Western Forest Products Inc. · TSX:WEF

Western Forest Products — Investor Presentation (September 2022)

60 slides from Western Forest Products's investor presentation, September 2022

1. Slide 1: Investor Presentation September 2022

   INVESTOR PRESENTATION September 2022 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 $1.5 Billion $250 Million 37% $495 Million Products and In Last Twelve In Last Twelve Of Historical Sales to Market Capitalization Practices Months Revenue Months EBITDA International Markets and Listed on the TSX Strong 1+ Billion Four 5.9 Million m3 2,000+ Environme

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 product focus provides greater earnings stability M

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

   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

   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 2020 Sustainability Report is available here 11

13. Slide 13: 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 2020  Refo

14. Slide 14: Western's Net Positive Climate Impact

    Western’s Net Positive Climate Impact Total Carbon Storage Annual Carbon Balance  The “balance sheet” perspective  The “income statement” perspective  Measures the carbon stored in  Measures Western’s annual carbon Western’s managed forests balance, calculated as the annual carbon sequestered by

15. Slide 15: Social Responsibility

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

16. Slide 16: Reconciliation With First Nations: Huu-ay-aht 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 in 2021(1) fostering positive working TFL 44 LP and relationships with Indigenous Integrated Resource groups Management Plan – Information sharing Integrated Resource Management Plan – Joint sustainable

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

    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) 59% $1.5 Billion Specialty In Last Twelve 5% Lumber Month Revenue Specialty Lumber 17% Commodity Lumber $250 Million Logs In Last Twelve 59% 19% Month EBITDA By-products $84 Million Net Cash on the Balance Sheet at the end of Q2/22

26. Slide 26: What Are Our Priorities

    What Are Our Priorities: Sustainably Execute On Our Long-term Priorities Explore Opportunities  Pursue margin-focused business opportunities  Grow our wholesale lumber and branded products business  Specialty products acquisitions Grow the Base  Optimize operations to improve margins  Targeted,

27. Slide 27: Company Updates

    Company Updates Sustainably Executing On Our Strategic Priorities

28. Slide 28: Second Quarter 2022 Results

    Second Quarter 2022 Results Highlights  Adjusted EBITDA of $66.2 million Revenue $437.4 Million  Announced Calvert acquisition  Confirmed $29 million in capital Adjusted projects in BC operations $66.2 EBITDA Million  Announced the renewal of a 10% normal course issuer bid Adjusted EBITDA % 15%

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$141.4 Combined Softwood Lumber Duties Rate (All Others Duty Rate %) million (C$182.0 million)(1) 20.23% – Equates to 37% of Western’s market capitalization(2) 17.91% – C$41.4 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) – Increase 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

    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: 2021 Was A Record Year

    2021 Was A Record Year And We Made Significant Progress Advancing Our Strategic Priorities Financial Performance Health and Safety  Record adjusted EBITDA of $302.1 million  No workplace COVID-19 outbreaks  Return on capital employed: 45%  Severity rate ahead of target goal  Total shareholder r

35. Slide 35: Strategic Partnership With The Huu-ay-aht First Nations In TFL 44

    Strategic Partnership With The Huu-ay-aht First Nations In TFL 44  Sale of Western’s ownership interest in TFL 44 LP(1) to HVLP(2) to occur in phases – TFL 44 LP(1) consists of certain Western assets and liabilities in its Port Alberni Forest Operation, including Tree Farm Licence (“TFL”) 44 – Long

36. Slide 36: Growing The Business: Sales And Marketing Initiatives

    Growing The Business: Sales And Marketing Initiatives And Growth Wholesale Lumber Growth Strategic Marketing Initiatives  Form strategic agreements with global  Increase our access to North American Home suppliers to offer an expanded product line Centre and Pro-Dealer sales channels that delivers

37. Slide 37: Growing the Business: New Branding Initiatives

    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

38. Slide 38: Growing The Business: Strategic Acquisitions

    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

39. Slide 39: Company Overview

    Company Overview Sustainable Product Lifecycle, From Forest To Customer

40. Slide 40: Timber Resource Is Directed To Highest Margin Opportunity

    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

41. Slide 41: Log Markets Determine Margin Decision

    Log Markets Determine Margin Decision Primary Target Logs by Value Log End Market Description Geographies Historical Average(1) 29%  Western’s sawlogs consumed by External internal manufacturing operations Log WFP Sales  Internal log supply supplemented by 20% Sawmills open market purchases to max

42. Slide 42: 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

43. Slide 43: Diversified Lumber Product Offering

    Diversified Lumber Product Offering Primary Target Lumber by Value Lumber Products Description Historical Average(1) Geographies  Consumer-orientated products  Premier softwood for external 24% Cedar applications Global $861 46%  Naturally durable Specialty Products 11% million  Specialized prod

