Good morning ladies and gentlemen. Welcome to the West Fraser Timber Q4 Conference Call. During this conference call, West Fraser's representatives will be making certain statements about potential future developments. These forward-looking statements are intended to provide reasonable guidance to investors, but the accuracy of these statements depends on a number of assumptions and is subject to various risks and uncertainties. Actual outcomes will depend on a number of factors that could affect the ability of the Company to execute its business plans, including those matters described under Risks and Uncertainties in the Company's annual MD&A, which can be accessed on West Fraser's website or through SEDAR, and as supplemented by the Company's quarterly MD&As. Accordingly, listeners should exercise caution in relying upon forward-looking statements. I’d like to turn the meeting over to Mr. Ted Seraphim, President and CEO. Please go ahead, Mr. Seraphim.

Thank you very much and thanks for joining us today. Today we're going to take a slightly different approach. I will make some broader comments about the company's progress, our view on markets and the SLA and then we’ll open it up for questions. And if you have any detailed questions pertaining to our financial statements, feel free to contact Rodger Hutchinson after the call. After undertaking an unprecedented capital expenditure program over the past five years, we are very pleased with the progress we're making in improving operational results, just a few highlights. We've had six major saw mill rebuilds, 10 new planers, 24 continuous kilns and six major energy and bio product projects over that period. Record adjusted EBITDA in 2016 of CAD674 million despite U.S. housing construction still at relatively modest levels and continuing B.C. interior log costs escalation. Lumber shipments were up 380 million feet despite a challenging weather related fourth quarter. Improving operational performance in all our segments including and improved production at our Hinton pulp mill. And one thing I really want to emphasize here is that we've invested heavily in recruiting and developing our people. And I think it's really starting to show. And we've also received a number of awards over the last number of years, Canada's top hundred employers four years in a row. And in 2017, we were also recognized as one of Canada's top employers for young people and I think we're strongly proud about that. We still see significant opportunity within our 40 mills to improve our operating results. Our expectation is that we will continue to see material operating improvement in 2017. We expect to increase the lumber production by another 250 million feet and are optimistic about continued cost and margin improvement in all three of…

[Operator Instructions] Our first question is from Mark Wilde from BMO Capital Markets. Please go ahead.

Good morning and a very nice Ted.

Thanks, Mark. Good morning to you.

I am just curious are there any other kind of elements other than kind of price and productivity that drove your fourth quarter lumber margins which might not be obvious to an outsider because your spread to your largest peers was uncommonly wide this quarter.

Well, I can't really comment on our peers.

Right.

We thought we had a decent fourth quarter. We still got a lot of room to improve our margins and to reduce cost. So I can't comment on our spread with others. I just know that our results are what they were. And I know you – I appreciate the kind comments, but we still believe we've got a lot more room to improve our results because with all this capital – major capital behind this. And frankly, I've said this a few times, our most senior group probably our mill managers and op have gone through a lot of – probably a lot of transition over the last three to four years given the retirements. And that group has been pretty solid for the last year and a half. And I just think the experience of our leaders, the Capitol behind us that we've still got lot of runway to improve our results. And I can tell you I'm pleased with. I'm somewhat pleased with our results, but I'm more excited about the focus of our senior leadership. So just at the end of the day here, the results kind of speak for themselves and we've got to make them better.

Okay. And I wonder just kind of turning over to kind of log supply log cost. First, can you just talk about sort of the reductions that are going on and annual allowable cut in BC and how that might affect West Fraser?

Is that a comment or a question?

That’s a question, any impact if we look over the next couple years for you guys.

Well, I mean, we can’t. I mean the fact of the matter is the AAC is coming down. The Mountain Pine Beetle were really near the end of it and we're getting close to the economic shelf let to some of this wood. So we do expect the interior to be smaller. I guess the question is who shrinks and who doesn't? And we've invested significantly to improve our competitive position in the interior. But that with that being said we do expect to see decreases in our production. We just can't predict how much and when. And a lot of it may depend on what our competitors decide to do with their production.

