WEST FRASER TIMBER CO., LTD Annual Report: A Look at 2025 Performance

Considering an investment in West Fraser Timber? This summary provides a clear, jargon-free overview of the company's performance over the past year, helping you understand its financial health and strategic direction.

Getting Started: Key Information

West Fraser Timber Co. Ltd. ("West Fraser") is a Canadian company headquartered in British Columbia. While Canadian, its shares trade on the New York Stock Exchange (NYSE) under the ticker symbol "WFG," making them accessible to U.S. investors.

This report details West Fraser's performance for the fiscal year ending December 31, 2025. All financial figures appear in U.S. dollars for consistency. This information is current as of February 11, 2026.

West Fraser prepares its financial statements using International Financial Reporting Standards (IFRS). These global accounting rules may present some numbers differently than U.S. Generally Accepted Accounting Principles (GAAP), which U.S. investors might typically encounter.

Business Overview: What West Fraser Does and Where It Operates

West Fraser is a leading, diversified producer in the wood products industry. Its product portfolio includes:

• Lumber: Basic wood planks used in construction.
• Engineered Wood Products: Products like Oriented Strand Board (OSB, used for sheathing), Laminated Veneer Lumber (LVL), Medium-Density Fibreboard (MDF), plywood, and particleboard.
• Pulp & Paper: Various types of pulp, such as northern bleached softwood kraft pulp, and paper.
• Other: Sales of wood chips and other by-products from its manufacturing processes.

As of the end of 2025, West Fraser operated an extensive network of facilities:

• 28 lumber mills
• 15 OSB facilities
• 3 plywood facilities
• 3 MDF facilities
• 1 particleboard facility
• 1 LVL facility
• 1 veneer facility
• 2 pulp and paper mills

These facilities span Canada, the U.S., the U.K., and Europe, demonstrating the company's broad geographic reach.

Management Discussion: Strategic Shifts and Key Developments

Over the past three years, West Fraser has actively reshaped its business, focusing on optimizing its core wood products operations and divesting non-core assets.

• Leadership Transition: Ray Ferris, the long-serving President and CEO, retired at the end of 2023. Sean McLaren, previously Chief Operating Officer, assumed the role of President and CEO on January 1, 2024, representing a leadership transition from within the company.
• Streamlining Operations through Mill Closures: To enhance efficiency and adapt to challenging market conditions, West Fraser permanently closed or indefinitely idled several lumber and OSB mills across North America.
  • These actions collectively reduced the company's lumber production capacity by approximately 950 million board feet and its OSB capacity by 1,300 million square feet over the last three years.
  • In 2025, West Fraser announced the permanent closure of lumber mills in Augusta, Georgia (reducing capacity by 140 million board feet), and 100 Mile House, B.C. (reducing capacity by 160 million board feet). Weak lumber demand and a lack of markets for wood residuals prompted the Augusta closure, while unreliable access to economically viable timber led to the 100 Mile House closure. The company also made the 2024 indefinite closures of its Huttig, Arkansas, and Lake Butler, Florida, lumber mills permanent. By December 31, 2025, West Fraser completed selling the sites of its permanently closed mills in Perry, Florida; Maxville, Florida; and Huttig, Arkansas.
  • For OSB, in December 2025, West Fraser announced the indefinite idling of its High Level, Alberta, mill (reducing capacity by 860 million square feet), effective spring 2026, due to significantly weakened OSB demand. The company also confirmed that a production line at its Cordele, Georgia, OSB facility, idled in 2023, would remain indefinitely offline (reducing capacity by 440 million square feet). These moves highlight West Fraser's focus on optimizing existing operations and divesting less profitable assets.
• Modernization Investments: While closing some mills, West Fraser also invested in others. The company completed modernizing its Henderson, Texas, lumber manufacturing facility, which is now ramping up production. This new mill expects to double the prior mill's annual capacity to 275 million board feet, with full benefits anticipated in late 2026.
• Strategic Acquisition: In November 2023, West Fraser acquired Spray Lake Sawmills in Alberta, adding approximately 155 million board feet to its lumber capacity and demonstrating targeted growth.
• Pulp Business Divestitures: West Fraser has been selling parts of its pulp business to concentrate on core wood products and reduce exposure to market volatility in the pulp sector.
  • In February 2024, the company sold its Hinton pulp mill for $5 million, eliminating about 250,000 tonnes of specific pulp production. West Fraser will continue to supply wood fiber to this mill under a long-term contract.
  • In April 2024, it sold its Quesnel River Pulp mill and Slave Lake Pulp mill for $120 million, removing another 690,000 tonnes of pulp capacity. These sales generate cash and simplify the company's business structure.
• Full Ownership of CPL: In April 2024, West Fraser gained full control of the CPL facility in British Columbia by dissolving a 50/50 joint venture. This facility produces about 340,000 tonnes of northern bleached softwood kraft pulp annually, making West Fraser its sole owner and operator.
• Environmental Commitment: In April 2023, the Science Based Targets Initiative (SBTi) officially validated West Fraser's targets for reducing greenhouse gas (GHG) emissions across all its operations, underscoring its environmental responsibility efforts.

