West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Shareholder Meeting (April 2019)
35 slides from West Fraser Timber's shareholder meeting presentation, Apr 23, 2019
Slide 1: Annual General Meeting
Annual General Meeting April 23, 2019
Slide 2: Forward-Looking Statements
Forward-Looking Statements 2 General: This presentation and comments associated with it contains historical exercise caution in relying upon forward-looking- statements and WFT undertakes no information, descriptions of current circumstances and statements about potential obligation to publicly upda
Slide 3: Consolidated Financial Results
Consolidated Financial Results 3 2018 2017 Q4 2018 Sales $ 6,118 $ 5,134 1,274 Cost and Expenses 5,046 4,264 1,259 Operating earnings 1,072 870 15 Finance Expense (37) (31) (9) Other 37 7 22 Earnings before Tax $ 1,072 $ 846 30 Tax provision (262) (250) 1 Net earnings $ 810 $ 596 29 Diluted EPS $ 10
Slide 4: Consolidated Financial Results: Adjusted EBITDA
Consolidated Financial Results 4 $ Millions Adjusted EBITDA 2018 2017 Q4 2018 Lumber $ 1,156 $ 884 $ 68 Panels 127 113 9 Pulp & Paper 258 172 47 Corporate/Other (3) (9) (4) Total $ 1,538 $ 1,160 120 EBITDA margin 25.1% 22.6% 9.4%
Slide 5: West Fraser Total Shareholder Return 2018
West Fraser Total Shareholder Return 2018 5 2018 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% -40.0% West Fraser Comp A Comp B Comp C TSX
Slide 6: West Fraser Total Shareholder Return 2017
West Fraser Total Shareholder Return 2017 6 2017 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% West Fraser Comp A Comp B Comp C TSX
Slide 7: West Fraser Total Return Since Housing Recession (2006)
West Fraser Total Return Since Housing Recession (2006) 7 12.0% From start of 2006 Recession 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% West Fraser Comp A Comp B Comp C TSX
Slide 8: West Fraser Total Shareholder Return 30 Years
West Fraser Total Shareholder Return 30 Years 8 12.0% 1989 to 2018 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% West Fraser Comp A Comp B Comp C TSX
Slide 9: Total Shareholder Return $1000 Invested 1986 - 2018
Total Shareholder Return $1000 Invested 1986 - 2018 9 $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 West Fraser Comp A Comp B Comp C TSX
Slide 10: Wood: The Original Environmental Building Material
Wood: The Original Environmental Building Material 10 • Our operations are 100% SFI certified for sustainable forest management & timber sourcing • Opportunity in wood buildings: low carbon footprint compared to many other common building materials • Softwood lumber board (SLB) estimates promotion o
Slide 11: 2018 Shipment Volatility - Lumber
2018 Shipment Volatility - Lumber 11 WFT Shipments to Production differential Undersupply Oversupply 100 50 0 MMfbm -50 -100 -150 -200 -250 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 SPF SYP Transportation and lag time to market can drive volatility
Slide 12: U.S. Housing Start Volatility
U.S. Housing Start Volatility 12 U.S. Housing Starts (not seasonally adjusted) 140 130 120 110 100 90 2017: 1,203 80 2018: 1,250 2019: 1,218 (YTD Feb) 70 60 J F M A M J J A S O N D 2017 2018 2019 Housing starts do not move in a straight line
Slide 13: Lumber Pricing Volatility
Lumber Pricing Volatility 13 $650 $120 $600 $100 $550 $80 $500 $60 US$/Mfbm US$/Mfbm $450 $40 $400 $20 $350 $0 $300 $250 -$20 $200 -$40 2013 2014 2015 2016 2017 2018 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Spread (R axis) SPF 2x4 #2& Btr SYP 2x4 #2& Btr Souther Yellow Pine (SYP) and Spruce Pine Fir (SPF) don’
Slide 14: U.S. Housing Starts
U.S. Housing Starts 14 2,500 2,000 Pent up demand 1,500 Thousands 1,000 500 0 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018 Housing Starts Underlying Demand
Slide 15: Demand Conditions: Remodeling
Demand Conditions: Remodeling 15 Leading indicator of Remodeling Activity $B 4 Qtr Moving Improvements and Repairs $340 8.0% 7.0% $330 4 Qtr Moving rate of Change 6.0% $320 5.0% $310 4.0% $300 3.0% $290 2.0% $280 1.0% $270 0.0% Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Expenditures % change Source: Ha
Slide 16: North American Lumber Consumption
