West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Investor Presentation (September 2019)
27 slides from West Fraser Timber's investor presentation, September 2019
Slide 1: Investor Presentation September 2019
Investor Presentation September 2019
Slide 2: Forward-looking statements and disclaimers
2 General: This presentation and comments associated with it contains securities regulatory authorities. Accordingly, readers should exercise historical information, descriptions of current circumstances and caution in relying upon forward-looking- statements and WFT undertakes statements about pote
Slide 3: West Fraser Overview
West Fraser Overview
Slide 4: We Attain Value from 100% of Our Resources
We Attain Value from 100% of Our Resources 4 Sustainably managed forest lands Plywood & LVL Lumber Reforestation Sawdust & shavings Chips Bark (fuel) MDF Supply agreements BCTMP Pulp NBSK Pulp Bioproducts Heat & (e.g. pellet plants) Electricity Integrated fiber strategy to maximize the value of the
Slide 5: Product & Geographic Diversification
Product & Geographic Diversification 5 Lumber Panels Pulp & Paper 33 mills 7 mills 5 mills SPF 3.6 Bfbm Plywood: 860 MMsf3/8” NBSK: 570 Mtonnes SYP 3.2 Bfbm MDF: 250 MMsf3/4” BCTMP: 690 Mtonnes Total 6.8 Bfbm LVL: 2.6 MMcf Newsprint: 135 Mtonnes 2018 Revenue Mix by Business Segment Lumber Panels Pul
Slide 6: Operations Diversification
Operations Diversification 6 Strong presence in key lumber producing regions and forest product markets
Slide 7: North American Lumber Capacity
North American Lumber Capacity 7 2018 West Fraser Lumber Capacity 2004 2.8 Billion feet US South West Fraser 11% Alberta Canfor 12% Weyco British Interfor Top 10 represent Columbia 48% of capacity 77% GP West Fraser Lumber Capacity 2018 7.1 Billion feet Sierra Pacific British Columbia Resolute 31% U
Slide 8: Consolidated Financial Results
Consolidated Financial Results 8 $ Millions Adjusted EBITDA Q2-19 Q1-19 Q2-19 Q1-19 Lumber $ 38 $ 84 Sales $ 1,317 $ 1,241 Panels 10 15 Cost and Expenses 1,375 1,231 Restructure/Impairment 26 - Pulp & Paper 7 11 Operating earnings (84) 10 Corporate/Other 1 - Finance Expense (13) (11) Total $ 56 $ 11
Slide 9: Liquidity
Liquidity 9 Scheduled maturities Available liquidity $900 $800 $900 $800 $700 $700 $600 $600 $500 $500 $400 $400 $300 $300 $200 $200 $100 $100 $0 -$100 2017 2018 Q1-17 Q1-18 Q1-19 Q2-19 $0 2019 2020 2021 2022 2023 2024 Bank lines Cash Increae in revolving credit facility Term loan Notes Revolver Amp
Slide 10: Capital Investment
Capital Investment 10 Capital Expenditure vs Amortization $400 200% Grade $350 $300 150% Capacity / $250 Recovery Production $200 100% $150 $100 50% $50 Modernization $0 0% initiatives 2015 2016 2017 2018 Capital Depreciation Percent Segment Capital Expenditure Capital Expenditure by type $10 $17 $6
Slide 11: Balanced Capital Allocation
Balanced Capital allocation 11 2015 through 2018 $3,000 $2,801 $1,199 $2,500 $1.1B returned to shareholders $2,000 $602 $1,500 $100 $110 $942 $1,000 $500 $1.8B Reinvested in the business $42 $90 $0 Cash from Capital Acquisitions Debt service Dividends Buybacks Other Retained cash operations Expendit
Slide 12: Share Repurchases
Share repurchases 12 Cumulative investment in repurchases Price: Shares: (millions of dollars) $1,138 2013 $44.60 64,554 $1,200 $1,057 $1,000 2014 $51.86 2,217,454 $800 2015 $55.57 1,078,856 $600 $364 $381 $400 2016 $44.06 4,306,159 $115 $174 $200 $3 $0 2017 $68.45 245,645 2013 2014 2015 2016 2017 2
Slide 13: West Fraser Total Shareholder Return
West Fraser Total Shareholder Return 13 TSR June 2006 to June 2019 Cdn$ Million Share Value Traded 14% Source: TD 10,000 12% 11.0% 10.4% 8,000 10% 8% 6,000 6.5% 6% 5.5% 5.4% 4,000 5.1% 4.2% 4% 2,000 2% 0.4% 0 0% 2018 2017 2016 West Dow DAX S&P/TSX FTSE Competitor Competitor Competitor Fraser A B C W
Slide 14: Market Overview
Market Overview
Slide 15: North America Lumber End Use and Consumption
North America Lumber End Use and Consumption 15 North America Lumber End Use 2018 Non-residential Other 6% New Residential Residential improvements 29% and industrial demand Industrial 25% are lower volatility demand drivers Residential Improvements 40% North America Lumber Consumption 35 30 25 Bill
Slide 16: Demand Conditions U.S.
