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Operator: Good morning. My name is Joelle, and I will be your conference operator today. Welcome to Canfor and Canfor Pulp's Second Quarter Analyst Call. [Operator Instructions] During this call, Canfor and Canfor Pulp's Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section of the company's website. Also, the companies would like to point out that this call will include forward- looking statements, so please refer to the press releases for the associated risks of such statements. I would now like to turn the meeting over to Susan Yurkovich, President and CEO of Canfor Corporation. Please go ahead.
Susan L. Yurkovich: President, CEO & Director Thanks, Joelle, and good morning, everyone. Thanks for joining the Canfor and Canfor Pulp Q2 2025 Results Conference Call. I'm going to open up with a few remarks, then I'll turn it over to Stephen MacKie, Canfor's Chief Operating Officer and CEO of Canfor Pulp, followed by Pat Elliott, our Chief Financial Officer of Canfor Corp and Canfor Pulp. We've also got Kevin Pankratz, Canfor's Senior Vice President of Sales and Marketing; and Brian Yuen, Vice President of Sales and Marketing for Canfor Pulp, who are here with us and available to take questions. While the market remain -- conditions remain really challenging, we continue to see improvements in our underlying business, supported by our geographic diversification, the capital investments that we've completed over the last few years and our ongoing commitment to optimizing our portfolio of assets to enhance our financial performance. To that end, as you know, we made some very tough decisions to close a number of facilities in British Columbia since 2023 due to high costs and ongoing fiber challenges. And in addition, this quarter, we announced the closure of our Estill and Darlington facilities in South Carolina due to persistent weak market conditions and sustained losses at those facilities. In combination, these closures have removed more than 2 billion board feet better aligning our production capacity with market demand. While extremely difficult for our people and communities, these decisions will enhance Canfor's ability to withstand significant trade headwinds, challenging market conditions and the general uncertainties that are impacting our business at this time. In transforming our business and leveraging across our globally diversified lumber platform, we believe we will be able to generate more stable cash flow and enhance our competitiveness over the long term. Despite the challenging market dynamics we're facing right now, our balance sheet remains strong, and it's allowing us to pursue strategic growth at the bottom of the cycle. And this quarter, we were very pleased to announce the pending acquisition of 3 sawmills from Karl Hedin in Sweden. These sawmills have exceptionally high-quality fiber in Central Sweden, which is a new operating region for Canfor Vida and will enhance our ability to access global markets and further reduce our reliance on the U.S. market. Supported by recent capital investments and a strong cultural alignment with the identified synergies, these sawmills will complement Vida's operating platform once the acquisition, which is subject to normal closing conditions, is completed later this year. Following this acquisition, our lumber platform will include approximately 35% of our lumber production based in the U.S. South, 35% in Sweden and 30% in Western Canada, providing meaningful geographic product and market diversification for the company. With respect to duties and tariffs, we have, of course, been expecting the increase in duty rates that come into effect this week and have been adjusting our sales strategy accordingly. However, there remains significant uncertainty regarding tariffs and the ongoing Section 232 investigation in the U.S. as well as the broader trade environment. We continue to monitor these developments closely and will adjust our plans to mitigate the impacts to the greatest extent possible. Notwithstanding this uncertainty, we are well positioned to navigate these challenges, supported by the actions that we've taken over the last several years to build out our low-cost globally diversified lumber platform. I'd now like to turn it over to Stephen MacKie to provide an overview of Canfor Pulp.