Financial Performance: The Numbers for 2025

West Fraser's financial results for 2025 show a challenging year compared to previous periods:

• Sales Declined Significantly: Total sales for 2025 reached $5.46 billion, a notable decrease from $6.17 billion in 2024 and $6.45 billion in 2023. This indicates lower sales volumes or prices.
• Substantial Loss: The company reported a significant loss of $937 million in 2025, a sharp contrast to a $5 million loss in 2024 and a $167 million loss in 2023. This means expenses far exceeded revenues this year.
• Earnings Per Share (EPS) Impact: Reflecting the large loss, diluted loss per share was $12.08 in 2025, compared to a loss of $0.07 per share in 2024.
• Factors Contributing to the Loss: Several key factors drove this difficult year:
  • Lower OSB Prices: Prices for Oriented Strand Board (OSB) products decreased significantly, impacting revenue.
  • Massive Restructuring Costs: West Fraser incurred substantial "restructuring and impairment charges," which surged from $102 million in 2024 to a staggering $712 million in 2025. These largely non-cash costs relate to mill closures, asset write-downs due to underperformance, and other one-time expenses from business streamlining, as detailed in the "Strategic Shifts" section.
  • Higher Tariffs: Export duties and tariffs more than doubled, rising from $72 million in 2024 to $177 million in 2025. This includes retroactive adjustments, primarily for softwood lumber duties.
  • Inventory Write-downs: The company also reduced the value of some inventory, reflecting a lower market worth than initially estimated.
  • Partial Offset: Slightly higher lumber prices partially mitigated these negative impacts.
• Adjusted EBITDA Plummeted: Adjusted EBITDA, a key measure of operating performance before interest, taxes, depreciation, and amortization, dropped dramatically from $673 million in 2024 to just $56 million in 2025. This indicates a significant decline in core business profitability.
• Return on Capital Employed (ROCE) Turned Negative: This metric, which assesses how efficiently a company uses its capital to generate profits, fell from 0% in 2024 to a negative -17% in 2025, showing that the company did not generate a return on its invested capital.
• Total Assets Decreased: Total assets declined from $8.76 billion in 2024 to $7.62 billion in 2025, likely due to asset sales and the aforementioned write-downs.
• Operating Cash Flow: Cash generated from operations significantly decreased to $190 million in 2025, down from $711 million in 2024, reflecting reduced profitability.
• Capital Expenditures: The company invested $340 million in capital expenditures in 2025, a reduction from $430 million in 2024, indicating decreased investment in property, plant, and equipment.
• Dividends Increased (Slightly): Despite the challenging year, West Fraser declared $1.28 per share in cash dividends in 2025, a slight increase from $1.26 in 2024, demonstrating a continued commitment to shareholder returns.

Financial Health: Maintaining Stability and Shareholder Value

West Fraser's management confirmed the effectiveness of its internal controls as of December 31, 2025. These systems ensure accurate and reliable financial reporting, providing confidence in the reported numbers.

An independent Audit Committee, acting as a financial oversight body on the board, further ensures financial integrity. The committee's chair, Gillian D. Winckler, is a recognized financial expert, adding an extra layer of assurance.

West Fraser reported no significant off-balance sheet arrangements, meaning no major hidden financial obligations exist that could unexpectedly impact investors.

As of December 31, 2025, West Fraser Timber had 78,299,822 common shares outstanding. This figure is crucial for per-share calculations. By February 10, 2026, the company had repurchased an additional 1,286,185 shares, further reducing the total outstanding shares.

For U.S. investors, it's worth noting that as a foreign company, West Fraser's rules for shareholder meeting attendance (known as "quorum") differ from typical U.S. companies listed on the NYSE, allowing for a lower attendance percentage for shareholder voting.

West Fraser has also actively managed its finances:

• Debt Management:
  • In May 2025, West Fraser renewed its primary credit line, a $1 billion Revolving Credit Facility, extending its maturity from July 2028 to May 2030. This provides continued access to funds.
  • The company also increased and extended a Term Loan Facility from $200 million to $300 million, maturing in May 2028.
  • To manage interest rate risk, West Fraser fixed the interest rate on $75 million of this $300 million loan at 3.27%, protecting against rising variable rates on that portion.
  • While the company repaid $300 million in senior notes (a type of bond) in October 2024 using cash on hand, its total long-term debt on the balance sheet increased from $200 million at the end of 2024 to $300 million at the end of 2025, primarily due to the increased Term Loan Facility.
• Liquidity: The renewal and expansion of credit facilities, coupled with active debt management, indicate that West Fraser maintains significant access to liquidity to support its operations and strategic initiatives.
• Share Repurchases: West Fraser has consistently bought back its own shares through Normal Course Issuer Bids (NCIBs). This reduces the number of outstanding shares, which can increase the value of each remaining share for investors.
  • In 2023, the company repurchased 1.83 million shares for $129 million.
  • In 2024, it repurchased 1.80 million shares for $144 million.
  • In 2025, it repurchased 1.64 million shares for $124 million.
  • West Fraser renewed its NCIB for 2025, authorizing the repurchase of up to 3.87 million shares by March 2, 2026. As of February 10, 2026, the company had already repurchased 1.29 million shares under this program, underscoring its commitment to returning value to shareholders.

