yes, there are always opportunities for us to further debottleneck our operations. The thing that I have always been very careful at adding to that is that these debottlenecking efforts don't come for free. They are the result of significant capital investment. And at the same time, the result of significant efforts from our operating team and capital teams because they need to be implemented on the fly, while you continue to successfully and safely operate a facility. So there is no such thing as free creep in our industry. It comes at high cost -- or high cost and it comes at high effort. Typically, because you're investing in an existing facility, the returns are attractive. Usually, sort of we're aiming for something like a 2 or 3-year return on these bigger debottlenecking investments. So they make our overall capital investment return very attractive, and that's why we continue to pursue them. But the other thing that I think is important there is that it brings capacity into the market much more gradually because it's incremental and not sort of big step changes, and therefore, much easier to absorb by our customers. And so, that's what we were trying to judge as we make these decisions.

Very good. Great. So that concludes this Q&A session. Thank you, Ray, Sean and Peter. We will now take a 5-minute break and be back for our second set of presentations, starting with James Gorman, who will discuss West Fraser and our views on sustainability. Thank you.

Thank you.

Good afternoon, and welcome back. My name is James Gorman, and I'm the Vice President of Government and Corporate Relations, and I oversee our sustainability portfolio. The very basis of our business is sustainability. Everything we do is predicated on maintaining healthy productive force for generations to come. Our company named West Fraser reflects the location of our first-ever forest tenure back in 1955, on the west side of the Fraser River near the town of Quesnel in Central British Columbia. Our mission is to provide sustainable wood products for the world. We believe our industry and our company are uniquely positioned to provide building products that consumers can feel good about because they're sustainably sourced, they continue to store carbon, they come from a company that values the environment, its people, its communities as well as its balance sheet. You can think about what we do as a circle, sustainable forest harvesting practices, coupled with a manufacturing process that utilizes 99% of the log, wood residuals from the sawmilling process like chips are used to make pulp. Bark is used to produce renewable energy. Sawdust and shavings are compressed to make MDF. Our products are used in climate smart construction and continue to store carbon throughout the life of that product. Our products are also recyclable and can be given new life and other products made from recycled wood material. When it comes to sustainability, we're proud of how we utilize the forest resource. This year, we celebrated the planting of our 2 billionth tree in Canada, as Ray mentioned. We plant on average slightly over 2 stems per every tree that we harvest. Annually, we harvest less than 1% of our managed forest area. In this past year, we were recognized with the Sustainable Forestry Initiative for our work in forest conservation in collaboration with The Nature Conservancy of Canada. 100% of our fiber is third-party certified as responsibly sourced. Our diverse and talented workforce is the secret to our success. 25% of our employees identify with an underrepresented racial or ethnic group; 14.5% of our employees are female; 8% of our employees are indigenous. Our Board has also become more diverse. 