Ketan Mamtora

Ketan Mamtora asked about Trex's new PVC products, specifically if they are part of a broader PVC product line expansion or if other product types are being considered. He also asked if the full-year guidance midpoint of 3% implies similar sales-through, indicating no significant inventory changes.

Answer

Adam Zambanini, EVP and COO, explained that PVC focus is primarily in New England and the West Coast (fire-prone areas). He stated Trex will remain in the PVC category but is not limited to PVC for fire solutions, aiming to aggressively target PVC contractors for conversion to WPC. Bryan Fairbanks, President and CEO, confirmed that the sales-through should be in a similar range to the guidance, implying no significant inventory changes.

Ketan Mamtora inquired about Trex's PVC product strategy, specifically if the recently launched ignition-resistant PVC decking is the first of several new PVC products or if future launches might extend beyond PVC, and whether the full-year guidance implies no significant inventory changes.

Answer

Adam D. Zambanini, EVP and COO, explained that PVC is primarily targeted at New England and fire-prone West Coast regions, emphasizing a focus on competing aggressively in the fire segment, not necessarily limited to PVC materials. He also mentioned targeting PVC contractors to convert them to WPC. Bryan H. Fairbanks, President and CEO, confirmed that the full-year guidance assumes no significant inventory changes.

Ketan Mamtora of BMO Capital Markets asked if Q4 production plans include an inventory build in the channel and inquired about capital allocation priorities as the major Arkansas investment concludes.

Answer

President & CEO Bryan Fairbanks responded that he expects both company and channel inventory levels to be similar to the prior year-end. Regarding capital allocation, he outlined the priorities as organic growth, followed by M&A opportunities, and finally share buybacks, noting that significant free cash flow generation is expected.

Ketan Mamtora of BMO Capital Markets asked if Q4 production plans include an inventory build in the channel and inquired about the company's capital allocation priorities as the major Arkansas investment concludes.

Answer

President & CEO Bryan Fairbanks responded that he expects both company and channel inventory levels to be similar to the prior year-end. He outlined capital allocation priorities as organic growth, potential acquisitions, and share buybacks, noting that free cash flow generation is expected to increase significantly.

Ketan Mamtora requested an update on the market performance and early results from Trex's newly launched suite of railing products. He also asked for clarification on how the previously mentioned $40 million inventory benefit would flow through in Q2 and Q3.

Answer

CEO Bryan Fairbanks reported meaningful dealer conversions for the new aluminum and steel railing systems, as distributors simplify their inventory and sales efforts to focus on the Trex brand. CFO Brenda Lovcik clarified that of the $40 million destocking headwind from the prior year, most of the favorable comparison would materialize in Q2, with the remainder in Q3, agreeing that a two-thirds/one-third split was a reasonable estimate.

Ketan Mamtora asked about the current state of distribution inventories for both general line and commodity products, particularly in preparation for the spring season, given the weakness in Q4. He also requested an update on the performance and current status of Boise Cascade's Doors and Millwork business.

Answer

Jeff Strom, Incoming CEO, stated that general line inventories in the field were lean in Q3/Q4, with customers relying on next-day service, and Boise Cascade's own inventories are building back up for service. Jo Barney, EVP of Building Materials Distribution, reported that door shops are performing well and making significant strides, with expansions underway and a focus on growing the pre-finished business, reducing lead times, and automating processes, leading to improved operational efficiency and revenue gains.

Ketan Mamtora questioned the drivers behind the expected double-digit year-over-year decline in Q2 I-joist volumes. He also asked for commentary on the company's inventory levels, which are up year-over-year, and sought CEO Nate Jorgensen's perspective on recent industry consolidation.

Answer

CFO Kelly Hibbs attributed the I-joist volume decline primarily to lower year-over-year housing start comparisons, not a loss of market share. COO Jeff Strom justified the higher inventory, stating the company strategically leaned into winter buys to serve a distribution-friendly market. CEO Nate Jorgensen commented that Boise Cascade is well-positioned to manage industry consolidation by staying focused on high-level execution for both suppliers and customers.

Ketan Mamtora from BMO Capital Markets asked if the trough for BMD EBITDA margins could be considered slightly above 5% given recent investments and mix shifts. He also inquired about the M&A pipeline and the company's interest in adding new product categories to its distribution business.

Answer

CFO Kelly Hibbs stated that the company's strategy is for BMD margins to average in the mid-5% range through a cycle, but he cautioned that margins could dip below 5% in Q1 2025 due to top-line pressures. On M&A, Hibbs confirmed continued interest in strategic opportunities, particularly on the distribution side. CEO Nate Jorgensen added that new product considerations are driven by customer and supplier needs and must align with the company's core competencies.

