Western Forest Products Inc. · TSX:WEF

Western Forest Products — Investor Presentation (March 2023)

58 slides from Western Forest Products's investor presentation, March 2023

1. Slide 1: Investor Presentation March 2023

   INVESTOR PRESENTATION March 2023 TSX:WEF

2. Slide 2: Forward Looking Statements and Non-GAAP Financial Measures

   Forward Looking Statements and Non-GAAP Financial Measures All financial references are expressed in C$ unless otherwise noted. This presentation contains statements and estimates that may constitute forward-looking statements under applicable securities laws. Readers are cautioned against placing u

3. Slide 3: Western At A Glance

   Western At A Glance A Sustainable, Specialty Wood Products Company

4. Slide 4: Western At A Glance

   Western At A Glance Sustainable $1.4 Billion $137 Million 36% $395 Million Products and In 2022 Revenue In 2022 EBITDA Of Historical Sales to Market Capitalization Practices International Markets and Listed on the TSX Strong 1+ Billion Four 5.9 Million m3 2,000+ Environmental, Social, Board Feet of

5. Slide 5: Why Own Western

   Why Own Western Supplier of sustainable wood products Strong ESG practices and policies Business of scale and leader in our key markets Superior timber asset base and secure fibre supply High-value, diverse products serving global markets Specialty products focus Margin-focused strategy with exposur

6. Slide 6: Western's Lumber Products Are Used In Multiple Sustainable End Uses Around The World

   Western’s Lumber Products Are Used In Multiple Sustainable End Uses Around The World Outdoor Exterior Interior Structural Industrial Living Appearance Living Interior Paneling, Lamstock, Packaging & Decking, Timbers, Siding, Trim & Fascia, Timbers, Framing, Interior Mouldings, Crating, Cross Arms, F

7. Slide 7: Wood Is Sustainable, Durable And Naturally Beautiful

   Wood Is Sustainable, Durable And Naturally Beautiful 6

8. Slide 8: Wood Is A Sustainable Building Material

   Wood Is A Sustainable Building Material Wood is the only major building material that Sustainability of Wood vs. Steel vs. Concrete(1) is renewable Total Energy Use Greenhouse Gases +140% +70% +81% +45% Wood is recyclable and biodegradable and comes from sustainably managed forests Wood Steel Concre

9. Slide 9: Mass Timber Buildings Further Support The Growth Of Wood As A Sustainable Building Product

   Mass Timber Buildings Further Support The Growth Of Wood As A Sustainable Building Product Increased use of wood in buildings will drive climate change benefits and increase lumber demand Maximizing wood use in both residential and commercial construction could remove an estimated 21 Million = 4.4 M

10. Slide 10: Wood Products Play An Important Role in Mitigating Climate Change

    Wood Products Play An Important Role in Mitigating Climate Change Growing trees absorb carbon from the air and New trees are release oxygen planted and the cycle of carbon removal continues As trees mature the When trees are rate of carbon harvested, the carbon removal decreases remains stored in wo

11. Slide 11: Western's Commitment To ESG

    Western’s Commitment To ESG Environment Stewardship Sustainable Forestry Practices, Sustainable Products, Climate Change, Biodiversity Social Responsibility Health & Safety, People & Culture, Diversity, Stakeholder & Community Engagement Corporate Governance Best Practices, Board Composition and Div

12. Slide 12: Western's ESG Highlights

    Western’s ESG Highlights Our 2021 Sustainability Report is available here 11

13. Slide 13: Advancing Our Carbon Accounting Reporting

    Advancing Our Carbon Accounting Reporting Advancements made during 2022:  Expanded our reporting to include Scope 1, 2, and 3 emissions assessments  Forecast Western’s carbon balance 100 years into the future  Received third party assurance over our 2020 carbon accounting report Western is a net

