Rayonier Inc. Reit · NYSE:RYN
Rayonier Inc. Reit — Rayonier — Investor Presentation (June 2015)
55 slides from Rayonier Inc. Reit's investor presentation, Jun 2, 2015
Slide 1: Rayonier Investor Presentation June 2015
Rayonier Investor Presentation June 2015
Slide 2: Safe Harbor Statement
Safe Harbor Statement outlook, timberland: or oper , jf Pl of 1995 "wil 1° “expect,” “estimate,” project," “anticip He 1h jpply of, our forest sding politcal changes pat identity, timber harvest \d endangered species, ; tural disast ‘distribution and Pr ipatitr REIT" status. wots, property aval poen
Slide 3: Rayonier Highlights
Rayonier Highlights Rayonier
Slide 4: Rayonier — Best-in-Class, Pure-Play Timber REIT
Rayonier — Best-in-Class, Pure-Play Timber REIT Attractive Real Estate Platform Third-largest timber REIT with 2.7 million acres of high-quality timberland Geographic diversity — U.S. South, Pacific Northwest, New Zealand Timberlands strategically positioned in competitive fiber baskets Focus on rec
Slide 5: Highly Productive, Geographically Diversified Timberlands
Highly Productive, Geographically Diversified Timberlands Total Rayonier = 2.7 million acres 445 y Washington — 368,000 acres, access to export markets 1.9 million acres — sawlog and pulpwood; Florida & Georgia coastal Sout! corridor HBU New Zealand 445,000 acres — manage and own 65% of joint ventur
Slide 6: Leading pure-play timberland REIT with recurring timber harvest EBITDA
Rayonier is a leading “pure-play” timberland REIT that generates the significant majority of its Adjusted EBITDA from recurring timber harvest operations. Timber Segment(s) 47% Other 53% Timber Segment(s) 73% Other 27% 2014 Adjusted EBITDA – Rayonier 2014 Adjusted EBITDA – Peer Group
Slide 7: Southern Timber segment harvest volume and EBITDA
Map of Properties Historical Harvest Volume Rayonier’s Southern Timber segment has nearly doubled its EBITDA since 2011, largely driven by acquisitions and significant price gains in key markets. Historical Adjusted EBITDA* (tons in 000s) ($ in millions) 4,930 4,741 5,322 5,292 5,296 3,000 3,500 4,0
Slide 8: U.S. South Growth-Drain Heat Map
U.S. South Growth-Drain “Heat Map”
Slide 9: Major Pulpwood Consuming Mills Proximate to RYN Lands
Major Pulpwood Consuming Mills Proximate to RYN Lands % of 2014 Long-Term Facility Key End Product Harvest Demand Trend Containerboard / Kraft 64% + Dissolving Pulp 9% + Pellets 9% + OSB 7% + Fluff Pulp 5% + Specialty Packaging 3% + Other 3% + Tissue – + Freesheet / Coated Paper – – Newsprint / Dire
Slide 10: Pellet mill demand and GA-2 pricing
($ per ton) Announced & Operating Pellet Mills Rayonier’s markets have benefited from increased demand from pellet manufacturing facilities, particularly in Georgia and Texas. Change in GA-2 Price vs. South Average $4 $6 $8 $10 $12 $14 $16 GA-2 South-Wide Avg
Slide 11: Stumpage price and consumption change by region
Change in Avg. Stumpage Price by Region from 2005 PeakChange in Consumption by Region from 2005 Peak Due to strong and growing pulpwood demand, Rayonier’s markets have experienced less pronounced declines in consumption and average stumpage pricing.