Okay. And then just kind of moving on from that Ted, do you have any expectation or any guidance for us in terms of what we might expect for kind of log cost in the interior in 2017 over 2016?

Not, not really. I mean a lot of it has to do with the purchase wooden market, but I think we probably see similar increases this year as we did last year and that's probably the safe forecast.

All right and then what would that be kind of order of magnitude?

Yes, somewhere around 4% to 5%.

Okay, all right. And then the one other thing I look as I just noticed in your commentary that your log costs in BC were quarter-to-quarter for the saw mills, but they were down for the plywood mills. And I don't – like I don't understand why that would be the case?

Well, this is – I can’t. I think I'm going to ask Rodger understand that because I don't think we gave that type of disclosure, but maybe Rodger can help me out with that one.

So in the commentary…

Yes, hi. Hi, Mark. It’s just was the function of the purchase market for the higher value peeler logs in the fourth quarter. There's nothing kind of indicating a trend at all in that. And normally, Mark, like you I would expect those to go in the same direction. And I think directionally that's what will happen next year.

Okay. Last thing, I want to do Ted, just touch for a minute on the trade issue. And I'm just curious you mentioned a negotiated settlement, but is the negotiated settlement, which incorporates some kind of a quota feature. Is that necessarily a bad agreement?

Well, until, we have something to look at, it's really hard for us to comment, Mark. I mean the Canadian government last offer was a 31% market share. We don't – I mean and that's a lot different than using the word quote. I mean there are so many details that have to be worked around that with what the conditions are, what about third country imports, how does that gets spread across Canada. So I think at this time first us to really make a definitive comment of what would work and what wouldn't work. I think we're waiting to get a legitimate counter offer from the U.S. And until that happens, there's really – I mean it's just speculation from our point.

Okay, all right. I'll turn it over, get back in the queue. Thanks.

Ok, thanks Mark.

Thank you. The next question is from Hamir Patel from CIBC Capital Markets. Please go ahead.

Hi, good morning.

Good morning.

You mentioned log cost inflation of about 4% to 5% in BC. Just curious what you're expecting for Alberta and the U.S. South this year?

Well, I think, we'll see. Obviously, we're going to see some cost inflation in Alberta and U.S. I mean we’re expecting it to continue to be relatively flat as it's been really over the last couple of years.

And your outlook for pulp kind of like you guys are so cautious, but it looks like producers for I guess both NBSK and BCTMP price that’s slated in China for March. When do you see that pricing rally in China coming to an end?

But we're always are relatively conservative as we project pulp markets I think and really they are two slightly different businesses: NBSK and BCTMP. I think about six or nine months ago, I think what we said is we expected the gap to close between BCTMP and NBSK primarily because of supply and demand for BCTMP is not really going to grow much and the stability of the primary users for BCTMP, I mean, in China their businesses are quite good. So we still see some potential for further compression between those two grades. In terms of the overall market, which obviously drives NBSK, drives hardwood Kraft and ultimately has an impact on BCTMP. There's a lot of capacity coming on and it has been delayed but it is coming and we expect things to be challenging probably towards the second half of this year. And I think we've all been surprised to the upside in the last three or four months and primarily because the capacity has been delayed coming on.

Right. So I just want to ask you about Hinton. I know in your remarks guys referenced some operational issues at the mill that weighed on Q4, give the big shut planned later this year. When do you see that mill getting targeted steady state production?

Well, I think, a couple of things. I mean when we look at our production of that mill from 2014 to 2016, production is up almost 20% on a daily basis. And I think from a production side, we're about two thirds of the way where we want to get to. The challenge we have is the volatility. And with kraft pulp mills, its better if you produce, I would say, 1,100 tons a day and it’s plus or minus 5% or 7%. We're still dealing with some variability. Our peaks are really high, but we still have some poor days and that's affecting our costs, but we're getting better and better on a run rate basis of getting higher production and getting similar operations. Again, our major shutdown, which is every three years, is in September of this year, but I'm pretty proud of the group that we've made a lot of progress. We've got more to make, but I'm quite confident that we're on the right path today. I don't think I could have said that a year ago. I'm confident we're on the right path, but we still have more to prove.