40% of our Board members are female, and our Board diversity policy has recently been updated. We're striving to improve our diversity at all levels of the organization. We recognize that diversity makes us better at what we do. Our priority is to continue to improve our diversity profile in our senior leadership roles. And to that end, over the past year, we've established a President's diversity council within the company to identify opportunities and barriers and to advance this work further and faster. Our safety goal is to eliminate all incidents and injuries. And our near-term goal is to reduce serious injuries by 50% by 2025. We're on track to do so. Our medical incidence rating is down 31% since 2016. Our most frequent injuries, like hand injuries, are down 28%, and the number of life-changing injuries fell from 10 in 2019 to 4 in 2020. We've got a lot more work to do each and every day, but we do see evidence that our measures to improve guarding, the lockout -- and lockout verifications in our facilities are really making a difference as is the relentless focus of our management teams on a day-to-day basis on safety. In Canada, indigenous communities are integral to everything we do. Everywhere in Canada that we operate, it's either treated or unseated territory and with that, comes the responsibility to advance Canada's commitment to reconciliation. We see opportunity for inclusion of indigenous peoples in our business. 8% of our employees are indigenous. 37 engagement processes are underway in our company. 24 indigenous communities are helping integrate traditional knowledge into our forest planning. At the same time, our business-to-business relationships with indigenous owned companies are rapidly expanding. This year, we rolled out an Indigenous Peoples policy that aligns with the UN declaration on indigenous people and the principles of free prior and informed consent. This policy guides us in our interactions with indigenous people. We've also taken the initial steps to become fully certified in progressive aboriginal relations. Our commitment to our forest dependent communities reflects not only the economic impact we bring, but also the fact that these are the places we live and work. We try to make these communities better through direct and indirect employment, by providing high-paying family supporting jobs and through our corporate donations program, where we've assisted communities build everything from community recreation facilities to important health care infrastructure. I want to speak a bit more directly about our environmental performance, and specifically, our greenhouse gas emissions. We've assessed our scope 1 and 2 emissions and can report that we've been able to drive those emissions down by 15% since 2005 despite the significant growth in the company over that period. The graph in the bottom left shows how our emissions break down by segment as well as our energy consumption. When it comes to finally measuring and managing our scope 3 emissions, we've got more work to do. And today, we've got a team working to better understand this component through our upstream and our downstream supply chains. Our next step in our ESG development is to identify emissions reductions targets, which we intend to do in the latter part of 2022. Further to our environmental performance, the processes we use to produce our materials result in very little waste and are highly efficient. We're proud of this fact and make available independently verified life cycle analysis of our products for our customers and the public. The graph on the right breaks down what happens to a log when it's processed in the mill. The graph on the left breaks down what we do with the 53% of the log that has not recovered through lumber or veneer product. You can see that 63% of it is used to make another product, like MDF, multi-density fiberboard or pulp where 23% is recovered for energy. Similarly, in the production of OSB, 86.5% of the tree is used to make our product, with the remaining 12.6% converted to useful biomass, less than 1% is lost to waste ash. We're proud of where we are, but we're even more excited about where we're going. This week, we're going to publish our 2020 sustainability report, which you'll be able to see [email protected]. In 2022, we'll publish our first ESG strategy that will contain specific commitments, targets for emission reductions. Our strategy will also lay out key performance indicators that we'll use internally and externally to gauge our ESG performance. In the interim, we'll continue to enhance our stewardship and processes to bring an even sharper focus to our ESG performance. I want to thank you for your attention. But before I turn it over to Robin to talk a little bit about integration of Norbord with West Fraser, I'd like to leave you with a 90-second video, celebrating the planting of our 2 billionth treat this summer. [Presentation]

