Don Demens – President and Chief Executive Officer Stephen Williams – Senior Vice President, Chief Financial Officer and Corporate Secretary

Sean Steuart – TD Securities Paul Quinn – RBC Capital Markets Stephen Atkinson – Dundee Hamir Patel – CIBC Capital Markets

Great. Well, thank you John and good afternoon everyone.

I’d like to welcome you to Western Forest Products 2016 first quarter conference call. Joining me on the call today is Steve Williams, our Senior Vice President and Chief Financial Officer.

We issued our first quarter results yesterday and I’ll provide you with some introductory comments and then ask Steve to take you through the summary of our financial results. I’ll then share our outlook for the next few quarters and provide a review of our capital projects and we open up to you for questions.

So let me start off by reviewing seasonality and the impact it can have on our business. Typical first quarters are characterized by a gradual improvement in both market demand and timberlands harvest production as we move from winter to early spring.

So weather plays a dominant role in how well lumber demand and harvest volumes progress. On the market side in Q1 2016 mild weather in most of North America led to an early start to the building season.

Improved demand from the U.S. new home construction segment coupled with the demands in China supported a higher pricing for commodity products compared to the previous quarter.

Continued strength in both the North American repair and renovation segment and in Japan supported our specialty business. From an operating point of view, a normal winter on the coast of BC restricted our access to the higher elevations of our timber harvesting land base.

A combination of reduced assets to the land base and contractor rate dispute, which we spoke out last quarter led to lower harvest volumes compared to a year earlier. But we successfully overcame this challenge of lower log availability as we capitalized on our well positional log inventories and delivered 6% growth in lumber production and 11% growth in lumber sales volumes compared to last year.

Our ability to increase lumber production and sales volumes and maintain our specialty product mix, allowed us to deliver adjusted EBIT of $35.7 million, which was a 21% improvement over both the last year and last quarter. Some additional highlights from the first quarter of 2016 include continued record safety performance, and keep increasing our revenue by 9% as compared to the same period last year.

Grew lumber sales revenue by 20% to $206 million. We accelerated our strategic capital program renting up three projects during the quarter and installing new optimization equipment in any stacking and packaging line at our Duke Point Sawmill.

We began to receive the first large production from our new timber harvesting limited partnership with the [indiscernible] First Nation. And finally in the quarter, we’re pleased to be part of an industry group which in partnership with First Nations government and environmentalists delivered a one-of-a-kind force management and conservation plan in the central coast of British Columbia.

That supports both the growth and second growth harvesting. While this agreement is unique, we believe it is an extension of the world leading substantial Forest practices that we deliver throughout our tenures in the coast of BC.

So with that, I’ll turn it over to Steve to review the numbers.

Thanks, Don, let me start by discussing our Q1 EBITDA results. As mentioned previously adjusted EBITDA for the quarter was $35.7 million, a 21% increase over the first and fourth quarters of 2015.

The increase in adjusted EBITDA was a result of improved log and lumber pricing and an improved sales mix. Lumber revenue increased 20% reflecting the benefits of 11% increase in shipments, a strong lumber sales mix in the benefits of a weaker average Canadian dollar compared to the first quarter of 2015.

Log revenue decreased 24% due to reduced sales volumes as a result of lower first quarter harvest. This was partly offset by a 21% increase in average log price realizations.

Byproducts revenue improved 11% as compared to the first quarter of 2015 as increased lumber production and resale of third-party purchases drove increased shipments. From a profit and loss perspective, first quarter operating income was $25.3 million in 2016, up 27% from $19.9 million, the same period last year on the strength of operating results.

Net income was $17.3 million or $0.04 per diluted share as growth in operating income was partly offset by deferred income tax expense of $6.8 million. This compares to $27.6 million or 7% for diluted share in the first quarter of 2015 that result included $9.1 million of net income from the discontinued operations related to the sale of Former [indiscernible] Portmill.

Now moving on the cash flow for the first quarter. Cash provided by operating activities grew to $28.1 million compared to the $8.2 million in the first quarter of 2015.

This increase was due largely to improve profitability and positive changes in the working capital. Our capital expenditures totaled $13.8 million in the current quarter, made up of discretionary maintenance capital of $4.1 million, discretionary investment inroads of $2.2 million and strategic capital spending of $7.5 million.

Our first quarter strategic capital investments include completing the installation of the new timber deck at the Chemainus Sawmill commissioning the single line conversion Ladysmith sawmill and the continued progress on our modernization projects at our Duke in sawmill and planer. Also during the first quarter, we distributed the dividend to shareholders of $0.02 per common share totaling $7.9 million.