Future Outlook: Navigating Challenges and Strategic Priorities

West Fraser anticipates continued near-term challenges, primarily due to the cyclical nature of the wood products industry and prevailing macroeconomic conditions. Management's strategic focus remains on enhancing operational efficiency, optimizing its asset base, and maintaining financial flexibility.

• Market Conditions: The company expects the U.S. housing market to remain sensitive to interest rates and affordability, which could continue to affect demand for lumber and engineered wood products. Commodity prices for lumber and OSB will likely remain volatile, influenced by supply-demand dynamics and global economic trends.
• Operational Focus: West Fraser will continue to prioritize cost management and optimize its manufacturing footprint. The Henderson, Texas, modernization project's full benefits should materialize in late 2026, improving lumber production efficiency. The company will also continue to assess its asset portfolio for further opportunities to enhance profitability and reduce exposure to less attractive segments, as demonstrated by ongoing pulp divestitures and mill rationalizations.
• Capital Allocation: Management commits to a balanced capital allocation strategy, including disciplined capital expenditures focused on high-return projects, maintaining a strong balance sheet, and returning capital to shareholders through dividends and share repurchases, as market conditions permit.
• Sustainability: West Fraser remains committed to its environmental targets, including the validated GHG emission reduction goals, integrating sustainable practices throughout its operations.

Competitive Position

West Fraser operates as one of the largest diversified wood products companies in North America and globally, with significant operations in Canada, the U.S., the U.K., and Europe. Its competitive strengths typically arise from:

• Scale and Diversification: The company's extensive network of facilities and broad product portfolio (lumber, engineered wood products, pulp) offers resilience against market fluctuations affecting any single product line or region. This scale also enables economies of scale in production and procurement.
• Geographic Reach: Operations across multiple countries and regions help mitigate risks associated with localized market downturns or regulatory changes and provide access to diverse customer bases.
• Integrated Operations: While divesting some pulp assets, West Fraser maintains integrated operations in many areas, leveraging wood fiber residuals from lumber production for other products, which enhances cost efficiency.
• Timber Access: The company benefits from access to significant timber resources through direct ownership, long-term licenses, or procurement networks, which is critical for a raw material-intensive industry.
• Operational Efficiency Initiatives: Ongoing investments in modernization and strategic mill rationalizations aim to improve the company's cost structure and enhance its competitive standing in a challenging market environment.

The highly cyclical nature of the industry, coupled with commodity price volatility and trade barriers (such as softwood lumber duties), means West Fraser operates in an intensely competitive environment where cost leadership and operational flexibility are crucial for maintaining market position.

Risk Factors: Potential Challenges for Your Investment

Investors should be aware of potential challenges that could impact West Fraser's future performance:

• Cyclical Industry: The wood products industry experiences inherent volatility. West Fraser's profits are heavily influenced by global economic conditions, particularly in North America, Asia, and Europe. The U.S. housing market (new construction and renovations) significantly drives its sales and currently faces headwinds.
  • U.S. Housing Market Challenges: High mortgage rates and housing affordability issues have kept new home construction muted. If the economy slows, interest rates remain high, or housing prices do not adjust, demand for new homes and West Fraser's products could continue to suffer. While the U.S. central bank has cut rates, actual bond yields have not decreased proportionally.
  • Repair & Remodeling Demand: Demand for products used in home repairs and renovations has also been subdued, constrained by historically low existing home sales.
• Commodity Prices & Oversupply: Most of West Fraser's products are commodities, meaning their prices can fluctuate significantly based on supply and demand.
  • The lumber industry has recently experienced a "protracted period of oversupply," especially in the U.S. South, which pressures prices.
  • The North American OSB industry has also recently entered a period of oversupply. While new mill projects face constraints, a risk of continued oversupply exists if new capacity outpaces demand.
• Tariffs on Softwood Lumber: This remains a long-standing issue for Canadian lumber companies exporting to the U.S.
  • In March 2025, the U.S. briefly imposed an additional 25% tariff on all imported goods, though it quickly rescinded this general tariff. However, West Fraser continues to face ongoing countervailing and anti-dumping duties on Canadian softwood lumber imported into the U.S. These duties significantly impact the company's costs and profitability, as evidenced by increased tariff expenses this year.

These market and regulatory factors create significant uncertainty and could continue to pressure West Fraser's financial results.