Stephen R. MacKie: CEO & President Thanks, Susan, and good morning, everyone. Canfor Pulp generated modest EBITDA in the second quarter with results reflecting the impact of lower sales realizations due to persistent economic and global trade uncertainty as well as a 4% stronger Canadian dollar. Weak demand and elevated global pulp inventories contributed to a sharp decline in pricing, particularly in China, where prices fell 7% in the quarter. However, the full impact of these price declines will not be evident in our sales realizations until the third quarter. While pulp pricing in China has stabilized recently, we anticipate weak market fundamentals to persist throughout the third quarter. While our paper business performed reasonably well, we also saw a sharp decline in sales realizations in the second quarter, reflecting the stronger Canadian dollar, weaker pricing in North America due to ongoing tariff and economic uncertainty and weaker demand driven by the aforementioned economic uncertainty. Notwithstanding the current macroeconomic challenges, Canfor Pulp continues to focus on areas within our control. As an organization, we are adapting to align with current market conditions. We have made progress on improving our productivity and reliability. We currently have an adequate chip supply to support our operating footprint, and we are intently focused on improving our cost structure. While market fundamentals are challenging in the short term, we believe our specialty product focus and unique fiber characteristics, combined with an enhanced focus on operational execution and disciplined cost management will allow us to navigate the current market dynamics. I will now turn it over to Pat to provide an overview of our financial results.
Patrick A. J. Elliott: CFO & Corporate Secretary Thanks, Stephen, and good morning, everyone. In my comments this morning, I'll speak to our second quarter financial highlights, a summary of which is included in our overview slide presentation located in the Investor Relations section of the Canfor website. Our lumber business generated adjusted EBITDA of $62 million in the second quarter, $1 million higher than the prior quarter. Adjusted EBITDA includes restructuring charges following the announced closures of Estill and Darlington that Susan mentioned earlier. Excluding these onetime items, our lumber business generated EBITDA of $68 million in the second quarter, up approximately $8 million from Q1, supported by solid earnings in Europe and continued ramp-up of low-cost capacity in the U.S. South. While global lumber markets remain challenging in the short term, the transformation of our lumber business in recent years has supported an improved cost structure and improved profitability. Our lumber business generated EBITDA, excluding onetime items, of approximately $130 million in the first half of 2025. While market conditions appear challenging through the balance of the year, our lumber platform is well positioned to capitalize on stronger lumber prices over the medium to long term, supported by our geographic diversification and low operating costs. Turning to our Pulp business. Canfor Pulp generated adjusted EBITDA of $6 million in the second quarter, down $15 million from the prior, reflecting the impact of lower pulp and paper sales realizations and, to a lesser extent, an uplift in pulp manufacturing costs. At the end of the second quarter, Canfor Pulp had net debt of $74 million and $80 million of available liquidity, while Canfor, excluding Canfor Pulp and the duty loan, ended the second quarter with net debt of approximately $87 million and available liquidity of $1.3 billion. On a consolidated basis, capital expenditures were approximately $51 million in the second quarter, including approximately $5 million for Canfor Pulp. Following completion of several major capital investments in recent years, we are anticipating significantly lower capital spending starting this year with approximately $240 million projected in our lumber business. Of this amount, approximately $160 million was spent in the first half of the year. For Canfor Pulp, we are currently forecasting capital spend of $45 million in 2025, including capitalized maintenance. Following completion of our recently announced acquisition in Sweden later this year, our balance sheet remains solid, supported by our improved operating platform, a seasonal working capital reduction in Sweden and an expected tax refund in Canada. In addition, we anticipate Canfor will continue to allocate a modest amount of capital to opportunistically repurchase shares throughout the year under its normal course issuer bid. And with that, we're now ready to take questions from analysts.
Operator: [Operator Instructions] Your first question comes from Ketan Mamtora with BMO.
Ketan Mamtora: Maybe to start with, can you talk about sort of if you saw any prebuy ahead of kind of duties going higher on the Western SPF side?
Susan L. Yurkovich: President, CEO & Director Kevin, do you want to take that?
Kevin Pankratz: Senior Vice President of Sales & Marketing Sure. Yes. We actually -- the buying behavior has actually been relatively steady like through June and July, and there might be a little bit of prepositioning. But quite frankly, customers are more or less keeping inventories adequately stocked in order just to meet their just-in-time demand. So I haven't seen any material buying increases.
Ketan Mamtora: Understood. So I mean, is it fair to say that inventories, you don't see kind of any material buildup in inventories?
Kevin Pankratz: Senior Vice President of Sales & Marketing I think our customers' inventory positions are actually relatively balanced. And like I said, with all the uncertainty that they're facing, I think they're just going to be buying as they need in a just-in-time basis.
