West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Investor Presentation (September 2010)
38 slides from West Fraser Timber's investor presentation, September 2010
Slide 1: Forestry Analyst Presentation
Forestry Analyst Presentation September 2010
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements, which are statements that are not historical facts, and as a result are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in or suggested by the forw
Slide 3: Discussion Agenda
Discussion Agenda Current economic environment West Fraser overview Why Invest in West Fraser? Summary 3 3
Slide 4: Current Economic Environment
Current Economic Environment US Housing Remains Very Weak Strong Canadian Dollar Recession Ending Slowly? Historic Low Lumber Prices Unprecedented Lumber Curtailments Continue in North America Rising China Lumber Market Pulp Prices Remain Strong 4 4
Slide 5: History
West Fraser Overview History • Started as a small family owned company in 1955. • Expanded through acquisitions and internal growth. • 2005 acquired Weldwood • 2007 acquired 13 sawmills in the U.S. • Ketcham family ownership today at 30%. 5 5
Slide 6: Fully Integrated Platform in Canada
Fully Integrated Platform in Canada . Lumber Panels Pulp & Paper 28 Mills 6 Mills 5 Mills SPF 3.5 billion feet Plywood: 830 million square feet (3/8”) SYP 2.0 billion feet MDF: 300 million square feet (3/4”) 1.2 million tonnes Total 5.5 billion feet LVL: 3.2 million cubic feet Largest lumber p
Slide 7: West Fraser Overview: Geographic Diversification
West Fraser Overview Geographic Diversification 7 7
Slide 8: Trend Sales Mix
Trend Sales Mix P ulp & P aper 23% P an els Lu m b er 14% 63% West Fraser is an integrated forest products company primarily focused on solid wood products 8 8
Slide 9: Lumber Sales Mix - 2009
Lumber Sales Mix - 2009 Asia 11% C anada 20% U SA 69% 9 9
Slide 10: Pulp & Paper Sales Mix - 2009
Pulp & Paper Sales Mix - 2009 N orth Am erica 30% Asia 60% Europe 8% 10 10
Slide 11: Why Invest in West Fraser?
Why Invest in West Fraser?
Slide 12: Why Invest in West Fraser?
Why Invest in West Fraser? Unique culture Re-invest Profits Conservative Balance Sheet Large Diversified Lumber Producer Growth Orientated in our Core Business Strong Pulp & Paper Business Shareholder Return 12 12
Slide 13: Culture
Why Invest in West Fraser? Culture Low cost Consistent, straightforward business plan Loyal, long-term employee and management base Internal competition through benchmarking Cohesiveness that reflects pride in what we do 13 13
Slide 14: Lumber Operating Rate 2009
Lumber Operating Rate 2009 85% 82% 80% 75% % of Capacity 70% 65% 63% 62% 62% 61% 60% 58% 55% 50% WFT WFT B.C. U.S. U.S. Canada Canada U.S. Interior South Low cost structure allows for higher operating rates in down market 14 14
Slide 15: Lumber Operating Rate Q2 2010
Lumber Operating Rate Q2 2010 110% 100% 98% 90% % of Capacity 80% 75% 73% 73% 70% 67% 64% 60% 50% WFT WFT B.C. Canada U.S. U.S. Canada U.S. Interior South Low cost structure allows for higher operating rates in down market 15 15
Slide 16: Re-investment
Why Invest in West Fraser? Re-investment 250 100% 90% 200 80% 70% $ million 150 60% 50% 100 40% 30% 50 20% 10% 0 0% 2000-04 2005 2006 2007 2008 2009 Avg. C apital % of D epreciation (R Axis) 16 16
Slide 17: Strong Balance Sheet – Net Debt
Why Invest in West Fraser? Strong Balance Sheet – Net Debt 800 Reduced $460 million of debt during the 700 worst market since the Great Depression 600 500 $ m illions 400 300 200 100 0 2007 Q 2 2010 17 25% Debt to Capital 12% Debt to Capital 17
Slide 18: Summary Liquidity Position
Summary Liquidity Position (Canadian $ millions) Q2 2010 Credit Facilities* 605 Amount Drawn (9) Letters of Credit outstanding (34) Available Credit 562 Cash, net of cheques issued 94 Total Liquidity 656 *$600 million available to WFT, $5 million available to ANC JV. The $600 million facility is bac
Slide 19: World's Largest Lumber Producer
Why Invest in West Fraser? W orld's Largest Lumber Producer 2009 Production 4.5 4.0 3.5 Billion Board Feet 3.0 2.5 2.0 1.5 1.0 0.5 0.0 r r o r o c nf s a se se n ic f i F r a e u Ca r a E Pa t h o es ye r St r a W e er W Si 19 19
Slide 20: Lumber Capacity Location
Lumber Capacity Location USA 36% BC 47% Alberta 17% Geographic diversification in lumber 20 20
Slide 21: B.C. Interior Lumber Production
B.C. Interior Lumber Production B .C . Interior Lum ber P roduction 17,000 2,300 Fore ca st 2,100 15,000 S tarts (thousands) 1,900 13,000 1,700 MMfbm 1,500 11,000 1,300 9,000 1,100 900 7,000 700 5,000 500 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 P roduction U.S . Housing S ta rts
