Weyerhaeuser Company · NYSE:WY
Weyerhaeuser — Investor Presentation (June 2021)
60 slides from Weyerhaeuser's investor presentation, Jun 24, 2021
Slide 1: Weyerhaeuser Investor Presentation Late June 2021
Weyerhaeuser Investor Presentation Late June 2021
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES 2 This presentation contains statements and depictions that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including, without limitation, with respect to: future
Slide 3: Weyerhaeuser Investment Thesis
WEYERHAEUSER INVESTMENT THESIS UNMATCHED PORTFOLIO INDUSTRY-LEADING PERFORMANCE DISCIPLINED CAPITAL ALLOCATION SUPERIOR SHAREHOLDER VALUE + + 3 Strong ESG Foundation | Our Forests and Wood Products are Natural Climate Solutions
Slide 4: Positioned for Superior Long-Term Value Creation
4 NEW DIVIDEND FRAMEWORK STRONG BALANCE SHEET RECORD OPERATING PERFORMANCE EXPANDED LEADERSHIP TALENT ENHANCING ESG LEADERSHIP GROWING MARKET DEMAND Reduced debt by $1.1 billion Favorable investment grade profile Returning significant and appropriate levels of cash to shareholders Highest Adjusted E
Slide 5: Strong Housing Sector Fundamentals
STRONG HOUSING sector fundamentals Best U.S. Housing Backdrop in a Decade 5 Weyerhaeuser is uniquely positioned to capitalize on U.S. housing strength and create value for shareholders Renewed preference for single-family homes Ongoing work-from-home flexibility has encouraged migration from urban c
Slide 6: Unmatched Portfolio
UNMATCHED PORTFOLIO Our Quality, Diversity and Scale Cannot Be Replicated 6
Slide 7: Who We Are
WHO WE ARE A Tax-Efficient Timber REIT with Three Industry-Leading Businesses 7 11 MILLION ACRES OWNED IN THE U.S. 35 MANUFACTURING FACILITIES ACROSS NORTH AMERICA 14 MILLION ACRES LICENSED IN CANADA 19 Lumber Mills 6 Oriented Strand Board Mills 6 Engineered Lumber Mills 3 Plywood / Veneer Mills 1 M
Slide 8: What We Do
WHAT WE DO Create and Capture Superior Value at Every Step 8 Diverse customer mix that fully values our quality, scale, reliability and sustainable practices Proprietary seedlings yield superior growth, wood quality and survival characteristics Customized planting deploys the best genetic material f
Slide 9: How We Do It: Our Sustainability Strategy
For more information, see our full ESG Presentation, view our alignment with key ESG frameworks, and visit www.wy.com/sustainability. 9 HOW WE DO IT Our Sustainability Strategy Sustainability Is a Core Value Sustainability Is a Core Value CLIMATE HOMES COMMUNITIES WEYERHAEUSER SUSTAINABILITY AMBITIO
Slide 10: Strong ESG Foundation: Environmental Stewardship
100% OF OUR TIMBERLANDS ARE REFORESTED AFTER HARVEST WE PLANT ABOUT 150 MILLION TREES EVERY YEAR Sustainable Forestry • Carbon Sequestration • Reduced Environmental Footprint Strong ESG Foundation Environmental Stewardship WE PARTICIPATE IN 11 HABITAT CONSERVATION PLANS IN NORTH AMERICA WE HARVEST O
Slide 11: Strong ESG Foundation: Social Responsibility and Corporate Governance
Strong esg foundation Social Responsibility and Corporate Governance GOVERNANCE HUMAN CAPITAL MANAGEMENT 94% OF ALL SALARIED EMPLOYEES HAVE AN INDIVIDUAL DEVELOPMENT PLAN WE DRIVE SIGNIFICANT SAFETY IMPROVEMENT 1,600+ LEADERS & EMPLOYEES HAVE COMPLETED UNCONSCIOUS BIAS TRAINING ETHISPHERE NAMED WY O
Slide 12: Timberlands: Superior Holdings Create Value Today and Tomorrow
TIMBERLANDS SUPERIOR HOLDINGS CREATE VALUE TODAY AND TOMORROW Unrivaled portfolio that cannot be replicated Diversified holdings at scale Superior supply chain Enduring value across market cycles Enhancing portfolio over time Unmatched timber-growing expertise 12
Slide 13: Our Timberlands Portfolio
