West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — CIBC Institutional Investor Conference 2014
33 slides from West Fraser Timber's conference presentation, Jan 22, 2014
Slide 1: CIBC Institutional Investor Conference
CIBC INSTITUTIONAL INVESTOR CONFERENCE INVESTOR PRESENTATION January 22-24, 2014 | Whistler, British Columbia
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation and comments associated with it contain forward-looking statements including statements relating to U.S. housing recovery, the potential for constrained lumber supply, energy- related opportunities, earnings sensitivity and estimated annual capital expend
Slide 3: Our Goals and Strategy
Our Goals • To be a leading forest products manufacturer, focused on solid wood products • Strong financial results through the business cycle • Long-term growth and shareholder value enhancement • Stable, conservative financial structure Our Strategy • Operational excellence • Diversification • Pro
Slide 4: Operational Excellence
Operational Excellence • Managing to ensure a committed workforce • Cost control and efficiency • Continuous reinvestment • Internal and external benchmarking and competition • Straightforward, consistent business model 4
Slide 5: Annualized Shareholder Return (Cdn$)
Annualized Shareholder Return (Cdn$) June 2006* – December 31, 2013 18% 15.8% 16% 13.9 % 14% 12% 10% 8.4% 8% 6% 4.7% 4.2% 4% 1.9% 2% 0% West Fraser S&P/TSX Dow Competitor A Competitor B Competitor C * June 2006 marked the beginning of the steep decline in U.S. housing starts 5 Source: TD Bank
Slide 6: Strong Cash Generation ($millions)
Strong Cash Generation ($millions) Ytd Total Q3-13 2012 2011 2010 2009 2008 Cash from Operations 1,369 386 195 85 421 96 186 Capital Expenditures 736 219 150 213 89 18 47 Dividends 108 18 24 24 8 10 24 6
Slide 7: Diversification
Diversification PRODUCTS GEOGRAPHY MARKETS - Lumber - Western - North - Panels Canada America - Market pulp - U.S. South - Asia - Newsprint 7
Slide 8: Product Diversification
Product Diversification LUMBER PANELS PULP & PAPER 27 mills 6 mills 5 mills SPF 3.8 Bfbm Plywood: 830 MMsf3/8” NBSK: 590 Mtonnes SYP 2.0 Bfbm MDF: 300 MMsf3/4” BCTMP: 650 Mtonnes Total 5.8 Bfbm LVL: 3.2 MMcf Newsprint: 135 Mtonnes • North America’s largest lumber producer • Largest plywood producer
Slide 9: Trend Sales Mix ($)
Trend Sales Mix ($) Pulp & Paper 24% Lumber 63% Panels 13% We are an integrated forest products company primarily focused on solid wood products 9
Slide 10: Geographic Diversification
Geographic Diversification 10
Slide 11: Product Differentiation
Product Differentiation • Wood as the best environmental choice • Renewable resource, sustainable business • Expanding applications • Bioenergy, full use of the resource 11
Slide 12: Integration (in Canada)
Integration (in Canada) • Lumber, panels, pulp and newsprint • Substantial fibre self-sufficiency • Fuller utilization of resource • Some benefits from counter-cyclicality • Better able to respond to new opportunities such as bioenergy 12
Slide 13: Earnings Growth Drivers - Lumber
Earnings Growth Drivers - Lumber Demand - North American housing - Chinese construction and industrial applications - Japanese housing Supply - Fibre limitations - Residual offtake - Mill closures - People Efficiency - Capital investment - Business model 13
Slide 14: Returns on Lumber: EBITDA Margin
0% 5% 10% 15% 20% 25% 30% 35% -10% -5% 1991 1992 1993 1994 1995 1996 1997 1998 1999 Returns on Lumber 2000 2001 2002 2003 2004 2005 EBITDA margin (%) - Lumber 2006 2007 2008 2009 2010 Average: 16% 2011 2012 Q3 YTD-13 14
Slide 15: U.S. Housing: Pent Up Housing Demand
U.S. Housing Pent Up Housing Demand (conventional + mobile) 2.25 2.00 1.75 Million Units 1.50 1.25 1.00 0.75 Production Underlying Demand 0.50 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Significant pent up demand bodes well for long-term recovery 15 Source: FEA, Q4 2013
Slide 16: U.S. Housing Forecast (2013 & 2014)
U.S. Housing U.S. Housing Forecast (2013 & 2014) Single & Multi Family 1,400 1,200 1,000 800 '000s 600 400 200 0 Mortgage Wells NAHB FEA APA RISI Mesirow Royal Average Bankers Fargo Financial Bank 16 Source: APA, December 2013
Slide 17: Canadian Shipments to China
Canadian Shipments to China 3,500 Equivalent to 300,000 housing starts 3,000 2,500 2,000 MMfbm 1,500 1,000 500 0 2006 2007 2008 2009 2010 2011 2012 2013 est. *2013 estimate is annualized ytd September 17 Source: Council of Forest Industries, September 2013