Ketan Mamtora: That's helpful. And then just one other question. With sort of duties going higher here, I'm curious kind of as to your sort of approach to production, particularly in light of kind of housing demand kind of being softer. Especially if sort of -- is your approach to pass through the entire duty increase? Can you just give us sort of some sense of how you all are approaching this?
Stephen R. MacKie: CEO & President Ketan, it's Stephen MacKie. Just I think from a production perspective, we obviously made some very difficult decisions over the last couple of years, and we've rationalized our -- some of the higher cost capacity that we had in Canada. And so our expectation is to run, and that's certainly our plan is to operate through the cycle. We think we're well positioned with limited exposure overall if you look broadly across our global platform to the U.S. So obviously, there's lots of volatility and things can change, and we'll be responsive to the market dynamics that we see out there, but our plan is to operate.
Operator: Your next question comes from Sean Steuart with TD Cowen.
Sean Steuart: I want to start with Europe. The pending acquisition there looks like attractive terms and the margin profile there remains really resilient. I guess I'd be interested in your perspective on other M&A opportunities in Europe. Is the interest still specific to Sweden? Is there any opportunity to maybe expand beyond Scandinavia for growth opportunities there?
Susan L. Yurkovich: President, CEO & Director Yes. Thanks, Sean. It's Susan. Yes, we really -- we like this Hedin acquisition. They're really good mills. They fit well into the Vida platform. And there's a lot of opportunity for us. It's mostly going into the European market and some into Japan. So it's really good for us. We'll be looking at integrating those 3 facilities into our operations. Of course, we're always keeping our eye open, but this does open up really another region for us because these assets are located in Central Sweden, which is a different sort of operating area for Canfor Vida.
Sean Steuart: And any -- I should read that as -- I guess, the appetite for further growth initiatives there. Your balance sheet is still in relatively strong shape. Are you intent to integrate this deal? And the tight or if other opportunities come -- would come forward, would you consider them at this point?
Susan L. Yurkovich: President, CEO & Director Well, Sean, we're always looking for things. We're looking for things all the time. We're looking at opportunities across our platform. But we've got -- we -- right now, we've got a job to do to integrate these assets into our Vida platform, and we're going to do that and -- but we'll keep our eyes open.
Sean Steuart: Okay. And then, Susan, maybe a question you don't want to answer, but I just want to get your thoughts on trade evolution here on Canada-U.S. lumber. How is your optimism that lumber can be included in a broader U.S.-Canada negotiation? And do you have any thoughts that you would share on quota being a potential facet of a potential deal?
Susan L. Yurkovich: President, CEO & Director Yes, sure. I mean, I think what we've heard is signals from the federal government, important signals that lumber is a priority out there along with steel and aluminum and auto and a couple of other sectors. And so I think we appreciate that. This is a really important industry to Canada. I think these are incredibly complex multilateral discussions. And I think my strong hope is that lumber is included in this. If we can achieve an agreement, I would very much like for lumber to be included in that resolution. As you know, this is a really long-standing agreement. As far as the form of that agreement, I think we leave it to our very competent negotiators, including the Chief Negotiator for Canada, Kirsten Hillman, who's a very seasoned negotiator, our ambassador in the U.S. And I think they'll be -- they're going to need some flexibility to try and reach resolution. So I'm not sure what form that resolution will take. But certainly, we've been working across -- working with the industry and are ready to support the federal government in finding a resolution on this file for lumber.
Operator: Your next question comes from Hamir Patel with CIBC Capital Markets.
Hamir Patel: Kevin, I was just wondering if you could give us a sense how lumber demand has fared with your key R&R customers this year, both in North America and in Europe.
Kevin Pankratz: Senior Vice President of Sales & Marketing Great. Thanks for the question. Actually, R&R for our experience here has been actually relatively steady. And I would say year- to-date compared to last year, relatively flat. However, we did see a little bit of a slowdown in the summer, but then since then -- or sorry, like in early July, but I have seen since it pick up. So I think that's been a positive in the marketplace. And then as far as Europe, I think they're experiencing the same thing that DIY segment has been performing relatively steady and keeping pace with the relatively year-over-year comps, which is actually much better than what we're seeing in new home construction, which is actually off.