Slide 22: Growth
Why Invest in West Fraser? Growth Recent acquisitions Weldwood ($1.4 billion) - 2005 US South ($380 million) - 2007 22 22
Slide 23: Growth Opportunities
Growth Opportunities Alberta U.S. South Bio-energy 23 23
Slide 24: Alberta – Key Advantages
Alberta – Key Advantages Competitive cost structure Expanding log supply Less impact from mountain pine beetle than B.C. West Fraser currently operates 30% of Alberta’s lumber capacity 24 24
Slide 25: West Fraser Alberta (Mm3)
West Fraser Alberta (M m3) 2009 2010 Coniferous AAC 4,500 4,800 Deciduous AAC 950 950 Increase in Coniferous AAC due to mountain pine beetle related harvest increases and rolling in 3 million m3 of undercut into the current AAC. Currently consuming 4.2 million m3. Additional 600,000 m3 of cut wi
Slide 26: U.S. South – Key Advantages
U.S. South – Key Advantages Proximity to market Demographics support longer-term housing thesis Expanding log supply FX and Trade hedge 26 26
Slide 27: U.S. South - Mill Locations
U.S. South - Mill Locations Seaboard RICHMOND Leola Opelika Maplesville Huttig MEMPHIS New Boston Armour Newberry ATLANTA Henderson Augusta Joyce Folkston (closed) JACKSONVILLE NEW ORLEANS Whitehouse Citronelle McDavid (closed) (closed) Geographic footprint across commercial SYP range. Well position
Slide 28: U.S. South SYP Supply (Current Operating Area)
U.S. South SYP Supply (Current Operating Area) Overall supply sustainable with sawtimber growth / removal ratio over 100% Large sawtimber less that 100% but capable of re-balancing based on demand Small Large Pulpwood Sawtimber Sawtimber Total Inventory (mm tons) 321 1,013 1,171 2,505 Growth (mm
Slide 29: U.S. South - SYP Growth Potential
U. S. South - SYP Growth Potential Independent producers represent half of the SYP capacity and consolidation expected due to capital and management succession constraints Several large corporate owners are rationalizing their capacity and re- evaluating their lumber manufacturing strategy Low
Slide 30: Bio-energy
Why Invest in West Fraser? Bio-energy West Fraser has a major corporate focus on bio- energy. We are currently a major bio-energy producer at existing facilities and actively expanding the conversion of bio-mass to energy. In addition, we are participating in the active evaluation of evolving
Slide 31: Strong Pulp & Paper Business
Why Invest in West Fraser? Strong Pulp & Paper Business Transformation of the Pulp Business Shut down Eurocan Restructure of Hinton Pulp Division Capacity increases through modest capital investment in the BCTMP business Benefits of the Green Transformation Program 31 31
Slide 32: Competitive Pulp Business
Competitive Pulp Business Pulp & Paper Ebitda/tonne 200 175 150 125 100 $/tonne 75 50 25 0 -25 Q 1 08 Q 2 08 Q 3 08 Q 4 08 Q 1 09 Q 2 09 Q 3 09 Q 4 09 Q 1 10 Q 2 10 West Fraser No Eu rocan C anfor West Fraser’s pulp business is competitive with Canfor’s pulp business 32 32
Slide 33: BCTMP
BCTMP High yield pulp Low capital requirement Low cost, low maintenance business Low fixed costs allow flexibility to match production with market demands Positive contributor to profitability of our pulp business. 33 33
Slide 34: Newsprint
Newsprint North Am erican Newsprint Cost Structure E xchange at $.88 Sourc e: PPPC Cos t Surv ey 2009 AN C C dn$/tonne Alberta Newsprint is the lowest cost newsprint producer in North America and a positive contributor to the profitability of our pulp and 34 paper business 34
Slide 35: Green Transformation Program - Approach and Priorities
Strong Pulp & Paper Business West Fraser Green Transformation Program - Approach and Priorities Based on 2009 results, our pulp business is competitive in the northern hemisphere. Our mills are well capitalized and up to current environmental standards. As such the primary focus is on high payba
Slide 36: Total Shareholder Return During Recession
Why Invest in West Fraser? Total Shareholder Return During Recession June 2006 – September 1, 2010 20% 9% 10% 1% 0% -10% -9% -10% -20% -30% -40% -35% -50% -60% -52% W est Fraser S& P/T SX D ow C ompetitor A C ompetitor B C ompetitor C 36 Source TD Bank 36
Slide 37: Summary - Why Invest in West Fraser?
Summary - Why Invest in West Fraser? Unique Culture Low Cost Modern and efficient plants Strong balance sheet Track record of growth Integrated platform North America’s largest lumber producer Shareholder return Exciting and Prosperous Future 37 37
Slide 38: West Fraser
td West Fraser
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