West Fraser Timber Co Ltd

TSX:WFG

Earnings Call Transcript

[Operator]

Good morning. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the Joint West Fraser-Norbord Q4 2020 Results Conference Call. During this conference call, West Fraser's representatives will be making certain statements about potential future developments. These forward-looking statements includes certain statements about West Fraser's future financial and operational performance; West Fraser's business outlook, including demands for products and available supply and expectations concerning costs; West Fraser's capital plans, including the completion and ramp-up of capital projects and the realization of the benefits of such plans and projects; the software lumber dispute, including adjustments to duty rates and related proceedings; and the integration of Norbord into West Fraser business. These statements include forward-looking statements within the meaning of Canadian and United States securities laws and are intended to provide reasonable guidance to investors. The accuracy of these statements depends on a number of assumptions and is subject to various risks and uncertainties that may cause future events to differ materially from the events implied by these statements. 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 management's discussion and analysis as supplemented by other risks and uncertainties as set out in the company's quarterly MD&A. These filings can be accessed on West Fraser's website or through SEDAR for Canadian investors and EDGAR for United States investors. Accordingly, listeners should exercise caution in relying upon forward-looking statements. [Operator Instructions] Thank you. Mr. Ferris, you may begin your conference.

[Raymond W. Ferris, CEO, President & Corporate Director]

Thank you, Joanna. Good morning to everyone, and welcome to our Joint West Fraser and Norbord Q4 2020 Conference Call. I'm joined today by Chris Virostek, CFO of West Fraser; Chris McIver, Senior VP of Marketing and Corporate Development; as well as Norbord's President and CEO, Peter Wijnbergen; and Norbord's Chief Financial Officer, Robin Lampard; and several other West Fraser executives. And both Peter and Robin now are part of the West Fraser family. This morning, I will make a few opening remarks, and then I'll pass the call to Peter and Robin for their comments about Norbord's stand-alone fourth quarter and full year 2020 results. We will then transition the call to Chris Virostek for his review of West Fraser's stand-alone fourth quarter and full year results before I make some concluding comments and we move to take questions. I'll remind everyone of Norbord's financial results referenced today will be in U.S. dollars, while those of West Fraser will be in Canadian dollars. Just a general comment before we get into some of the materials. It's an exciting period to be in the forest products industry, not just for West Fraser, but the industry in general, to be a meaningful part of an industry that provides sustainable and renewable building products required for a low-carbon economy. And we're able to do this, simply by participating in the natural life cycle of the forest that we live and operate in every day. Manufacturing building materials from a sustainable and renewable forest is but one very important part of the required solution for society to meet its climate change objectives. It's an industry that we are both privileged and proud to be part of. 2020 was an incredible year for West Fraser. Despite a year of rapid change and uncertainty, we managed to deliver strong results. We did so by being agile and minimizing COVID-related business disruptions, thanks to our focus on the health and safety of our employees and communities. We were able to do this while achieving the best safety record in the history of the company, and yet we know we can do much better in our journey to eliminate serious incidents and injuries in our workplace. We also achieved gains in other areas as a result of the capital and operating initiatives that we've invested in over the past several years, which are now being realized. I could not be more proud of what our teams have accomplished. In mid-November, we announced the proposed acquisition of Norbord, the world's largest producer of OSB, which just closed on February 1. And I would be remiss if I did not recognize the outstanding work of both project teams. In particular, the finance and legal departments, who worked tirelessly to close this transaction, which was announced on November 19, 2020, in the middle of a pandemic and with seasonal holiday challenges, to a smooth and successful closing on February 1. Well done to both Robin and Chris's teams. I am pleased to remind our listeners that this transaction positions West Fraser as one of the world's leading wood-based panels -- sorry, wood-based building products producers. So with that, I will pass the call over to Peter.