Hamir Patel: Okay. Susan, I had a question for you with -- assuming the current trade situation continues, just given the large reductions to your BC platform over the past year. When you think about the difference between your combined antidumping countervailing rate and the rate for West Fraser, would you expect that spread to really narrow when the AR7 preliminary rates come out?
Susan L. Yurkovich: President, CEO & Director Yes.
Hamir Patel: Okay. And any -- I mean, would that sort of play out over 2 years? Or it will be a big step down you think in AR7 just given the geographic...
Susan L. Yurkovich: President, CEO & Director There will be a step down. And you'll -- yes, there will be a step down. But yes, we will -- we expect that, that spread will be diminished.
Operator: Your next question comes from Matthew McKellar with RB.
Matthew McKellar: First for me, just with the changes to your Southern Yellow Pine portfolio and the current market backdrop, how should we be thinking about SYP shipments in the second half? And what kind of maybe reduction in fixed costs should we associate with those 2 most recent mill closures?
Susan L. Yurkovich: President, CEO & Director Maybe, Kevin, you want to talk about the markets and then Stephen?
Kevin Pankratz: Senior Vice President of Sales & Marketing Okay. Yes. I think our outlook for shipments will be actually pretty flat, I think, quarter-over-quarter. And then Stephen?
Stephen R. MacKie: CEO & President Yes. I think our shipments, what you can expect, Matt, is that, obviously, we've seen the impact or we will see the impact of the Estill and Darlington closures of those capacity reductions. Those will be offset to a fairly large degree with the ramp-up in capacity of some of our recent capital investments down in the Southeast U.S. with the modernization of our Urbana facility, the construction of our new greenfield facility at Axis. And both of those operations are progressing through their start-up curves very well. And we're also looking at some potential incremental capacity at a couple of our other facilities. So I think we'll largely offset and be reasonably flat on an annualized basis.
Matthew McKellar: Okay. Next for me, you talked about mentioning -- adjusting, sorry, your sales strategy following the implementation of higher duties I guess things could change here. But based on your expectations of how you'd expect demand and pricing to evolve, what percentage of Canadian produced wood would you expect to sell into the U.S. in a sort of status quo scenario where higher antidumping duties remain in place, final countervailing duties are in line with preliminary results, and we see no incremental Section 232 tariffs? Or maybe to even reframe it, how do we expect your geographic sales mix for lumber to evolve here over the next couple of quarters?
Kevin Pankratz: Senior Vice President of Sales & Marketing Yes. Thanks, Matt. Actually, the situation is quite fluid, as you can imagine. And so a lot is going to depend on how pricing reacts in the U.S. market versus the Canadian market. And we have the flexibility to navigate through that. And it's something that we're going to have to monitor and will be monitoring on a daily basis. And so it's kind of hard to exactly say because throughout this whole journey, even the last couple of months, week-to-week, it has pivoted and changed depending on demand, liquidity and financial results. So that's -- I mean, it's kind of hard to say exactly because we're not dealing with a real fixed situation.
Matthew McKellar: Okay. That's fair. And then last for me, could you just please refresh us on the most impactful initiatives you have underway to improve the cost structure at Canfor Pulp?
Stephen R. MacKie: CEO & President Yes. Thanks, Matt. I mean, for the most part, the single biggest thing that we can do is really improve or continue to improve our reliability and our operational performance uptime and execution. So I think the team -- there's -- team is intently focused on running the facilities with greater stability. We've shored up the fiber supply. We've got sufficient fiber to support our operating footprint today. So we're in good shape there, and we see continued modest progress downward on that cost curve within the fiber supply. And then it's really about operational reliability and stability. Our cost structure is -- can be competitive when we run and run well, and that's the focus of the team, particularly as we head into -- through the third quarter and into the fourth quarter and the turnaround that we'll have at Northwood in Q4. So that's what I would say about that, Matt.
Operator: There are no further questions. I'll now turn it over to Susan for closing comments.
Susan L. Yurkovich: President, CEO & Director Thanks very much for joining us. We'll see you next quarter.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.