West Fraser (WFG) Inks Deal to Sell Canada Mills to Atlas
West Fraser Timber Co. Ltd. WFG announced that it entered a definitive agreement with Atlas Holdings to sell its Quesnel River Pulp mill in Quesnel and its Slave Lake Pulp mill in Slave Lake. This move will allow West Fraser to focus its resources on being the premier wood-building product company in North America.
The announced agreement includes related woodlands operations and timber holdings in Alberta, as well as a long-term fiber supply agreement for the Quesnel River Pulp mill.
Founded in 2002, Atlas is headquartered in Greenwich, CT. It owns and operates multiple pulp, paper and wood products businesses in Canada and the United States.
Millar Western Forest Products will operate the pulp mills at Quesnel River and Slave Lake after the deal is closed. Millar Western is a more than 100-year-old Canada forest products company that joined the Atlas family of manufacturing and distribution businesses in 2017. It is headquartered in Edmonton and has existing pulp mill operations in Alberta, which establishes a strong foundation for the Quesnel River and Slave Lake pulp mills.
The sale is expected to close after the completion of customary regulatory reviews and satisfaction of customary closing conditions. The total cash proceeds from the sale amount to $120 million.
As of Jun 30, 2023, the company’s cash and short-term investments were $994 million, down from around $1.16 billion as of Dec 31, 2022. Capital expenditure for the second quarter of 2023 was $106 million.
In the second quarter of 2023, WFG reported a 1.2% year-over-year decline in revenues to roughly $1.61 billion. The company witnessed challenging demand markets, particularly in the Pulp & Paper segment.
Unscheduled downtime events at its mills, including an extended maintenance shutdown at Hinton Pulp, and the curtailment of Cariboo Pulp mill due to fiber supply constraints impacted the results. In the backdrop of declining pulp prices, which led to a significant inventory write-down, the Pulp & Paper segment experienced higher-than-expected losses.
Price Performance
Shares of the company have gained 1% over the past year compared with the industry's 19.1% growth.
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Zacks Rank & Stocks to Consider
West Fraser currently carries a Zacks Rank #5 (Strong Sell).
Some better-ranked stocks from the basic materials space are Hawkins, Inc. HWKN, Carpenter Technology Corporation CRS and L.B. Foster Company FSTR. HWKN and CRS sport a Zacks Rank #1 (Strong Buy) at present, and FSTR carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hawkins has an average trailing four-quarter earnings surprise of 25.5%. The Zacks Consensus Estimate for HWKN’s fiscal 2024 earnings is pegged at $3.40 per share. The consensus estimate for 2024 earnings has moved 38% north in the past 60 days. Its shares gained 58% in the last year.
Carpenter Technology has an average trailing four-quarter earnings surprise of 10%. The Zacks Consensus Estimate for CRS’s fiscal 2024 earnings is pegged at $3.48 per share. The consensus estimate for 2023 earnings has moved 8% north in the past 60 days. Its shares gained 109.6% in the last year.
L.B. Foster has an average trailing four-quarter earnings surprise of 134.5%. The Zacks Consensus Estimate for FSTR’s 2023 earnings is pegged at 53 cents per share. Earnings estimates have been unchanged in the past 60 days. FSTR’s shares gained 98.4% in the last year.
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West Fraser Timber Co. Ltd. (WFG) : Free Stock Analysis Report