Thank you, James. What an incredible milestone. Good afternoon, everyone. I'm Robin Lampard, SVP of Finance at West Fraser. I joined the company earlier this year upon the acquisition of Norbord, where I was the CFO. During my 25 years at Norbord, I participated in its transformation from a Canadian-based diversified forest products company to the world's largest OSB producer. With Norbord joining the West Fraser family, I'm delighted to be a part of the combined company's continued transformation, building on our platform as a global wood products leader. Today, I'll provide some perspective on the integration and how it's going so far. As Ray already highlighted, West Fraser's acquisition of Norbord created the world's largest lumber and OSB producer, with 2020 pro forma revenue of almost $7 billion and adjusted EBITDA of just under $2 billion. The combined company can supply all wood-based building products used in the construction and renovation of homes and is now a one-stop shop for our customers. The acquisition brought together 2 companies that were aligned around a strategy of growth and best-in-class industry leadership with strong track records of prudent capital allocation. Both companies share a longstanding cultural foundation of safety first and operational excellence underpinned by a strong commitment to sustainability. You've already heard from Sean and Peter, how our 2 largest business segments have a common approach to reinvestment for growth and industry leadership. And you've just heard from James on the importance of sustainability that is at the core of everything we do. Bringing the 2 organizations together has created a critical mass of scale and capability in key regions that supports recruitment, retention and development initiatives to attract and maintain top talent. The combined company also has a broader market perspective and better understanding of demand drivers from its more diverse product offerings, wider geographic presence and larger customer base. Our integration objectives are simple and clear: to fully integrate Norbord and West Fraser without disrupting operations in a timely way; to build an organization that combines the best of both companies, including structure, people and processes; and to achieve our synergies target within 24 months, while at the same time, continuing our focus on prioritizing safety and the long-term goal of eliminating all serious incidents and injuries across the combined company. On this slide, you can see our integration road map. In the first week, we began operating under the West Fraser brand and identity, renaming our website, mill signage and product packaging, and we held Welcome to West Fraser sessions at every Norbord mill and corporate office. In the first month, we formed an integration steering committee, comprising senior leadership from both companies that meets biweekly to oversee all integration work streams. We also converted all Norbord employees over to West Fraser's collaboration tools like Outlook and Microsoft Teams to facilitate cooperation across the company that is so critical during a business combination, especially during a global pandemic. Within the first quarter, there was widespread learning about each part of the business and sharing of best practices that informed our detailed integration planning. And of course, we also reported our first quarter of combined financial results that required us to work through the complexity of purchase price accounting and conversion to U.S. dollar currency. Within the first half, we developed increasing clarity around the organizational structure, roles, compensation and HR programs. We also developed road maps for the integration of key systems, structures and processes and identified a path to deliver the targeted synergies. As we complete our ninth month together, we are executing on our integration plans and realizing synergies. In addition, through bringing together the sustainability efforts of both teams, as you just heard from James, you are on the cusp of publishing an updated sustainability report that highlights the combined company's strong ESG credentials. So what are our key learnings so far? While the companies are culturally as a like as we thought, there are some key areas where we are leveraging the relative strength of each business to inform our integration plans and priorities. In the corporate work stream, we have far greater organizational depth and capability to manage business systems, conversions and cybersecurity as well as financial planning and analysis to support growth opportunities. This will allow us to more quickly execute on the heavy lifting of integrating our business systems infrastructure. In the sales work stream, we're integrating advanced data analytics to better understand and predict customer demand as well as industry risks and opportunities. This is informing the harmonization of our market strategy as we look to make West Fraser a more relevant, efficient and valuable supplier to our principal homebuilding, repair and renovation, and industrial customers. In the operations work stream, we're bringing a more systematic and technology-based approach to equipment reliability across the business, starting in the U.S. South, where several of our lumber and OSB mills are in close proximity to each other. As you know, our synergy target was established at USD61 million. We have leaders and subject matter experts focused on fixed separate with synergy work streams that currently involve over 75 people across the company. To date, we've identified 90% of these targeted synergies and are starting to realize meaningful amounts. Let me give you some specific examples. The most obvious source of synergies is in corporate from combining 2 public companies into 1 and saving millions of dollars in governance, audits, continuous disclosure and other professional fees as well as harmonizing service providers in functions like IT, compensation, benefits and insurance. In the sales area, the company spends $750 million on transportation and logistics each year. And we're aligning terms with key rail and truck carriers as well as optimizing roots to ensure we minimize so-called empty miles. In operations, we spend over $500 million on wood procurement activities in overlapping fiber baskets and are collaborating to optimize the full basket of available timber in those regions, maximizing utilization and reducing costs. And in general purchasing, we spend more than $400 million with our combined top 20 strategic vendors and are working to optimize terms, costs and the working capital investment for these purchases. We are very much on track to deliver on our synergies commitment by the end of next year. And so in summary, while we still have lots of work to do, we're pleased with our progress so far. We're proud of and grateful for how well our teams have worked together to integrate the businesses get out the synergies despite the challenges of working remotely and restrictions on travel. And with that, I will pass the podium over to Chris.