Slide 18: Canadian Fibre Supply
Canadian Fibre Supply 80 Annual Allowable Cut Forecast 70 60 50 Million (M3) 40 30 20 10 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 BC Interior Quebec Ontario 18 Source: FEA, Q4 2013
Slide 19: West Fraser Lumber Production
West Fraser Lumber Production 2004 2012 2.8 Bfbm 5 Bfbm 11% 30% 12% 50% 77% 20% B.C. Interior Alberta U.S. South 19
Slide 20: West Fraser Lumber Capacity
West Fraser Lumber Capacity U.S. 37% B.C. 41% Alberta 22% Geographic diversification in lumber 20
Slide 21: Lumber Operating Rate - 2012
Lumber Operating Rate - 2012 100% 94% 95% 90% 83% 85% % of Capacity 78% 80% 74% 75% 75% 72% 70% 65% 60% 55% 50% WFT WFT B.C. U.S. U.S. Canada Canada U.S. Interior South Low-cost structure allows for higher operating rates in down market 21
Slide 22: U.S. South Positive Timber Inventory
U.S. South Positive Timber Inventory Bfbm, Int’l 25 Drain Projected Excess Growth 20 15 10 28.5 Bfbm of deferred sawtimber volume 5 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 22 Source: FEA, Q4 2013
Slide 23: Earnings Growth Drivers - Pulp
Earnings Growth Drivers - Pulp Demand - China’s paper, tissue and packaging demand - Developing countries’ demand - Price of cotton and similar products Supply - European paper capacity closures - Russian and Canadian start ups - Product diversification (e.g. dissolving pulp) - South American produc
Slide 24: Pulp & Paper Sales Mix – 2012
Pulp & Paper Sales Mix – 2012 ($) Europe, 7% North America, 35% Asia, 58% 24
Slide 25: Pulp - NBSK End-Use Products
Pulp - NBSK End-Use Products Specialty 10% Coated Paper 11% Uncoated Tissue/ Towel Paper 55% 10% Board 14% West Fraser 2012 shipments: 530,557 Metric Tonnes 25
Slide 26: Pulp - BCTMP End-Use Products
Pulp - BCTMP End-Use Products Tissue/Towel Specialty 1% 8% Uncoated Paper Board 23% 47% Coated Paper 21% West Fraser 2012 shipments: 626,085 Metric Tonnes 26
Slide 27: Paper — Newsprint Cost Structure
Paper — Newsprint North American Newsprint Cost Structure Per Exchange Rate Cdn$/tonne ANC Alberta Newsprint is the lowest cost newsprint producer in North America and a positive contributor to the profitability of our pulp and paper business 27 Source: PPPC Cost Survey 2011
Slide 28: Bioenergy Opportunities
Bioenergy Opportunities • Woodwaste to produce heat and steam to dry wood products and for electricity and steam for pulp mills • Woodwaste to produce electricity to be used or sold • Pulp mill effluent as a source for biogas-electricity generation • Expanding opportunities to generate and sell elec
Slide 29: Bioenergy Opportunities: Power Generation from Biomass
Bioenergy Opportunities Power Generation from Biomass Cariboo pulp mill turbo-generator (completed) • Mill achieved energy self-sufficiency and excess power sold to B.C. Hydro Slave Lake pulp mill biomethanation project • Estimated startup late 2014 B.C. Hydro (Phase II) power generation projects (a
Slide 30: Capital Strategy
Capital Strategy • Reinvest profits to lower costs, improve efficiency through technology and improved processes • Estimate normalized annual capital spending between $150 and $225 million • Anticipate several years of “catch up” capital spending including 2013 estimated to exceed $300 million 30
Slide 31: Earnings Sensitivity to Key Variables (2012)
Earnings Sensitivity to Key Variables (2012) Earnings Sensitivity to Key Variables (based on year-end capacities 1 - $ millions, except as otherwise indicated) Factor Variation Change in Earnings Lumber price 2,3 US$10 (per Mfbm) 49 2,3 Plywood price Cdn$50 (per Msf) 31 3 MDF price US$50 (per Msf) 1
Slide 32: Why Invest in West Fraser?
Why Invest in West Fraser? • Proven ability to generate strong cash flow even in worst markets • Consistent, straightforward business plan • Loyal, long-term employee and management base • Conservative financial management coupled with proven ability to grow strategically 32
Slide 33: “WFT” – Toronto Stock Exchange
“WFT” – Toronto Stock Exchange www.WestFraser.com These materials have been prepared by Management of the Company. No regulatory authority has approved or disapproved of the contents of these materials. These materials do not constitute an offer to sell or the solicitation of an offer to buy any sec
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