(1) See appendix for reconciliation to GAAP amounts and definition of Adjusted EBITDA. Other is excluded. Approximate total acres as of December 31, 2020. High value Douglas fir Premium land west of the Cascade mountains Sawlogs are approximately 90% of harvest Unique Japan export presence Premium S
Slide 14: Timberlands Customers: Diverse Customer Mix
THIRD-PARTY DOMESTIC CUSTOMERS WEYERHAEUSER MILLS EXPORT CUSTOMERS TIMBERLANDS REVENUE BY END MARKET (2020) We flex supply to meet dynamic customer demands and capture market opportunities TIMBERLANDS CUSTOMERS Capture Full Value Through a Diverse Customer Mix 14
Slide 15: Timberlands Export Markets
Percentages based on 2020 full year Timberlands export sales. TIMBERLANDS EXPORT MARKETS Unrivaled Market Position and Supply Chain Expertise UNIQUE JAPAN BUSINESS Multi-decade relationships supplying steady post & beam housing market Western timberlands ownership provides premium logs at unrivaled
Slide 16: Timberlands: Enduring Value Across Market Cycles
NCREIF Timberland INDEX INDEXED MARKET VALUE Per Acre, by Region Source: National Council of Real Estate Investment Fiduciaries (NCREIF) Timberland Index. Changes in index composition may affect average market values (e.g. NCREIF Northwest expanded to include Idaho in 2013). TIMBERLANDS Enduring Val
Slide 17: Timberlands Portfolio Management
ENHANCING AND OPTIMIZING TIMBERLAND HOLDINGS TIMBERLANDS PORTFOLIO MANAGEMENT Disciplined and Opportunistic 17 $1.6 BILLION OF PROCEEDS(1) FROM STRATEGIC DIVESTITURES SINCE 2017 U.S. South U.S. West (1) Divestitures include Montana (2020), Michigan (2019), Uruguay (2017) and Twin Creeks (2017). Twin
Slide 18: Real Estate, Energy & Natural Resources
REAL ESTATE, ENERGY & NATURAL RESOURCES MAXIMIZE THE VALUE OF EVERY ACRE WE OWN Continually evaluate every acre Deliver a significant premium to timber value Focus on emerging natural climate solutions Capture the full value of surface and subsurface assets 18 Generate consistent and reliable cash f
Slide 19: Real Estate: Unlock Higher and Better Use Value
REAL ESTATE Unlock Higher and Better Use (HBU) Value 1.3 MILLION ACRES with HBU attributes CONTINUALLY EVALUATE every acre ≤1% of timberland acres SOLD ANNUALLY 55–80% Premium to Timber Value SINCE INCEPTION consistently exceeding 30% target Asset Value Optimization (AVO) PROCESS 19 Approximate acre
Slide 20: Energy & Natural Resources
ENERGY & NATURAL RESOURCES Maximize the Value of Surface and Subsurface Rights EBITDA MIX (1) Infrastructure Rights of Way Wind and Solar Power Wetland Mitigation Banks Aggregates & Industrial Materials Oil & Natural Gas Oil & Natural Gas Wind, Solar & Other Aggregates & Industrial Materials Cell To
Slide 21: Real Estate, Energy & Natural Resources: Consistent Cash Generation
REAL ESTATE, ENERGY & NATURAL RESOURCES Consistent, Reliable Cash Generation (1) See appendix for reconciliation to GAAP amounts. The quantity of real estate HBU property was reduced by divestitures of the company’s Michigan and Montana timberlands in 2019 and 2020, respectively. Adjusted EBITDA(1)
Slide 22: Wood Products: Maximizing Margin Through the Cycle
WOOD PRODUCTS MAXIMIZING MARGIN THROUGH THE BUSINESS CYCLE Unmatched scale, brand and reputation Diversified mix of high-quality products Relentless focus on industry-leading cost structure Diverse customer mix and demand drivers Superior returns through the cycle: “Black at the bottom” 22
Slide 23: Wood Products Portfolio
LUMBER ORIENTED STRAND BOARD ENGINEERED WOOD PRODUCTS DISTRIBUTION WOOD PRODUCTS PORTFOLIO Industry-Leading Scale, Diversification and Quality 2nd largest producer in North America 19 lumber mills 5.2 BBF capacity 4th largest producer in North America 6 oriented strand board mills 3.1 BSF capacity L
Slide 24: Wood Products: Diverse Demand Drivers and Customer Mix