Okay, thanks, Ted. That’s all I have.

Okay, thanks, Hamir.

[Operator Instructions] Our next question is from Sean Steuart from TD Securities. Please go ahead.

Thanks, good morning everyone.

Good morning, Sean.

Ted, the CapEx guidance of CAD300 million this year is a little bit of a step up from 2016. Can you speak to any updates on specific discretionary projects you're looking at and many thoughts on pay backs for though those types of projects?

Well, I think, what I can say is that given the size of our Company, and you know CAD300 million is not an excessive amount. It's still 1.5 times our depreciation. We've got two relatively large projects that are included in that plan. We have not approved them yet, Sean. So I don’t really want to talk about them yet, but obviously they’re – let's put it this way they're saw mill related. But the rest of it is a lot of smaller quick pay back projects. We don't normally comment on our pay backs for individual projects but they're pretty much in line of what we've been seeing in the last three or four years in terms of our pay backs, somewhere in the three plus year range. So we've got a number of good projects and again in our Company, particularly in our saw mill business, with 28 saw mills we find something that works well at one mill we're going to try to do it at 28 of them. We'll continue to look for those value added projects, those CAD1 million or CAD2 million projects, you do that 28 times you're at CAD50 million before you know it.

Got it. And second question, just on the recent price spike in western Canada. Your thoughts on what's contributed to that and specifically if West Fraser has managed shipments to the states in anticipation of potential retro active assessment of counter bailing duties?

Well, I think, number one, it's very hard for us to predict what's going to happen with respect to CBD and ADD. I think everybody knows we're one of the four respondents and we can't predict what will happen in terms of the potential of critical circumstances and retro activity. But fundamentally, we entered this year with low inventories and we're not changing the way we sell or where we sell. We've always been a Company that tries to be very consistent. And so, I think that's really our plan. Given our cost structure and given where markets are today if that issue occurred, the retro activity, I don't think it would change our behavior at all. In terms of what's happening in the market, I think at the end of the day we're in a period of uncertainty and uncertainty does always create interesting market conditions. You didn't ask the question, but the key thing for us is not what's happening this month or this quarter. As usual we focus on the long-term trend and we see lumber fundamentals being very strong as we move through 2017 into 2018. We expect volatility in 2017 given the softwood lumber dispute, but we’re still very encouraged about the medium term.

Thanks for the context. That's all I had. Thanks Ted.

Okay, you bet, Sean.

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

Yes, thanks very much. Good morning, Ted.

Hey, good morning, Paul.

Just a question, you referenced you're one of the respondents for the U.S. Department of Commerce and make a point in here about substantial time commitment and cost. Maybe you could just give us some color around what's involved in that and what the expected cost is?

Well, it is – let me put it this way. We expected that we were going to be an ADD respondent. CBD this is new at least for softwood lumber where they're picking specific companies. So we've been preparing for this for quite some time. And Rodger can probably quantify better than I can because he's spending a lot of his time and Chris McIver is with me as well. So, we're spending a lot of time in our organization. We've had lawyers in our offices. We’ve got 10 or 15 people that are spending a significant amount of their time. I don't know if Rodger want to add more to it. I mean, financially, depending on how long it goes it could be a material amount in total, but on an annual basis it's not a material amount, but it's definitely a cost. I don't know if Rodger want to add anything to…

Ted, I think, basically you've got it covered very well. The biggest constraint on us as a Company is the time commitment. We've got a lot of people that are working very hard on a number of projects and the ADD and CBD investigations just add to the load. So we've got a lot of commitment people spending a lot of time they could be putting elsewhere. That's the biggest cost to us.

Okay, thanks for that. And just maybe a question for Chris because he's there with you. Export markets strength of those relative to where they've been in the past, you know, we expected duties to come in at some point at the end of April and I imagine most western based producers will turn to export markets for at least some relief. What's the status right there now?

