Slide 1: Investor Update
Investor Update September 2012 Duncan Davies President & CEO
Slide 2: Company Update
Section 1 Company Update az INTERFOR
Slide 3: Company Update: Timber Tenures and Capacity
Company Update Timber Tenures AAC 000 m3 B.C. Interior 700 MMbf Adams Lake 325 MMbf DFir & SPF Dimension 500 Castlegar 225 MMbf DFir, Cedar & SPF Dimension 500 Grand Forks 150 MMbf SPF & DFir 500 B.C. Coast 315 MMbf Hammond 165 MMbf Cedar Specialty 2,000 Acorn 150 MMbf Hem & Dfir Japan/Specialty 3,5
Slide 4: Capacity more than doubled and diversified
Company Update 2002 2007 2011 Southern Southern B.C. Southern B.C. B.C. Interior Interior Interior 21% 22% U.S. 42% U.S. 38% 39% B.C. Coast B.C. Coast 79% 40% B.C. Coast 19% Production Capacity Production Capacity Production Capacity 772 MMbf 1,345 MMbf 1,650 MMbf Including Crown Pacific Including P
Slide 5: North America's Largest Lumber Producers in 2011
Company Update North America’s Largest Lumber Producers in 2011 Billion 5.0 bf 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Source: Wood Markets monthly – March 2012 Interfor was the 8th largest lumber producer in North America in 2011 5
Slide 6: Discretionary capex and asset upgrades
Company Update • Interfor has spent more than $275 million in the last 10 years to upgrade its assets. Major projects were completed at Adams Lake, Molalla and Port Angeles Discretionary Capex (excluding acquisitions) 1. $ millions 80 60 Includes $100 million 40 sawmill at Adams Lake 20 0 1. In addi
Slide 7: State-of-the-Art-Facilities
State-of-the-Art-Facilities 7
Slide 8: State-of-the-Art-Facilities
State-of-the-Art-Facilities 8
Slide 9: Commodity and specialty product offerings
Company Update • Interfor produces a wide range of commodity and specialty offerings Specialty Cedar 16% 10% Rough cedar Cedar siding Rough cedar Structural Specialty 33% Commodity Cedar decking Japan structural Framing Lumber Studs 41% Facia & trim Millwork Structural dimension Interfor’s product l
Slide 10: Benchmark Prices, January '03 to August '12
Company Update Benchmark Prices, January ’03 to August ‘12 1400 US$/Mbf 2X6 Knotty S4S Cedar 1200 1000 800 600 Hemlock 4 1/8” grn squares 13’ HF 9’ 2X4 Stud 400 200 SPF 2X4 #2&Btr Random Dimension Source: Random Lengths Publications Inc. 0 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/12 1/11 Interfor’s
Slide 11: New Interfor Brand
New Interfor Brand Ra Ais . Wr INTERFOR INTERFOR | | A h | h q Up : > ER INT, TERFOR INTERFOR WTERFOR — \yre 13 hy ! a ew ea ‘TERFOR INTERFOR INTERFCOR INTERFOR NTE nw ERFOR _ INTATERFOR MTeoR a INTERFOR
Slide 12: Lumber Production 2005 to 2011
Company Update Lumber Production - 2005 to 2011 Billion bf 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 '05 '06 '07 '08 '09 '10 '11 Interfor’s production volume was 1.3 Bbf in 2011 (up 14% from 2010) 12
Slide 13: Geographic sales mix
Company Update 2010 * 2011 * Japan 9% Japan 6% China 20% China 28% U.S. 50% U.S. Pacific Rim 2% 44% Canada 20% Pacific Rim 2% Europe & Other 2% Europe & Canada 16% Other 1% Total Lumber Sales $482 million Total Lumber Sales $538 million (1.1 Bbf) (1.3 Bbf) * Based on sales volume; includes wholesale
Slide 14: Lumber Volumes to China & Pacific Rim
Company Update Lumber Volumes to China & Pacific Rim (excluding Japan) MMbf 400 300 200 100 0 2008 2009 2010 2011 Interfor’s sales to China and the Pacific Rim increased rapidly during the past 3 years 14
Slide 15: Financial Update
Section 2 Financial Update az INTERFOR
Slide 16: Selected Income Statement / Cash Flow Items
Financial Update Selected Income Statement / Cash Flow Items 1. C$millions 2011 2010 2009 Sales 758.0 625.6 389.8 Net Income (Loss) (13.5) (5.2) (23.9) EBITDA 2. 46.6 48.4 (6.4) Cash from Operations 3. 43.6 40.7 (21.6) Capital Expenditures (36.2) (42.2) (27.6) 1. 2010 and 2011 under International Fi
Slide 17: Selected Balance Sheet Items
Financial Update • In April ‘11 Interfor issued 8.2 million shares @ $7.00 for gross proceeds of $57.6 million. Proceeds were initially used to repay debt Selected Balance Sheet Items C$ millions Dec ‘11 Dec ‘10 Dec ‘09 Long-term debt 110.7 156.0 144.5 Equity 390.8 347.5 361.4 Net debt 100.3 146.7 1
Slide 18: Bank facilities and available credit
Financial Update • Interfor’s bank facilities were modified and extended, effective July ‘11 As at Dec ’11 Operating Term Line Total C$millions Line Available line of credit 65.0 200.0 265.0 Maturity July ‘15 July ‘15 Maximum borrowing 65.0 200.0 265.0 available Drawings & letters of credit 5.1 110.
