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Operator: Ladies and gentlemen, welcome to Western Forest Products' Fourth Quarter 2025 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. [Operator Instructions] During this conference call, Western's representatives may make forward-looking statements within the meaning of applicable securities laws. These statements can be identified by words like anticipate, plan, estimate, will and other references to future points. Although these forward-looking statements reflect management's reasonable beliefs, expectations and assumptions, they are subject to inherent uncertainties and actual results may differ materially. There are many factors that could cause actual outcomes to be different, including those factors described under risks and uncertainties in the company's annual MD&A, which can be accessed on SEDAR and is supplemented by the company's quarterly MD&A. Forward-looking statements are based only on the information currently available to Western and speak only as of the date on which they are made. Except as required by law, Western undertakes no obligation to update forward-looking statements. Accordingly, listeners should exercise caution in relying on forward-looking statements. I would now like to turn the meeting over to Mr. Steven Hofer, President and CEO of Western Forest Products. Mr. Hofer, please go ahead.
J. Hofer: Thank you, Galen, and good morning, everyone. I'd like to welcome you to Western Forest Products 2025 Fourth Quarter Conference Call. Joining me on the call today is Glen Nontell, our Chief Financial Officer. Before we get started, I'd just like to extend our thoughts and prayers to the community of Tumbler Ridge to all the victims and all the families impacted. We issued our 2025 fourth quarter and full year results yesterday. I will provide you with some introductory comments and then ask Glen to take you through our financial results. I will follow Glen's review with our outlook section before we open the call to your questions. Despite more challenging markets and higher softwood lumber duties and tariffs in 2025, we entered 2026 with a significantly improved balance sheet to navigate the expected near-term market uncertainty. We also continue to execute on our strategic priorities to accelerate our transition to higher-value products. Some highlights over the last year include: surpassing our health and safety targets for the company's Medical Incident Rate achieving an MIR of 2.7 in 2025 compared to our target of 2.87 and 3.84 in 2024. We are also proud to report several operations achieved 0 recordable incidents in 2025. In Timberlands, we continue to focus on improving log sorts stratification to drive incremental margin. These efforts alongside a disciplined focus on log inventory management has resulted in 11% improvement in log inventory turnover since 2023. In manufacturing, we have improved our operational uptime to 86% in 2025 and compared to 85% in 2024. Our Duke Point facility achieved a 92% uptime in the fourth quarter. We also continue to focus on log and lumber recovery while improving lumber inventory turnover by 9% year-over-year. In sales and marketing, we continued our customer focus, developing value-added products and programs targeted with the end user in mind. Specialty products comprised 52% of sales in 2025, and we increased kiln dried sales to a record 41% of total sales in 2025 and compared to 37% in 2024. In addition, we achieved improved on-time shipping performance of 88% in 2025 compared to 84% in 2024. We made significant progress advancing our strategic capital investments in kilns to support higher-value products. Our two continuous kilns and one thermal kiln at our value-added division are expected to be commissioned in 2026. These investments will allow for more kiln-dried lumber production, generating higher margins than green lumber. From a labor perspective, we completed a 6-year collective agreement that covers the company's USW hourly employees. The agreement is one of the longest term agreements in the history of the BC Coastal forest sector. And finally, we strengthened our balance sheet and liquidity position through $76 million in non-core asset sales and the extension of our $250 million credit facility to July 2028. Overall, I am proud of the significant contributions across our entire organization, which have provided a strong foundation to build from in 2026. I will now turn it over to Glen to review our key financial results.