Slide 12: U.S. South timberlands in strong markets
Rayonier’s U.S. South timberlands are located in some of the strongest markets, with a significant concentration (~56%) in the Coastal FL/GA region. Timber Mart-South Q1-2015 Composite Stumpage Price by Region Q1-2015 Price Change versus 2005 Average Price ($ per ton) (%) 375k a c. 697k a c. 320k a
Slide 13: U.S. South pulpwood and sawtimber pricing vs. South average
U.S. South Pulpwood Pricing – RYN vs. South Avg. U.S. South Sawtimber Pricing – RYN vs. South Avg. Favorable supply-demand dynamics in key Rayonier markets drive significant pricing premiums relative to market averages. ($ per ton) ($ per ton) $8.77 $9.68 $10.35 $14.36 $16.12 $18.48 2012 2013 2014 T
Slide 14: Southern Timber pine harvest mix and thinnings
% of Southern Timber Pine Harvest from Thinnings Historical & Projected Southern Timber Pine Harvest Mix Rayonier’s enhanced silviculture activity and thinning regime implemented in 2008 are expected to yield a higher proportion of grade timber going forward. (% of pine harvest) (% of pine harvest)
Slide 15: Pacific Northwest harvest volume and EBITDA
Map of Properties Historical Harvest Volume Rayonier’s Pacific Northwest harvest is expected to decline over the next several years pursuant to the Company’s sustainable harvest strategy. Historical Adjusted EBITDA* (tons in 000s) ($ in millions) 1,369 1,665 1,947 1,979 1,664 500 750 1,000 1,250 1,5
Slide 16: Pacific Northwest log demand and pricing
1.4 1.8 1.5 1.4 1.5 ~1.5 Pacific Northwest Log Demand & Pricing (BBF / $ per MBF) Pacific Northwest log demand and pricing has largely recovered to pre-recession levels due to increased export demand. – $100 $200 $300 $400 $500 $600 $700 $800 – 2.0 4.0 6.0 8.0 10.0 12.0 14.0 West Coast Lumber Produc
Slide 17: New Zealand joint venture harvest and EBITDA
Map of Properties Historical Harvest Volume Rayonier’s 65%-owned joint venture in New Zealand provides geographic, species and market diversification. Historical Adjusted EBITDA* (tons in 000s) ($ in millions) – – 2,808 2,405 2,360 – 500 1,000 1,500 2,000 2,500 3,000 2010 2011 2012 2013 2014 NA NA –
Slide 18: New Zealand export markets in the Pacific Rim
Rayonier’s New Zealand JV increases the company’s exposure to attractive and growing export markets in the Pacific Rim. Mix Shift of New Zealand Export Volume New Zealand Export vs. Domestic Pricing (million m3 JAS) (NZ$ per metric ton) – 0.5 1.0 1.5 2.0 2.5 2006 2008 2010 2012 2014 Korea China Indi
Slide 19: Overview of Land Acquisition Strategy
Overview of Land Acquisition Strategy Asset Quality Optionality Value Creation Financial Profile Rayonier Timber end markets with favorable supply / demand tension Well-developed infrastructure, access to ports and other transportation hubs Potential for land appreciation driven by local and regiona
Slide 20: Plantation productivity as key value driver
Plantation productivity is a key driver of value, as higher site index properties generate greater harvest yields and a more valuable product mix. Current Harvested Stands Expressed Site Index: High 60’s Current Planted Stands Implied Site Index: High 70’s+ Projected Harvest Mix by Site Index Projec
Slide 21: Illustrative EBITDA per acre: productivity and market quality
“Below-average” and “above-average” timberlands can yield significantly different cash flow profiles and corresponding valuations. Ilustrative EBITDA per Acre – Productivity & Market Quality Comparison Low-Productivity / Weak Market: High-Productivity / Strong Market: 60% Plantation & 65 Site / Bott
