Fourth Quarter

• Sales exceed $1.1 billion
• Earnings of $79 million or basic EPS of $1.01
• Adjusted earnings¹ of $101 million or Adjusted basic EPS¹ of $1.28
• Adjusted EBITDA¹ of $193 million or 17% of sales
• Net cash provided by operating activities of $182 million
• Quarterly cash dividend of $.07 declared

2016

• Record sales exceed $4.4 billion
• Earnings of $326 million or basic EPS of $4.06
• Adjusted earnings¹ of $330 million and Adjusted basic EPS¹ of $4.11
• Adjusted EBITDA¹ up 62% compared to 2015; improves to 15% of sales
• Lumber segment leads improvement as U.S. housing continues to recover and previous capital investment contributes to improved productivity
• Capital spending of $273 million and combined dividend and share buybacks of $212 million
• Year end balance sheet strong with net debt to total capital ratio of 14%

VANCOUVER, Feb. 16, 2017 /CNW/ - West Fraser reported earnings of $79 million or $1.01 basic earnings per share on sales of $1,107 million in the fourth quarter of 2016 and earnings of $326 million or $4.06 basic earnings per share on sales of $4,450 million for 2016.  These results compare with previous periods as shown in the table below.

Adjusted EBITDA, Adjusted earnings and Adjusted basic EPS as described in this News Release reflect the adjustments described in the tables referred to in the section titled "Non‑IFRS Measures" of our 2016 Management's Discussion & Analysis.

Operational Results

In the quarter our lumber operations generated operating earnings of $107 million (Q3-16 –$114 million) and Adjusted EBITDA of $144 million (Q3-16 - $151 million).  Production and shipments declined quarter over quarter due to cold weather in several of our operating areas and fewer operating days.  The segment's results benefited from a weaker Canadian dollar while Canadian log costs continued to rise.

Our panels segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $17 million (Q3-16 - $30 million) and Adjusted EBITDA of $20 million (Q3-16 - $33 million).  The major contributor to the decline was plywood pricing as winter weather slowed Canadian construction.

Our pulp & paper segment generated operating earnings of $20 million (Q3-16 – $22 million) and Adjusted EBITDA of $30 million (Q3-16 - $31 million).  NBSK operations were able to offset additional costs associated with cold weather with higher shipments while BCTMP price improvements offset reduced shipments caused by port congestion.

Outlook

Our President and CEO Ted Seraphim said:  "During 2016 we faced a number of challenges and, although we still have important work to do, I have been greatly encouraged by the progress that we have made across the Company in achieving operational excellence.  This will continue to be our focus in the coming years as it is the critical component of our business over which we have control.  I'm grateful to our many employees whose commitment to this standard of excellence is evident in their daily activities."

Mr. Seraphim also commented on the current softwood lumber dispute:  "In light of the operational progress that we are making as a company, it is particularly disappointing that we find ourselves once again caught up in another dispute with our American neighbours over softwood lumber exports from Canada to the U.S.  West Fraser has worked hard to contribute to a resolution of this long‑standing dispute, as have various levels of government in Canada and other Canadian industry participants.  West Fraser was recently selected by the U.S. Department of Commerce as a mandatory respondent in separate subsidy and dumping investigations which has imposed substantial time commitments and costs on us.  Despite this we continue to support a negotiated settlement that will manage trade in a fair and reasonable manner but, as always, we would prefer no agreement to a bad agreement."

Annual Financial Statements and Management's Discussion & Analysis ("MD&A")

The Company's consolidated financial statements for the year ended December 31, 2016 and related MD&A is available on the Company's website:  www.westfraser.com and on the System for Electronic Document Analysis and Retrieval at www.sedar.com under the Company's profile.

Dividend Declared

The Board of Directors of the Company has declared a dividend of $0.07 per share on the Common shares and the Class B Common shares in the capital of the Company, payable on April 3, 2017 to shareholders of record on March 20, 2017.

Dividends are designated to be eligible dividends pursuant to subsection 89(14) of the Income Tax Act (Canada) and any applicable provincial legislation pertaining to eligible dividends.

The Company

West Fraser is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy with facilities in western Canada and the southern United States.

Forward‑Looking Statements

This Report contains historical information, descriptions of current circumstances and statements about potential future developments.  The latter, which are forward‑looking statements and are included under the heading "Outlook", are presented to provide reasonable guidance to the reader but their accuracy depends on a number of assumptions and is subject to various risks and uncertainties.  Actual outcomes and results will depend on a number of factors that could affect the ability of the Company to execute its business plans, including those matters described in the 2016 annual Management's Discussion & Analysis under "Risks and Uncertainties", and may differ materially from those anticipated or projected.  Accordingly, readers should exercise caution in relying upon forward‑looking statements and the Company undertakes no obligation to publicly revise them to reflect subsequent events or circumstances, except as required by applicable securities laws.

