West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Investor Presentation (January 2019)
28 slides from West Fraser Timber's investor presentation, January 2019
Slide 1: Investor Presentation January 2019
Investor Presentation January 2019
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, demand for lumber, the potential for constrained lumber supply, log cost inflation, lumber industry production, pulp demand and capa
Slide 3: Market Overview
Market Overview Ey West Fraser
Slide 4: U.S. Lumber End Use and Consumption
U.S. Lumber End Use and Consumption U.S. Lumber End Use 2017 Nonresidential/Mobile, 6% Single Family Construction, Industrial 27% Production, 24% Multifamily Construction, 4% Residential Improvements, 39% 35 U.S. Lumber Consumption (Billion ft) 30 25 20 15 10 5 0 2005 2006 2007 2008 2009 2010 2011 2
Slide 5: North American Lumber Consumption
North American Lumber Consumption 80 75 72 70 64 64 62 60 60 58 56 53 51 50 50 48 45 39 43 43 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F US Consumption Canadian Consumption Lumber demand growth trending at ~ 2 billion board feet per year 5 Source
Slide 6: North American Lumber Production
North American Lumber Production 80 30 70 25 60 20 50 40 15 Billion Bf 30 10 20 5 10 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F U.S. Canada Canada West (R Axis) US South (R Axis) Lumber production growth constrained in western Canada 6 Source: US Census Bu
Slide 7: Annual Allowable Cut on the decline in British Columbia
Annual Allowable Cut on the decline in British Columbia British Columbia Interior 70 16 65 14 Billion BF (softwood lumber production) 60 12 Million m3 (AAC & Harvest) 55 10 50 8 45 6 40 4 Log supply constraints 35 will create price 2 pressure 30 0 AAC (m3) Harvest (m3) Softwood Lumber Production (BB
Slide 8: Regional share of North American Lumber Production
Regional share of North American Lumber Production 35% 30% 25% 20% 15% 10% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Canada West Canada East US South US West Western Canada supply facing reduced by log availability 8 Source: US Census Bureau & Statistics Canada,
Slide 9: North American Lumber Supply & Demand
North American Lumber Supply & Demand 70 Imports Exports Net (Billion bf) 68 2005: 3.0 (2.7) 0.3 2020: 2010: 0.5 (4.8) (4.3) 3.0 Billion bf 66 2017: 1.4 (5.5) (4.1) 64 Impact of Announced 62 Capacity additions 60 58 56 54 52 50 2015 2016 2017 2018F 2019F 2020F Production Demand On North American Mil
Slide 10: Pulp End-Use Products
Pulp End-Use Products Chemical Pulp Mechanical Pulp Box Board, 6% Specialty, Printing 8% Fluff, 10% and Tissue, 34% Writing, 38% Tissue, 5% Other, 3% Specialty, 22% Printing Box and Board, Writing, 46% 28% Diversified end uses and markets 10 Source: PPPC 2017
Slide 11: Market Pulp Supply and Demand
Market Pulp Supply and Demand BCTMP Chemical Pulp Chemical Pulp Demand (M tonnes) • No new major capacity additions 2018 to 2020 30,000 40% • Pulp demand projected to grow 2.2% over next 5 25,000 years 35% • Demand growth driven by tissue and packaging 20,000 demand 15,000 30% • Growth will be prima
Slide 12: West Fraser Overview
West Fraser Overview Ey West Fraser
Slide 13: 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 14: Operations Diversification
Operations Diversification Strong presence in key lumber producing regions and forest product markets 14
Slide 15: Product & Geographic Diversification
Product & Geographic Diversification LUMBER PANELS PULP & PAPER 34 mills 7 mills 5 mills SPF 3.9 Bfbm Plywood: 860 MMsf3/8” NBSK: 570 Mtonnes SYP 3.2 Bfbm MDF: 250 MMsf3/4” BCTMP: 690 Mtonnes Total 7.1 Bfbm LVL: 2.6 MMcf Newsprint: 135 Mtonnes 2017 Revenue Mix by Business Segment Lumber Panels Pulp