[Peter C. Wijnbergen, President, CEO & Director]

Well, thank you, Ray, and good morning, everyone. The past year was truly remarkable in many respects for Norbord, as OSB demand exceeded all expectations in the face of a global pandemic that caught many by surprise. This demand strength led to Norbord's best ever financial results as we delivered adjusted EBITDA of USD 384 million in Q4 and $865 million for the full year. In North America, U.S. home construction activity recovered strongly in the second half of the year, bouncing back from the weakness that unfolded during the early stages of the pandemic. Repair and remodeling was also robust, with demand running at a record pace for much of the year. Industrial demand has also continued to recover and has now normalized back to, and in some cases, above the pre-COVID levels. During the early stages of the pandemic, we took decisions -- decisive action at Norbord to align our production with weaker demand by implementing a flexible operating strategy. This new approach -- operating approach allowed us to cycle down in the second quarter and then back up to meet the demand recovery in the second half of the year, all while efficiently managing cost. In North America, full year production was at 80% of available capacity compared to 85% of 2019, with the reduction due in part to the impact of the pandemic on customer demand in the second quarter. Fourth quarter shipments were down 8% from the third quarter, but increased 5% year-over-year. The decrease from the third quarter was due to fewer fiscal days in the fourth quarter and maintenance downtime taken during the typically slower seasonal demand period in the fourth quarter. It took 191 mill days of downtime in Q4 compared to 32 days in Q3. OSB suppliers struggled to keep up with the stronger-than-expected recovery in OSB demand, leading to the record high benchmark prices in the fourth quarter that have now carried into the first quarter of 2021. We cannot meet the strong demand from our currently operating mills and so we made the decision in December to resume production at Chambord with a restart this spring. This mill will be part of our flexible operating strategy. And once fully ramped up, after the typical start-up curve, Chambord is expected to be one of the lowest cost OSB mills. In Europe, our adjusted EBITDA increased from $16 million in Q3 to $20 million in Q4 on the strength of the recovery in demand and improving European OSB pricing. Full year adjusted EBITDA in Europe was $48 million. We made great progress at our Inverness mill in the fourth quarter, where the Phase 2 expansion is now complete and the mill is ramping up or will continue its ramp-up towards its new capacity of 945 million square feet per year. This expansion will help us to continue to supply substitution-driven OSB demand growth in Europe for years to come. As we move forward with West Fraser as one organization, I want to take -- I wanted to acknowledge my Norbord colleagues for all their commitments and hard work, especially this past year. And I look forward to continue to work together as President of Engineered Wood at West Fraser, as we embark on this new and very exciting next chapter in our company's story. And with that, I'll pass the call on to Robin.

[Robin E. Lampard, Senior VP & CFO]

Thanks, Peter, and good morning, everyone. Just two quick reminders from me today as you update your West Fraser models with Norbord's Q4 results. First, in light of the steep increase in North American benchmark OSB prices that has continued into Q1, I'll remind you of the inherent lag in our realized prices versus those benchmarks during periods of rapidly changing prices, and of course, the same thing applies to lumber. This lag, which cuts both ways, occurs because of the timing impact of our order files for commodity and value-added products as well as the roughly 25% of North American OSB volume that goes into specialty end uses, where negotiated prices don't move up or down with the commodity benchmark. Second, you will have seen the USD 112 million of taxes payable on the Norbord balance sheet at year-end. And similarly, West Fraser had CAD 124 million of taxes payable on its stand-alone balance sheet at year-end. Both entities have large tax installments to pay in Q1 related to the strong profitability in fiscal 2020. So that will impact operating cash flow this quarter, in addition to the usual seasonal impacts we always see in Q1 from building log inventories in the north and paying out profit share and bonus accruals. So with that said, I'll hand the call to Chris.