Ketan Mamtora asked for clarity on the expected Q4 seasonal slowdown for EWP and BMD given a strong October, inquired about the performance of the BROSCO acquisition, and requested the EWP operating rate for the third quarter.

Answer

CFO Kelly Hibbs and CEO Nate Jorgensen acknowledged the strong October but anticipate a slowdown in November and December due to fewer sales days and macro uncertainty, emphasizing the need to be agile. Jeff Strom, Head of BMD, reported that the BROSCO business has been 'rock solid' and is exceeding expectations. Kelly Hibbs confirmed that EWP operating rates were around 80% in Q3.

Ketan Mamtora from BMO Capital Markets asked about the M&A pipeline, specifically where the most opportunities lie and if the company is skewing more towards M&A in 2026 compared to 2025's share repurchase focus. He also inquired about the company's view on full-cycle profitability and M&A opportunities within the packaging business, and the broad repair and remodeling (RNR) trends, particularly for ProWood, beyond new residential weakness. Finally, he asked about Factory-Built trends and expectations for 2026.

Answer

Will Schwartz, President and CEO, stated that the M&A pipeline is the best it's been in three years, driven by intentional outreach to strengthen the core business while remaining return-focused. He highlighted packaging as a 'highlight area' for M&A due to its fragmentation. Regarding RNR, Schwartz described it as a 'soft market' with challenged consumer confidence and affordability. Mike Cole, Chief Financial Officer, broke down ProWood's 13% unit decline, attributing 8% to storm-related demand and the remainder to general soft demand. For Factory-Built, Schwartz sees opportunity in tackling affordability challenges by enhancing visual appeal, while Cole noted good momentum in new products despite some commodity share loss.

Ketan Mamtora asked about the M&A pipeline, identifying areas of greatest opportunity, and whether the company plans to skew more towards M&A than share repurchases in 2026. He also inquired about the company's view on the full-cycle profitability and M&A opportunities within the packaging business. Additionally, he sought insights into the broad repair and remodeling trends and the performance and expectations for the Factory-Built segment in 2025 and 2026.

Answer

President and CEO William G. Schwartz stated that the M&A pipeline is the best it's been in three years, with intentional efforts and outreach focusing on strengthening the core business while remaining return-focused. He highlighted packaging as a 'highlight area' for M&A due to its fragmentation and the company's understanding of the business. For ProWood and R&R, William G. Schwartz described it as a 'soft market' with challenged consumer confidence and affordability, but the company's portfolio is positioned to capture opportunities. An unnamed executive clarified that an 8% unit decline in ProWood was storm-related, leaving mid-single-digit declines from soft demand. For Factory-Built, William G. Schwartz believes it addresses affordability challenges in housing, with opportunities to enhance visual appeal. An unnamed executive added that some share was lost in commodity business, potentially challenging units, but new product momentum (e.g., Endurable drop-down deck, BRAWN brand) could lead to a positive mix change.

Ketan Mamtora of BMO Capital Markets questioned if the competitive dynamics in the site-built business have stabilized or worsened, asked how UFP Industries is positioning itself for the upcoming increase in Canadian lumber duties, and inquired about the capital allocation priorities between M&A and share repurchases.

Answer

CFO Michael Cole stated that while site-built volumes increased seasonally from Q1 to Q2, pricing pressure has intensified and is expected to continue. CEO Will Schwartz noted that Canadian lumber is a small component of their total spend, with most purchases being domestic, and the company is exploring converting products to domestic species to mitigate duty impacts. Regarding capital allocation, Cole reiterated that growth through capital investments and M&A is the top priority, but share buybacks are a great avenue when the stock is trading at a discount and M&A opportunities are not attractive.

Ketan Mamtora of BMO Capital Markets asked for the approximate EBITDA impact from the Deckorators customer shift, whether the underlying market was flat, the timeline for the shift's resolution, and the nature of the current M&A pipeline and preferred deal size.

Answer

Chief Financial Officer Michael Cole quantified the negative manufacturing variance impact from the Deckorators volume decline at $2 million and noted the overall 11% unit decline could be used for estimation. Chief Executive Officer William Schwartz confirmed the underlying market was flattish and that the shift should be fully resolved in Q2, with the second half expected to be up year-over-year. On M&A, Schwartz described the pipeline as robust across all business units. Cole added that the company is open to both traditional tuck-in acquisitions and larger, disciplined transactions that are close to their core business.

Ketan Mamtora asked about current trends in the Packaging segment, focusing on demand, pricing, and competitive dynamics. He also requested an update on the company's $1 billion multi-year capital expenditure program and sought guidance on how to model incremental and decremental margins for the Packaging and Construction segments following recent cost rationalizations.