WOOD PRODUCTS Diverse Demand Drivers and Customer Mix NEW RESIDENTIAL: SINGLE & MULTI-FAMILY REPAIR & REMODEL: PROFESSIONAL AND DIY PERCENT OF SALES BY END MARKET (2020) NON-RESIDENTIAL CONSTRUCTION, INDUSTRIAL AND OTHER USES 24 Percentages are approximate based on 2020 full year Wood Products net s
Slide 25: Wood Products: Achieved Black at the Bottom
WOOD PRODUCTS Achieved “Black at the Bottom” $ in millions Delivering and Maintaining Record Low Cost Structure Improved EWP & Distribution EBITDA Through Market Headwinds ADJUSTED EBITDA(1) Positioned for Superior Performance Through the Cycle Cost Net of Logs/MBF Indexed to 2013 Controllable Cost/
Slide 26: Industry-Leading Performance
INDUSTRY-LEADING PERFORMANCE Significant, Sustainable Margin Improvement Through the Cycle 26
Slide 27: Operational Excellence
27 27 OPERATIONAL EXCELLENCE Delivering Superior Execution and Ongoing Improvement OUR FOCUS AREAS TIMBERLANDS Harvest & Haul • Silviculture • Marketing • Merchandising WOOD PRODUCTS Controllable Cost • Recovery • Reliability • Product Mix Cross- Business OpX MARGIN IMPROVEMENT FUTURE VALUE COST AVO
Slide 28: Our OpX Scorecard
DRIVING SUPERIOR RELATIVE PERFORMANCE Our OpX Scorecard We are “Black at the Bottom” TIMBERLANDS ADJUSTED EBITDA(1,2) PER ACRE WEST LUMBER(4) ORIENTED STRAND BOARD SOUTH ENGINEERED WOOD PRODUCTS DISTRIBUTION Source for competitor data: public SEC filings, National Council of Real Estate Investment F
Slide 29: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION Long-Term Commitment to Balancing Three Key Priorities 29
Slide 30: Disciplined Capital Allocation: Three Key Priorities
Disciplined capital allocation Balanced and Sustainable Philosophy – Three Key Priorities 30 INVEST IN OUR BUSINESSES RETURN CASH TO SHAREHOLDERS MAINTAIN AN APPROPRIATE CAPITAL STRUCTURE CORE ALLOCATION Investment Grade Credit Rating Disciplined Capital Expenditures Sustainable Base Dividend OPPORT
Slide 31: Base Plus Variable Supplemental Dividend Framework
0 RETURNING CASH TO SHAREHOLDERS “Base Plus Variable Supplemental” Dividend Framework First quarter 2021 Adjusted FAD totaled $645 million 31 (1) See appendix for definition of Adjusted FAD and reconciliation to GAAP amounts. (2) Weyerhaeuser may also utilize opportunistic share repurchase to return
Slide 32: Dividend Framework is Sustainable Over the Business Cycle
Returning cash to shareholders Dividend Framework is Sustainable Over the Business Cycle 32 SUSTAINABLE BASE DIVIDEND supported by Timberlands and Real Estate & ENR cash flow, even at bottom of the cycle SUPPLEMENTAL DIVIDEND or share repurchase to achieve targeted return of 75-80% of annual Adjuste
Slide 33: Returning Cash to Shareholders: Demonstrated Commitment
Returning cash to shareholders Demonstrated Commitment 33 RETURNED NEARLY $9 BILLION TO SHAREHOLDERS SINCE 2014 Through Dividends and Share Repurchase $ millions
Slide 34: Capital Expenditures
CAPITAL EXPENDITURES Wood Products – $320 million Maintenance capex Projects to improve costs and reliability Beginning Holden Sawmill modernization Timberlands – $125 million Reforestation and silviculture Roads and infrastructure Corporate – $15 million IT system upgrades Real Estate & ENR – Very
Slide 35: Solid Balance Sheet and Financial Flexibility
Maintain AN appropriate capital structure Solid Balance Sheet and Financial Flexibility (1) Last twelve months Adjusted EBITDA for each quarter presented. See appendix for reconciliation to GAAP amounts. 35 NET DEBT TO ADJUSTED EBITDA (LTM)(1) 3.5x INVESTMENT GRADE CREDIT PROFILE Baa2 Moody’s BBB St
Slide 36: Superior Shareholder Value
SUPERIOR SHAREHOLDER VALUE Capitalizing on Strong Portfolio and Operational Performance 36
