Q: Western forest Products just made a deal to sell 14.500 hectares of forest land to Eastwood Forests. Considering that wef's debt is around $83 million (could you confirm that please) I would call the transaction substantial from WEF's perspective. Do you agree? WEF says they will use the funds to reduce debt and invest in equipment that will allow them to make higher value wood products, such as another kiln. I never sold my small position in WEF but this might be the catalyst to move it up a smidge. Do you agree or do you think this transaction is going to hurt wef in the future since they will have to buy their logs instead of harvesting them from their own land?
5i Research Answer:
It will take debt down by a big chunk, but we would also note WEF last week outlined a 2025 capex program of $60M+, so debt could tick up again depending on how cash flow goes. The corporate impact may be a wash, but it really now depends on log prices. Margins could be squeezed if prices go the wrong way. Investors did like the move and the stock has done well this year. Tariffs of course remain the big variable here. We would still consider it quite risky overall.