West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — BMO Timber and Wood Products Summit 2017
36 slides from West Fraser Timber's conference presentation, May 2017
Slide 1: BMO Timber and Wood Products Summit
BMO Timber and Wood Products Summit Seattle, May 10-11, 2017
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 expendi
Slide 3: West Fraser Then and Now
West Fraser Then and Now THEN NOW From humble beginnings to North America’s largest lumber producer 3
Slide 4: Wood is Good
Wood is Good Wood is an ideal building material 4 Source: reTHINK Wood
Slide 5: Integration - We Attain Value from 100% of Our Resources
Integration - We Attain Value from 100% of Our Resources Sustainably managed forest lands Reforestation Lumber Plywood Remanufacturers Sawdust and shavings Chips Bark (Fuel) MDF Supply agreements BCTMP Pulp NBSK Pulp Bioproducts Heat and Electricity (e.g. pellet plants) Integrated fiber strategy to
Slide 6: Sustainable Forest Management
Sustainable Forest Management • In the last 3 years we’ve planted more than 180 million trees • West Fraser manages 7 million hectares of certified sustainably managed forests • We’ve planted more than 1.6 billion trees since 1955 • We plant approximately two trees for every tree we harvest • Plante
Slide 7: Market Overview
Market Overview Ey West Fraser
Slide 8: U.S. Lumber End Use
U.S. Lumber End Use U.S. Lumber End-use 2016 U.S. Lumber End-use Normalized Nonresidential/ Nonresidential/ Mobile, 5% Mobile, 6% Single Family Construction, Single Family 26% Industrial Construction, Production, 24% 31% Industrial Production, 27% Multifamily Construction, 4% Residential Multifamily
Slide 9: U.S. Existing Home Sales Continue to Improve
U.S. Existing Home Sales Continue to Improve Existing House Sales Annualized (000) 8,200 7,200 6,200 5,200 4,200 3,200 2,200 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Existing Housing Inventory 4,400 14 3,900 12 3,400 10 Months Supply 000's units 2,900 8 2,400 6 1,900 4 1,400 2
Slide 10: U.S. Housing Starts
U.S. Housing Starts Thousands 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F Total Single Multi Underlying Demand Expect that the recovery has room to continue 10 Source: U.S. Census Bureau, West Fraser
Slide 11: North American Lumber Consumption
North American Lumber Consumption 80 75 72 70 64 64 62 60 56 58 60 53 51 51 48 50 45 43 43 39 40 Billion Bf 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F U.S. Consumption Canadian Consumption Demand for lumber expected to grow by 2B board feet per yea
Slide 12: North American Lumber Production
North American Lumber Production 80 25 70 20 60 50 15 40 Billion Bf 10 30 20 5 10 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F U.S. Canada Canada West (R Axis) Canada East (R Axis) US West (R Axis) US South (R Axis) Lumber production growth constrained 12 S
Slide 13: North American Lumber Supply & Demand
North American Lumber Supply & Demand 70 Imports 2005: 3 billion 68 Imports 2016: 900 million 2020: 66 4.3 billion 64 62 Billion Bf 60 58 56 54 52 2015 2016 2017F 2018F 2019F 2020F Production Demand On North American Mills Potentially growing gap in lumber supply 13 Source: US Census Bureau & Statis
Slide 14: North American Lumber Capacity
North American Lumber Capacity Mmfbm Top 10 Lumber Capacity 7,000 6,000 5,000 Top 10 make up 44% of Capacity 4,000 3,000 2,000 1,000 0 Resolute Interfor GP Western Weyco Canfor Tolko Sierra Pacific West Fraser Hampton West Fraser has largest share of a growing market 14 Source: Company reports, FEA
Slide 15: China Imports of Logs and Lumber
China Imports of Logs and Lumber (M M3) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Lumber Logs Demand from China continues to grow 15 Source: General Administration of Customs of The People’s Republic of China
Slide 16: North American Offshore Lumber Exports
North American Offshore Lumber Exports 8 6.9 7 6.5 6.5 6.3 5.9 6 5.5 4.8 5 4 Billion Bf 3.5 3.2 3.2 3.0 3 2.7 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Offshore Exports US Offshore Exports Canada Total Volume has been directed away from export markets 16 Source: US Census Bur
Slide 17: Returns on Lumber
Returns on Lumber Ebitda Margin (%)- Lumber 40% 35% 30% Average: 15.7% 25% 20% 15% 10% 5% 0% -5% -10% 1995 2002 1991 1992 1993 1994 1996 1997 1998 1999 2000 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1-17 Current margins above long term average 17
Slide 18: West Fraser Overview
West Fraser Overview Ey West Fraser