14. Slide 14: Environmental Stewardship

    Environmental Stewardship  100% of our managed tenures  Only forestry company on the are certified B.C. Coast to operate a seed orchard and tree nursery  Sustainably manage and harvest the entire forest profile  More than 3 trees planted for over generations every 1 tree harvested in 2021  Refo

15. Slide 15: Social Responsibility

    Social Responsibility  Our goal is a zero-incident  Independent audits and inspections workplace  Environmental, Health and Safety  Annual safety training for all Board committee employees and contractors  Comprehensive Health and Safety  ISNetworld certification process Management System for

16. Slide 16: Reconciliation With First Nations: Western And Huu-ay-aht First Nations, A Success Story

    Reconciliation With First Nations: Western And Huu-ay-aht First Nations, A Success Story Building a Mutually Beneficial Relationship with Huu-ay-aht First Nations 2017  Established a relationship – Sale and purchase of three properties – Long-term lease back of a dry land sort in Sarita Bay, B.C. –

17. Slide 17: Further Advancing Indigenous Relationships

    Further Advancing Indigenous Relationships  Investing time and resources in Selected Milestones(1) fostering positive working TFL 44 LP and relationships with Indigenous Integrated Resource groups Management Plan – Information sharing Integrated Resource Management Plan – Joint sustainable forest m

18. Slide 18: Community Involvement And Support

    Community Involvement And Support Friendship Garden at Cedar Elementary in Campbell River, B.C. Contributions To Support Communities Provide access to a number of public recreation sites located in our For more company and working forests via community news, visit us on our extensive network of main

19. Slide 19: Corporate Governance

    Corporate Governance  Independent Board Chair  Whistleblower hotline  Annual elections  Comprehensive and transparent disclosure  Annual director assessments  Shareholder engagement Best  Annual say-on-pay voting  Diversity and inclusion policy Practices  Majority voting for director electi

20. Slide 20: Sustainability-Linked Credit Facility

    Sustainability-Linked Credit Facility Western was the 1st North American public paper and forest products company to transition to a sustainability-linked credit facility $250 million Sustainability-Linked Credit Facility  Increase or decrease borrowing costs by up to five basis points based on the

21. Slide 21: Company Snapshot

    Company Snapshot Sustainably Growing and Creating Long-term Shareholder Value

22. Slide 22: Who We Are: Our Mission, Vision And Values

    Who We Are: Our Mission, Vision And Values Our Vision: To provide the most sustainable building materials on the planet Our Mission: We safely produce high margin, targeted specialty building materials for our selected global customers in a value for service relationship Our Values: Our values guide

23. Slide 23: What We Do: Margin-Focused, Specialty Lumber Company

    What We Do: Margin-Focused, Specialty Lumber Company  Leading cedar lumber, timbers and Japan square manufacturer in North America  Offer a range of appearance, structural and industrial wood products  Our products are used in various outdoor living, interior living, exterior appearance, structur

24. Slide 24: Where Do We Do It: Serve Global Markets From Coastal B.C. And Washington

    Where Do We Do It: Serve Global Markets From Coastal B.C. And Washington Canada 5.9 Million Coastal B.C. Cubic Metres In Allowable  6 Sawmills Annual Cut From Our  2 Remanufacturing Facilities Coastal B.C. Timberlands  Timberlands  Seedling Nursery 1+ Billion Board Feet of Annual Lumber United S

25. Slide 25: How We Have Performed: Financial Snapshot

    How We Have Performed: Financial Snapshot Annual Sales by Product(1) 58% $1.4 Billion Specialty In Last Twelve 5% Lumber Month Revenue Specialty Lumber 17% Commodity Lumber $137 Million Logs In Last Twelve 58% 20% Month EBITDA By-products $16 Million Net Cash on the Balance Sheet at the end of Q4/22

26. Slide 26: What Are Our Priorities: Focus On Growing Long-term Shareholder Value

    What Are Our Priorities: Focus On Growing Long-term Shareholder Value Strategic Priority Description  Focusing on operating execution and excellence, with a mindset of continual improvement  Commitment to health, safety and environmental compliance Business  Improving recovery, efficiency and mar