[Christopher D. McIver, Senior VP of Marketing & Corporate Development]

Thanks, Robin, and good morning, everyone. When we last reported earnings in October for West Fraser, recovery in lumber demand had driven a strong price reaction in wood products, lifting lumber prices to all-time highs. And while these prices gave back some ground in the fourth quarter, they remained elevated versus historic norms, owing to continued demand strength from new home construction, renovation applications, lean channel inventories and a limited supply response. In terms of financial performance, West Fraser generated consolidated adjusted EBITDA of CAD 1.46 billion for the full year. In the fourth quarter, our consolidated adjusted EBITDA reached CAD 544 million, down from the CAD 605 million in the third quarter as lumber prices temporarily pulled back. Our lumber segment specifically, adjusted EBITDA was CAD 508 million in the fourth quarter versus CAD 552 million in the third quarter. We recorded a duty recovery of CAD 124 million as in respect of the 2017 and 2018 duty rates as final rates were released in November. Our panel segment continued its strong performance in the fourth quarter as higher plywood pricing offset slightly lower shipments and fiber cost inflation. Adjusted EBITDA in pulp declined in the fourth quarter as we took maintenance downtime at Hinton and Quesnel River Pulp in the fourth quarter. More recently, pulp markets are showing signs of recovery. Turning more specifically to shipments in lumber. 2020 SPF shipment volumes declined as compared to 2019, due to the impact of permanent mill closures and shift reductions implemented in 2019, which reduced our capacity and, therefore, our available production. Conversely, SYP shipment volumes increased from the prior year as demand was strong in the second half of 2020, and we generated increased production due to capital improvements and improved reliability at our mills in the U.S. South. Cost of production were lower in 2020 than in 2019 due to changes in volumes, reductions in log costs, higher capacity utilization overall and improved SYP productivity and recovery. And overall, while price was clearly a significant impact in 2020, we are most pleased by the things that we can control, and that's the progress we have made on costs in 2020 across all our segments. Shifting to capital allocation on the balance sheet. Capital expenditures were CAD 241 million in 2020, slightly lower than our typical spending as we focused on realizing the benefits of the capital we have spent in the past few years. Given the strong results, our liquidity increased materially in 2020, exiting the year with available liquidity of CAD 1.62 billion. Debt levels remained modest with total debt of CAD 730 million and net debt of just CAD 71 million, exiting 2020. And lastly, as you will have seen, our Board maintained the dividend level at CAD 0.20 per share for the quarter. With that, I'll turn the call back over to Ray for our outlook on 2021 and an update on some select projects.

[Raymond W. Ferris, CEO, President & Corporate Director]