Glen Nontell: Thanks, Steven. Fourth quarter adjusted EBITDA was negative $6.2 million as compared to $14.4 million in the same period last year. As compared to the prior year, results in the fourth quarter were impacted by a 26% reduction in lumber shipments, a 34% reduction in log shipments given lower harvest volumes and higher softwood lumber duties with a combined duty and tariff rate of 45% compared to 14% in the same period last year. This was partially offset by higher log prices on Cedar and first sawlogs and lower stumpage expense. We closed the fourth quarter with approximately 50 million board feet of lumber inventory and 649,000 cubic meters of log inventory. Turning to CapEx. Our 2026 total CapEx spending is expected to be between $45 million to $50 million, which includes approximately $16 million related to 2 previously announced continuous kilns and one thermal kiln at our value-added division. From a balance sheet perspective, we ended the fourth quarter with liquidity of approximately $212 million and a net debt-to-cap ratio of 7%. Touching on our Columbia Vista sawmill, we have made the difficult decision not to rebuild at the site and listed property for sale in December. We have received significant interest for the property, receiving multiple offers above the asking price of USD 10.6 million to date. We will look to finalize the sale of the property late in the first quarter or early in the second quarter of 2026. In addition, we are working with the insurance adjuster to finalize available property insurance proceeds. We plan to use proceeds from the property sale and insurance to initially repay debt to further deleverage our balance sheet. Turning to first quarter seasonality. In typical first quarters, our timber harvesting activity can be periodically interrupted by winter weather. Harvest volumes are typically skewed to the end of the quarter when the weather and light conditions support greater activity. From a market perspective, sales typically accelerate through the quarter. We plan to continue to manage production to market demand and available log supply. Steven, that concludes my comments. .
J. Hofer: Thanks, Glen. Turning to our market outlook. Lumber markets remain challenged heading into 2026. Customer expectations are there will not be a significant improvement in demand during the first half of the year. That said, operating curtailments from lumber producers in 2025 are expected to decrease available supply towards the end of the first quarter, which could lead to upward price pressure as demand improves. We remain cautiously optimistic that the U.S. 30-year mortgage rates now at 3-year lows, may support improved housing affordability and modestly stimulate U.S. housing demand this year. Demand in Western Red Cedar product lines remain slow following the trajectory of other building products. In Japan, the yen has further weakened against the U.S. dollar and housing starts continue to be below $800,000 on an annualized basis. Western continues to be focused on the competitiveness of Hemlock and Douglas fir maintain current market share. But market demand for the first quarter of 2026 is lower compared to the fourth quarter of 2025. Overall, we currently have our first quarter order file of approximately 78 million board feet. Touching on the La-kwa sa muqw Forestry Limited Partnership in TFL 64. During the second quarter of 2025, employees represented by the USW commenced a strike at the limited partnership. In January of this year, USW members voted to reject a new collective bargaining agreement with the limited partnership. If there is no near-term resolution to the strike, additional operating curtailments may be required at our Saltair and Duke Point sawmills near the end of the first quarter due to log supply. The limited partnership continues to work to bring a resolution to the strike, and both parties have agreed to mediation process, which is occurring this week. Turning to our Engineered Wood Products Group. To support a modest expansion of our product and service portfolio, including ready to finish -- sorry, ready to install fabricated glulam beams, we are investing in a new CNC fabrication machine at our existing Fruit Valley manufacturing site in Vancouver, Washington. We are currently in the process of finalizing procurement of the manufacturing equipment with delivery and installation anticipated towards the end of this year. In parallel, we are also evaluating opportunities to modernize and consolidate our existing glulam facilities in the region at our Fruit Valley facility. Project planning will continue through 2026, and additional details will be shared as the strategy progresses. Looking ahead, we will remain focused on executing our strategic priorities and CapEx plans while also ensuring we maintain a strong balance sheet. With that, we can open the call up to questions.
Operator: [Operator Instructions] First question is from Ben Isaacson with Scotiabank. .
Ben Isaacson: First question is on the Columbia Vista decision not to rebuild it. Is that going to require some CapEx spend to reconfigure mills elsewhere? .
J. Hofer: Thanks, Ben. Appreciate the question. No. What we've essentially done is been able to add supply from our Saltair facility in Canada, to maintain our market share in both Douglas Fir and Hem-Fir KD squares to Japan. So it's essentially, we've just reallocated that product line to one of our existing facilities.