27. Slide 27: Company Updates

    Company Updates Sustainably Executing On Our Strategic Priorities

28. Slide 28: 2022 Year In Review

    2022 Year In Review Financial Performance and Growth Health and Safety  Adjusted EBITDA of $136.9 million  Medical Incident Rate reduced by 9%  Return on capital employed: 20%  Severity Rate reduced by 41%  Acquisition of glulam manufacturer, Calvert Company Balanced Capital Allocation Advancin

29. Slide 29: Calvert Acquisition: Positioning For Growth in Mass Timber

    Calvert Acquisition: Positioning For Growth in Mass Timber  One of the oldest glulam manufacturers in the U.S. – Products used in industrial, commercial and residential projects around the world  Two facilities in Washington – Annual capacity of 35 million board feet of glulam  Calvert owner will

30. Slide 30: Recently Announced Strategic Capital Investments

    Recently Announced Strategic Capital Investments  $29 million of strategic capital Strategic Capital Investments Include: investments to support:  New continuous kiln at our Saltair – Value-added manufacturing sawmill – Grow value-added wood $12.3  Increased capacity for continuous million drying

31. Slide 31: Softwood Lumber Duties Update

    Softwood Lumber Duties Update  Duties on deposit of US$149.9 Combined Softwood Lumber Duties Rate (All Others Duty Rate %) million (C$203.0 million)(1) – Equates to 52% of Western’s 20.23% market capitalization(2) 17.91% – C$63.7 million included as a long-term receivable on Western’s balance sheet

32. Slide 32: Balanced Approach To Capital Allocation

    Balanced Approach To Capital Allocation   Payment of a regular quarterly dividend ($0.0125 per share) – Increased quarterly dividend 25% in May 2022   Disciplined annual capital expenditures – Approximately $30 to $40 million per year in annual maintenance of business and road capex   Maintain

33. Slide 33: Capital Allocation: Returning Capital To Shareholders While Growing And Investing In The Business

    Capital Allocation: Returning Capital To Shareholders While Growing And Investing In The Business Returning Capital Investing In To Shareholders Our Business Core Regular Quarterly Disciplined Annual Allocation Dividend Capital Expenditures Opportunistic Internal Strategic Share Repurchases Capital

34. Slide 34: Strategic Partnership With Huu-ay-aht First Nations In Tsawak-qin Forestry Limited Partnership

    Strategic Partnership With Huu-ay-aht First Nations In Tsawak-qin Forestry Limited Partnership  Tsawak-qin Forestry Limited Partnership consists of certain Western assets and liabilities in its Port Alberni Forest Operation, including Tree Farm Licence (“TFL”) 44 – Current LP Ownership: Western 65%

35. Slide 35: Growing the Business: New Branding Initiatives To Drive Growth

    Growing the Business: New Branding Initiatives To Drive Growth  An exclusive Home Centre brand covering all products  Targeting end-users and contractors  Appearance grade residential products (decking, siding, outdoor living)  Targeting end-users through the distribution and pro- dealer channel

36. Slide 36: Growing The Business: Strategic Acquisitions To Geographically Diversify And Grow the Business

    Growing The Business: Strategic Acquisitions To Geographically Diversify And Grow the Business 1 Arlington Distribution and Processing Centre Arlington, WA Overview Strategic Rationale  18-acre distribution and processing facility  Centralized warehousing and distribution near the high  170,000 s

37. Slide 37: Company Overview

    Company Overview Sustainable Product Lifecycle, From Forest To Customer

38. Slide 38: Diverse and Unique Species Mix

    Margin Strategy / Fibre And Processing Flow Chart Standing Timber Log Availability Margin Decision Market Segments Log Markets Domestic Log Markets External Log Export Log Allowable Sales Markets Annual Cut(1) Diverse and Unique Species Mix Hemlock / (AAC) For Logs Pulp Log Balsam ~34% of Logs Sold

