United States President Donald Trump added new tariffs this week, particularly calling out Canadian lumber. The enforcement of a Part 232 motion got here as an enormous shock to the sector. The transfer places near-term uncertainty on the merchandise, with the potential to depress shipments to the US. This could possibly be huge, given the cross-border dependency Canada has on our neighbours to the South.
This combo may due to this fact be fairly exhausting on Canadian wooden producers, with extra volatility, weaker near-term earnings, steering revisions, and a return to former tariff points. The speedy results are unfavorable; nonetheless, long run, a number of Canadian shares may present worth. So, let’s have a look at what traders must know not simply within the close to time period, however medium and long run as properly.
WFG
Let’s have a look at one of many largest producers on the market, West Fraser (TSX:WFG). It is a massive, built-in provider with publicity to lumber, Oriented Strand Board (OSB), and pulp. Whereas it stays liquid and has versatile operations, its second quarter confirmed that it could possibly be in danger from these new tariffs.
The second quarter noticed gross sales are available in at US$1.5 billion, with a web lack of $24 million. Its adjusted earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) hit US$84 million, with lumber at simply US$15 million. Once more, its money is strong at US$646 million, permitting it to repurchase about $450,000 shares 12 months to this point. But steering has already been lowered.
Administration lowered 2025 cargo ranges and lowered OSB cargo targets as demand is already easing. So these tariffs are prone to hit the Canadian inventory even more durable. All whereas capital expenditures stay heavy at US$400 to US$450 million. All thought of, West Fraser has been one to maintain on the watchlist, and stays so at the moment.
SJ
An alternative choice is Stella Jones (TSX:SJ), which affords a special product mixture of pressure-treated wooden, utility poles, and industrial wooden merchandise. Tariffs on lumber are due to this fact much less direct for core markets, however the sector weak point may nonetheless hit the corporate by way of pricing and demand for these merchandise.
That being mentioned, its financials look rather a lot more healthy. It maintains a robust EBITDA at $189 million or an 18.3% margin. Nevertheless, that doesn’t imply it’s excellent. Gross sales had been down 1% from final 12 months, with working earnings at $155 million from $168 million in 2024. This led the Canadian inventory to carry anticipated gross sales all the way down to $3.5 billion in 2025 from $3.6 billion – once more, influenced by the macroeconomic challenges.
There’s a silver lining, nonetheless. The Canadian inventory continues to purchase again shares, in addition to try to create development by means of acquisitions. This has included the acquisition of Brooks Manufacturing in September for roughly US $140 million. If the deal is an effective one, traders should see development regardless of all these tariff points.
Backside line
U.S. tariffs positively harm Canadians greater than they assist. Nevertheless, they might additionally create alternatives in case you put money into the fitting firms. Sadly, WFG seems to be as if it’s struggling even with out the tariffs. SJ is as properly, however is making an attempt to create development by means of good investments. The least bit, I’d merely add these to your watchlist for now reasonably than go all in on a dip.
