West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Q2 2021 Earnings Presentation
37 slides from West Fraser Timber's earnings presentation, July 2021
Slide 1: Investor Presentation
Investor Presentation July 2021
Slide 2: Forward-looking statements
2 General: This presentation contains “forward-looking information” and “forward-looking statements” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of the U.S. Securities Act of 1933, the U.S. Securities Exchange Act of 1934, and the “sa
Slide 3: Q2 2021 Earnings Summary
Q2 2021 Earnings Summary
Slide 4: Consolidated Financial Results
Consolidated Financial Results 4 US$ Millions US$ Millions Adjusted EBITDA* Q2-21 Q1-21 Q2-21 Q1-21 Lumber $ 994 $ 646 Sales $ 3,779 $ 2,343 NA EWP** 1,106 353 Costs and Expenses** 1,793 1,464 EU EWP** 39 11 Operating earnings 1,986 879 Pulp & Paper 25 11 Finance Expense, net (20) (13) Corporate/Oth
Slide 5: Q2 Consolidated Adjusted EBITDA Reconciliation
Q2 Consolidated Adjusted EBITDA Reconciliation 5 Higher stumpage, primarily in Canada, and higher labour and other input costs Recovery from seasonal railcar shortages in Canada and a period of extreme winter conditions in the U.S. South Results from February 1, inclusive of $93 million purchase pri
Slide 6: West Fraser North America Lumber and EWP EBITDA Margin
6 West Fraser North America Lumber and EWP EBITDA Margin 70% NA Lumber Average: 16% 60% NA EWP (proforma) Average: 21% 50% 40% 30% 20% 10% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1-21* North America Lumber North America EWP (proforma) Note: Lumber EBITDA is after duties; North Ame
Slide 7: Q2-21 versus Q1-21
7 Q2-21 versus Q1-21 US$ millions unless Q2 2021 Q1 2021 Change otherwise indicated Recovery from seasonal railcar shortages in Canada and a period of Lumber Shipments (MMfbm) 1,628 1,389 239 extreme winter conditions in the U.S. South NA OSB Shipments (MMsf 3/8”) 1,585 1,010 575 Full quarter of OSB
Slide 8: Liquidity ($millions)
Liquidity ($millions) 8 Available liquidity Scheduled maturities 4,000 1,500 as of July 28, 2021 3,500 1,200 3,000 2,500 900 2,000 1,500 600 1,000 300 500 0 0 2019 Q120 Q220 Q320 Q420 Q121 Q221 2021 2022 2023 2024 2025 2026 2027 Bank lines Cash Term loan Notes Revolver Debt to capitalization 60% 40%
Slide 9: Strategic Capital Program
Strategic Capital Program 9 Investment program to support safety, cost improvements and strategic growth initiatives Work on approximately $180 million of identified projects to begin H2 2021 and continue through 2023 Lumber NA EWP Project Costs ~$150M ~$30M Payback 3-4 years 3-4 years Volume/Pr
Slide 10: Demand Conditions for Wood Building Products
10 Demand Conditions for Wood Building Products U.S. Housing Starts (not seasonally adjusted) Leading indicator of Remodeling Activity $B 4 Qtr Moving Improvements and Repairs 160 $360 14% 140 $350 4 Qtr Moving rate of Change 12% 120 $340 100 $330 10% M Starts Seasonally adjusted: $320 8% 80 2018: 1
Slide 11: Lumber Supply Conditions
Lumber Supply Conditions 11 Total North America Lumber Supply (Production) North America Lumber Supply (Production) 20.0 2020 Canada Other 15.0 23% Billion Board Feet US South 35% 10.0 5.0 US Other BC 0.0 27% 15% Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Canada US
Slide 12: OSB Supply Conditions
OSB Supply Conditions 12 Total North America OSB Supply (Production) North America OSB Supply (Production) 2020 7.5 US North Billion Square Feet 3/8” basis 12% 6.0 Canada 32% 4.5 3.0 1.5 US South 0.0 56% Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Canada US South US