39. Slide 39: External Log Sales

    Log Markets Determine Margin Decision Primary Target Logs by Value Log End Market Description Geographies Historical Average(1) 28%  Western’s sawlogs consumed by External internal manufacturing operations Log WFP 20% Sales  Internal log supply supplemented by Sawmills open market purchases to max

40. Slide 40: Manufacturing And Sales

    Manufacturing And Sales Log Marketing Manufacturing Sales Supply Strategy Strategy Strategy Log diameter and margin determines lumber products manufactured Log Cutting Patterns Log Dimension 5 – 11” 11 - 18” 16 - 22” 20 - 30” 24”+ Product Narrow Wide Grade & Squares Timbers Dimension Dimension Appea

41. Slide 41: Specialty Products

    Diversified Lumber Product Offering Primary Target Lumber by Value Lumber Products Description Historical Average(1) Geographies  Consumer-orientated products  Premier softwood for external 25% Cedar applications Global $897 45%  Naturally durable Specialty Products 11% million  Specialized prod

42. Slide 42: Specialty Products Focus

    Specialty Products Focus  Approximately 75% of WFP Average Lumber Price vs. Commodity Lumber Price (C$ per mfbm) lumber revenue is $1,800 generated from non- Strike Impacted $1,400 commodity products $1,000  Typically a significant $600 price premium to $200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

43. Slide 43: Seasonality Of The Business

    Seasonality Of The Business  Weather (snow pack, heat) Harvest Volume(1) Closing Log Inventory(1) (000 m3) (000 m3) and daylight can impact harvest volumes and costs 1,190 1,041 948 904  Inventory levels can 971 955 928 884 fluctuate through the year, impacting working capital Q1 Q2 Q3 Q4 Q1 Q2 Q3

44. Slide 44: Prior Strategic Capital Investments

    Prior Strategic Capital Investments  Initiatives focused on: – Reducing costs – Increasing efficiency Duke Point Sawmill Duke Point Planer Duke Point Planer: Auto grading – Increasing production of targeted products – Growing volumes  Applying proven Chemainus: Timber grading station Chemainus: Ti

45. Slide 45: Appendix

    Appendix Supplemental Materials

46. Slide 46: Repair And Remodelling Statistics

    Repair And Remodelling Statistics U.S. Repair & Remodelling Expenditures Remodelling Market Index (US$ billions) $202 90 $168 $175 $172 $178 Above 50 $158 $164 $161 $165 means majority $147 $139 $137 of survey $130 70 participants are $122 $115 $115 reporting better activity than prior quarter 50 30

47. Slide 47: Western Red Cedar – Illustrative Price Trends

    Western Red Cedar (“WRC”) – Illustrative Price Trends WRC High Value Clears WRC Timbers (C$ per mfbm) (US$ per mfbm) $12,000 $3,500 $10,000 $3,000 $8,000 $2,500 $6,000 $2,000 $4,000 $1,500 $2,000 $1,000 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 S

48. Slide 48: North America Statistics: Supply / Demand

    North America Statistics: Supply / Demand North American Housing Starts B.C. Interior Allowable Annual Cut (million) (million cubic metres) Forecast 45% U.S. 1.9 68 decline 2.0 1.9 1.8 1.8 Canada 1.7 0.2 1.6 0.3 0.3 0.2 1.5 1.5 1.5 0.2 1.5 1.4 1.4 56 0.2 1.3 0.2 0.2 1.2 0.2 0.2 50 50 1.1 0.2 49 48 4

49. Slide 49: North American Statistics: Lumber Prices

    North American Statistics: Lumber Prices North American Commodity Lumber Prices Hem-Fir, Coast Commodity Lumber Price (US$ per mfbm) (US$ per mfbm) Forecast $1,800 $916 Average ('23 - '27): $614 $846 $1,400 Average ('16 - '20): $446 $729 $697 $597 $613 $1,000 $567 $488 $462 $425 $600 $377 $341 $200