Thank you, Chris. Let me start with a couple of general comments on the acquisition of Norbord and on the outlook for 2021. First, I'd like to officially welcome the Norbord team to West Fraser. And to also welcome Marian Lawson and Colleen McMorrow as the new West Fraser Board members, both having joined from Norbord's Board. As we've talked about previously, the addition of Norbord to the West Fraser family gives us additional financial flexibility to pursue strategic growth opportunities and better positions the company to deliver value to shareholders through the cycle. And while it's still early days, we are already seeing how Norbord's people and assets will be a very strong complement to West Fraser. And we remain very excited about the opportunities that lie ahead. In terms of our end markets, record low mortgage rates, the ongoing trend toward greater work-from-home options, have created strong incentives for people to purchase new homes and undertake renovations and do-it-yourself projects. Remote working, when combined with the underlying housing formation deficit, has continued to drive demand for single-family homes that consumes more of our building products than multifamily. While we recognize that there are many factors outside of our control that can temporarily influence markets, including uncertainty around the long-term economic implications of the effects of COVID-19, we are optimistic about the favorable market fundamentals we're currently seeing and is further supported by the environmental benefits of building with wood, which have been never more clear and more accepted. Keeping our employees and community safe and focusing our attention to servicing our customers' needs are our priorities going forward. Record high pricing in the past few months has led to strong results, but it is still a relatively new trend. And with that in mind, including our memory of markets just 12 months ago, we will be both thoughtful and patient with our capital allocation strategy. Now I'd like to share a few updates regarding a few select projects, particularly those that relate to the U.S. South and our strategy there. Our new manufacturing complex in Opelika, Alabama is a great example of the opportunity that we see in the U.S. South. Final upgrades were completed in 2020, and we are seeing a significant uplift in all of our key metrics: safety, productivity and in cost reduction. And we see further upside as we reach our operating expectations, perhaps, most importantly, is our people strategy. Improving the work environment while creating fewer but higher value jobs is key in reducing turnover and improving our ability to recruit and retain the people needed to be able to execute on our strategy. Turnover has reduced substantially, which we believe is key to achieving our expectations. The construction of our new complex in Dudley, Georgia, is on track, and we anticipate starting up the planer before the end of the month. In fact, it's in the early stages as we speak, with the rest of the site coming online later in the second quarter. The area benefits from a good fiber supply and is strategically located close to key lumber consuming markets in the U.S. South. Similar to Opelika, we expect growth in production, cost reduction and a further execution of our overall people strategy. It's important to note, both from a cost and a sustainability perspective, that as a result of our continued capital investment in our southern operating platform, we now extract 10% more lumber from the same log than we would have in 2007. Producing more lumber without having to consume more timber is good for the planet, and it's good for our business. We are encouraged by the projects that we have been able to bring to completion in the U.S. South and look forward to continuing to operationalize them in 2020. And we remain committed to deploying capital prudently to support our low-cost operating platform. Finally, I want to remind everyone that it is our employees that have taken on the burden of transition this past year and, in doing so, have improved our overall ability to tackle whatever challenge comes next. The dedication and perseverance of our people across the company is what I am most thankful for and proud of. Thank you. And with that, we'll turn the call back to the operator for questions.

[Operator]

[Operator Instructions] First question comes from Mark Wilde at BMO.

[Mark William Wilde, Senior Analyst]

Yes. I wondered to start out, it sounds, Ray and Chris, like your tone around kind of capturing returns on some of these southern CapEx projects is more positive than what I heard maybe 6 months ago. Can you just talk about that a little bit?

[Raymond W. Ferris, CEO, President & Corporate Director]

Well, I'll try, Mark, I -- if it sounds different, I'd -- I'll apologize for that. It's -- I think it's -- I think our view hasn't changed. I think as we actually start to realize and achieve them, I think we probably get more excited and you hear that tone, but I don't think our expectations are any different, for sure. Just we're really starting to realize those today.

[Mark William Wilde, Senior Analyst]

And Ray, what would be the runway that would be left in terms of improving productivity, improving yields? You talked about that 10% increase in yields you've had across the south since '07. How much remains? And can you help us think about what the financial impact of that might be?

[Raymond W. Ferris, CEO, President & Corporate Director]

So -- well, I think it's -- I'm going to answer that with a two-pronged question. I mean we're always investing even in our mills that are fairly well capitalized to continue to kind of improve that platform. So I mean, that to me, kind of goes on regardless. With respect to strategic capital, the large -- and I think I pretty much get this question and it's a fair question every quarter. And I think I've used that baseball analogy, where are we in the baseball game. And we're -- we've got quite a bit of runway left still. And so as far as capturing, giving you a number, I think we'll leave that to later. But I think as you're aware, I mean, we still see -- I would kind of say, we're kind of in the sixth inning or the top of the fifth or -- sorry, top of the sixth or bottom of the fifth sort of thing as far as what we see as runway to continue to deploy strategic capital in the U.S. South to fundamentally kind of move recovery in those remaining mills and lower our costs and frankly, achieve better margins with -- on -- from our product stream. So still quite a bit of work to do. And that, Mark, is why frankly, we're quite excited about our runway.

[Mark William Wilde, Senior Analyst]

Yes. Okay. Ray, I wondered if we could then just turn to kind of capital allocation. And I guess the kind of the top question within that is the dividend, because Norbord had this variable dividend structure. And it just seems like in light of the markets that we're in right now, this is exactly the kind of situation where you might consider a variable dividend. So can you just -- can you talk about dividend strategy as you sit right now? And then also, sort of how you'd prioritize other uses for capital, including perhaps just building a cash position right now and kind of hedging yourself in terms of where the market is going to go?