North American Lumber Consumption 16 80 75 72 70 64 64 62 60 60 58 59 56 53 51 50 50 48 45 43 43 Billion Feet 39 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F US Consumption Canadian Consumption Lumber demand growth trending at ~ 2 billion boar
Slide 17: 2018 Lumber Supply
2018 What is Happening to supply? 17 Lumber Supply Up 1.6% 60 50 Up 40 Billion fbm 4.4% Down 1.8% 30 20 Down 3.4% 10 0 BC Canada US Total NA 2017 2018 Source: Western Wood Products Association, management estimates
Slide 18: North American Lumber Supply & Demand
North American Lumber Supply & Demand Supply & Demand 18 70 Imports Exports Net (Billion bf) 68 2005: 3.0 (2.7) 0.3 2010: 0.5 (4.8) (4.3) 2018: 1.6 (5.2) (3.6) 66 Impact of 2020: 1.8 Billion bf Announced 64 Capacity 62 Additions 60 58 56 54 52 50 2015 2016 2017 2018 2019F 2020F Production Demand Nor
Slide 19: Panels Segment
Panels Segment 19 4th Quarter 2018 2017 2018 Plywood Production (MMsf 3/8” basis) 205 833 838 MDF Production (MMsf 3/4” basis) 55 224 191 LVL Production (Mcf) 430 2,251 2,676 Sales 151 676 600 Adjusted EBITDA 9 127 113 Benchmark Prices Plywood (per Msf 3/8” basis) CAD$ 465 548 509 ($ millions, excep
Slide 20: Panels Segment: Benchmark Plywood Prices
Panels Segment 20 Benchmark Plywood Prices 575 525 475 425 375 2013 2014 2015 2016 2017 2018 Q1 2019 Plywood benchmark price (MMsf 3/8” basis)
Slide 21: Pulp & Paper Segment
Pulp & Paper Segment 21 4th Quarter 2018 2017 2018 Production (Mtonnes) BCTMP 157 652 674 NBSK 121 499 498 Newsprint 32 119 122 Sales 268 1,163 988 Adjusted EBITDA 47 258 172 Benchmark Price NBSK U.S. (US$ per tonne) 1,428 1,337 1,105 Newsprint (US$ per tonne) 715 692 584 ($ millions, except as othe
Slide 22: Pulp & Paper Segment: Benchmark Pulp Prices
Pulp & Paper Segment 22 Benchmark Pulp Prices 1,475 1,375 1,275 1,175 1,075 975 875 775 675 575 475 2013 2014 2015 2016 2017 2018 2019 NBSK – U.S. (per tonne) NBSK – China (per tonne) Newsprint (per tonne)
Slide 23: Challenges
Challenges 23 TIMBER BASE SOFTWOOD LUMBER DISPUTE TRANSPORTATION OPERATIONAL EXCELLENCE
Slide 24: BC Mountain Pine Beetle Impact
BC Mountain Pine Beetle Impact 24 British Columbia Interior 70 16 65 14 Billion BF (softwood lumber production) 60 12 Million m3 (AAC & Harvest) 55 10 50 8 45 6 40 4 Log supply constraints will create price pressure 35 2 30 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Slide 25: Investing in BC
Investing in BC 25 $550+ million invested in BC operations past 7 years
Slide 26: West Fraser Lumber Capacity Growth
West Fraser Lumber Capacity Growth 26 Lumber Capacity 2004 2.8 Billion feet Lumber Capacity 2018 7.1 Billion feet US South British 11% Columbia Alberta 31% 12% US South 45% British Columbia 77% Alberta 24% 3,000 2,500 2,000 MMfbm 1,500 1,000 500 0 2014 2015 2016 2017 2018 WFT Prod. CFP Prod. IFP Pro
Slide 27: Strength in our Geographic Footprint
Strength in our Geographic Footprint 27
Slide 28: West Fraser Capital Spending
West Fraser Capital Spending 28 500 Since 2013, we’ve spent approximately $2 billion to modernize our facilities 400 300 200 100 0 2013 2014 2015 2016 2017 2018
Slide 29: Achieving Our Potential
Achieving Our Potential 29 Our objective: Low-cost, high margin producer in each of our product lines, diversified across geographic regions Our focus is on: - Safety - Execution - Leveraging our West Fraser Strengths - People
Slide 30: Safety
Safety 30 Safety excellence is operational excellence Operational excellence is safety excellence
Slide 31: Safety and Operating: Deliberate, Disciplined & Documented
Safety and Operating: Deliberate, Disciplined & Documented 31 One safety and operating system consistently building off the best practices
Slide 32: Our People
Our People 32 We are committed to supporting employee’s development – Promote within – Internal courses and skills training – Partnerships with educational organizations Improving on a core strength and value
Slide 33: Employees & Development
Employees & Development 33 - 50% of our senior leadership group is in a new role in the last two years - 2,133 new employees in 2018 - 179 student interns & co-ops - 838 certified & active tradespeople - 507 training apprentices
Slide 34: West Fraser Strategy
West Fraser Strategy 34 Low Cost Reinvest Our Profits Prudent Balance Sheet
Slide 35: Thank You
Thank You 35
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