With improved cash flow from operations and the strong balance sheet we continue be well positioned to execute on our balanced approach to capital allocation. Don that concludes my comments.

Great. Steve, thank you.

Let me start off our outlook section by testing on second quarter’s seasonality. Difficult second quarter, our harvest volumes increase as the snowpack melts and we’re able to access the complete timber harvesting land base.

We expect to capitalize on the improved weather and realize our usual seasonal increase in harvest volumes. However, our total log production and volume will continue to be impacted by the contractor dispute in TFL 44.

We do expect to recover the delayed harvest volumes in TFL 44 once this dispute and issues are resolved. Looking to our markets, our mid to long-term global market outlook remains positive, gradual recovering and add stage new home construction segment is continuing.

In the longer-term we believe the increased demand from the U.S. recovery and continued demand from China will combine with a reduction in supply from the BC in carrier to deliver a stronger pricing environment.

In the second quarter, we expect commodity lumber consumption and prices to improve as demand from the U.S. new home construction market reaches the seasonal peak and demand in China continues at a steady pace.

I should note that the recent volatility in the Canadian U.S. dollar exchange rate could impact mill price realizations for our commodity products.

We expect our Cedar in these specialty segments to continue to benefit from increased growth and spending in the North America repair and renovation segments. Recent consolidation in Cedar business will help support improved market pricing as we enter the peak consumption period.

Sales volumes on these products will remain steady as we continue to implement our strategic capital at our Duke Point Sawmill. In Japan, we expect market demand to accelerate of the proposed 2017 consumption tax increase.

Improved demand is expected to drive U.S. dollar price improvements but like the rest of our specialty mix, improvements in realized pricing maybe limited by the recent Canadian dollar appreciation.

So let me now turn to our log markets. We expect sawlog markets to continue to perform well in second quarter of 2016.

In the domestic market, the favorable combination of limited supply and strong demand will support pricing. More balanced inventories in China are starting to achieve export more prices firm.

In contrast, the pulp log prices are expected to remain weak due to increased inventories and lower consumption levels from coastal BC pulp price. Now let me move on to our capital plan.

We continue to implement our planned strategic capital program. Our goal is to position Western as the only company in the coast of BC, people consuming the complete profile of the coastal forest and competitively manufacturing a diverse product mix.

Our capital plan will further support our ability to sustainably harvest our tenures, which is critical to our long-term profitability. So we have announced approximately $98 million of the improved projects as part of our original $125 million strategic capital program.

And these projects serve now in various stages of implementation or have been completed. Through the first quarter, we had invested $82 million of the $98 million that we did approved.

In the first quarter we successfully ramped up the Chemainus timber deck and arrange in a single-line conversion. Both of these projects have exceeded our pro forma expectations and we continue to drive performance in our Saltair and Duke Point operations.

We continue to work on additional plans that will position Western as a top quartile producer in our targeted bottom lines. In the second quarter, we will complete the tie in of the new timber at Duke Point, we’ll install equipment to allow for the first, I mean, till the drive products at our Duke Point Planer and we will start to map our timberlands inventory utilizing three dimensional light or laser scanning technology which will deliver a more robust and detailed forced inventory.

We’re excited about the return these projects will deliver once they’re complete. During the first quarter we continued our balanced approach to capital allocation.

We advanced the strategic investment in our business and grew lumber production. We returned $7.9 million for our shareholders for our dividend program and we paid down another $5 million in debt.

So with operator, I can open it up for questions.

Thanks, good afternoon guys. A couple of questions, first I want to talk on Japan.

Don you thought there not so much near-term, I guess, you’re anticipating some demand being pulled forward. But the last consumption tax I think it’s not delayed from under the Japanese housing market and demand based exactly.

Do you have any initial thoughts on how this might shape up into the spring and summer next year once the next cycle is through?

Sure, Sean, well good afternoon and thanks for the question. I look back at the history, so when we’re talking about consumption tax increases in Japan, we’ve got a few through history and what we see typically is about a 10% reduction in housing starts as a result of the consumption tax and associated reduction in lumber purchases.

So we anticipate a reduction as we move through 2017 into 2018. I think difference this time will be the dynamics associated with how well the U.S.

market is doing and we still believe that U.S. producers who have been recently increased production into their Japanese market will begin to take volume away from the market and direct it back into the U.S.

which will create an opportunity for us. But to conclude there is no question that we would expect the reduction in overall demand in Japan as a result of a consumption tax being implemented.