Slide 19: EBITDA Margin 2007 – Q2 2012
Financial Update EBITDA Margin 2007 – Q2 2012 1. 12% 10% 8% 6% 4% Interfor 2% 0% -2% -4% Peer Group 2. -6% -8% 2007 2008 2009 2010 2011 2012 6 mos Rank 1 1 1 3 2 3 1 Excludes impact of lumber duty refunds 2 Peer group includes Canfor, West Fraser and Western Forest Interfor’s financial results have
Slide 20: Share Prices Indexed from Jan 2007
Financial Update Share Prices Indexed from Jan 1, ’07 to Sept 17, ‘12 150 125 100 75 50 25 0 Interfor ‘s share price has lagged CFP and WFT since mid-2008 20
Slide 21: Analysts' EBITDA Estimates and EV Multiples
Financial Update Financial Analysts’ Recent EBITDA Estimates and Indicated EV Multiples Firm Date EBITDA $C millions EV / EBITDA 2012E 2013E 2012E 2013E Raymond James 29-Aug-12 $58.0 $110.0 7.6 4.0 RBC 7-Aug-12 $44.0 $66.0 10.0 6.7 Salman 3-Aug-12 $50.0 $80.8 8.8 5.5 Scotia Capital 2-Aug-12 $45.0 $7
Slide 22: Key Takeaways
Section 3 Key Takeaways az INTERFOR
Slide 23: Key Takeaways
Key Takeaways • Interfor has been radically transformed over the last 7 - 8 years • Interfor is positioning its assets to be top quartile (top decile) • Interfor has a balanced geographic manufacturing base and diversified product lines and market exposure • Interfor has a strong balance sheet and a
Slide 24: Appendix
APPENDIX • Impact of Mountain Pine Beetle in B.C. • China: Wood Frame Construction Markets • U.S. Housing Market
Slide 25: Impact of Mountain Pine Beetle in B.C.
APPENDIX Impact of Mountain Pine Beetle in B.C.
Slide 26: Mountain Pine Beetle (MPB) – Area Affected
Mountain Pine Beetle (MPB) – Area Affected AAC1 MMm3 Central and Northern B.C. 0.0 50 – 75% Pine Adams Lake in Southern B.C. 0.5 28 – 30% Pine Castlegar & Grand Forks in Southern B.C. 1.0 17% Pine Coastal B.C. Woodlands 2.0 Adams Lake No Pine 3.5 1. Annual Allowable Cut (million m 3) Castlegar
Slide 27: China: Wood Frame Construction Markets
APPENDIX China: Wood Frame Construction Markets
Slide 28: China Markets - Wood Frame Construction
China Markets - Wood Frame Construction Wood truss re-roofing (east and north China) Suburban villas (east, north, n-east, s-west) Low cost rural housing (south-west) Resort homes (north) 28
Slide 29: China Markets - Sectors under development
China Markets- Sectors under development Public buildings Apartment infill walls / partition walls Multi-story residential Mixed-use hybrid 29
Slide 30: China Markets - Use of B.C. Wood in Construction
China Markets- Use of B.C. Wood in Construction House framed with SPF lumber SPF used for furniture frames Cedar used as siding and for outdoor structures 30
Slide 31: U.S. Housing Market
APPENDIX U.S. Housing Market
Slide 32: U.S. Housing Starts 2004 – July 2012
U.S. Housing Starts 2004 – July 2012 • New house construction is the largest driver of lumber consumption in the U.S. • Starts peaked at 2.1 million units in 2005 and dropped to 480,000 units in early 2009 • Starts averaged 609,000 units in 2011 and 728,000 units YTD, 2012 ANNUAL MONTHLY DATA Jan ‘1
Slide 33: Total New & Existing Homes 2004 – July 2012
Total New & Existing Homes 2004 – July 2012 Total sales of new and existing homes are currently at 4.8 million units, below normalized levels of 6-7 million units Months supply were at 6.3 months in July‘12; above a normalized level of 5-6 months ‘04 – ‘11 MONTHLY DATA Jan ’10 – July ‘12 9,000 1
Slide 34: U.S. Home Price Trend – Case-Shiller Indices
U.S. Home Price Trend – S&P’s Case-Shiller Indices • The 10 and 20 City monthly composite index increased by 2.2 and 2.3% respectively m/m in June; yr/yr prices increased 0.1 ans 0.5%. • As of June, 2012, average home prices are back to early 2003 levels. Home Price Index 1987 - 2012 34 Index of 100
Slide 35: Uncertainty Around the U.S. Housing Recovery
Uncertainty Around the U.S. Housing Recovery 1. • The estimated “Shadow Supply” of housing inventory (distressed homes) peaked at 5.8 million in March 2010 and declined to 4.2 million as of March 2012 REO Inventory, Foreclosures in Process, and Seriously Delinquent Loans Number of Homes/Mortgages in
Slide 36: U.S. Home Affordability is High
U.S. Home Affordability is High • Affordability has risen to record highs during the 2009-12 period which could positively impact the recovery 170.0 167.5 165.0 July 2012 = 161; 1990-91 Recession 2001 Recession 162.5 Rates at ~3.9% 160.0 157.5 2007-09 Recession 155.0 152.5 150.0 147.5 145.0 142.5 14
Slide 37: Investor Update
Investor Update September 2012 Duncan Davies President & CEO