Good morning, ladies and gentlemen. Welcome to the West Fraser Timber Q3 Conference Call. During this conference call, West Fraser’s representatives will be making certain statements about potential future developments. These forward-looking statements are intended to provide reasonable guidance to investors, but the accuracy of these statements depends on a number of assumptions and is subject to various risks and uncertainties. Actual outcomes will depend on a number of factors that could affect the ability of the company to execute its business plans, including those matters described under risks and uncertainties in the company’s annual MD&A, which can be accessed on West Fraser’s website or through SEDAR and as supplemented by the company’s quarterly MD&As. Accordingly, listeners should exercise caution in relying upon forward-looking statements. I would now like to turn the meeting over to Mr. Ted Seraphim, President and CEO. Please go ahead, Mr. Seraphim.

Thank you and good morning. I think what we’ll do today is a little different. Larry will – Larry Hughes will make comments with regards to our performance and then I will just make few summary comments at the end. So with this, I’ll turn it over to Larry.

Thanks, Ted, and thanks to everyone joining us today. Please refer to the advisory contained in our quarterly MD&A under the heading Non-IFRS Measures concerning our use of term such as EBITDA, adjusted earnings, and adjusted basic earnings per share. For the third quarter, we reported earnings of $107 million, or earnings per share of $1.35. In the quarter, we had several significant non-operational items, which affected our results. These are shown in the table on page three of our MD&A. If we adjust the $7 million expense related to equity-based compensation and the loss of $2 million related to translation of U.S. dollar denominated long-term financing, the result on an after-tax basis is adjusted earnings of $115 million, or adjusted basic earnings per share of $1.45 for the quarter. The equity-based compensation expense reflects an increase in the company’s share price over the quarter and a loss on the U.S. long-term financing resulted from a weakening of the Canadian dollar on a period ending basis. On a similarly adjusted basis, results of this quarter improved compared to those of the second quarter of 2016, when we achieved adjusted earnings of $64 million and adjusted basic earnings per share of $0.80. From an operating earnings and adjusted EBITDA perspective compared to the previous quarter and the third quarter of 2015, results improved from each of our Lumber, Panels and Pulp and Paper segments. Adjusted EBITDA margin for lumber improved to 19% from 14% in the previous quarter and 4% in the same quarter of 2015. For Panels, adjusted EBITDA margin reached 24%, up from 16% in the previous quarter and 20% achieved in the third quarter of 2014. For Pulp and Paper, adjusted EBITDA margin improved to 13% from 2% in the second quarter and 11% in the third quarter…

Thanks, Larry. I will make a few comments regarding our operational performance. I will also briefly comment on lumber and pulp markets and provided you with few comments with respect to the SLA. We continue to make progress in our lumber business and are seeing the benefits of our extensive capital spending program. Including the acquisition of Manning Forest Products which we acquired in October 2015, we’ve increased production by approximately $330 million board feet over the first nine months of 2016 compared to the same period in 2015. We are well on our way to achieving the $400 million board feet increase that we projected for the year. We’re seeing improvements in manufacturing costs, recovery, and grade as well. Our panels business continues to be a strong performer for the company. The third quarter was no exception, as we generated $33 million of EBITDA. We’re experiencing better operational results in our pulp and paper business as compared to 2015, two points of note. Firstly, we are enjoying improving market conditions for our BCTMP business supported by strong industry operating rates and low inventories in global BCTMP markets. Secondly, our Hinton mill continues to show improving results with respect to reliability and production. I’m quite encouraged by the overall progress we’re seeing across the company with respect to taking full advantage of our capital spending program. In addition, as our capital spending returns to more normalized levels, we’re able to focus even more on driving operational performance and we’re seeing the benefits of that as well. With respect to lumber markets, we have been consistent in our view that until we see $1.3 million U.S. housing starts, we will experience some volatility in lumber markets. Last week’s release of U.S. housing starts and permits reinforces our view that we’re in the midst of a steady recovery in housing, which bodes well for medium-term lumber markets. The softwood lumber standstill agreement expired on October 12. There have been ongoing discussions between the Canadian and U.S. governments on this issue, and we understand that further discussions will occur this week. It wouldn’t be prudent for us to speculate on the outcome of these discussions. But I will make three comments. Firstly, during the standstill period, SPF and southern yellow pine prices are up 20% and 28%, respectively. Secondly, West Fraser has said all along that we prefer – that we would prefer no deal over a bad deal. And we appreciate the efforts of our provincial and federal governments to ensure that any agreement recognizes this approach. Thirdly, West Fraser is well-positioned to mitigate the impact of potential litigation, as we have invested heavily in capital and improved the competitiveness of our mills, and as you know, approximately 40% of our lumber production is in the U.S. With that, we’re ready for questions.