[Christopher D. McIver, Senior VP of Marketing & Corporate Development]

Sure, Mark. I'll take that. I think in terms of capital allocation, the hierarchy is the same, right? I think it's something for us that's been durable, regardless of market conditions. And in fact, I think for both companies, the approach to capital allocation has been similar, there's been a bit of a difference in terms of the manner in which it's executed. But we both believe in investing in being the -- having a leading low-cost manufacturing platform. That hasn't changed. Having financial flexibility to weather disruption and approach growth opportunities when they exist, and providing returns to shareholders and striking a balance across all those. I think as we said, now is the time, I think, more than anything, to be patient. Today's market is not necessarily the new norm. We're into peak working capital and cash consumption in the first quarter. And we have to work to optimize the capital structure here coming out of this, and we're really kind of only 2 weeks post-completion. So this cash accumulation of this order of magnitude, it's really a phenomenon in the last 4 or 5 months, and it’s healed balance sheets from what's been a fairly difficult '19 and early '20. On the dividend specifically, what I would say, Mark, is our approach historically has been to pay a sustainable fixed dividend and have done so consistently over a long period of time. We didn't need to adjust our dividend in early 2020, even when markets were difficult, and we'll continue to appropriate -- evaluate the appropriateness of that strategy over the long term.

[Mark William Wilde, Senior Analyst]

Okay. Fair enough. I do want to just close by saying in my 30 years of covering the sector, I think this is one of the transactions that makes the most sense to me and has the potential to add the most value over time. So I wish you luck on those, and I'll turn it over.

[Operator]

The next question comes from Hamir Patel at CIBC Capital Markets.

[Hamir Patel]

Ray, when you first announced the Norbord deal in November, you pointed to, I believe it was a USD 61 million of synergies within the first 2 years. Have you been able to refine your expectations there as you move through closing?

[Raymond W. Ferris, CEO, President & Corporate Director]

Hamir, what I'd say is, I have to remind ourselves, it's day 10. I think we're into our -- and so what I'd say is, no, we really haven't further refined those, and we'll certainly update people from time to time on our progress on synergies. We were pretty conservative on our synergies. I think we still have a view that it is conservative, but we're in the process of assembling our teams and actively building action plans to further refine and execute on those synergies. But it's going to take us a little while to get up and running with that, Hamir.

[Hamir Patel]

And Ray, you touched on the Dudley project. Can you speak to what other rebuilds you might have underway over the next year or 2?

[Raymond W. Ferris, CEO, President & Corporate Director]

Good question. I won't go into it in detail, Hamir, but I -- we're -- I just kind of say that we do have a runway in front of us. I think as we announce and kind of bring forward our capital programs, I would say that both Norbord and West Fraser, I think we've got a pretty decent track record that when we invest this capital that we achieve pretty good returns, and that's a pretty good use of -- and so I would say, I just expect more of that. But at this point, I'm not going to kind of give specific communities that we're going to -- that we're moving forward until we're ready to announce that.

[Hamir Patel]

Sure. Fair enough. And just a final question I had for Peter. Peter, a couple of years ago, Norbord had looked at potentially entering the siding market. And it was, I think, a variety of reasons at the time that it didn't make sense. Given the change of ownership and some of the industry developments, is that an area that you see as a potential growth area for the combined entity?

[Peter C. Wijnbergen, President, CEO & Director]

Hamir, no, I think we're still of the opinion today that we have opportunities that provide us with significantly better risk-adjusted returns. So we will continue to focus our OSB growth of the business on the industrial sector. Obviously, we will continue to evaluate how these things grow. And I'd like to remind everyone that we have a lot of OSB capacity in the Aspen region, which is, I think, what is most suited to siding production. But right now, our strategy remains unchanged.