Slide 22: Acquisitions improving portfolio productivity
Commercial Forest Area – % Plantable (1) Since the beginning of 2014, Rayonier has acquired or has under contract 97,000 acres of timberland for $200 million, improving the overall productivity of our portfolio. Harvest Rate – Tons per Acre per Year (2) (%) (tons per acre per year) Productivity – Si
Slide 23: Significant HBU Potential in FL and GA Coastal Corridor
Significant HBU Potential in FL and GA Coastal Corridor =, Rayonier Overview of Coastal Corridor Properties Timberland ownership base of ~200,000 acres Approximately 40 miles of water frontage = Approximately 250 miles of road and highway rontage Land holdings at five interchanges on I-95 and two pl
Slide 24: Coastal corridor planning areas
RIVERFRONT Residential / Hospitality CHESTER RD Age Targeted Residential WEST NASSAU Rural Residential EAST NASSAU Mixed Use – 285 ACRES BELFAST COMMERCE – 985 ACRES BELFAST Mixed Use
Slide 25: Coastal corridor acreage and active projects
Within Rayonier’s 200,000-acre coastal corridor portfolio, we have undertaken two projects comprising roughly 1,220 net developable acres. Coastal corridor 200,000 gross acres Planning nodes 25 92,100 gross acres High potential sites 4 8,500 gross acres Active projects 2 1,860 gross acres 1,220 net
Slide 26: East Nassau Mixed Use Village
East Nassau Mixed Use Village Nassau Co, FL approx 21-miles north of Jacksonville at I-95 / A1A interchange Community Mixed-Use Northeast FL / Southeast GA 285 acres Catalyzed by new K-5 school opening fall of 2017 Highly visible location, avg. 40,000 vehicles passing the site daily Over 20,000 acre
Slide 27: East Nassau Mixed-Use Village Growth Trajectory
JACKSONVILLE DOWNTOWN JACKSONVILLE INT’L AIRPORT ~ 20 mile Radius MSA boundary Other Rayonier properties Rayonier planning areas AMELIA ISLAND East Nassau Mixed-Use Village Growth Trajectory
Slide 28: Belfast Commerce Centre
Belfast Commerce Centre 23 miles south of Savannah, GA Class A Industrial Park Southeastern U.S. 936 acres = Zoning allows 10.5 million square feet industrial uses = CSX Select Site, direct rail service into the Port of Savannah (16 miles) = 8,800 feet of rail frontage 11,100 feet of I-95 frontage;
Slide 29: Recap of Rayonier's Strategic Priorities
Recap of Rayonier’s Strategic Priorities v Design harvest strategy to achieve long-term, sustainable yield Balance biological growth, harvest cash flow and responsible stewardship Manage for Sustainability v Acquire . High-Quality Pp Timberlands Pursue timberland acquisitions that improve portfolio
Slide 30: Rayonier Represents an Attractive Investment Opportunity
Rayonier Represents an Attractive Investment Opportunity Timber Asset Class Poised for Growth Discount to Underlying Asset Value =, Rayonier Steady improvement in housing starts projected over next few years Favorable supply dynamics relative to last peak in housing starts with decline in Canadian s
Slide 31: Industry Dynamics
Industry Dynamics Rayonier
Slide 32: Anticipated Upturn in U.S. Residential Construction
Anticipated Upturn in U.S. Residential Construction Mountain Pine Beetle Epidemic in British Columbia Significant Increase in Lumber and Log Exports to China Major Timber Supply Contractions in Eastern Canada Return to Trend – Implied Demand Change vs. 2014 and Prior Peak (2005) 7% 2
Slide 33: Annual U.S. Housing Starts & Decade Averages
- 0.5 1.0 1.5 2.0 2.5 1960’s 1970’s 1980’s 1990’s 2000’s 2010’s Decade Averages Annual Housing Starts 1.4 1.8 1.5 1.4 1.5 ~1.5 Annual U.S. Housing Starts & Decade Averages (starts in millions) Housing Starts Still ~33% Below Trendline 2014: 1.0MM Housing starts have begun to recover and are expected