Thank you. We will now take questions from the telephone lines. [Operator Instructions] The first question is from Mark Wilde from BMO. Please go ahead.

Good morning, Ted. Good morning, Larry.

Good morning, Mark.

Good morning, Mark.

Guys, can we just start off by helping us understand the quarter-to-quarter improvement in the pulp and paper business, because it was up about $27 million, I think on an EBIT basis – EBITDA basis. And if I go to the indices and I just look at how much CTMP prices were up, maybe it looks like 20% to 25% of the improvement. So I’m wondering if you can help us kind of parse out the other elements in the improvement, including Hinton?

Well, I think, we also had some maintenance downtime in the second quarter. So we need to care when mill had maintenance downtime – we had maintenance downtime at our QRP mill. But again, there’s also a lag in pricing, as you know, particularly for pulp, given the time between order and the time between shipment. So, we had – we’ve stronger results in pricing for BCTMP. Our Hinton – our mills all ran well in the quarter. Hinton ran particularly well compared to past quarters. And I think I said in the last call, we continue to see margin tightening between in terms of pricing between BCTMP and other kraft pulp. So I think it was combination of all those elements.

Okay. Ted, is it possible to just give a sense of sort of maintenance in second quarter versus maintenance in third quarter, and where that will be in the fourth quarter?

We have no maintenance plans for the fourth quarter.

Okay. And then in the second quarter and the third quarter, what was the Delta there?

Well, I think in the second quarter, we had probably, I’m trying to remember, this is probably a week of maintenance at our Cariboo pulp mill and I think three or four days of maintenance at our [indiscernible] pulp mill. But I’m not entirely sure that, but we can check and one of us can get back to you…

Okay.

…if we’re wrong. But we had no scheduled maintenance in the third quarter.

Yes, just – it’s just helpful in trying to kind of pull apart the pieces. If I turn over to wood business, this tremendous growth you’re getting in LVL, can you talk a little bit about that, Ted? And also maybe give us a sense of how much of that LVL stays in Canada and how much you’re selling down in the U.S.?

Well, I mean, our LVL business is tied to housing starts, and we’ve seen improvement there. In terms of our breakdown between Canada and the U.S., there’s – it’s really – we’re really in both regions in a material way, I don’t really want to go much further in detail on that, but it really has to do with improving markets.

Well, I just...

And again, we have one mill, all right. We don’t have 10 mills, we have one mill. So and our folks up at LVL plant have been doing an excellent job making that no more competitive as well.

Yes. You’re just – you’re up about 30% year-on-year.

Yes.

And if I look at the housing start numbers or industry data, nobody else is up in those kind of terms. So I didn’t know whether you’ve done some debottlenecking there, or what’s going on?

We’ve just added – we’ve added more hours. And given we have one plant, I think, we have the ability to be a lot more nimble than maybe somebody with multiple plants.

Okay. And then over in the plywood business, your pricing was stronger than we expected. I guess that you’re mainly selling into the Canadian market. So is it just a Canadian market brand differently than the numbers we see from like Random Lengths for the U.S. pricing?

Well, I think, it’s always, I mean, we’re basically a Canadian supplier. And so, there’s really no shift in terms of how the Canadian plywood market works against indexes. It just says, we had a very strong quarter price wise.