Slide 37: Favorable Fundamentals Across Our Markets
FAVORABLE FUNDAMENTALS ACROSS OUR MARKETS Driven By Continued Demand for U.S. Housing LUMBER ORIENTED STRAND BOARD WESTERN LOGS SOUTHERN LOGS 37 Improving sawlog demand Fiber log demand generally stable Log pricing flat, expect sawlog prices will rise slowly over time Emerging log export opportunity
Slide 38: Our Working Forests Are Part of the Climate Solution
OUR WORKING FORESTS ARE PART OF THE CLIMATE SOLUTION An Endlessly Renewable Resource that Absorbs and Stores Carbon OUR GROWING FORESTS ABSORB CO2 OUR WOOD PRODUCTS STORE CARBON FROM THE ATMOSPHERE FOR THE LIFE OF THE PRODUCT WE PLANT MORE TREES THAT ABSORB EVEN MORE CO2 AS THEY GROW 38 WOOD IS THE
Slide 39: Weyerhaeuser Investment Thesis
WEYERHAEUSER INVESTMENT THESIS UNMATCHED PORTFOLIO INDUSTRY-LEADING PERFORMANCE DISCIPLINED CAPITAL ALLOCATION SUPERIOR SHAREHOLDER VALUE + + 39 Strong ESG Foundation | Our Forests and Wood Products are Natural Climate Solutions
Slide 40: Appendix: Market Overview and Supplemental Information
APPENDIX Market Overview and Supplemental Information 40
Slide 41: Expect Long-Term Growth in U.S. Housing
EXPECT LONG-TERM GROWTH IN U.S. HOUSING Source: U.S. Census Bureau YTD as of April 2021 41 Increased demand from major buyer segments Low mortgage rates, and record low inventories for existing and new home sales Uptick in mortgage rates could dampen demand Material constraints, and labor and lot av
Slide 42: Level of Construction Remains Below Housing Need
LEVEL OF CONSTRUCTION REMAINS BELOW HOUSING NEED ANNUAL U.S. HOUSING NEED MILLIONS OF UNITS Source: FEA, Q1 2021 Based on 2020-2030 U.S. POPULATION BY AGE 2021 Source: U.S Census Bureau, FEA 42 Current pace of building activity is still insufficient to meet underlying demand U.S. housing market unde
Slide 43: Strong Repair & Remodel Activity
STRONG REPAIR & REMODEL ACTIVITY Demand transitioning from do-it-yourself home improvement to larger, professionally built projects Expect continued favorable repair & remodel sales volumes Housing stock continues to age, with median age greater than 40 years Rising home equity U.S. HOUSING STOCK ME
Slide 44: Lumber Demand and Fundamentals Are Favorable
LUMBER DEMAND AND FUNDAMENTALS ARE FAVORABLE LUMBER PRICING FRAMING LUMBER COMPOSITE NORTH AMERICAN LUMBER CONSUMPTION BY END USE, 2020 Source: FEA Source: Random Lengths Q2 QTD as of 6/18/2021 44 Strong new residential construction activity and solid home improvement demand Favorable industry opera
Slide 45: Lumber: B.C. Mill Closures Have Reduced Industry Capacity
LUMBER B.C. Mill Closures Have Reduced Industry Capacity Log supply declining in British Columbia due to fires, pine beetle and lower allowable cut Canadian lumber exports to the U.S. remain subject to duties Canadian share of lumber market has decreased U.S. Southern lumber production gaining share
Slide 46: OSB Market Fundamentals Are Positive
OSB MARKET FUNDAMENTALS ARE POSITIVE 46 Strong demand from new residential construction activity High industry operating rates Pricing remains in record territory ORIENTED STRAND BOARD PRICING 7/16” NORTH CENTRAL WY’s SENSITIVITY CHANGE IN REALIZATIONS $10/MSF ≈ $30 million EBITDA ANNUALLY WEYERHAEU
Slide 47: Western Logs: Favorable Domestic and Export Demand
Largest driver of demand is growing U.S. housing activity Solid Japanese demand for premium logs Improved Chinese demand with European and Australian supply challenges Able to rapidly flex volume in response to changing markets JAPAN HOUSING STARTS WOOD-BASED WESTERN SAWLOG PRICING DELIVERED DOUGLAS
Slide 48: Southern Logs: Improving Sawlog Demand