Slide 34: Residential construction is the key driver of lumber demand
Residential construction is the key driver of lumber demand… U.S. Housing Starts North American Lumber Consumption by End-Use (starts in millions) (BBF) - 0.5 1.0 1.5 2.0 2.5 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Single-Family Multi-Family Year - 20 40 60 80 00 01 02 03 04 05 06 07 08 09 10 1
Slide 35: Housing starts vs. pine sawtimber prices
U.S. South sawtimber pricing has historically trended in line with residential construction: ~1.5 million starts = ~$45 sawtimber. y = 0.023x + 12.373 R² = 0.6226 $0 $10 $20 $30 $40 $50 $60 $70 $80 500 750 1,000 1,250 1,500 1,750 2,000 2,250 1.5mm starts = $45 sawtimber $0 $10 $20 $30 $40 $50 $60 $7
Slide 36: China driving log and lumber exports
China has driven substantial growth in log and lumber exports from the Pacific Northwest and British Columbia, respectively. U.S. Pacific Northwest Log Exports North American Lumber Exports (BBF) (BBF) - 0.5 1.0 1.5 2.0 05 06 07 08 09 10 11 12 13 14 Rest of World China Year - 2.0 4.0 6.0 8.0 10.0 05
Slide 37: Mountain pine beetle mortality
~ 1% Mortality ~ 45% Mortality ~ 15% Mortality ~ 55% Mortality
Slide 38: Inventory of Available Live and Dead Lodgepole Pine
1.4 1.8 1.5 1.4 1.5 ~1.5 Inventory of Available Live and Dead Lodgepole Pine By Years Since Attack (Mil m3) The mountain pine beetle epidemic is expected to significantly constrain the availability of economically viable pine inventory in B.C. for many decades. - 200 400 600 800 1,000 1,200 1,400 1,
Slide 39: Eastern Canada harvest restrictions and mill closures
Increased harvest restrictions and large-scale paper mill closures are projected to lead to reduced lumber production of nearly 20% in Eastern Canada. Unsustainable Harvest Levels Higher Costs & Lower Production from Eastern Canada Issue Government Mandated Harvest Reductions Result Closure of Pulp
Slide 40: U.S. South expected to exceed prior peak demand
Based on the major supply-demand shifts currently underway, the U.S. South is expected to exceed prior peak levels of demand even at trend-level housing starts.
Slide 41: Rayonier Appendix
=>, Rayonier Appendix
Slide 42: Financial Highlights
Financial Highlights ($ in millions, except per share data) Three months ended March 31, Profitability 2015 2014 Sales $140.3 $143.2 Operating income 27.7 14.4 Net income attributable to Rayonier Inc. 17.7 41.4 Pro forma net income (1) 17.7 10.4 Adjusted EBITDA (1) 61.4 43.5 Diluted Earnings Per Sha
Slide 43: Variance Analysis – 4Q 2014 to 1Q 2015
Variance Analysis – 4Q 2014 to 1Q 2015 Operating Income ($ in millions) Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total 4Q14 Operating income $13.5 $3.7 $2.9 $2.6 ($0.3) ($8.2) $14.2 Pro forma adjustments(1) — — — — — 2.4 2.4 Pro forma operat
Slide 44: Variance Analysis – 1Q 2014 to 1Q 2015
Variance Analysis – 1Q 2014 to 1Q 2015 Operating Income ($ in millions) Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total 1Q14 Operating income $10.5 $12.6 $2.4 $0.7 ($0.4) ($11.4) $14.4 Volume/Mix 1.2 (7.3) 1.9 8.5 — — 4.3 Price 0.8 (2.8) (1.3
Slide 45: Cash Available for Distribution
Cash Available for Distribution* ($ in millions, except per share data) Three Months Ended March 31, 2015 2014 Operating Income $27.7 $14.4 Depreciation, depletion, amortization 30.0 26.0 Non-cash cost of land and real estate development costs recovered upon sale 3.7 3.1 Adjusted EBITDA* $61.4 $43.5