Okay. And can you maybe talk a little bit about the export market to China right now, because it sounds like it’s been pretty good for you all through the year after taking kind of a leg down, I think, we’re on the middle of last year?

Yes, I mean, I think, we’ve seen volumes being very stable for us. We also have been extremely committed to that market. I mean, we are in there in good times and bad times. We’ve built – this is a long-term market for our company, we continue to be focused on it. So I mean, we’re seeing very, very stable demand this year in terms of our customer base, because I think for one reason, we’ve been, as I said, a very consistent supplier.

Okay. And I’m just finally on this issue. I’m just – I’m – I wondered if you could speak to the inventory charges, because it seems like the inventory charges remains relatively consistent even while kind of low grade lumber prices have been moving up. And you might have thought that improved pricing on the lower grades might have translated to lower inventory charges?

Well, Mark, Rodger accuses me of wanting to be an accountant. And I think he do a better job explaining this than me.

Hi, Mark.

Hi, Rodger.

Mark, it’s basically just a normal lower cost of market test on our utility and economy lumber. And I think we – you’re right. We’ve seen some improvement in utility prices. But they haven’t resulted in much of a change yet on that realizable value test we do. So the write-down in the quarter was about $11 million or so. Like I say, most of that is just the regular utility in economy lumber. So we haven’t changed methodology and remained pretty consistent.

Okay, thanks. I’ll jump back in the queue. Thanks.

Okay. Thanks, Mark.

Thank you. The following question is from Paul Quinn from RBC Capital Markets. Please go ahead.

Yes, thanks, and good morning, Ted and Larry.

Good morning, Paul.

Hey, Paul.

I just had a couple of easy questions. One, just on capital allocation here. You’ve been buying back shares. Dividend really hasn’t moved for any length of time. You’ve been active in the M&A market. So, I guess, the question going forward here and given the sort of their market uncertainty around SLA, do you want to keep this underleveraged balance sheet right now? Are there M&A opportunities and do you still feel prudent on buying back shares when the time is right?

So that was your easy question. I think three parts to it. I think, fundamentally, we’re always looking for growth opportunities, Paul. And that’s just – this – that’s just a constant with our company. We haven’t seen any in the last, I guess, 12, 15 months that we’ve gone all that excited about. We’re going to continue to invest capital in our business. I think this year, I think, we’re expecting to spend in the order of about $250 million give or take and next year we’re probably in similar vein. Our share buybacks, we’ve – since we’ve started this program, we’ve bought, I think, over 7 million shares over the last 2.5 years. And as Larry mentioned, we’ve got the normal course issuer bid. We can buy another 3.8 million shares between now and I guess middle of next September, and I expect, we’ll continue to do that. As – obviously, we will monitor our balance sheet. We are, as you mentioned, slightly conservative in terms of our balance sheet. I think we’ll continue to remain so unless we saw a very exciting and significant acquisition. And I think at the end of the day, if no great opportunities are there for us, we are prepared to carry cash for periods of time if that becomes a case as well. So I think really we want to continue with a prudent approach to our balance sheet.

Okay. And just on – you’ve referenced the higher Western SPF and southern yellow pine prices during the standstill. Is that to imply that the increase Canadian shipments into the U.S. haven’t had a material effect on pricing, or is that – is contrary argument would say that, prices will be even higher without the increase?

Well, I don’t really wanted to bake the reasons why? I think I was just making a point, and I think it’s pretty clear than in period of free trade, prices are up significantly in southern yellow pine, in particular. So I’ll leave that to others to decide what that means.

I like the point made. Okay, thanks. Good luck.

Okay, thanks.

Thank you. The following question is from Sean Steuart from TD Securities. Please go ahead.

Thanks. Good morning, guys.

Hey, good morning.

Hey, Sean.

A couple of questions. So for thinking about CapEx in 2017 continuing at about $250 million. Can you give a little bit of detail on the focus for discretionary projects? And I’ve seen the local press with regards to the plants in Newbury. Any further detail you can give on that project, and some of the other discretionary spending programs you have in mind?