[Operator]

The next question comes from Sean Steuart at TD.

[Sean Steuart, Research Analyst]

Congratulations on closing the deal. Two questions. Ray, I just want to revisit capital allocation and appreciating you're only a couple of weeks in here, but as you wrap your arms around the transaction, any thoughts on how long you think the integration will take and when you might be comfortable or the Board might be comfortable in revisiting M&A as you look for ways to put the balance sheet to work?

[Raymond W. Ferris, CEO, President & Corporate Director]

Well, I'll maybe start and then Chris can rescue me if necessary, but with respect to integration, I mean, it's just not -- it's really corporately finance, accounting, IT, Chris and Robin, I mean that's happening very quickly and I think that transition, of course, there's multiple phases to it, right? But a lot of that will occur over the next few months. And so I’ve got a fair amount of confidence that there won't be significant disruption from that because, quite frankly, we're really looking at taking two great finance teams and building, quite frankly, even more capacity to go forward. So -- and I think Chris and Robert are already demonstrating that. So on the other integration, I'd remind everybody, we bought a world-class organization that has fantastic assets and even better people. And so today, I kind of go, there's not a lot of stuff that we're losing a lot of sleep about having to integrate, because we're just building on best practices. So it really, frankly, doesn't take us very far off of our game plan. And so I'm not going to speak for the Board, but I think we've always looked at this as something that was going to make the company stronger right out of the gate. I believe that still to be true, and frankly, not take us off any of our other strategies we might have around opportunities that might come our way. And so I think we're ready to move forward as needed.

[Sean Steuart, Research Analyst]

Okay. Second question for Chris and/or Robin. Robin, you mentioned the Q1 working cap requirements. And specifically, I'd like to get some context on Western Canadian log inventories, especially in BC, and I know there is a rush to build log decks ahead of the stumpage hike in January. Can you give us a sense of what the working cap build for the combined company might look like in Q1 on the inventory side relative to what we would normally expect in the quarter? Were you able to get ahead of it in Q4, I guess, is the question.

[Christopher D. McIver, Senior VP of Marketing & Corporate Development]

I mean I can start on that and then Robin can add some color on the Western Canadian OSB business. I think there's always lots of factors that affect how you're able to execute and we do our best to kind of manage the changes in stumpage and how we haul. But weather is a big impact of that -- has a big impact on that as does the availability of contractors. So I would say, if you think about the two -- the variables of volume and price, I don't think that there's major differences in terms of volume of kind of where we would typically be on a seasonal basis. But you've got differences in the stumpage on the inbound that have affected things year-over-year. And so that -- with higher stumpage on the same -- on a similar volume, you're clearly going to have more working capital build than in prior years. So I don't know that we can kind of go any further than that on it right now, but we are working hard to make sure that we've got the log inventory that is economically justified for us in order to operate through the coming season.

[Robin E. Lampard, Senior VP & CFO]

Yes. Chris, the only thing I would just add, I guess, for some context, for historical context on the OSB side of the business is historically, the Norbord entity has experienced anywhere from a $50 million to $100 million working capital build in the first -- operating working capital build in the first quarter, and driven by, as I said, the build in log inventories in the north and also the payout of things like profit share accruals. So as you look to this year, obviously, profit share based on last year will be higher than it has historically been, but that's certainly the range -- order of magnitude range that we've experienced.

[Sean Steuart, Research Analyst]

And one last quick one, where do NOLs stand? Do you have any ability to shield cash taxes going forward?

[Christopher D. McIver, Senior VP of Marketing & Corporate Development]

I can take that. You'll see in our disclosure, Sean, we've pretty much used up all of our NOLs at this point in time. We have a few that are a bit restricted, but pretty much all out of NOLs right now.

[Operator]

The next question comes from Paul Quinn at RBC.