44. Slide 44: Specialty Product Focus

    Specialty Product Focus  Approximately 76% 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 commodity lumber Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

45. Slide 45: 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 1,237 1,053  1,008 Inventory levels can 981 973 928 942 882 fluctuate through the year, impacting working capital Q1 Q2 Q3 Q4 Q1 Q2

46. Slide 46: 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

47. Slide 47: Appendix

    Appendix Supplemental Materials

48. Slide 48: Repair And Remodelling Statistics

    Repair And Remodelling Statistics U.S. Repair & Remodelling Expenditures Remodelling Market Index (US$ billions) 90 $186 $175 $168 $165 $170 Above 50 $158 $157 $161 means majority $147 of survey $139 $137 70 $130 participants are $122 reporting better $115 $115 activity than prior quarter 50 30 '12

49. Slide 49: 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 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 Source: R

50. Slide 50: 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 U.S. 2.0 68 41% 2.0 1.9 1.8 1.8 decline Canada 0.2 1.6 0.3 1.6 0.2 0.2 58 1.5 1.5 56 1.5 1.4 1.4 0.2 0.2 1.3 0.2 1.2 0.2 0.2 50 50 49 1.1 0.2 48 48 0.2

51. Slide 51: North American Statistics: Lumber Prices

    North American Statistics: Lumber Prices North American Commodity Lumber Prices Hem-Fir, Coast Commodity Lumber Price (US$ per mfbm) Forecast (US$ per mfbm) $1,800 $916 Average ('23 - '26): $619 $859 $1,400 Average ('16 - '20): $446 $688 $678 $1,000 $597 $571 $541 $488 $425 $600 $377 $341 $200 '12 '

52. Slide 52: Japan Statistics

    Japan Statistics Japan Housing Starts Douglas Fir Lumber Prices to Japan (000s) (US$ per mfbm) 980 967 965 $2,300 909 942 920 883 892 905 875 860 865 815 $2,000 $1,700 $1,400 $1,100 $800 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22E '23E '24E '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 Source: Japan

53. Slide 53: China Log And Lumber Statistics

    China Log And Lumber Statistics China Lumber Imports China Commodity Lumber Price (million m3) (US$ per mfbm) $800 40 37 37 37 34 31 $700 29 28 30 26 27 24 21 $600 20 $500 10 $400 0 $300 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 LTM '16 '17 '18 '19 '20 '21 '22 Jun-30 Russia North America New Zealand O

54. Slide 54: Historical Financial Snapshot – Annual

    Western Forest Products: Historical Financial Snapshot – Annual Revenue ($ millions) Adjusted EBITDA ($ millions) $1,478 $1,418 $302 Strike $1,187 $1,143 $1,197 Impacted (1) $250 $1,037 $1,082 Strike $978 $965 Impacted (1) $808 $148 $153 $144 $129 $117 $117 $109 (2) $32 $85 ($2) '13 '14 '15 '16 '17

55. Slide 55: Historical Financial Snapshot – Last 8 Quarters

    Western Forest Products: Historical Financial Snapshot – Last 8 Quarters Revenue ($ millions) Adjusted EBITDA ($ millions) $437 $414 $353 $360 $120 $319 $323 $328 $291 $71 $66 $66 $63 $65 (1) $53 $32 $34 $40 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/20 Q4/20 Q1/21 Q2/21 Q3/21 Q4/21 Q1/22 Q2

56. Slide 56: 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 $84 Strike $128 $134 Impacted (3) $62 $111 $118 $109 $59 $56 $55 $99 $50 $87 $80 $37 $32 $33 $19 $11 '13 '14 '15 '16 '17 '18 '19 '20 '21 LTM '13 '14 '15 '16

57. Slide 57: Historical Share Price Performance And Price to Book

    Western Forest Products: Historical Share Price Performance And Price to Book Historical Share Price Relative to EBITDA ($ per share | $ millions) $3.50 $302 $3.00 Strike Impacted (1) $250 $2.50 ($ per share) $2.00 $148 $153 $144 $129 $117 $117 Current Share $1.50 $109 $32 (2) Price: $1.52(3) $1.00

58. Slide 58: Western Forest Products: Facilities

    Western Forest Products: Facilities Sawmills Production 2021 Production Mix Log Diameter Sawmill Location Capacity(1) Douglas Yellow Focus 2021 2020(2) WRC(3) Hemlock Fir Cedar Ladysmith Ladysmith, BC Small 90 88 19 -- 100% -- -- Cowichan Bay Duncan, BC Medium 215 131 82 47% 45% 8% -- Saltair Ladysm

59. Slide 59: 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

60. Slide 60: 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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