Yes. Well, the Newbury project is not – it’s something that was approved last year or maybe even the year before, and that – that’s a major sawmill upgrade. We put a new player in there a year ago, and it’s in a very good timber drain. So we are modernizing the sawmill. We’re looking at some other potential sawmill upgrade in the U.S.. And again, our normalized capital, Sean, should be in the order of $200 million plus or minus $25 million. So when we talk about $250 million, it’s not extraordinary spending. But we’re continuing to look at project, and we haven’t finalized our capital plans for next year. We’ll be doing that over the next month and bringing that to our Board for approval in December. But I think, when we sort of forecast $250 million, that is where we are today. And we’re – but we’re going to continue to look for good projects to continue to improve the company. So there’s more opportunities particularly in the U.S. itself for us to modernize at plants.

And, Ted, any guidance you can give on incremental volume gains in the south we might expect in 2017, based on the CapEx your spending out?

Well, I put pressure on operating guys if I did that. But I think, we probably would expect to see and it’s probably better to ask that – answer that question when we talk about our fourth quarter results. But I think we’re going to continue to see increases in production, maybe not quite at the same rate as this year, but not too far off either way.

Okay. And question for Larry or Rodger, even adjusting for the inventory accounting and how you expense logs in Q2. Your lumber unit costs were still better than expected. And I guess, the question I have is, how much of the July stumpage increase in BC showed up in your Q3 results? And how much should we expect will run into Q4, if you understand what I’m getting out there?

Yes, Sean, in terms of stumpage increases, I mean, it was a smallish increase that we’ve talked about. I would say probably half of that would have showed up in the – in our quarterly results just giving – given the timing of it and the processing of the logs. So that perhaps be a small increase in the future. I think the capital projects that we’ve done in the past in BC were further along in the ramp up curve, and that accounts for a bit of the cost reduction in our sawmill divisions.

Okay. Thanks, guys. I’ll get back in the queue.

Okay. Thanks, Sean.

Thank you. The following question in from Hamir Patel from CIBC Capital Markets. Please go ahead.

Hi, good morning.

Good morning.

Ted, given a rising vendor expectations for sawmills in the south. I’m just wondering if that’s changed how you think about Greenfield?

Can you ask that question again?

So just, I imagine there’s a growing disconnect between what sawmill owners expect to sell out right now in the south. And I suspect that’s going to persist until we get more clarity on the SLA So I’m just curious if that’s maybe changed how you think about potentially doing a Greenfield?

Well, the first thing we look at it is, we look at the timber drain and that’s key for us in terms of understanding, if we can be profitable in a timber drain, is number one. Number two, we still have significant opportunity to improve our U.S. south operating performance. We have still improvement in terms of bringing our capital on the line down there. So that’s really our focus. We believe we can grow our production, reduce our costs, increase our value really through our organic growth in the U.S. So, your comment about vendor expectations are – is probably true. I mean, there have not been that many acquisitions in the last 12 months in the U.S. So I think that may be true. At some point in time, Greenfield may be of interest to us, but it’s not a priority for us today. It’s not really something where we’re really spending any material time on looking at.

Fair enough. Larry, question for you on pension funding. Is there anything we should be thinking about that for 2017?

But the – this – we do a valuation – a full valuation of our pension fund every three years, and this is the third year. And so probably around September, we will be establishing our funding base. But our focus with respect to the pension is the deficit, that is generated by very, very low interest environment. And what we’re looking at as a lot of folks are, as you know, what’s the future of corporate borrowing rates, a lot of talk in the U.S. right now about an interest rate hike. And so that that in and of itself starts to eliminate some of the pension deficit. But it’s something that we were looking at. And I think 2017 will be a year that we will be focusing on whether we’re comfortable with the size of the deficit in our pension plans. We’ve got plenty of liquidity where we talk about capital allocation that that plays into the mix as well.

Great. Thanks, Larry. That’s all I had.

Thanks, Hamir.

Yes, thank you.

Thank you. [Operator Instructions] The next question is from Daryl Swetlishoff from Raymond James. Please go ahead.