Slide 46: Southern Timber Overview
Southern Timber Overview 2014 2015 Q1 Q2 Q3 Q4 FY 2014 Q1 Q2 Q3 Q4 YTD Sales Volume (Tons in 000s) Pine Pulpwood 776 707 867 934 3,284 905 — — — 905 Pine Sawtimber 387 363 492 459 1,701 418 — — — 418 Total Pine Volume 1,163 1,070 1,359 1,393 4,985 1,323 — — — 1,323 Hardwood 111 79 55 66 311 47 — — —
Slide 47: Pacific Northwest Timber Overview
Pacific Northwest Timber Overview 2014 2015 Q1 Q2 Q3 Q4 FY 2014 Q1 Q2 Q3 Q4 YTD Sales Volume (Tons in 000s) Pulpwood 86 73 51 52 262 55 — — — 55 Sawtimber 458 375 295 274 1,402 270 — — — 270 Total Volume 544 448 346 326 1,664 325 — — — 325 — — — Northwest Sales Volume (Converted to MBF) — — — Pulpwo
Slide 48: New Zealand Timber Overview
New Zealand Timber Overview 2014 2015 Q1 Q2 Q3 Q4 FY 2014 Q1 Q2 Q3 Q4 YTD Sales Volume (Tons in 000s) Domestic Sawtimber (Delivered) 144 170 179 151 644 150 — — — 150 Domestic Pulpwood (Delivered) 73 77 103 99 352 100 — — — 100 Export Sawtimber (Delivered) 142 193 231 261 827 201 — — — 201 Export Pu
Slide 49: Timber Segments Selected Operating Information
Timber Segments Selected Operating Information ($ in millions) Three Months Ended 3/31/2015 12/31/2014 3/31/2014 Depreciation, Depletion and Amortization Southern Timber $14.3 $14.8 $12.0 Pacific Northwest Timber 3.8 3.8 6.3 New Zealand Timber 8.0 8.7 6.5 Total $26.1 $27.3 $24.8 Capital Expenditures
Slide 50: Real Estate Overview
Real Estate Overview 2014 2015 Q1 Q2 Q3 Q4 FY 2014 Q1 Q2 Q3 Q4 YTD Sales ($ in MMs) Improved Development(1) — — — — — — — — — — Unimproved Development 0.1 1.4 1.4 1.9 4.8 4.8 — — — 4.8 Rural 5.1 5.4 25.1 5.4 41.0 6.8 — — — 6.8 Non-strategic / Timberlands 0.3 27.2 0.3 3.7 31.5 12.2 — — — 12.2 Total S
Slide 51: Definitions of Non-GAAP Measures
Definitions of Non-GAAP Measures Pro Forma Operating Income is defined as operating income adjusted for internal review and restatement costs. Pro Forma Net Income is defined as net income attributable to Rayonier Inc. adjusted for internal review and restatement costs and discontinued operations. A
Slide 52: Reconciliation of Reported to Pro Forma Earnings
Reconciliation of Reported to Pro Forma Earnings ($ in millions, except per share amounts) March 31, 2015 December 31, 2014 March 31, 2014 Three Months Ended $ EPS $ EPS $ EPS Operating income $27.7 $14.2 $14.4 Internal review and restatement costs — 2.4 — Pro Forma Operating Income $27.7 $16.6 $14.
Slide 53: Reconciliation of Operating Income to Adjusted EBITDA by Segment
Reconciliation of Operating Income to Adjusted EBITDA by Segment ($ in millions) Southern Pacific Northwest New Zealand Real Corporate Three Months Ended Timber Timber Timber Estate Trading and Other Total March 31, 2015 Operating Income $12.4 $2.6 $5.7 $12.6 $0.3 ($5.9) $27.7 Depreciation, depletio
Slide 54: Reconciliation of Operating Income to Adjusted EBITDA by Segment cont.
Reconciliation of Operating Income to Adjusted EBITDA by Segment cont. ($ in millions) Southern Pacific Northwest New Zealand Real Corporate Timber Timber Timber Estate Trading and Other Total 2014 Operating Income $45.6 $29.5 $9.5 $47.5 $1.7 ($35.5) $98.3 Depreciation, depletion & amortization 52.3
Slide 55: Reconciliation of Operating Income to Adjusted EBITDA by Segment cont.
Reconciliation of Operating Income to Adjusted EBITDA by Segment cont. ($ in millions) Southern Pacific Northwest New Zealand Real Corporate Timber Timber Timber Estate Trading and Other Total 2011 Operating Income $13.4 $29.5 $4.2 $47.3 $1.5 ($40.8) $55.1 Depreciation, depletion & amortization 43.3