[Paul C. Quinn]

Maybe I'll start on the lumber side. Just trying to understand the mix shift or shipment shift really, that you experienced in 2020 from shipping down to these states as opposed to shipping in Asia. And given where prices are in '21 here, do you expect that sort of shift to continue?

[Raymond W. Ferris, CEO, President & Corporate Director]

Yes. Paul, I'm going to let Mr. McIver speak to that.

[Christopher D. McIver, Senior VP of Marketing & Corporate Development]

Yes. I would say we have shifted our business. And I think it's important to remember, Canada remains a pretty critical market for us as well and has been -- we had a very good 2020 in Canada in the lumber side. Yes, just like on the OSB side, we're not in these markets for the short term. We're going to continue to have a meaningful presence in both Japan and China, where as you know, prices are challenged compared to North America right now, but this will swing. Saying that, we have reduced significantly our total volumes in the markets, and we'll probably hold them similar to where they've been in the last quarter, depending in -- demand is much stronger in Japan coming into 2021 from last year and China remains kind of as it has been so.

[Paul C. Quinn]

All right. And then maybe an OSB question to Peter. Just, Peter, how should we think about the ramp-up at Chambord? How much volume in '21? And is it -- yes, if you could sort of parse it out by quarters, that'd be great.

[Peter C. Wijnbergen, President, CEO & Director]

Well, first, I should start saying we're making really good progress towards our objective to get production happening here at the end of the quarter or in the beginning of the spring, despite that process being hampered significantly by this whole COVID situation and the lockdown that we're working our way through. So I'm very pleased with the progress we're making. Most of the work that needed to be done on the plant is complete and we're in sort of making sure everything works and is commissioned properly stage. We've been able to sort of count on a very strong relationship with the union from before. And so we're making good progress on getting people on board. When I think about a start-up of an OSB mill, typically, we would sort of -- I would be pleased, based on past experience, if after about a year's worth, we're at about 70% of the capacity. That's certainly what we would have built our plan -- what we have built our plan around. So that means, on average, in the first year, something north of 50% of the available capacity. And you can sort of imagine that, obviously, they'll all -- that will all come in the first quarter. But that's sort of a ramp-up that you should expect, very much like what we saw in Alabama and Jefferson, when we started those mills up in the past.

[Paul C. Quinn]

Okay. Yes, that's helpful. And Peter, while I got you, have you been hearing any rumors about other OSB mills starting up in North America here?

[Peter C. Wijnbergen, President, CEO & Director]

Other than the ones that you reported on, I haven't heard of any other ones, no.

[Paul C. Quinn]

Okay. So we're both right. Maybe the last question to Ray. Just on the '21 outlook here, you've got NBSK up 11.5% year-over-year. In terms of production, this -- I suspect you always set a high bar and they've struggled to deliver. Just wondering what gives you the confidence to be able to get that this year?

[Raymond W. Ferris, CEO, President & Corporate Director]

Yes, no. Paul, well, I think I'd just remind you that we had a pretty significant market-related downtime in Caribou last year around the pandemic and chips. So I would say, from a production standpoint, I think we look at our NBSK as frankly, quite achievable. Just when we look at our look going forward. And what was the second part of that question, Paul?

[Paul C. Quinn]

Well, it was just on that. I mean if I look back in your production history, I don't see anything up at the [ 515 ] level going back. So is there any material change in the mills themselves, that gives you more confidence now?

[Raymond W. Ferris, CEO, President & Corporate Director]

Well, we're not planning any market-related downtime in 2021, like we had in 2020. And the second part of that is that as we talked about in Q3, we did have a difficult shutdown at Hinton with a tragic incident, and that impacted that. But I have to tell you the -- for 9 or 10 months of 2020, we saw the best pulp product, other than the market downtime we had at Caribou. We were quite pleased with how our pulp group performed, notwithstanding a blip in the fourth quarter.

[Operator]

The next question is a follow-up from Mark Wilde at BMO.