Okay. And a question for Steve.

The elevated legal costs were in SG&A and you mentioned the bunch of different buckets have contributed to that. Should we think of that as a nonrecurring item and how fast will, I guess, a return to more normal SG&A feature your results?

Great. So I think this about $0.5 million increase due to a legal cost, due to contractor disputes, the new [ph] negotiations and some SLA prep.

So I think you’ll see it come down gradually here as we work through those processes.

Okay, I’ll get back in the queue. Thanks guys.

Thank you. Good morning or good afternoon.

Anyway in terms of the projects at Saltair can you bring me up to speed where you are right now and give me an idea of what's to come.

Sure, Stephen, the Saltair project was a two phased project, it started in 2013 and was completed in September of 2015. We started to ramp-up.

It was the conversion of a new backend of the mill and a merchandiser at the front end of the mill to make the largest single-line mill on the coast of DC. Strategically what we intended to do there was to take logs off of [indiscernible] that are quite slow and put them on to sharp chains and reduce costs substantially.

And so what we’ve seen thus far at Saltair is a ramping for production in many of the days in the last 1.5 month has actually – we’ve gone past our pro forma results and we’re very pleased with the results thus far. And as we’ve said our implementation of the merchandiser in September essentially activated or action the $40 million investment and we’d expect to see that 30% return that we expected through 2016.

Great. Yeah, so good things to come.

And then the second thing, you got your capacity to $1.1 billion, is there going to be an increase as you finish like their optimizing the different mills?

Well, that’s a very good question. So in our annual report it is $1.1 billion board feet.

I think interestingly enough, we’ve been averaging about 80% or so past the utilization over the last couple of and we’ll be targeting closer to 90% through the end of this year. We are already seeing some increases in operating rates, so we’re pleased say we’re back, we’re upto 100 hours now at our Cowichan Bay mill and 100 hours at Ladysmith.

So whether we see an actual increase in the total capacity. I think we’ve already announced this $1.1 billion, we’ll see how that progresses over time.

But we are moving quickly to a higher capital utilization which I think is encouraging heavily.

Yeah and I assumed the idea is improving recovery, so that it wouldn’t be necessarily that you’re using more wood.

Well, there will be a combination, so absolutely the addition of new equipment and the modernization of our coastal manufacturing could improve recovery but in addition we will be consuming more volume of logs that in our own mills as we increase capacity utilization.

Sure. Thanks so much.

Thank you, Stephen.

Yeah, thanks. Good afternoon gentlemen.

A couple of questions, one, just where in the process on the contractor dispute are you and is there at some point or what’s the point that you’ll see a resolution?

Good morning Paul or afternoon. So the issue in TFL 44 and you’re familiar with that over in Port Alberni is a rate dispute between ourselves and the contractor who pulls the contract of log for us there.

The process is actually pretty well-defined, first step is the mediation which we’re currently in, if there is no resolution to the mediation we’ll then move to arbitration. So while the timeline of that is a little uncertain, I think we could say that the determine when a ruling will occur.

I would expect the ruling if we move to arbitration by the end of the second quarter. So I think to be clear, we view our harvest as delayed, not lost and we’d expect to catch up that volume in subsequent quarters if we can reach a resolution.

Some background for you, our TFL 44 AEC is about 780,000 meters. We probably missed about 100,000 meters in Q1 and we would expect that would be ramped up a little bit in Q2 as seasonally we’re able to harvest and get more on the land base.

Okay, that’s great. And then it looks like you harvested 1 million meters in Q1 you had to 221 in production, what was your log consumption, was it close to the 1 million meters?

Yeah, it is close to the 1 million meters, on top of my head I had 950 meters or close to that and so it was very interesting from our perspective, Paul, that – we entered the period lower log inventories and harvest at the last year. We were really well positioned in our log inventory to maintain that production, and actually grow production year-over-year.

And as you from the results we were very well positioned on the Cedar front to grow our Cedar production.

Okay, so I guess, the underlying question I’m trying to get is, how are the log inventories now, especially given what you want to cut on the lumber side going into Q2?

Well, so our inventory levels are certainly lower, I think than we would like. We’ve got a plan to ramp up production to try to achieve an increase in lumber production going forward.