Well, thanks. Good morning, guys.

Good morning, Daryl.

Just a follow-up question on the spread between southern yellow pine and SPF. So, I think, today it’s around $116. Can you comment on some of the end use changes for yellow pine that are driving the spread? And where do you think that spread goes in the event we do get a duty of some kind?

Well, I think we’re seeing improvements obviously in U.S. housing construction. So, that that is helpful. In terms of what occurs if we go into a duty world, I mean, at the end of the day here, you’re paying duties on SPF that would tell me that you’re going to see the spread increase.

Thanks, Ted. That’s all I had.

Okay. Thanks.

Thanks, Daryl.

Thank you. The next question in from Mark Wilde from BMO.. Please go ahead.

Yes, I just have a few follow-ups. Ted, where we have right now would you say in terms of the operating performance of Hinton and then kind of just consistency versus what you’d like to see that mill at?

Well, if we look back two years ago, I’d say, we’re two-thirds of the way there in terms of production per day. On an annual basis, I think, we’re a little further along if we look at quarter-on-quarter improvement. In terms of our peak performance of that mill, our grade days are significantly higher than our grade days were two years ago. So there’s a lot of positive momentum going there, Mark. So, we look at 2017 as is being a pretty important year for us. We continue to look for ways to debottleneck parts of that mill, which to me is a positive step. But the other thing that’s important is, when your mill is not running reliably, it really does drives your costs up maintenance and that sort of thing. And so, that’s an area that we also expect to come further into line for us, as the mill runs better. So, I’d say overall in terms of overall operating performance from a financial standpoint, we’re not even halfway there yet from my perspective. But we’re getting there.

Okay, all right. Secondly, you mentioned in the release that your log costs are down across the southern U.S. I just wondered if you could quantify that. We noted that the timber market sell prices have been down for, I think, the last three or four quarters?

Well, we’re in 15 different timber drains, so…

Okay. I know it’s not a model [Multiple Speakers].

So to make a general comment would be probably not all that helpful for us. So, I think, we really can’t add much more to what you get in terms of the reported – the numbers from to timber, Mark. So, it’s fairly flat, and overall and we don’t see that changing materially in the short-term.

Yes, okay. Last thing I want to do is just come back to the sort of the trade issue. In the past you’ve said kind of a quota is kind of no-go territory. I just wondered whether you could conceive of some kind of a solution, which is maybe a hybrid, which incorporates elements of a quota and maybe variable duties?

Well, I think, first of all, West Fraser is not the company that’s going to say what’s going to happen. It’s going to be government, at least, government, at least, from a Canadian perspective. We fundamentally believe in free trade and that maybe had something to do with the comment I made around pricing during the standstill. But we understand that manage trade is what we’ve had and is what will end up with what that looks like? How that looks? At the end of the day, we can’t really crap that. We just want to make sure that the competitive mills in the industry are the ones that are running at the end of the day. And we want to be rewarded for the capital we’ve invested and we want to be rewarded for our operating performance.

Okay. Just one other kind of high level on the trade.

Yes.

There it seems like the two candidates are both sounding a lot more hawkish on the trade issue than the existing administration down here? And I just, I wondered whether that creates, you think any incentive on your side of the border to maybe get a deal done with the current administration rather than take whatever is going to come in after January 20?

Well, let me put it this way. I think, the Canadian government has reached out on a number of occasions to the U.S. to try and find a solution. And. I think it’s been reported what has been put on the table just two weeks ago. And so from my perspective, Canada has gone a long way. In my opinion, the balls in the U.S. is good. And I guess U.S. should – will decide whether they want to litigate or negotiate. And at this point in time, we’re – the two governments are still talking, so we’re going to be supportive.

Okay, fair enough. Wishing you good luck in the fourth quarter and as we move into 2017.

Okay, I appreciate it. Thanks, Mark.

Thanks, Mark.

Yes.

Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to Mr. Seraphim.

Well, first of all, thank you for all attending and we’ll talk to you in about three months. Thanks.