Yes, good morning, Paul. They’re pretty strong right now, Paul. We're certainly not shipping as much as we could if we chose to. I suspect by April there will be a lot more people on the market. That could affect it a bit. But China in particular, and Japan, are both really pretty strong right now. We're kind of happy with where they're at and we haven't changed our shipping patterns. Can't speak for others but certainly we're finding demand staying pretty robust, came through the end of last year pretty strong and so far first quarter is good as well.

All right, that's all I had. Good luck, guys.

Thanks, Paul.

Thanks, Paul.

Thank you. The next question is from Mark Wilde from BMO Capital Markets. Please go ahead.

Yes, just a comeback on a couple of things on the pulp mills.

You bet.

Rodger, can you just help us, we've pretty much seen pulp prices go up every month. Can you help us think of any lags in terms of how we should expect that to kind of roll through to your earnings over the next couple of quarters?

Are you expecting, Rodger to answer this question?

Rodger or Larry, whoever. I just want to understand…

Rodger hasn't sold a ton of pulp in his life. You kind of hurt my feelings there. And Chris just as well. Because Chris is responsible for that, so maybe I'll pass it along to Chris to.

All right, thanks Mark. There is usually a couple month lag in pulp pricing typically is what you see because you've got the deliveries down to the docks and then offshore. So, I think you see a couple months usually on the lag side which is a bit longer than lumber.

Okay, all right. That’s helpful. And then just is there a significant year-over-year delta in sort of maintenance cost and kind of lost volume from the two MBSK outages in 2017 versus 2016?

Yes, I mean, when we – I think the Caribou shutdown is 12 days and I believe the Hinton shut, which is in May and the Hinton shutdown is…

14 days…

And that’s in September. So last year, we took a many shut at Caribou in 4, 5 days. So, yes, I mean, the impacts there, but frankly our expectation given our improved production particularly at Hinton is – our goal is to produce at least as much pulp this year as we did last year with fewer operating days.

Okay. And is there a like I think you have mentioned that Hinton is going to be in September, I am just trying to think about how the pattern kind of these costs lands in 2017…

Well, Rodger may need to correct me on it, but fundamentally we amortize the maintenance shut down, so with Caribou we amortize it over two years, Hinton we amortize it over three years. And so the big impact is the loss production during that period of time when the mill is down.

I got it, that’s really helpful. Okay, let me just see if I got anything else here. You had a big increase in LVL volume. Like 29% year-on-year, can you help us to understand what was behind that?

You always ask about LVL, but I…

I tried to…

It’s one little mill but I'll pass it on to Chris and our folks up in Rocky are happy you're asking the question.

LVL is directly linked to new housing. So as new housing has come back we have really seen a pick-up. Canada's been a really good market for us as well on the LVL side. And with housing ticking along pretty good in Canada, you're right. We're seeing more strength in the first quarter that than we did in the fourth quarter as well. So we're pretty happy with the way it's going there.

Okay, all right, the last question I had is it possible to get a sense of kind of where you're lumber operating rates were kind of BC, Alberta, southern U.S.?

Lumber, well, we get lumber operating rates against capacity…

Yes, yes…

For the year or for the quarter?

For the quarter, quarter and year if I can them.

Yes, I think, why don’t you give Rodger a call later, but ultimately, I mean, we’re trying to run our mills full, their impact in the fourth quarter primarily by poor weather and a major capital upgrade at our Newberry saw mill, but I don't know if you want to add more.

Well, I just add, Mark. I don’t have kind of the operating rates by region in front of me, but they’d be pretty proportionate to our capacity rates, which we disclosed, and we do operate as full as we can and various regions are impacted by weather events and other capital projects at various times, but the proportion is pretty close to capacity.

Okay, all right, that’s helpful. I will touch base with you later this afternoon, Rodger.

Okay.

Thanks guys and good luck in 2017.

I appreciate it, Mark.

Thank you. There are no further questions registered. I’ll turn the meeting back over to Mr. Seraphim. Please go ahead, sir.