Thank you, Robin, and thank you for joining us today. I'm delighted to have the opportunity to talk to you about West Fraser. My name is Chris Virostek, and I've been CFO at West Fraser since 2017. Prior to that, my experience was that another building products company, where I was focused primarily on finance and corporate development. I'll spend a couple of minutes recapping our financial performance, our approach to capital allocation, return metrics and our recent earnings trends. We like to reference back to the peak of the prior housing cycle in 2005 when we look at return metrics. At that time, housing starts in the U.S. were over 2 million units per year. Our performance from that time covers a period of the worst housing correction in history and the slow 15-plus-year recovery that has been underway. As you can see from the chart on the top of the slide, over that time period, West Fraser's enterprise value has more than tripled, eclipsing by a margin, our traditional wood product peers. Chart on the bottom shows our shareholder returns have been better cumulatively over that same period as well. Notably, also when compared to the broader S&P Select Homebuilding Index, which includes a number of different building product categories. Turning to capital allocation, we believe in a balanced approach across the cycle, a consistent approach to capital allocation is the key to long-term value creation. Key priority for us is to make sure that we are deploying the right investments into our existing businesses, to re-life assets, innovate, modernize technologies or expand capabilities. I think you've seen from the earlier videos, the scale of some of these investments that we've been making. We prefer to be investing consistently, not only when times are good and capital happens to be robust. The ability to do that relates directly to the second pillar of our capital allocation strategy, and that is to maintain financial flexibility. Our business has cycles, and they can be significant. Having financial flexibility means we aren't forced to make difficult decisions in difficult markets that are not optimal for the long term. In 2020, at the onset of the pandemic, we were able to arrange additional liquidity lines on short notice. We continue to execute on our capital expenditure plans, and we maintained our dividend when many others in our industry had to make adjustments. Finally, we also believe that returning capital to shareholders is a priority. Historically, we've done this through a stable, consistent and growing dividend and the use of a normal course issuer bid. You can see from this recap after giving effect to our substantial issuer bid that closed in August, approximately 38% of the cash flow from operations that we have generated in the last 5.5 years has been returned to shareholders. At the same time, we've reduced net leverage and built a stronger cash flow generating platform that can better weather cycles in the industry. Nearly 1/3 of the cash flow from operations has been reinvested as capital expenditure back into the business and deployed for growth by acquisition. We are currently holding a larger-than-traditional cash position as a result of recent market conditions and are taking a thoughtful patient approach to returning to a more typical level of cash and debt over a long term. Our leverage and liquidity profile that maintains our investment-grade rating and financial flexibility is important to support our ability to continue to grow. Turning to return metrics. We've seen steadily improving trends in both our return on capital employed and on our return on shareholders' equity. We believe both have benefited from our balanced approach to capital allocation. We have reinvested in our operations to reduce costs, improve margins and boost efficiencies. We've grown by acquisition in low-cost manufacturing regions and attractive product verticals. We have invested in larger scale projects like Opelika, Dudley and Chambord that have not yet been fully operationalized. As Sean and Peter discussed earlier, we see further upside in these projects as they reach their full potential. Over the last 5 years, our return on capital has averaged 14%. Turning to return on shareholders' equity. We have also seen an improving trend for many of the same reasons that have impacted our return on capital, but also due to our regular return of capital to shareholders through our dividend and our use of buybacks, both normal course, and more recently, our substantial issuer bid, in which we repurchased CAD1 billion of outstanding shares. You can see the combined historical EBITDA of West Fraser and Norbord, including Norbord's merger with Ainsworth in 2015. However, this does not give pro forma effect to the 11 saw mills acquired in the low-cost regions of Alberta and the U.S. South over the time period presented. Most notable is the step change recently from the 10-year average EBITDA to the more recent 5-year average EBITDA. As you heard in the earlier session, the supply-demand balance has been an important factor in the progression of wood product markets and has been 15 years in the making. The long, slow recovery towards 1.5 million housing starts finally reached a tipping point in the last 4 to 5 years. 2019 was a year disrupted by a slowdown in new home construction and several supply chain disruptions. We find ourselves, however, positioned significantly better today for a difficult market like 2019 should one arise, given the actions we have taken to reduce production in high-cost regions, expand in lower-cost regions and invest capital to continuously improve our cost position. In terms of liquidity, capitalization and our maturity profile, we have a very well-positioned balance sheet that has progressed to a net cash position as of the end of the second quarter. We recently renewed our revolving credit facility and have a 5-year fully committed undrawn USD1 billion revolver at our disposal. We've certainly seen a high degree of variability in pandemic-affected cash flows in the last 2 years, and we're committed to being patient and thoughtful in how we use debt in the capital structure and how we deploy the capital that we have accumulated. And finally, a comment on our share buybacks and trading liquidity. Cumulatively, since we started buying back shares, we've repurchased over USD2 billion of stock. We have approximately 5.4 million shares remaining under our normal course issuer bid, which is opened through February of 2022. That is in addition to the 10.3 million shares we recently purchased under our substantial issuer bid. We have a view on trend EBITDA and a mid-cycle valuation, and we review that model regularly to arrive at a view of intrinsic value. And when our shares are below that, we aim to repurchase and retire those shares. We listed on the New York Stock Exchange on February 1, concurrent with the closing of the acquisition of Norbord and have seen daily trading volumes steadily grow and are pleased with the results so far. With that, I'll turn it over to Rob -- turn it back over to Robert for the Q&A session. Thank you.