Answer

Executive Chairman Matthew Missad stated that the Packaging segment continues to face market pressure, which is expected to last through the first half of 2025, although he believes pricing has bottomed. CFO Michael Cole added that a negative mix shift is occurring, with the lower-margin PalletOne business outperforming. Regarding CapEx, Cole confirmed the $1 billion plan is intact, with $350 million in new projects planned for approval in 2025. For margins, he suggested that historical decremental/incremental ranges of around 20% for Packaging and Construction remain a reasonable guide, provided there are no major pricing swings.

Ketan Mamtora of BMO Capital Markets inquired about the M&A pipeline, asking if opportunities were concentrated in a specific segment, and questioned if the cadence of the multiyear capital investment plan would change given the market backdrop. He also requested more detail on pressures within the Construction segment.

Answer

CEO Matt Missad stated that the M&A strategy is focused on finding the best value within their established strategic runways rather than weighting any single segment. CFO Mike Cole affirmed that the multiyear, ~$1 billion capital investment plan remains on its expected cadence over the next 4-5 years. Regarding the Construction segment, Matt Missad cited broad economic uncertainty and rate sensitivity, while Mike Cole specified that the weaker Q4 outlook was driven by underperformance in the Commercial and Concrete Forming business units.

Ketan Mamtora from BMO Capital Markets asked about the demand trends for LP's ExpertFinish product, noting strong Q4 volumes, and inquired about its allocation status and overall market performance. He also questioned LP's strategy for additional siding capacity, including the Maniwaki option, and how OSB production is being managed.

Answer

Jason Ringblom, Chief Executive Officer, highlighted favorable macro trends for ExpertFinish, citing tight labor and demand for durable solutions, leading to outperformance in new construction and R&R. He confirmed LP came off ExpertFinish allocation on February 1st due to OEE improvements. Regarding capacity, he mentioned the new Green Bay line ramping in Q2 and ongoing engineering for future expansions, with capital spend back-end loaded. For OSB, he noted capacity is managed to demand, with recent price rebounds suggesting a more balanced market.

Ketan Mamtora of BMO Capital Markets sought clarification on the Siding guidance for the second half of the year, noting the implied strong Q4 revenue growth after a flat Q3. He also asked about the operating rates for both the OSB and Siding segments in Q2 and the company's production strategy for OSB given the low price environment.

Answer

EVP & CFO Alan Haughie explained the guidance implies a symmetrical year, with Q4 2025 volumes showing healthy growth over a relatively low Q4 2024. VP of IR Aaron Howald stated Q2 OSB operating rates were in the mid-80% range, with Siding slightly lower. CEO Brad Southern added that for OSB, the strategy is to match production to demand to avoid building inventory, which necessitates taking downtime.

Ketan Mamtora of BMO Capital Markets questioned the Siding guidance for the second half, particularly the implied strong Q4 growth following a flat Q3. He also requested details on Q2 operating rates for both Siding and OSB, and the company's production strategy for OSB amid low prices.

Answer

CFO Alan Haughie explained the guidance implies a symmetrical year, with the healthy Q4 year-over-year growth resulting from a comparison to a relatively weak Q4 in the prior year. VP of IR Aaron Howald stated Q2 OSB operating rates were in the mid-80% range, with Siding slightly lower. CEO Brad Southern reiterated that the OSB strategy is to match production to demand to avoid building inventory, which necessitates taking downtime.

Ketan Mamtora asked about the primary drivers for the Siding segment's outperformance relative to single-family housing starts, the demand trends in the Repair and Remodel (R&R) market, and current inventory levels in both home center and pro channels.

Answer

CEO William Southern explained that the strong Q1 performance was broad-based, with particular strength in shed orders creating an easy comparison to the prior year. He noted that while home center order intake was soft, sell-through was good, leading to inventory drawdowns. Southern characterized Siding channel inventories as seasonally appropriate and OSB inventories as potentially lean due to recent price movements.

Ketan Mamtora from BMO Capital Markets questioned why the Siding EBITDA margin is guided to remain flat in 2025 despite growth in high-margin products, and asked for details on the Houlton Line 2 capacity expansion.

Answer

CFO Alan Haughie explained that the margin reflects significant reinvestment, including ~$20M in inflation, $10-15M in added selling and marketing, and ~$5M in engineering costs for growth projects. Executive Aaron Howald added that the Houlton Line 2 expansion will add approximately 300 million square feet of capacity, focusing on lap and trim products.

Ketan Mamtora asked if product category needs, like lap and trim versus panel, still influence Siding expansion decisions. He also inquired about current demand trends and order activity through Q3 and into October.

Answer

CEO Brad Southern confirmed that product mix is a key factor, noting that current growth in lap and trim might favor a more specialized press setup for the next expansion. He characterized current demand activity as solid and steady, feeling like a 'pre-COVID solid year,' which provides confidence heading into year-end.

