Canfor Corporation · TSX:CFP
Canfor — RBC Investor Conference 2014
27 slides from Canfor's conference presentation, May 2014
Slide 1: Alan Nicholl and Pat Elliott, May 2014
Alan Nicholl Pat Elliott Senior Vice President, Finance & CFO Vice President & Treasurer May 2014
Slide 2: Forward Looking Statements
Forward Looking Statements The presentation and answers to questions today contain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed
Slide 3: Canfor Corporation (CFP)
Canfor Corporation (CFP) C A N F O R C O R P O R A T I O N 3
Slide 4: CFP Overview
CFP Overview • US market demand steady, reflecting improved housing prices, pent up demand and falling unemployment; availability of financing and land continue to be challenges • Canadian market weaker after robust performance in recent years • China shipments increased in value for 2013, continuin
Slide 5: Canfor's Operations
CANFOR’S OPERATIONS Sawmill Pulp & Paper Other Western Canada East Coast Prince JD Little Forest George • 20 sawmills located across North America Centre Northwood Fort St. John ALBERTA • 4 pulp mills including 1 paper mill Canada Prince George Taylor • Fibre base supports our customer focused strat
Slide 6: SPF Global Market Diversification
SPF Global Market Diversification 2007 Sales Volumes 4.5 Billion fbm North America, 89% Korea Japan, 6% China, 2% Other, 3% China 2013 Sales Volumes Japan 4.2 Billion fbm North America, 66% Other, 3% Emerging China, 24% markets Japan, 7% C A N F O R C O R P O R A T I O N 6
Slide 7: Global Demand For All Lumber Grades
Global Demand For All Lumber Grades Offshore Markets North America J-Grade Square Edge • Japan • US • China J- Grade • Canada Square Edge MSR • Korea • US • Japan • Canada • China Square Edge / MSR #2 &Better #2 &Better • US • China • Canada Construction Grade #3 & Economy • China (#2&Btr) #3 & Econ
Slide 8: The United States
THE UNITED STATES C A N F O R C O R P O R A T I O N 8
Slide 9: US Housing Starts Forecast
US Housing Starts Forecast Multifamily Single Family 2.000 1.800 1.600 1.400 1.200 In 2014, analysts predict a 1.000 15% 0.800 increase in US housing starts 0.600 0.400 0.200 0.000 2010 2011 2012 2013 2014 2015 2016 2017 2018 * Source: FEA 9
Slide 10: US Housing Starts Averaging 1.33 Million units
US Housing Starts Averaging 1.33 Million units (over the last 12 years) Total Housing Starts Underlying Demand (Thousands of Units) 2,200 2,000 2,068 1,800 1,956 1,848 1,801 1,600 1,705 2.7 Mil surplus 1.33 Million Units 1,400 1,200 1,355 3.7 Mil deficit 1,000 800 906 923 780 600 587 609 400 554 200
Slide 11: Residential Spending ($Billion)
Joint Center for Housing Studies Leading Indicator of Remodeling Activity Four-Quarter Moving Total in Billions Four-Quarter Moving Rate of Change $170 20% 14.0% 14.7% $160 11.4% 15% 10.4% 9.9% 9.0% Residential Spending ($Billion) 8.4% 6.3% 7.4% 10% $150 6.2% $154 Rate of Change (%) 4.2% 4.5% 4.5% 5
Slide 12: North American Capacity and Demand
North American Capacity and Demand Housing Starts - millions (right axis) Capacity(BBF) Demand (BBF) 2.5 90 80 2 70 60 1.5 50 1 84% Operating Rate 40 63% Operating Rate 30 0.5 20 10 0 0 Source: FEA, US Census, Company Data C A N F O R C O R P O R A T I O N 12
Slide 13: CAD Price/Operating Rate (1992-2013)
CAD Price/Operating Rate (1992-2013) $600 Years with operating rates ≥ 84%, 2x4 $500 price averaged CAD$415 $400 2013 avg. Price– C$356 Operating Rate – 76% $300 $200 60% 65% 70% 75% 80% 85% 90% 95% Source: Company Data Operating Rate C A N F O R C O R P O R A T I O N 13
Slide 14: 2013 Canadian Exports to the U.S.