Demand conditions U.S. 16 U.S. Housing Starts (not seasonally adjusted) Leading indicator of Remodeling Activity Monthly $B 4 Qtr Moving Improvements and Repairs 140 $330 8.0% Repair and renovation growth $320 7.0% 4 Qtr Moving rate of Change 120 continues $310 6.0% 100 $300 5.0% 80 Seasonally adjus
Slide 17: North American Lumber Consumption
North American Lumber Consumption 17 80 75 72 70 64 63 61 60 58 59 59 56 53 51 50 50 48 45 43 43 Billion Feet 39 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F US Consumption Canadian Consumption Lumber demand growth trending at 1 to 2 billion b
Slide 18: Demand Conditions Offshore
Demand Conditions Offshore 18 North American Offshore Lumber North American Offshore Lumber Imports Exports (Billion BF) 7 $600 7 6 $500 6 5 5 $400 US$/Mfbm Billion BF 4 4 $300 3 3 $200 2 2 1 $100 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 0 $0 2005 2006 2007 2008 2009
Slide 19: Chinese Lumber Demand
Chinese Lumber Demand 19 30,000 25,000 20,000 M cubic meters 15,000 10,000 5,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 North America Russia Europe Other 1 million cubic meters = ~ 295 million board feet Although price sensitive, China continues to import significant lumber Source: FEA
Slide 20: Supply Conditions
Supply conditions 20 Billion fbm Lumber Supply MMfbm North America Curtailments 25 800 Down 4% 700 Mix of 20 temporary 600 and permanent 15 Up 1% 500 Down 9% 400 10 300 Down 16% 200 5 100 0 0 BC Canada US Total NA 2018Q4 2019 Q1 2019 Q2 Ytd 04-18 Ytd 04-19 Source: Western Wood Products Association,
Slide 21: Annual Allowable Cut on the Decline in BC Interior
Annual Allowable Cut on the decline in BC Interior 21 70 14 BC Interior Purchase Log Cost $110 Billion BF (softwood lumber production) 65 12 60 $100 Million m3 (AAC & Harvest) 10 55 $90 8 $/M3 50 $80 6 45 $70 Log supply 4 40 constraints will create price $60 pressure 35 2 $50 30 0 2014 2015 2016 201
Slide 22: Share of North American Lumber Production
Share of North American Lumber Production 22 32% 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Canada West Canada East US South US West Western Canada a key supply region, facing fibre cost and availability headwinds Source: US Census B
Slide 23: North American Lumber Production
North American Lumber Production 23 North America Softwood Lumber Production Millions of Board Feet US Other (25%) US South BC (30%) Eastern Canada (18%) Alberta 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 MMfbm 2005 2018 Growth constrained in several significant lumbe
Slide 24: Market Pulp Supply and Demand
Market Pulp Supply and Demand 24 BCTMP Chemical Pulp • China growth is slowing due to US/China trade Chemical Pulp Demand (M tonnes) tensions, may impact 2019 30,000 40% • No new major capacity additions 2018 to 2020 25,000 • Pulp demand projected to grow 2.3% over next 20,000 35% 5 years 15,000 30%
Slide 25: West Fraser Timber Co. Ltd.
West Fraser Timber Co. Ltd. 25 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 securities of the Comp
Slide 26: Appendix
re] West Fraser - i; “PARPENDIX /
Slide 27: Earnings Sensitivity to Key Variables
Earnings Sensitivity to Key Variables 27 Estimated Earnings Sensitivity to Key Variables1 (2018) (based on 2018 production - $ millions) Factor Variation Change in pre-tax earnings Lumber price US$10 (per Mfbm) 90 Plywood price Cdn$10 (per Msf) 8 NBSK price US$10 (per tonne) 7 BCTMP price US$10 (per
West Fraser Timber — Investor Presentation (September 2019) on 6ix