Ketan Mamtora asked for color on Q1 2026 activity levels and the impact of recent weather events on guidance, seeking to understand if the slowdown is unique to January. He also inquired about Builders FirstSource's short-term leverage philosophy for M&A opportunities, given the cyclically challenged environment.

Answer

CEO Peter Jackson confirmed a slow start to Q1, with a nice ramp-up expected, and noted that severe January weather significantly disrupted homebuilding markets like Texas, Carolinas, and Florida. CFO Pete Beckmann quantified the weather impact at $30 million-$40 million in sales for the last week of January. CEO Peter Jackson reinforced that the company prioritizes strategic long-term decisions, confident in its consistent cash flow, stating that short-term leverage fluctuations would not deter them from acquiring the right assets that create value.

Ketan Mamtora asked for color on the activity levels observed at the start of 2026 and the impact of recent weather events on the Q1 guidance, seeking to understand how much of this impact is unique to January.

Answer

CEO Peter Jackson confirmed a slow start to the year, with a nice ramp-up expected in January, but noted that the severe weather was as bad as advertised, disrupting major homebuilding markets. CFO Pete Beckmann quantified the weather impact as approximately $30 million-$40 million in sales for the last week of January, potentially extending into February, which will affect year-on-year percentages.

Ketan Mamtora of BMO Capital Markets inquired whether the company is seeing increased substitution of Southern Yellow Pine for Canadian Spruce in lumber due to price differentials, and asked for an order-of-magnitude comparison of current truss margins versus 2019 levels.

Answer

CEO Peter Jackson acknowledged that while SPF is preferred, substitution to SYP has been a modest, long-term trend driven by cost, but he has not seen a step-function change yet. When asked to compare current truss margins to 2019, he simply stated they are 'Better.'

Ketan Mamtora from BMO Capital Markets asked for the key drivers behind the downward revision to the 2025 guidance. He also followed up to confirm if the previously discussed EBITDA impact from the multifamily downturn was still in line with expectations.

Answer

CEO Peter Jackson identified the main drivers for the guidance change as lower single-family starts and slightly tighter margin pressure, which is correlated to the lower starts. CFO Pete Beckmann and Jackson both confirmed that the impact from the multifamily downturn is directionally in line with previous expectations and that the company is lapping the majority of that headwind in the first half of the year.

Ketan Mamtora questioned the projected 2025 revenue decline in multifamily, asking if it was due to lapping tough comparisons or anticipated further declines. He also asked if the margin normalization in both multifamily and single-family was nearing its end.

Answer

CEO Designate Peter Jackson confirmed the multifamily revenue decline in 2025 is primarily a result of lapping a strong prior year, as the business has now stabilized. CFO Designate Pete Beckmann added that multifamily margin normalization should be largely complete by Q1 2025. Jackson concluded that while pressure remains due to below-normal starts, the company is in the 'late innings' of the overall margin normalization process.

Ketan Mamtora inquired about West Fraser's M&A opportunities given depressed lumber prices, including potential interest in expanding outside North America, and the expected ramp-up of the Henderson Mill amidst a muted demand environment.

Answer

President and CEO Sean McLaren stated that M&A focus is on strengthening the company with quality assets, especially at the bottom of the cycle, leveraging their strong balance sheet. He confirmed satisfaction with European assets but no specific expansion plans outside North America. Regarding Henderson Mill, he explained it began commissioning in late Q4, replacing existing capacity, with ramp-up expected through the current year to adjust the platform with a new low-cost asset.

Ketan Mamtora asked about potential M&A opportunities given depressed lumber prices, specifically if West Fraser is interested in growing outside of North America in lumber. He also inquired about the ramp-up of the Henderson Mill in the context of a muted demand environment.

Answer

President and CEO Sean McLaren stated that West Fraser's focus is on strengthening the company at the bottom of the cycle, prioritizing asset quality. He mentioned the company's balance sheet allows it to react to quality opportunities, though stronger assets typically wait for better market conditions. McLaren expressed satisfaction with the European business's performance at the bottom of the market but had no specific M&A opportunities outside North America to discuss. Regarding the Henderson Mill, McLaren explained it began commissioning at the end of Q4 2025, replacing an existing mill's volume, and is expected to ramp up through the year, providing a low-cost asset for platform adjustment.

Ketan Mamtora asked about West Fraser's production management strategy for lumber and North America OSB amidst soft demand and potential negative EBITDA, and the implied Q4 operating rate for OSB. He also inquired about M&A opportunities in the current down cycle, focusing on inorganic growth.