Thank you, Chris. And now it's time to move into our final Q&A session with James, Robin and Chris. But before I do that, let me provide a final slide with today's key investment highlights. You may recall, you're at the beginning of our webcast today that Ray Ferris offered reasons to own West Fraser shares. Following on that theme, we would summarize investment takeaways from today as follows. We believe West Fraser is an attractive building products investment opportunity with positive industry and company fundamentals. We see a positive demand backdrop for wood-based building products and new home construction, repair and renovation, and industrial applications. The recent recovery in housing markets has created a balanced supply and demand picture for both lumber and OSB. And we view wood as the preferred product for building in a low-carbon economy. In terms of West Fraser fundamentals, we have well invested assets in low-cost regions. We are product and geographically diverse. West Fraser shares have provided attractive returns. We have a conservative financial posture and a balanced capital allocation strategy. And lastly, West Fraser has strong ESG credentials. So with that summary, let's jump in now to our final Q&A session. As a reminder, you may enter your questions in the slide of window on your webcast page. As we wait for questions to come in, let me start with a question for Chris. Mr. Virostek, what has been the broader investment community reaction to the recent SIB that West Fraser just completed?

Great. Thanks, Robert, and appreciate the question. I think, certainly, in the early part of this year, we found ourselves in a unique situation given how the back half of 2020 and early 2021 unfolded. And we wanted to be quite thoughtful and deliberate about how we looked at ways to return capital. And historically, the NCIB and dividend was adequate. But we found ourselves in a different situation. So we took some time to study it and launched the SIB in July and closed it in August. It was oversubscribed by 30%. And I think certainly, in all the investor interactions that we've had since we closed that SIB, we've received very positive feedback that it was a good way to deploy capital. It was the right amount, and investors generally have been very favorable in their reaction to the SIB.

Excellent. Thank you. I'm going to stick with you, Chris. Chris, you mentioned a thoughtful and patient consideration regarding the company's long-term capital structure. Can you give updated thinking around target metrics?

Listen, I think as we think and we laid out that hierarchy, right, or the priorities is we're always thinking about how -- what are the investment opportunities for us in our platform, how do we maintain that financial flexibility, and how do we produce those returns. The portion of capital that gets allocated to each of those elements is going to vary a little bit from year-to-year because of the nature of our business that our cash flow can be a bit variable. But over the long term, we want to be committing significant resources to all 3 of those pillars. I mentioned our -- maintaining our investment-grade rating and staying within metrics that keeps us there, we think, is an important lever for us in terms of being able to grow and not be forced to make decisions that at an inopportune time that remove optionality for us, so...

Very good. Thank you. We're going to transition here. We've got a question for James. James, you mentioned a forthcoming ESG strategy and the process of target setting. Can you speak more about that, please?

Yes. I think we've -- when you look out across the corporate world these days, I think companies are actively in the process of setting ESG targets, making commitments about where they'd like to be in 2030 and 2050. And I think in many cases, companies make those commitments without having an understanding of how it is that they're going to get there. I think the approach that we'd like to take and are taking is one that gives us a very good sense about where we are today and what's achievable going forward. And so, what we want to do is set GHG targets that are ones that we know that we're going to be able to actually both stretch for, but also achieve. And that's going to be part of our process, and we hope to have those committed to in a short period of time, and we are looking at things like the science-based target initiative and are considering commitments around in that regard, and that will certainly inform our work going forward.

Very good. Thank you. I'm going to transition now to Robin. Robin, you're up. Robin, what are you most worried about with the integration of Norbord?

Great question, Robert. In all honesty, I'm actually not really worried about anything, which is saying something because I am a worrier by nature. But listen, myself and my management colleagues at Norbord firmly believe that combining with West Fraser was Norbord's best strategic move at this stage in the company's evolution. And so, what I would say is this, our biggest challenge is really managing our excitement and our desire to get at everything in the face of what we see as a huge opportunity set with this great wood products platform that we have. So we're working really hard to prioritize and pace the work of our integration teams. And I'll just leave it there.

That's helpful. Thank you. Thank you. We are going to come back to a question for Chris. And it's -- really I'll reword it, but it's basically, could you elaborate a little bit more on this intrinsic value model that informs your buybacks? They're asking for some more specifics. Maybe we just keep it a little bit higher level than that. But what can you share on our intrinsic value model, Chris?