Ben Isaacson: My next question is, we've seen wood products pricing move higher -- you did talk about demand in Red Cedar, not really keeping up. How close are you to a run rate breakeven EBITDA right now?
Glen Nontell: Maybe I'll take that one, Ben. I mean, obviously, you can see in the results in the fourth quarter and the curtailment that we've taken ourselves and others are fairly close to breakeven. I'd say, looking into the first quarter here, we see still some challenging headwinds. We might see some pickup late in the first quarter and early in the second quarter. But if you're talking at this point, we have -- definitely do have Cedar product lines that are profitable and others that are more challenged from a breakeven perspective. .
Ben Isaacson: And then just last question. You said Douglas Fir and Hemlock squares are down quarter-over-quarter for Q1. Can you just give some magnitude on how much we should expect them to be done? .
Glen Nontell: Yes. I mean the current order file right now is -- I'm going to say it's probably in the 5% to 7% quarter-over-quarter. We're a little optimistic as we go into the middle of the year and into Q3 that things will normalize. The yen is having a big impact on the overall competitiveness of all imports into the Japanese market. So we'll be paying attention to what occurs on the exchange rate as we go forward here. But our focus, both from a log standpoint and from a manufacturing standpoint is to be globally competitive in that marketplace. It's a very important market for our company, for the species that we have access to. And frankly, the Japanese market, they prefer the species that we have and the quality that we deliver to that marketplace. So obviously, some short-term headwinds right now on overall demand in the quarter, but I think we'll see a normalization as we go into the balance of the year.
Operator: The next question is from Sean Steuart with TD Cowen.
Sean Steuart: A couple of questions. Steven, I want to talk about your operating rate trajectory here. You guys have taken a lot of curtailments that you spoke to. And I gather most of this decision is tied to markets and rising duty deposits and Section 232 tariffs. Can you help put some perspective around how much of the curtailments are related to log supply constraints in the coast? How much of the decision is being driven by the fiber situation.
J. Hofer: Thanks, Sean. It probably would take a little bit more time to kind of go through it at an operational by operational basis. Each mill has some different dynamics in play. Some are directly impacted by the change in tariffs from 14% to our rate today of 45%. Other facilities are constrained by certain log profiles that are in, I would say, limited supply and are uneconomic, and that would kind of be the discussion, for example, at Chemainus. But we're really focused on ensuring that when we run that it's -- it has a chance of being profitable for us. So we're not taking any risk on running below our cash shutdown costs and building excess inventory. So we're just being very, very disciplined on our run rates across each of the facilities. I will say though that I'm really pleased on the level of execution within our facilities around reliability and uptime. So despite some curtailments, our team on the manufacturing side has just done an outstanding job in the last couple of years of demonstrating that we can run our facilities at higher levels of reliability and uptime.
Sean Steuart: Okay. And I guess the follow-on there is appreciating Chemainus still be down this year. Do you feel like the current capacity footprint is viable for the company? And appreciating there's an anticipation that demand will eventually start to recover here and volumes should improve. I'm just trying to weigh the cost benefit of this extensive rolling downtime versus potential permanent capacity closures. Is this the right capacity footprint for the company going forward? .
J. Hofer: Well, those are questions that we have every day, including with our board and with our shareholders around what is the optimal operating configuration for Western relative to the overall log profile and log supply on the BC Coast. And so you can see that we continue to be focused on optimizing our operating platform, and we're having to make some really difficult decisions. And that's evident at a place like Chemainus, where we just, in today's market environment and the log profile at that mill was designed to consume that we don't have a profitable program there for that mill. So it will stay curtailed for the balance of this year. But the question is around what is the optimal manufacturing configuration for our company. We're focused on that every day.