Answer

Sean McLaren, President and CEO, explained West Fraser's nimble, variable operating strategy for lumber and OSB, driven by economics and customer demand, building on early actions like mill closures. Chris Virostek, EVP and CFO, indicated an implied Q4 OSB operating rate of around 80% due to seasonal maintenance. Regarding M&A, Chris Virostek emphasized a 'quality first' approach, leveraging the strong balance sheet for selective, high-quality inorganic growth, a strategy Sean McLaren, President and CEO, reiterated as prioritizing quality and enhancing strength at the bottom of the cycle.

Ketan Mamtora asked about West Fraser's production management strategy for lumber and North America OSB amidst a challenging demand environment, particularly given the potential for negative EBITDA in lumber. He also inquired about the implied Q4 operating rate for OSB and the company's approach to M&A opportunities, leveraging its strong balance sheet in the current down cycle.

Answer

President and CEO Sean McLaren explained that West Fraser maintains a nimble and variable operating strategy based on economics and customer demand, reinforcing earlier actions like mill closures and shift adjustments. EVP and CFO Chris Virostek clarified that the implied Q4 OSB operating rate would be around 80%, factoring in strategic Q4 maintenance shutdowns. Regarding M&A, Chris Virostek emphasized a "quality first" approach, guided by assets that strengthen the company, especially at the bottom of the cycle, aligning with West Fraser's long-standing inorganic growth strategy. Sean McLaren reiterated that quality and enhancing strength at the bottom of the cycle are priorities.

Ketan Mamtora from BMO Capital Markets asked for clarification on West Fraser's openness to a lumber quota, any updates on the Section 232 investigation, the company's operating rates for lumber and OSB in Q2, and the key indicators for its flexible operating strategy in OSB.

Answer

President and CEO Sean McLaren reiterated that the priority is including lumber in broader trade talks and that no options are off the table. He confirmed no new insight into the Section 232 investigation. CFO Chris Virostek did not provide specific operating rates but noted U.S. lumber is running well below preferred utilization. For OSB, Virostek explained they closely monitor new housing starts and permits to flex production, as inventory capacity is limited.

Ketan Mamtora from BMO Capital Markets asked for clarification on West Fraser's openness to a lumber quota, sought an update on the Section 232 investigation's timeline and scope, requested Q2 operating rates for lumber and OSB, and inquired about the key indicators for managing OSB production.

Answer

CEO Sean McLaren reiterated that the industry has not taken any options off the table to support the Canadian government's trade negotiations. He also stated there was no new information on the Section 232 investigation. CFO Chris Virostek explained that operating rates can be derived from production figures against annual capacity and noted that OSB production is managed by closely monitoring housing market trends, with limited inventory capacity requiring quick reactions.

Ketan Mamtora from BMO Capital Markets asked for clarification on West Fraser's openness to a lumber quota, an update on the Section 232 investigation, the operating rates for lumber and OSB in the second quarter, and the key indicators for managing OSB production.

Answer

CEO Sean McLaren reiterated that the industry's priority is including lumber in a broader trade deal and no options are off the table. He had no new information on the Section 232 investigation. CFO Chris Virostek directed to annual capacity figures for calculating operating rates and noted they monitor housing starts, permits, and interest rates to manage OSB production, which requires quick reactions due to limited inventory capacity.

Ketan Mamtora from BMO Capital Markets asked if West Fraser is open to a lumber quota, sought updates on the Section 232 investigation, and requested Q2 operating rates for lumber and OSB, as well as the key indicators for managing OSB operating schedules.

Answer

President and CEO Sean McLaren reiterated that the industry's priority is including lumber in a broader trade deal and that they have no new information on the Section 232 investigation. CFO Chris Virostek explained that operating rates can be derived from production versus annual capacity figures and noted that the OSB business reacts quickly to housing market indicators like starts and permits due to limited inventory capacity.

Ketan Mamtora from BMO Capital Markets asked for clarification on West Fraser's openness to a lumber quota, an update on the Section 232 investigation's timeline and scope, Q2 operating rates for lumber and OSB, and the key indicators driving the company's flexible operating strategy for OSB.

Answer

President & CEO Sean McLaren stated the industry's priority is including lumber in a broader trade deal and that no options have been taken off the table. He confirmed no new insight into the Section 232 investigation. SVP & CFO Chris Virostek advised calculating operating rates from public capacity data and noted that for OSB, the company closely monitors housing starts, permits, and regional trends to adjust production, given limited inventory capacity.

Ketan Mamtora of BMO Capital Markets asked for clarification on West Fraser's openness to a lumber quota, an update on the Section 232 investigation's timeline and scope, Q2 operating rates for lumber and OSB, and the key indicators for managing OSB production.

Answer

CEO Sean McLaren reiterated that the industry's priority is including lumber in a broad Canada-U.S. trade deal and no options are off the table. He stated there is no new information on the Section 232 investigation. CFO Chris Virostek noted that operating rates can be derived from production figures against annual capacity and that they monitor housing starts, permits, and inventory levels to manage OSB production flexibly, as storage capacity is limited.