Slide 16: North American Lumber Capacity
North American Lumber Capacity West Fraser Lumber Capacity 2004 2.8 Billion feet West Fraser US South 11% Canfor Alberta 12% Weyco Interfor British Columbia Top 10 GP 77% represent 48% of capacity Sierra Pacific West Fraser Lumber Capacity 2018 7.1 Billion feet Resolute British Columbia Hampton 31%
Slide 17: Financial Results
Financial Results Ytd Q3 Ytd Q3 2017 2016 2018 2017 5 Sales 4,844 3,758 5,134 4,450 Billion Adjusted EBITDA* 1,418 819 1,160 674 in Adjusted EBITDA margin 29.3% 21.8% 22.6% 15.1% annual sales Earnings 781 389 596 326 Strong pricing resulting in significant earnings growth 17 * Adjusted EBITDA is def
Slide 18: Capital Investment Strategy
Capital Investment Strategy • Reinvest profits to lower costs, improve efficiency through technology and improved processes • Capital spending in 2017 of $336 million New merchandiser and debarker in High Prairie, Alberta • Cumulative capital spending of $1.6B between 2013 and 2017 • Growth through
Slide 19: Significant capital reinvestment
Significant capital reinvestment Major rebuilds of 12 sawmills Upgraded 11 planers Added 35 continuous kilns Built 6 energy and bioproducts projects 19 Years: 2013-2017
Slide 20: Opelika, Alabama Case Study
Opelika, Alabama Case Study Investment Rationale • Excellent timber drain • Solid existing work force • Proximity to markets • Site infrastructure • Attractive payback • Low execution risk Project Highlights • Increased capacity of ~ 100Mfbm • Climate controlled operator environment • Completed on t
Slide 21: Cumulative capital allocation
Cumulative capital allocation $3,000 2015 through September 2018 Retained/ Other Buybacks/ 5% Dividends $2,500 33% Capex 40% $1,113 $920M returned to $2,000 shareholders (55% of free cash flow) $1,500 Acquisitions $2,789 $602 $137 22% $1,000 $96 $1.7B Reinvested in the $824 $500 business $56 $235 $0
Slide 22: Share buybacks - history
Share buybacks - history Cumulative Shares repurchased (thousands of share) 20,000 15,985 15,000 10,000 7,603 7,849 5,000 2,218 3,297 65 0 2013 2014 2015 2016 2017 2018 Cumulative investment in repurchases (Millions of dollars) $1,500 $1,058 $1,000 $500 $365 $382 $115 $175 $3 $0 2013 2014 2015 2016
Slide 23: Total liquidity and Debt/EBITDA
Total liquidity and Debt/EBITDA Total Liquidity $1,000 $800 $258 $302 $282 $231 $600 $50 $132 $86 $100 $400 $553 $553 $551 $551 $562 $556 $200 $444 $400 $- Q4/2016 Q1/2017 Q2/2017 Q3/2017 Q4/2017 Q1/2018 Q2/2018 Q3/2018 Undrawn Bank Lines Cash Debt/EBITDA 1.0 0.8 0.5 0.3 0.0 Q4/2016 Q1/2017 Q2/2017
Slide 24: West Fraser Total Shareholder Return
West Fraser Total Shareholder Return TSR June 2006 to December 2018 Share Value Traded 14% Cdn$ Million Source: TD 10,000 11.8% 12% 9,000 10.6% 8,000 10% 7,000 6,000 8% 5,000 5.8% 5.6% 6% 4,000 4.5% 4.1% 3.7% 4.0% 3,000 4% 2,000 1,000 2% 0 0% 2018 2017 2016 West Dow DAX S&P/TSX FTSE CompetitorCompet
Slide 25: Total Shareholder Return
Total Shareholder Return $1,000 invested: June 2006 – December 31, 2018 4,500 $4,080 4,000 $3,540 3,500 3,000 2,500 $2,040 $1,980 2,000 $1,740 $1,670 $1,650 $1,580 1,500 1,000 500 0 West Fraser Dow Dax TSX FTSE Competitor A Competitor B Competitor C 25 Source: Toronto Dominion Bank
Slide 26: “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 27: APPENDIX
APPENDIX 27
Slide 28: Earnings Sensitivity to Key Variables (2017)
Earnings Sensitivity to Key Variables (2017) Estimated Earnings Sensitivity to Key Variables1 (based on 2017 production- $ millions) Factor Variation Change in pre-tax earnings Lumber price US$10 (per Mfbm ) 78 Plywood price Cdn$10 (per Msf) 8 NBSK price US$10 (per tonne) 6 BCTMP price US$10 (per to
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