Sean Steuart: Okay. Just 1 last one for me. Columbia Vista, the site sale process, can you give us perspective on timing and maybe not willing to divulge, but any thoughts on potential proceeds for that site? .
Glen Nontell: Yes, Sean, it's Glen. We listed the property for sale in December at an asking price of USD 10.6 million. To date, we've received multiple offers at or above that asking price. And we are working to finalize that sale late in the first quarter or early in the second quarter. Concurrent with that, we are also looking to finalize the insurance process, which would be incremental potential proceeds to that land sale.
Operator: The next question is from Matthew McKellar with RBC.
Matthew McKellar: Maybe first, just a question on the thermally modified Hemlock initiatives. Could you maybe talk a bit about how that product will be marketed and what kind of demand indications you have for today? And then help us understand how you potentially approach considering any further investments in capacity there? .
J. Hofer: Thanks, Matt. We're really excited about this initiative. It's certainly we see that as a path forward to add incremental value and margin to our Hemlock profile. So the first thermally modified kiln will become operational towards the end of this year. I would say that we are being very disciplined in managing expectations. We're going to start relatively small, and we're going to walk before we run, and we're going to deliver -- exceed expectations from a product quality and from a product usability standpoint. The opportunity for thermal modified hemlock will be primarily around decking -- exterior decking applications, siding applications and Soffit and Fascia applications. But again, this is just 1 kiln, relatively small volumes to start with. But we do see a very unique opportunity to continue to build a viable, profitable program. As far as the go-to-market strategy, this will not be commodity. This will be inside of our specialty product category. And typically, this gets sold through very targeted distribution partners who are aligned around specialty building materials. So we're engaged in that process today. There's a lot of work being done on technical specifications, usability standards, installation requirements, marketing collateral, so forth. So it's not a commodity piece of 2x4. It will be -- definitely be a niche specialty product and a marketing program that aligns with that.
Matthew McKellar: Great. I'd also like to ask about the CDKs. And I think you said the kiln dried sales are maybe 41% of total with the capacity you're bringing on, how should we expect that mix to evolve to maybe exit '26? Would you expect to fill up that incremental capacity quite quickly with your kind of current level of activity and mix? Or how should we kind of set our expectations there? .
J. Hofer: Yes. I think the easiest way, Matt, is just to think about each continuous dry kiln with the species mix that we have and the product line that we manufacture. You can kind of look at each kiln having an annual capacity of around 80 million board feet. If you just look at -- you can do the math on the back of the envelope there what that will do to our incremental kiln-dried product. So each kiln on an annualized basis will be around 80 million feet of additional kiln dried product.
Matthew McKellar: Perfect. Okay. That's straightforward. And if I could just 1 last one in. Just around the glulam markets and maybe your motivation around the expansion of the product portfolio. Maybe what you're seeing around demand or supply-demand balance and the market opportunity there?
J. Hofer: Yes. I mean our investment that we're referencing is relatively modest. Our -- previously, we've been a supplier of what we would call glulam billets into the mass timber market. We have a very strong existing glulam product line in curved beams as well as in industrial beams. But this investment in fabrication is really targeted toward the mass timber market. And every opportunity that we have to capture incremental margin in that segment, we want to capture that. And -- so as we move down this product offering, it's just being able to do a certain level of fabrication on those beams that are going into a mass timber project. And there's quite a nice incremental margin there that we're able to capture. So relatively short payback. We've added a couple of very strong technical resources to our team, and we're seeing some really nice uptick in our ability to provide a fabricated beam with all the installation hardware into some very unique projects that are very, very profitable. So again, we're -- it's a phased approach. It's a modest investment and it's all focused on capturing that incremental margin in the supply chain.
Operator: This concludes the question-and-answer session. I'd like to turn the conference back over to Mr. Hofer for any closing remarks. .
J. Hofer: Well, thanks, everyone, for joining our call today. We appreciate your continued interest in our company, and we look forward to our next call in May. Have a great day.
Operator: Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.