Ketan Mamtora inquired about current demand trends for lumber and OSB as the market enters its busiest season, and asked for an update on capital allocation priorities, specifically comparing the M&A pipeline against share repurchases.

Answer

SVP of Sales and Marketing, Matt Tobin, described customer purchasing as 'somewhat subdued' and cautious, with no significant changes in demand drivers. President and CEO Sean McLaren added that despite a slow, weather-impacted start to the year, inventories are in reasonable shape and volumes should normalize, excluding unpredictable tariff impacts. On capital allocation, McLaren stated that the criteria for M&A remains very high, focusing on acquisitions that are immediately strengthening. SVP and CFO Christopher Virostek emphasized the company's durable, cycle-agnostic strategy that keeps all options open, but noted that current tariff uncertainty makes pricing potential M&A assets challenging.

Ketan Mamtora from BMO Capital Markets asked about the impact of recent U.S. pulp mill closures on chip residue income in the U.S. South and the underlying demand assumptions for residential construction and R&R in the 2025 volume guidance.

Answer

President and CEO Sean McLaren explained that pulp mill closures, combined with increased lumber production, have put downward pressure on chip prices in the U.S. South, though the impact is regional. Regarding 2025 guidance, McLaren and CFO Christopher Virostek stated it largely reflects a continuation of the run rate from the second half of 2024, without baking in significant changes to demand drivers or speculating on external factors like tariffs.

Ketan Mamtora inquired about the demand trend in the Repair and Remodeling (R&R) market for lumber, the reasons for a muted price response in SPF lumber despite strong new construction, and the preliminary outlook for capital expenditures in the next fiscal year.

Answer

President and CEO Sean McLaren, along with SVP of Sales and Marketing Matt Tobin, noted that while Southern Yellow Pine (SYP) demand has seen slight improvement, recent price gains are primarily due to supply-side curtailments. They explained the SPF price dynamic is influenced by strong demand for wider-width products. SVP and CFO Christopher Virostek indicated that 2025 CapEx would likely trend slightly lower than 2024 as major projects are completed, with no new large-scale projects planned for the immediate near-term.

Ketan Mamtora asked about Rayonier's capital allocation priorities, specifically comparing the attractiveness of share repurchases versus M&A opportunities in timberland or downstream wood products, given current market conditions. He also sought an update on the evolution and expected ramp-up of carbon and other land-based solutions opportunities for 2026 and 2027.

Answer

President and CEO Mark McHugh stated that the timberland M&A market remains competitive with strong values, making it difficult for Rayonier to justify most transactions given their cost of capital. He believes buying back their own stock in the public market is currently the best way to acquire timberland assets. He also mentioned evaluating investments in the wood products manufacturing business through the same lens of long-term value creation. Regarding Land-Based Solutions, McHugh highlighted continued focus on growth, an enhanced platform post-merger (gaining exposure to carbon capture and storage, lithium, and brine opportunities), and optimism for long-term upside despite public policy and regulatory digestion causing project timetables to be pushed out.

Ketan Mamtora of BMO Capital Markets asked about the company's perspective on M&A opportunities in timberland or downstream wood products versus share repurchases. He also inquired about updates on Land-Based Solutions opportunities, including carbon and solar projects, and their expected ramp-up through 2026 and 2027.

Answer

CEO Mark McHugh stated that the timberland M&A market remains competitive, making it difficult to justify acquisitions, and reiterated that buying back their own stock is currently the best way to acquire timberland assets. He expressed excitement about the enhanced platform for Land-Based Solutions post-merger, noting combined exposure to solar, carbon capture and storage, and lithium/brine opportunities, seeing significant long-term upside despite public policy factors pushing out project timetables.

Ketan Mamtora of BMO Capital Markets asked about the Southern Timber segment, seeking to understand if there were signs of demand stabilization and improvement beyond the effects of salvage activity, particularly given recent housing data and customer sentiment for the second half of the year.

Answer

EVP & Chief Resource Officer Douglas Long noted that despite challenges, pine sawtimber pricing was up 3% quarter-over-quarter. He described customer sentiment as mixed but with positive signals, such as some mills planning to increase production and customers in Florida returning to normal harvesting patterns. Long expressed optimism that as salvage volumes clear and Canadian duties take effect, positive momentum will build, though many customers remain cautious.

Ketan Mamtora from BMO Capital Markets questioned how the company balances its positive second-half outlook with a weaker-than-expected housing environment and asked for an update on progress in natural climate solutions like solar and carbon capture.