[Mark William Wilde, Senior Analyst]

Yes. I wondered if we could just talk about both consumer responses to these record high prices for lumber and OSB, whether you might see deferrals taking place and some types of construction activity, maybe like do-it-yourself market for decks or things like that? And then also, supplier responses, Peter, I saw a story in The Trades a couple of weeks ago about OSB hitting the Gulf Coast from Europe. So I wondered if you guys could talk about supply responses in both OSB and lumber.

[Raymond W. Ferris, CEO, President & Corporate Director]

I'm going to let -- Chris is going to take the first part of that, for sure, Mark.

[Christopher D. McIver, Senior VP of Marketing & Corporate Development]

And then I'll maybe pass it over to Peter on the supply side. But yes, just it's really interesting. All our customers, and as we're all getting more integrated, listening to a lot of the OSB side, where the story is very similar to the lumber side. Our consumers would like to pull away. Our customers have tried a couple of times. They tried in the fourth quarter, particularly on the lumber side. Their demand is so large, they just really can't afford to not be in the market, every day. And the biggest customers are in every day. And they're just restocking their yards. The do-it-yourself market, while not as active on a percentage increase as it was last year, it's still very, very busy. And so the box stores are busy just -- and they're pushing all their treating partners and all their suppliers to get more and more product. So the other thing that we're seeing is that these -- we don't expect these prices to last forever. But what we are seeing is a bit of an acceptance that maybe going forward -- and I would say maybe that a price level may be different than it has been in the past a bit, but we'll see if that comes to fruition. And on supply, you did speak to lumber, we're seeing wood come in from Europe as we have, but European markets are very good in the lumber side right now. So they're not that incented to come over. So with that, maybe I'll pass over to Peter on the OSB.

[Peter C. Wijnbergen, President, CEO & Director]

Yes. I think same perspective, I would say, offer up, Mark. The -- yes, there are some imports of OSB coming from Europe to North America. They're quite limited. The European mills are not capable to address sort of the bulk of the market demand in North America for technical reasons. So it should have a limited aspect of the market that they can compete in. And at the same time, European demand has really been growing and prices are improving there as well. So if you combine those 2 things, the volume that is flowing in, so far anyways, is, I would say, largely immaterial.

[Mark William Wilde, Senior Analyst]

Okay. All right. That's helpful. And then over on the pulp side, where we've had this amazing rally over the last probably 60 to 75 days, can you just help us in thinking about how that would roll through for West Fraser? I think you have more Asian business than, say, some of the companies that are more skewed down into the Southern U.S. So I'm thinking that it should roll through a little more quickly for you. But if you can just help us with that, that would be great.

[Christopher D. McIver, Senior VP of Marketing & Corporate Development]

Yes, Mark, maybe I'll -- this is Chris. I'll try to take a stab at that. I think a few things. One, 60 to 75 days is probably a bit longer than we've seen it. It's a fairly recent phenomena for us. Yes, we certainly are seeing very improved pricing it's going to take us a little while to get through the order file to see that pricing no different than what Robin said earlier around taking a bit of a lag before you see the improvement. So that's going to take a little while. But we're very encouraged by what we're seeing in the markets. And certainly, Asia's picking up, which puts pressure on both Europe and North America. So we see things looking much better on the pricing side for at least the first half of this year.

[Mark William Wilde, Senior Analyst]

Okay. That's helpful. And finally, is there any way to kind of quantify what those outage days up at Quesnel might have cost in the fourth quarter?

[Raymond W. Ferris, CEO, President & Corporate Director]

I don't have a number that I could really put -- that would be helpful. Sorry about that, Mark.

[Mark William Wilde, Senior Analyst]

That's okay, Ray. I just wanted to check. I'll turn it over.

[Operator]

There are no further questions at this time. You may proceed.

[Raymond W. Ferris, CEO, President & Corporate Director]

Well, thank everyone for joining our call and for your continued support, and we look forward to talking to you in Q2. Thank you very much, everyone.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.