Sawlog demand increasing as mill operating rates rise WY fiber log demand stable WY’s timberlands are well positioned to benefit from rising lumber production and capacity across the South Additional upside opportunity from Southern log exports 48 SOUTHERN LOGS Improving Sawlog Demand Will Drive Lon
Slide 49: Well-Laddered Debt Profile
WELL-LADDERED DEBT PROFILE Minimal Maturities Until 2023 (1) $860 million WestRock note maturing 2023 includes extension option. Revolving credit facility was undrawn as of March 31, 2021. This credit facility has a capacity of $1.5 billion and expires in January 2025. $5.3 billion of long-term debt
Slide 50: ESG External Recognition
LISTINGS ON ESG INDICES ESG RATINGS AND RANKINGS We have a “WINNING” RATING from 2020 WOMEN ON BOARDS 3BL MEDIA named WY one of the 100 BEST CORPORATE CITIZENS 50 Environmental, social & governance External Recognition JUST CAPITAL named WY one of AMERICA’S MOST JUST Companies ETHISPHERE named WY on
Slide 51: We Are Timber-Growing Experts
TARGETED SILVICULTURE CUSTOMIZED PLANTING We are TIMBER-GROWING Experts Deeply Committed to Environmental Stewardship PROPRIETARY SEEDLINGS We cultivate seedlings with superior survival, growth, and wood-quality characteristics We deploy the best genetic material for each acre on our land base Our p
Slide 52: Our Timber Supply-Chain Expertise Is Unrivaled
Our TIMBER Supply-chain EXPERTISE is unrivaled We Capture Maximum Value At Each Step Unmatched supply chain capabilities MATURE FORESTS We grow diverse product offerings in scale quantities with superior, reliable quality DATA-DRIVEN MARKETING SUSTAINABLE HARVESTING Our expert harvest planning captu
Slide 53: Our Wood Products Supply Chain Is Efficient
9 MILLION PRODUCT DISTRIBUTION LOW-COST MANUFACTURING OUR WOOD PRODUCTS SUPPLY CHAIN IS EFFICIENT We Drive Out Cost and Maximize Value From Raw Materials to End Use FIBER PROCUREMENT We source the optimal mix of raw materials internally and externally to maximize margins Our operational excellence a
Slide 54: Our Vision
OUR VISION > tinver‘end!ond forest products company. HOW WE WIN ‘WHAT IT LOOKS LIKE Vv Vv CORE RELENTLESS Key WEYERHAEUSER, VALUES FOCUS BEHAVIORS [ATTRULY GREAT COMPANY Safety Integrity Gitizenship Sustainability + Develop our people ‘Act with urgency Drive operational |*f| Beaccountable | = ‘excel
Slide 55: Adjusted EBITDA Reconciliation: Total Company
ADJUSTED EBITDA RECONCILIATION Total Company Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold, unallocated pension
Slide 56: Net Debt to Adjusted EBITDA Reconciliation
Net debt to ADJUSTED EBITDA RECONCILIATION Total Company 56 LTM = last twelve months. Net debt to Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Net debt to Adjusted EBITDA, as we define it, is long-term debt and borrowings on line of credit, n
Slide 57: Adjusted EBITDA Reconciliation: Timberlands
Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold, unallocated pension service costs and special items. Adjusted EB
Slide 58: Adjusted EBITDA Reconciliation: Wood Products
Amounts presented reflect the results of operations acquired in our merger with Plum Creek Timber, Inc. beginning on the merger date of February 19, 2016. Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is opera
Slide 59: Adjusted EBITDA Reconciliation: Real Estate, Energy & Natural Resources
Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold, unallocated pension service costs and special items. Adjusted EB
Slide 60: Adjusted Funds Available for Distribution (FAD) Reconciliation
ADJUSTED FUNDS AVAILABLE FOR DISTRIBUTION (FAD) RECONCILIATION 60 Funds available for distribution (FAD) is a non-GAAP measure that management uses to evaluate the company's liquidity. FAD, as we define it, is net cash from operations adjusted for capital expenditures. FAD measures cash generated du