Answer

President & CEO Mark McHugh acknowledged that recent headwinds, particularly from transitory salvage volume and pandemic-related market dislocations, have been challenging but maintained a long-term optimistic view based on strong housing fundamentals. Collin Mings, an executive, added that progress in land-based solutions continues, highlighting the 154,000 acres in CCS leases and the positive industry implications of Microsoft's recent carbon credit purchase from a pulp mill. He also noted that acres under option for solar leases continued to increase in the first quarter.

Ketan Mamtora of BMO Capital Markets asked about the strategy for the asset disposition program beyond leverage targets and questioned why Southern log prices haven't risen with lumber production over the last decade, seeking reasons for future optimism.

Answer

President & CEO Mark McHugh stated that with leverage targets met, the company can be patient and opportunistic in completing its $1 billion disposition plan, and is not averse to exceeding it for compelling value. On Southern pricing, he attributed past weakness to a disconnect between SYP and SPF lumber prices tied to the R&R cycle, but expressed confidence that a normalization of R&R and higher Canadian duties will create a positive inflection point.

Ketan Mamtora asked about Weyerhaeuser's comfort level with its net leverage, which climbed to 5x, emphasizing the importance of maintaining an investment-grade rating. He also inquired about the company's openness to further divestitures given the disparity between public and private timberland values, and whether Weyerhaeuser would be a net seller or buyer in the near term.

Answer

CFO David Wold affirmed that the 3.5x net leverage target is mid-cycle, and current higher leverage reflects trough commodity pricing, not balance sheet weakness. He reiterated the foundational importance of an investment-grade rating and base dividend. He also stated Weyerhaeuser is open to any transactions that drive long-term shareholder value, without committing to being a net seller or buyer.

Ketan Mamtora asked about Weyerhaeuser's comfort level with its net leverage, which climbed to 5x, given the importance of an investment-grade rating. He also inquired about the company's openness to further timberland divestitures, considering the disparity between public and private market values, and whether Weyerhaeuser expects to be a net seller or buyer in the near term.

Answer

CFO David Wold stated that investment-grade rating and base dividend are foundational. He explained that 3.5x net leverage is a mid-cycle target, and current 5x leverage reflects trough commodity pricing impacting EBITDA, highlighting balance sheet strengthening efforts. He affirmed openness to more divestitures if they drive long-term shareholder value and reiterated that the company will look at all opportunities to optimize shareholder value for the long term, without committing to being a net seller or buyer.

Ketan Mamtora inquired about the potential for substitution between Southern Yellow Pine (SYP) and SPF lumber given the duty situation and asked for the company's Q2 operating rates for its key Wood Products businesses.

Answer

CEO Devin Stockfish confirmed a significant opportunity for SYP to gain market share from SPF due to the growing price gap and builders' focus on cost. He then provided the Q2 operating rates: high-80s for lumber, mid-90s for OSB, and high-70s for Engineered Wood Products.

Ketan Mamtora inquired about the state of channel inventories for lumber, OSB, and EWP given the cautious market sentiment. He also asked for an update on the progress of forest carbon projects and whether the company was on track to meet its 2025 goals.

Answer

CEO Devin Stockfish characterized channel inventories as lighter than normal for this time of year, noting that while supply is currently meeting demand, a sudden pickup in building activity could lead to price spikes. He confirmed the forest carbon program is on track for a significant 5x to 10x increase in 2025, with two projects approved and seven more in the pipeline.

Ketan Mamtora of BMO Capital Markets asked about the progress in recapturing Engineered Wood Products (EWP) market share from open web floor trusses and sought details on the expected increase in Forest Carbon credit sales in 2025.

Answer

CEO Devin Stockfish explained that recapturing EWP market share has been slower than anticipated due to recent low lumber prices, but he remains confident it will convert back over time. On the Natural Climate Solutions (NCS) front, Mr. Stockfish reported selling approximately 50,000 credits in 2024 and projected a significant 5x to 10x year-over-year increase in carbon credit sales for 2025, driven by seven additional projects currently in the pipeline.

Ketan Mamtora asked for clarification on the sequential pressure in the Engineered Wood Products (EWP) business, the operating rates for key segments in Q3, and the status of log exports from the U.S. South.

Answer

CEO Devin Stockfish explained the EWP pressure was primarily volume-related, as they cut production to match weaker-than-expected July housing activity, which increased unit costs. He provided Q3 operating rates: lumber (mid-to-high 70s), OSB (high 80s), and EWP (mid-60s). He also confirmed they are actively growing log exports from the U.S. South to markets like India and Vietnam to diversify away from China.

Ketan Mamtora asked about any regional nuances between North America and international segments for Q4 and Alliance Laundry's long-term deleveraging targets.

Answer

CEO Mike Schoeb stated no significant regional nuances are expected for Q4, noting that while emerging markets can be lumpy, core markets like the U.S., Europe, and Asia remain stable. CFO Dean Nolden explained that specific deleveraging targets would be provided with 2026 guidance, reiterating that deleveraging remains the top priority, supported by strong free cash flows and historical organic deleveraging of 0.5 to 1 turn per year.