Slide 13: Total Shareholder and Capital Returns
13 Total Shareholder and Capital Returns Annualized Total Shareholder Return from January 1, 2006 to June 30, 2021* 12% 10.5% 10.5% 9.9% 10% 8% 6.4% 6.2% 6.1% 6% 5.5% 4% 2% 0% West Fraser S&P 500 S&P/TSX Peer 1 Peer 2 Peer 3 Peer 4 Comp Capital Allocation from January 1, 2018 to June 30, 2021** > $9
Slide 14: Summary
Summary 14 Q2 2021 Recap Looking Forward Manageable operational impact due to COVID-19 Fundamentals for wood product demand remain favorable Results buoyed by strong lumber and EWP demand Successful integration of Norbord Liquidity grew significantly even after repaying Continued focus o
Slide 15: West Fraser Overview
West Fraser Overview
Slide 16: West Fraser delivers climate-smart wood and building solutions
Responsible, Resourceful and Climate-Smart 16 West Fraser Norbord Combined West Carbon Stored in Carbon stored in wood products 9.4 million 5.8 million 15.2 million Products (2019: in tCO2e) Fraser delivers GHG Emissions Scope 1 and 2 GHG emissions 1,494.0 662.4 2,156.4 climate- (2019, thousands of
Slide 17: 2021 Milestone: Two Billionth Tree
2021 Milestone: Two Billionth Tree 17 • West Fraser is a leader in producing sustainable, diversified wood products from a renewable resource • This summer, we will plant our two billionth tree as part of our reforestation program to renew the forests that we sustainably manage • This is part of our
Slide 18: A Global Wood Products Leader
18 A Global Wood Products Leader West Fraser’s diverse wood products portfolio recently expanded with the addition of a leading EMPLOYEES WORLDWIDE LUMBER MILLS PULP & PAPER 850 GWH RENEWABLE MILLS ENERGY FACILITIES global oriented strand board (OSB) producer Created the destination provider for
Slide 19: Operating Footprint on Two Continents
Operating Footprint on Two Continents 19
Slide 20: More Relevant, Efficient and Valuable to Principal Customer Segments
More Relevant, Efficient and Valuable to Principal Homebuilder, 20 Building Construction and Pro-Dealer Customer Segments
Slide 21: West Fraser is North America's Largest Lumber Producer
21 West Fraser is North America’s Largest Lumber Producer West Fraser 2020 Capacity 6.7 Billion feet West Fraser 11% British Columbia Weyerhaeuer 27% 9% 2020 N.A. Canfor Other Industry US South 44% 8% Production 48% 60 Bfbm Georgia-Pacific Tolko 5% 2% Interfor 5% Alberta Idaho Forest 25% 2% Resolute
Slide 22: West Fraser is a Leading OSB Producer
22 West Fraser is a Leading OSB Producer West Fraser Panel Capacity by Region North American OSB Industry Europe European OSB Industry 22% Other US Martco 6% West 38% Other 6% Fraser 10.9 16% Huber 28% Bsf-3/8" Smartply 8% Sonae- 4% Kronospan Industry Arauco 40% Tolko 5% Industry 8% Capacity Capacit
Slide 23: Market Overview
Market Overview
Slide 24: Lumber and OSB Supply Overview
Lumber and OSB Supply Overview 24 Lumber OSB Aggregate North American production growth constrained It is a lengthy process to construct and ramp production of a by log availability in multiple regions, particularly BC greenfield OSB mill, with an estimated three to five years to get to “first p
Slide 25: This is not 2005 – Today's North American Lumber Supply
This is not 2005 – Today’s North American Lumber Supply 25 80 2.5 Lumber production growth stagnating even with strong markets in 2017 and 2018; labour, equipment and log availability challenge growth 70 2.0 60 U.S. Housing Starts (millions) 50 Lumber Supply Demand Billion Board Feet 1.5 BC Other U.