50. Slide 50: Japan Statistics

    Japan Statistics Japan Housing Starts Douglas Fir Lumber Prices to Japan (000s) (US$ per mfbm) 980 967 965 942 $2,300 883 892 909 905 860 860 860 850 815 $2,000 $1,700 $1,400 $1,100 $800 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23E '24E '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 Source: Jap

51. Slide 51: China Log And Lumber Statistics

    China Log And Lumber Statistics China Lumber Imports China Commodity Lumber Price (million m3) (US$ per mfbm) 37 37 37 $800 40 34 31 $700 29 30 26 27 27 24 21 $600 20 $500 10 $400 0 $300 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '16 '17 '18 '19 '20 '21 '22 '23 Russia North America New Zealand Othe

52. Slide 52: Western Forest Products: Historical Financial Snapshot – Annual

    Western Forest Products: Historical Financial Snapshot – Annual Revenue ($ millions) Adjusted EBITDA ($ millions) Strike $1,418 $1,444 $302 Impacted (1) $1,187 $1,143 $1,197 Strike $1,037 $1,082 Impacted (1) $978 $965 $808 $148 $153 $144 $137 $129 $109 $117 $117 ($2) '13 '14 '15 '16 '17 '18 '19 '20

53. Slide 53: Western Forest Products: Historical Financial Snapshot – Last 8 Quarters

    Western Forest Products: Historical Financial Snapshot – Last 8 Quarters Revenue ($ millions) Adjusted EBITDA ($ millions) $437 $120 $414 $353 $360 $356 $323 $328 $291 $63 $66 $65 $66 $53 $17 ($12) Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Lumber

54. Slide 54: Western Forest Products: Historical Cash Flow, Capital Allocation And Debt

    Western Forest Products: Historical Cash Flow, Capital Allocation And Debt Cash Flow from Operations(1) ($ millions) Capex(2) ($ millions) $282 Strike Impacted (3) $84 $128 $134 $118 $111 $99 $87 $59 $62 $80 $56 $55 $50 $44 $37 $32 $11 $19 ($10) '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '13 '14 '15 '1

55. Slide 55: Western Forest Products: Historical Share Price Performance And Price to Book

    Western Forest Products: Historical Share Price Performance And Price to Book Historical Share Price Relative to Adjusted EBITDA ($ per share | $ millions) $3.50 $302 $3.00 Strike Impacted (1) $2.50 ($ per share) $2.00 $148 $153 $144 $129 $137 $109 $117 $117 $1.50 Current Share $1.00 Price: $1.24(2)

56. Slide 56: Western Forest Products: Facilities

    Western Forest Products: Facilities Sawmills Production 2022 Production Mix Log Diameter Sawmill Location Capacity(1) Douglas Yellow Focus 2022 2021 WRC(2) Hemlock Fir Cedar Ladysmith Ladysmith, BC Small 90 80 88 -- 86% 14% -- Cowichan Bay Duncan, BC Medium 215 95 131 36% 55% 9% -- Saltair Ladysmith

57. Slide 57: Analyst Coverage

    Analyst Coverage Analyst & Firm Contact Information Hamir Patel 604-331-3047 CIBC hamir.patel@cibc.com Daryl Swetlishoff 604-659-8246 Raymond James daryl.swetlishoff@raymondjames.ca Paul Quinn 604 257-7048 RBC paul.c.quinn@rbccm.com Benoit Laprade 514-287-3627 Scotiabank benoit.laprade@scotiabank.co

58. Slide 58: Investor Relations Contacts

    Investor Relations Contacts Stephen Williams Executive Vice President & Chief Financial Officer 604-648-4572 swilliams@westernforest.com Glen Nontell VP, Corporate Development 604-648-4630 gnontell@westernforest.com These materials have been prepared by Management of the Company. No regulatory autho

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