Ketan Mamtora asked about any specific nuances between North America and international segments to consider for Q4, and for Dean Nolden's perspective on a normalized deleveraging target.

Answer

CEO Mike Shabe indicated no significant expected changes between North America and international for Q4, though emerging markets (like Middle East/Africa, less than 3% of revenue) can be lumpy. He emphasized that core markets (U.S., Europe, Asia) remain stable. CFO Dean Nolden stated that the company would provide specific deleveraging targets with 2026 guidance, but reiterated that deleveraging remains the top priority, with a historical organic deleveraging trend of half to a full turn per year, supported by strong free cash flows.

Ketan Mamtora inquired about the basis for PotlatchDeltic's Q3 lumber price forecast, the expected reversal of one-time costs in the Wood Products segment, and the company's capital allocation strategy, particularly the balance between share repurchases and maintaining balance sheet strength amid market uncertainty.

Answer

President & CEO Eric Cremers explained that the flat Q3 lumber price forecast anticipates that new duties and potential tariffs will tighten supply, causing prices to rise through the quarter. He confirmed that a "perfect storm" of non-recurring Q2 costs in Wood Products, including project-related downtime and an inventory charge, are not expected to repeat in Q3. Regarding capital allocation, Cremers stated that protecting the dividend and balance sheet are paramount, but aggressive share repurchases were pursued in Q2 due to the stock's significant discount to its net asset value and a positive long-term outlook.

Ketan Mamtora inquired about current demand trends in the new construction and repair and remodel (R&R) channels, the state of channel inventories, and the factors influencing Q2 Northern sawlog price realizations.

Answer

President and CEO Eric Cremers described the lumber market as decent, with the South on firmer footing than the North, which he believes is digesting inventory bought in anticipation of tariffs that did not materialize. He noted that channel inventories are generally low and sees price risk to the upside in the second half of the year. Executive Wayne Wasechek added that for Q2 Northern sawlog prices, the typical positive effect from log weight is expected to be offset by lower pricing observed in April.

Ketan Mamtora from BMO Capital Markets asked about the potential for further unit cost reductions at the Waldo sawmill, the current state of the timberland M&A market, and the impact of recent pulp and paper mill closures in the U.S. South.

Answer

President and CEO Eric Cremers confirmed more unit cost improvements are expected at the Waldo mill in Q1 2025 before it becomes fully operational in Q2. He described the timberland M&A market as 'quiet,' stating the company remains open to large deals only if they meet its cost of capital threshold. Both Cremers and executive Wayne Wasechek acknowledged challenges from mill closures but expressed long-term optimism due to emerging technologies like biofuels and bioplastics creating new demand for wood fiber.

Ketan Mamtora of BMO Capital Markets sought clarification on the Q4 Northern sawlog pricing guidance, asking if it was net of the seasonal density factor. He also inquired about the timeline for solar option contracts to impact the P&L and the current state of the timberland M&A market.

Answer

Executive Wayne Wasechek confirmed the 2-3% Northern sawlog price increase guidance is on a net basis. President and CEO Eric Cremers expressed strong optimism for solar, stating that while significant P&L impact is not expected until 2026 and 2027, demand is robust and he anticipates a high option execution rate. Cremers also described the timberland M&A market as 'paused,' with a lack of high-quality properties for sale due to economic uncertainty, though buyer interest remains high.

Inquired about the company's market strategy for its siding products and requested an update on the progress of its key recycling initiatives (HDPE to LDPE conversion and PVC usage).

Answer

The siding strategy focuses on a premium, niche accent product for wood conversion, leveraging their existing contractor base. The HDPE-to-LDPE conversion is over halfway done, with a future focus on processing efficiencies. Recycled PVC usage continues to increase, with a current focus on optimizing the raw material processing.

Asked about the waterproofing business, specifically its underlying growth trends excluding hurricane impacts, future growth expectations, and how its margin profile compares to the overall Beacon average.

Answer

The executive described waterproofing as a higher-growth segment than core roofing, driven by regulations and climate changes. The company has grown it to a $700M+ run-rate business via acquisitions. Its margin profile is similar to residential roofing, and the long-term goal is for it to operate above the company's average gross and EBITDA margins, though work remains to integrate recent acquisitions.

Asked about the key drivers that would determine whether the company reaches the high end or the low end of its full-year EBITDA guidance range.

Answer

Reaching the top end of the guidance depends on several factors: strong execution on recent price increases, continued momentum and market share gains in the commercial sector, storm activity being above the 10-year average, contributions from M&A, and faster-than-expected ramping of new greenfields and acquired branches.