Sure, Robert. Thanks for that. We know that there's cycles in this industry. And so what we try to look at is the long-term supply/demand picture, we try to look at the investments that we've made in the platform and how they're progressing in terms of ramp up, what do we think our long-term view is on the inputs that we use in those processes and the fiber baskets that we operate in. And we try to come up with a mid-cycle earnings for each of those business units and then look at a year out from Now where do we think the balance sheet is going to be in terms of leverage, liquidity and cash and so forth. And then we use that to drive a share price. It's not something we adjust every day or every week because I think we have a lot of conviction in our view of mid-cycle and where it is. I'm not going to throw out a mid-cycle lumber price or mid-cycle EBITDA number, if that's what folks are waiting for. It's a bit proprietary, I'll say. But I think we try to be thoughtful in that approach and look and take on balance, all those inputs that you've heard about today is the capital that we spent, the supply and demand, how long it takes for things to come on, where are we in the housing cycle and its recovery and the demand in R&R and industrial applications. And so, all of those things inform our view of where do we think things are headed at a mid-cycle.

Very good. Thank you. I'm going to come back to James. This is an interesting question. There is evolving discussion around the economics of carbon offsets in Europe. Is this something that West Fraser sees as a potential revenue opportunity in the future? What do we think about carbon offsets?

Yes. I think carbon offset policy in both Canada and in the United States is sort of a growing area of interest of governments and is the subject of early policy work, but it's a place where neither of those jurisdictions have landed their policy frameworks in that regard. I mean, I think among high energy-intensive high emitters, I expect that we're going to get knocks on the door from those folks who are looking for investments in renewable energy-type opportunities as potential offsets as those frameworks start to develop. I think where a lot of people talk about this area as they talk about the value of potential standing timber. And I think what makes this a difficult policy area for government is like a company like ours is not an owner of timber. And so it's not clear that we would benefit from our management of those timber resources when it came to that kind of an offset policy. But I think increasingly, governments, as they observe enormous wildfires in the State of California, in Oregon, and Washington state, in British Columbia again this year, that the concern around unmanaged forests is a highly concerning one to government. And I think that they're concerned about creating policy frameworks that would lead to unmanaged forestry. And I think there's a real value in seeing what highly managed for us like in the State of Florida and throughout the southeast with prescribed burning and active forest management is both better for the environment and is better for the economy.

Very good. Thank you. Chris, you're popular on this Q&A. Right back to you. Here we go. And I'm changing the words a little bit here. If you believe current analyst estimates, West Fraser is poised to have significant surplus cash on the balance sheet in the coming quarters. How would you think about another SIB versus a special dividend or perhaps raising the current dividend?

Well, thanks, Robert. I think when we look at this and I'd say there's an evaluation process that we go through, and we try to look forward. And as I said, historically, in more regular markets, I'll say, than what we've seen in the last kind of 12 to 18 months, the dividend and our adjustments to the dividend and the use of NCIB, we're adequate to keep the balance sheet within the right guardrails. We've seen unprecedented conditions in the last 12, 18 months. But I think more than anything, we don't want to rush out and try to solve the problem tomorrow, and it's a wonderful problem to have to have this much capital. But I want to make sure that we're taking our time with this. We did an SIB. If we think it was the right tool there, we'll continue to evaluate what all those other tools are. On our dividend, I think just to go back to some comments that I made earlier, yes, it's a small dividend. But I think we'll get a member too is when we were at the pandemic, it was structured in a way that we didn't touch it. We didn't cut it. We kept on paying it through the pandemic, which, to us, is a sign of signaling our strength in the cash flow over the cycle. So I would say we're going to continue to evaluate the options that are in front of us and find ways. And as you know, we actively engage with investors all the time and seek feedback on what works. And overwhelmingly, I think the feedback so far has been there's a high degree of satisfaction with how we're pursuing things right now.

Excellent. And with that, we're going to wrap up here. So thank you, James, Robin and Chris. That concludes our Q&A session and our Inaugural Analyst and Investor Event. On behalf of West Fraser and our presenters today, I want to thank you again for joining us, and please contact me directly at [email protected], should you require additional information. Thank you, and goodbye.