Conference Call

Investors are invited to listen to the quarterly conference call on Friday, February 17, 2017 at 8:30 a.m. Pacific Time (11:30 a.m. Eastern Time) by dialing 1-866-225-0198 (toll‑ free North America).  The call may also be accessed through West Fraser's website at www.westfraser.com.

West Fraser Timber Co. Ltd.
Notes to Condensed Consolidated Interim Financial Statements
(figures are in millions of dollars, except where indicated - unaudited)

1. Nature of operations

West Fraser Timber Co. Ltd. ("West Fraser", "we", "us" or "our") is a diversified wood products company producing lumber, LVL, MDF, plywood, pulp, newsprint, wood chips and energy with facilities in western Canada and the southern United States.  Our executive office is located at 858 Beatty Street, Suite 501, Vancouver, British Columbia.  West Fraser was formed by articles of amalgamation under the Business Corporations Act (British Columbia) and is registered in British Columbia, Canada.  Our Common shares are listed for trading on the Toronto Stock Exchange under the symbol WFT.

2. Basis of presentation and statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting as issued by the International Accounting Standards Board and using the same accounting policies and methods of their application as the December 31, 2016 annual financial statements.  These condensed consolidated interim financial statements should be read in conjunction with our 2016 annual financial statements.

3. Inventories

Inventories at December 31, 2016 were written down by $5 million (September 30, 2016 - $10 million; December 31, 2015 - $21 million) to reflect net realizable value being lower than cost.

4. Other

Power agreements

In March 2016, the termination of our three‑year power strip agreement was negotiated.  In addition, Capital Power Corporation gave notice of its intent to terminate its role as buyer of the Sundance C Power Arrangement ("Sundance") effective March 24, 2016.  As a result of this termination, our role as a party to the Power Syndicate Agreement also terminated.  These agreements had provided us with a portion of the electricity generated from two power plants in Alberta at substantially predetermined prices.

Prior to the termination, we recorded the agreements at fair value with the resulting gains or losses being recorded through other income.  In the fourth quarter of 2016, Capital Power Corporation settled a dispute with the Government of Alberta related to the termination of Sundance.  As a result, we recorded in other income an additional $8 million loss related to our share of the settlement.

Insurance proceeds

Our WestPine MDF mill, located in Quesnel, British Columbia, was closed due to a fire on March 9, 2016 and will remain closed until repairs are complete.  The mill is insured for property damage and business interruption.  The impact on pre‑tax earnings is as follows:

Estimated business interruption insurance is recorded as a reduction of cost of products sold.  Estimated insurance proceeds to be spent to replace equipment are accounted for as proceeds of disposition, and the resulting gain has been included in other income.

The final amount of the insurance claim will be determined after the mill reconstruction is complete and the mill returns to expected production rates.

5. Tax provision

The tax provision differs from the amount that would have resulted from applying the British Columbia statutory income tax rates to earnings before tax as follows:

6. Earnings per share

Basic earnings per share is calculated based on earnings available to Common shareholders, as set out below, using the weighted average number of Common shares and Class B Common shares outstanding.

Diluted earnings per share is calculated based on earnings available to Common shareholders adjusted to remove the actual share option expense (recovery) charged to earnings and after deducting a notional charge for share option expense assuming the use of the equity‑settled method, as set out below.  The diluted weighted average number of shares is calculated using the treasury stock method.  When earnings available to Common shareholders for diluted earnings per share are greater than earnings available to Common shareholders for basic earnings per share, the calculation is anti‑dilutive and diluted earnings per share are deemed to be the same as basic earnings per share.

7. Segmented information

The geographic distribution of external sales is as follows¹:

8. Softwood lumber dispute

The Canada – U.S. Softwood Lumber Agreement ("SLA") expired in October 2015 and on the expiry of that agreement a one year moratorium on trade sanctions by the U.S. came into place.  The Government of Canada and the U.S. Trade Representative have been unable to reach agreement on a new managed trade agreement.

On November 25, 2016 a coalition of U.S. lumber producers petitioned the U.S. Department of Commerce and the U.S. International Trade Commission to investigate alleged subsidies to Canadian producers and levy countervailing and anti-dumping duties against Canadian imports.

The U.S. Department of Commerce has initiated its investigation and is expected to make a preliminary determination regarding countervailing duties in April 2017, and in June 2017 for anti‑dumping duties.  If the U.S. Department of Commerce determines that "critical circumstances" apply, duties could be applied retroactively up to 90 days prior to the preliminary determinations.  We have been chosen by the U.S. Department of Commerce as a "mandatory respondent" to both the countervailing and anti-dumping investigations and as a result will receive unique company specific rates.

We categorically deny the U.S. allegations of subsidies and dumping and will vigorously defend ourselves and the Canadian industry against the unfounded allegations.

West Fraser shares trade on the Toronto Stock Exchange under the symbol:  "WFT".

SOURCE West Fraser Timber Co. Ltd.

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