So we’re not only planning on increasing our own harvest to build our inventories and position ourselves better, but we also are out on the market purchasing more logs and we have an inventory of standing timber purchases, which we’ve purchased from BC timber sales, which will be activating this quarter. So I think good question because you know it is tight log market but we are very active in trying to build our inventories and anticipate being able to do that pending some weather related something else.

Okay. You guys, just stay on the log side, you guys mentioned the stumpage increased on March 1st, so was the level of the increase?

Yeah, the government went through and increased stumpage March 1st as you’re very familiar our stumpage system in BC and the coast is determined both by the auction behavior out of the BCTS of the data that’s put into our progression analysis as well as log pricing updates quarterly out of Vancouver log market. And what we’ve been seeing is we’ve been seeing log pricing especially in specialty sorts going up quite quickly recently and that had led to a stumpage increase.

So for specific permits that are heavy to specialties you could see up to an $8 or $10 increase in stumpage. Because we harvest across the profile of the Forest I would anticipate the cost increase to be muted $1 to $2, so I think it’s a good estimate for Western.

And that $22 what is that on percentage increase?

Probably just gain 20%.

Okay.

Okay and it’s a difficult response simply because it all depends on where we are in the profile and on the land base. So it moves around a little bit, Paul, but I think that’s a fair number.

Definitely can appreciate that. Okay and then you referenced a 15% increase in Western Red Cedar volumes.

Have you seen, what’s the I guess comparable increases in some of the lumber that you’re producing?

Well, a good question. So we did increase 15% of course total lumber production was up 6% and we maintained our specialty mix.

So what was positive about that is in our specialties include Niche, Japan and Cedar. So basically its balanced across our segments.

A little heavier obviously in Cedar, a little less in Japan, but we’re seeing a pretty balanced outcome. I did allude looking forward, I did say that we ramped hours at a couple of commodity mills, so you probably can expect to see our specialty mix decline going forward.

Simply because we’re operating more hours in our commodity business.

Okay. So that essentially, if I understand you right that says commodity was flat year-over-year?

No, commodity was up as well, because our total was up 6%, so Cedar represents a about 25% of our total volume.

Okay. I think that’s all I got.

Hey thanks very much. Good results, best of luck.

Great. Thank you Paul.

Hi, good afternoon. Don, could you may be give us a sense as to the percent of U.S.

Cedar demand that get serviced by Canadian production?

Good question. I think and it’s a good question because there have been a recent change at least on the costal side of the U.S.

where the largest Cedar lumber producers, decided to exit the business and most of those logs in that flown into the fencing business. So when we look at and consider lumber, the vast majority of lumber Cedar consumed in the United States is coming from Canada.

There's a large fencing business in the U.S. for Cedar and then there is a smaller business in the interior of the U.S.

through Idaho on panel stock and paneling and the like. I would say estimate 85% of lumber comes from Canada on a lumber basis taking up the fencing.

Right. Okay, can you maybe help us understand what you think might happen if we enter a period of countervailing and dumping duties.

How might that play out for some of your higher value products?

Well, I think it’s early to speculate as to exactly what will happen and not knowing what the American position is currently and what level of CVD, if the CVD was levied upon, Canadian shipments. I believe we’re in a pretty good position on specialty lumber because it is in high demand.

And we call it demand driven market and pricing has been extremely said or improving in contrast to what's going on in the commodity business or service on the commodity business. So in the end whatever CVD is applied, I'm sure there will be a sharing of the impact between customers and suppliers because of such strong demand in the specialty segment.

Thanks. That’s helpful.

And just final question for Steve, could you give us a sense as to what total CapEx spending for 2016 is likely to shape up?

Maybe I’ll grab this one as well, Hamir. So we have guided previously that we’ll have discretionary maintenance capital of about $35 million to $40 million every year that includes roads in our timberlands, replacing our equipment, replacing our equipment, the obsolete equipment in our manufacturing.

And we've been targeting about $35 million to $40 million of strategic capital. As I said, we've invested already $82 million of the $98 million thus far.

That would leave $16 million of strategic capital still do be put into our business this year. We did $7.5 million in the first quarter so that’s kind of, that end up to $24 million and we have more projects coming.

So I would guide you to just consider $40 million as an estimate for strategic capital per year and in fact to our discretionary maintenance capital which we’ve got lined up this year about $35 million to $40 million as well.

Okay. Great.

Thanks guys.

Great. Thank you, Hamir.

Great. Thanks, John.

So to close, I’ll just like to thank all of you for your attention and support of Western. I think we continue to be encouraged by our most recent results and look forward to sharing with you our second quarter results in August.

With that, have a great day.