Slide 19: Our Strategy
Our Strategy Operational Geographic Excellence Diversification Product Integration Diversification Straightforward strategy for success in all market conditions 19
Slide 20: Operational Excellence
Operational Excellence Straightforward, consistent business model Managing to ensure Internal and external a committed benchmarking workforce Cost control and Continuous efficiency reinvestment Focused on continuous improvement in all aspects of the business 20
Slide 21: Operations diversified by geography
Operations diversified by geography Geographic diversification Lumber Capacity U.S. B.C. 37% 38% Alberta 25% Strong presence in key lumber producing regions 21
Slide 22: Product Diversification
Product Diversification LUMBER PANELS PULP & PAPER 28 mills 7 mills 5 mills SPF 4.1 Bfbm Plywood: 850 MMsf3/8” NBSK: 570 Mtonnes SYP 2.4 Bfbm MDF: 250 MMsf3/4” BCTMP: 680 Mtonnes Total 6.5 Bfbm LVL: 3.2 MMcf Newsprint: 135 Mtonnes Lumber Panels Pulp 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Divers
Slide 23: Pulp End-Use Products
Pulp End-Use Products Chemical Pulp Mechanical Pulp Boxboard Other Newsprint Other Fluff 5% 4% Printing Specialty 4% 3% Based and Papers Products Writing 8% 10% Papers 31% Boxboard 44% Specialty Papers 19% Printing & Writing 41% Source: PPPC 2013 Tissue 31% Source: PPPC 2013 Multiple end uses and ma
Slide 24: Capital Strategy
Capital Strategy • Reinvest profits to lower costs, improve efficiency through technology and improved processes • Capital spending in 2016 of $273 million • Estimated 2017 spending of $300 million and normalized spending between $175 and $225 million • Growth through opportunistic acquisitions focu
Slide 25: West Fraser Capital Spending
West Fraser Capital Spending $ Millions 500 • Over the past five years, we’ve spent approximately $1.4 billion to modernize our facilities 400 300 200 100 0 2012 2013 2014 2015 2016 Lumber Pulp Other Reinvesting for long term sustainability 25
Slide 26: $1.4B in capital projects
$1.4B in capital projects Major rebuilds of 10 sawmills Upgraded 12 planers Added 28 continuous kilns Built 6 energy and bioproducts projects 26
Slide 27: Earnings Summary
Earnings Summary 2017 Q1 2016 2015 Sales 1,189 4,450 4,100 Adjusted EBITDA 245 674 417 Earnings 123 326 104 Strong Q1 Results 27
Slide 28: Why Invest in West Fraser?
Why Invest in West Fraser? • Proven ability to generate strong cash flow, even in worst markets • Consistent, straightforward business plan • Loyal, long-term employee and management base • Conservative financial management coupled with proven ability to grow strategically • Strong historical shareh
Slide 29: Share Value Traded
Share Value Traded Cdn$ Million 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2016 2015 2014 WFT CFP IFP Strong liquidity profile 29
Slide 30: Significant Cash Returned to Shareholders
Significant Cash Returned to Shareholders 250 Share Buy-back Dividends 200 150 $ MILLIONS 100 50 0 2013 2014 2015 2016 Flexible capital deployment strategy 30
Slide 31: Annualized Shareholder Return (Cdn$)
Annualized Shareholder Return (Cdn$) June 2006* – April 2017 14% 12.6% 12% 10.8% 9.8% 10% 8.4% 7.9% 8% 6.8% 6% 5.5% 4.9% 4% 2% 0% West Fraser Dow DAX S&P/TSX FTSE Competitor A Competitor B Competitor C * June 2006 marked the beginning of the steep decline in U.S. housing starts Attractive relative r
Slide 32: Total Shareholder Return (Cdn$)
Total Shareholder Return (Cdn$) $100 invested: June 2006 to April 2017 400 $366 350 $306 300 $277 250 $242 $230 $204 200 $180 $168 150 100 50 0 West Fraser Dow DAX S&P/TSX FTSE Competitor Competitor Competitor A B C 32 Source: Toronto Dominion Bank
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
Slide 34: APPENDIX
APPENDIX 34
Slide 35: Earnings Sensitivity to Key Variables (2016)
Earnings Sensitivity to Key Variables (2016) Estimated Earnings Sensitivity to Key Variables1 (based on 2016 production- $ millions) Factor Variation Change in pre-tax earnings Lumber price US$10 (per Mfbm ) 80 Plywood price Cdn$10 (per Msf ) 8 NBSK price US$10 (per tonne) 7 BCTMP price US$10 (per t
Slide 36: Duty Timelines
Duty Timelines SUBSIDY (CVD) AND ANTI-DUMPING (AD) DUTIES TIMELINES Jan, 2018 Aug. 29/17 Final Determination <2 | CASH DEPOSIT CASH DEPOSIT REQUIRED FOR REQUIRED 4 MONTHS GOING FORWARD CASH DEPOSIT CASH DEPOSIT REQUIRED FOR REQUIRED 6 MONTHS GOING FORWARD 1 1 \ a Zz alin ‘Determination Final Determi
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