West Fraser Timber Co. Ltd. — financial distress indicators
Financial-health summary
West Fraser Timber Co. Ltd.'s reported numbers place it in the 'Watch' financial-health band (distress score 47/100). The main indicators are operating profit does not cover interest, cash runway under 12 months and losses in each of the last 3 years. Independently, the Ohlson accounting model puts its 1-year failure probability at 17% and the market-implied (Merton) default probability is 0.0%. In its favour: strong current ratio (2.06).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Interest coverage (EBIT / interest) is -9.31×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
At the current free-cash-flow burn, cash covers ~2 months.
Going-concern standard: management must assess ability to continue for 12 months (ASC 205-40). Runway below that horizon forces dilution, asset sales or default.
Net income negative in 3 of 3 fiscal years.
Persistent losses erode equity and the capacity to absorb shocks.
Revenue declined every year for three years.
Structural, not cyclical, decline.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Strong current ratio (2.06).
- High insider/promoter ownership (32%) aligns management with survival.
📰 Recent news scan
- CEO Sean McLaren will chair West Fraser (WFG)'s October 29 earnings call. - Stock TitanGoogle News · 2026-10-08
- West Fraser Timber Co.Ltd (WFG) Shares Fall 4.0% -- What GF Scor - GuruFocusGoogle News · 2026-10-06
- (WFG) and the Role of Price-Sensitive Allocations - Stock Traders DailyGoogle News · 2026-10-04
- West Fraser Timber Co. Ltd (WFG) Stock Forecasts - Yahoo FinanceGoogle News · 2026-10-03
- West Fraser Timber (TSX:WFG) Stock Forecast & Analyst Predictions - Simply Wall StreetGoogle News · 2026-10-01
- West Fraser Timber Co. Ltd. (NYSE:WFG) Stock Has Average Target Price of $85.20 According to Brokerages - MarketBeatGoogle News · 2026-09-25
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do West Fraser Timber Co. Ltd.'s financial-health indicators show?
As of 2026-10-08, West Fraser Timber Co. Ltd.'s public financial data places it in the 'Watch' band with a distress score of 47/100, driven by operating profit does not cover interest, cash runway under 12 months and losses in each of the last 3 years. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is West Fraser Timber Co. Ltd.'s financial distress score?
47/100 ('Watch'). Ohlson O-score -1.61 (model 1-year failure probability 17%). Merton distance-to-default 9.31 σ (model default probability 0.0%).
What works in West Fraser Timber Co. Ltd.'s favour?
Strong current ratio (2.06). High insider/promoter ownership (32%) aligns management with survival.
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
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Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.