2013 - CANADIAN EXPORTS TO THE U.S. IS 10.9 BFBM WITH 5.2 BFBM TO OFFSHORE 2013 BC Exports 5.2 B 5.8 B 2018 1.0 B OFFSHORE 1.0 B 2.7 B Coast 8.0 B 2.0 B Northeast US Exports Inland 4.5 B 1.5 B OFFSHORE South 15.0 B Source: COFI & WWPA C A N F O R C O R P O R A T I O N 14
Slide 15: 2018 Canadian Exports to the U.S.
2018 - CANADIAN EXPORTS TO THE U.S. IS 11.5 BFBM WITH 4.5 BFBM TO OFFSHORE 2013 BC Exports 4.5 B 6.5 B 2018 1.0 B OFFSHORE 1.5 B 2.5 B Coast 12.0 B 2.2 B Northeast US Exports Inland 6.5 B 1.5 B OFFSHORE South 21.0 B Source: Canfor C A N F O R C O R P O R A T I O N 15
Slide 16: North American Lumber Prices Forecast
North American Lumber Prices Forecast FEA Western SPF (2x4,2&Btr) FEA Southern Pine (2X4,2&Btr) RISI Western SPF (2x4,2&Btr) RISI Southern Pine (2X4,2&Btr) 550 500 450 400 Lumber Price (USD) 350 300 250 200 2013 2014 2015 2016 2017 2018 Source: FEA, RISI C A N F O R C O R P O R A T I O N 16
Slide 17: Japan
JAPAN 17
Slide 18: Japan – Significant Market for BC
Japan – Significant Market for BC Canfor has had a strong relationship with Japan for more than 40 years Mature, high value market and a strong cultural ties to wood construction Widespread recognition of environmental, health, seismic benefits of using wood 2x4 market continues to be the ba
Slide 19: China
CHINA C A N F O R C O R P O R A T I O N 19
Slide 20: British Columbia Shipments to China
China has grown from obscurity into BC lumber producers’ largest offshore market Huge demand for affordable housing Expanded wood use to include higher grade lumber British Columbia Shipments to China First 3,500 3,000 Volume (MMfbm) 2,500 North American lumber 2,000 company in China 1,500 1,0
Slide 21: China Imports - Logs & Lumber
China Imports - Logs & Lumber (HW & SW) Lumber Imports by Country 2013 Share by Countries 11 10 Lumber Volume (Bfbm) 9 8 Lumber 7 Russia (30%) 6 5 Canada (32%) 4 3 2 Thailand USA (11%) 1 (7%) 0 2006 2007 2008 2009 2010 2011 2012 2013 Canada Russia USA Thailand New Zealand Sweden/Finland Others 2013
Slide 22: BC Shipments to the U.S. and China
BC Shipments to the U.S. and China Source: DFAIT, COFI, Random Lengths Publications C A N F O R C O R P O R A T I O N 22
Slide 23: Canfor Pulp Products Inc. (CFX)
Canfor Pulp Products Inc. (CFX) C A N F O R C O R P O R A T I O N 23
Slide 24: Canfor Pulp Overview
Canfor Pulp Overview • Three facilities located in close proximity within Prince George, BC • Well capitalized mill operations with stable, low cost fibre supply • Significant recent capital investment (≈$200M) preserving top quartile performance • Growing energy revenues from current and future hig
Slide 25: Operating Capacity
Operating Capacity • Significant new hardwood capacity forecast to come to market in the near- Ratio D/C Ratio (Hardwood) D/C Ratio (Softwood) NBSK (right axis) BEK (right axis) $USD/tonne 100% 1000 term 97% • Historical price 95% 95% 95% 94% 94% 94% 94% 800 premium of $70 for 93% 93% 93% 92% NBSK o
Slide 26: Diversified End-Use & Region
Diversified End-Use & Region • Targeting customers that need End Use 2007 End Use 2013 reinforcing pulp Commodity 6% Commodity 6% • Specialty Tissue 12% Tissue • 28% Décor, Masking tape base, Abrasive backing, Publishing 19% Labels Specialty 30% Publishing 52% • Tissue Specialty 47% • Branded top qu
Slide 27: Investor Contacts
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 Company and shall not constitute an