Slide 26: North American Lumber Production and Housing Starts Equivalence
North American Lumber Production in 2020 Housing Starts Equivalence* 26 1.6 0.10 0.52 1.49 1.4 100,000 additional starts U.S. Housing Starts (millions) 1.2 could require ~2.4BBF of 0.35 additional production 1.0 (approximately 10 new sawmills) 0.8 0.40 0.6 0.4 0.22 0.2 0.0 B.C. Canada Other U.S. Oth
Slide 27: North American OSB Operating Capacity
North American OSB Operating Capacity* 27 OSB Operating Capacity and U.S. Housing Starts 30 2.5 Some industry capacity curtailed in late 2019 has re-started while some remains idled; one mill 25 was permanently closed in 2020 2.0 West Fraser re-started its OSB mill in Chambord, 20 Quebec in Marc
Slide 28: North American OSB Capacity and Housing Starts Equivalence
North American OSB Capacity in 2020 Housing Starts Equivalence* 28 1.6 0.10 0.41 1.45 1.4 100,000 additional starts U.S. Housing Starts (millions) 1.2 could require 0.92 Bsf 0.17 (3/8-inch) of additional 1.0 OSB capacity, which is 0.22 the approximate capacity 0.8 of one large-scale 0.25 greenfield
Slide 29: North American OSB Operating Capacity
North American OSB Operating Capacity* 29 OSB Operating Capacity and U.S. Housing Starts 30 2.5 Some industry capacity curtailed in late 2019 has re-started while some remains idled; one mill 25 was permanently closed in 2020 2.0 West Fraser re-started its OSB mill in Chambord, 20 Quebec in Marc
Slide 30: North America Wood Products End-Use
North America Wood Products End-Use Driven by Demand in New Residential and Lower-Volatility R&R Markets 30 North America Lumber End Use 2020 Domestically Produced Panel Consumption 2019 Non-residential Other 22 MDF 20.9 6% 20 Particleboard SW Plywood HW Plywood OSB 22% 18 New Industrial 16 Resident
Slide 31: West Fraser Timber Co. Ltd.
West Fraser Timber Co. Ltd. 31 These materials have been prepared by Management of the Company. No regulatory authority has approved or disapproved TSX and NYSE: WFG of the contents of these materials. These materials do not constitute an offer to sell or the solicitation of an offer to buy any secu
Slide 32: Appendix
Appendix
Slide 33: Analyst Estimates
33 Analyst Estimates (SPF & SYP US$/Mfbm, OSB US$/Msf (7/16" basis), China NBSK US/tonne 2021 SPF 2x4 2021 SYPW 2x4 2021 OSB NC 7/16” 2021 China NBSK CIBC $862 CIBC $819 BMO $819 RBC $829 RJ $900 BMO $835 RJ $850 CIBC $857 BMO $909 BNS $875 BNS $878 BNS $858 BNS $922 RJ $875 CIBC $938 TD $863 TD $94
Slide 34: US Housing Start Estimates
34 US Housing Start Estimates (Thousands) 1,700 1,600 1,500 1,400 1,380 1,300 1,290 1,250 1,203 1,200 1,174 1,112 1,100 1,000 2015 2016 2017 2018 2019 2020 2021F 2022F Actual High/Low Forecasts Industry analysts expect strong growth in U.S. housing starts to continue Source: U.S. Census Bureau, indu
Slide 35: Analyst Coverage
Analyst Coverage 35 Organization Analyst Name Contact BMO Capital Markets Mark Wilde (212) 883-5102 mark.wilde@bmo.com CIBC World Markets Hamir Patel (604) 331-3047 hamir.patel@cibc.com ERA Forest Products John Cooney (604) 267-3021 jcooney@era-research.com Research Raymond James Daryl Swetlishoff (
Slide 36: Sustainability Reporting
Sustainability Reporting 36 Full 2019 ESG Report SASB, GRI & TCFD disclosures westfraser.com/ESG-Report ESG Report Highlights http://bit.ly/WF-ESG-2019 Attractive ESG attributes, significantly upgraded reporting
Slide 37: Non-IFRS Measures
37 Non-IFRS Measures: This presentation makes reference to certain non-IFRS measures, such as Adjusted EBITDA and net debt to capital ratio. Non-IFRS measures do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by others. Fo