West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Investor Presentation (September 2012)
36 slides from West Fraser Timber's investor presentation, September 2012
Slide 1: Investor Presentation
Investor Presentation September 2012
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation and comments associated with it contain forward-looking statements including statements relating to U.S. housing recovery, the potential for constrained lumber supply, projected B.C. Interior lumber production, energy-related opportunities, earnings sensi
Slide 3: Our Goals
Our Goals To be a leading wood products manufacturer, focused on solid wood products Strong financial results through the business cycle Long-term growth and shareholder value enhancement Stable, conservative financial structure 3 3
Slide 4: Our Strategy
Our Strategy Operational excellence Diversification Product differentiation Integration 4 4
Slide 5: Operational Excellence
Operational Excellence Managing to ensure a committed workforce Cost control and efficiency Continuous reinvestment Internal and external benchmarking and competition Straightforward, consistent business model 5 5
Slide 6: Diversification
Diversification Products Geography Markets 6 6
Slide 7: Product Differentiation
Product Differentiation Wood as the best environmental choice Renewable, sustainable business Expanding applications 7 7
Slide 8: Integration
Integration Substantial fibre self-sufficiency Fuller utilization of resource Some benefits from counter-cyclicality Better able to respond to new opportunities such as bioenergy 8 8
Slide 9: Earnings Growth Drivers
Earnings Growth Drivers North American housing and economic growth Asian economic growth Western Canadian electricity demand Key sensitivities 9 9
Slide 10: U.S. Housing
U.S. Housing Pent Up Housing Demand (conventional + mobile) 2.25 Million Units 2.00 1.75 1.50 1.25 1.00 0.75 Production Underlying Demand 0.50 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Significant pent up demand bodes well for long-term recovery. 10 Source: FEA 10
Slide 11: U.S. Housing
U.S. Housing U.S. Housing Forecast (2012 & 2013) Single & Multi family 1,000 900 800 700 600 000 500 400 300 200 100 0 NAR RBC NAHB APA Wells FEA RISI Wood Average Fargo Markets Source: APA/Wood Markets 11
Slide 12: SPF Shipments from Canada to China
SPF Shipments from Canada to China 3,000 Represents approximately 200,000 single-family new houses 2,662 2,500 2,000 1,585 MMfbm 1,500 1,000 836 500 358 152 0 2007 2008 2009 2010 2011 Source: COFI China has become a major consumer of Canadian softwood lumber 12 12
Slide 13: Pulp & Paper
Pulp & Paper Pulp & Paper Sales Mix – 2011 ($) N. America, 37% Asia, 56% Europe, 7% 13 13
Slide 14: Energy Opportunities
Energy Opportunities Woodwaste for heat and steam to dry wood and for electricity and steam for pulp mills Woodwaste for electricity to be used or sold Pulp mill effluent as a source for electricity generation Expanding opportunities to generate and sell electricity levering off current business 14
Slide 15: Earnings Sensitivity to Key Variables
Earnings Sensitivity to Key Variables (based on year-end capacities1 - $ millions except where otherwise stated) Factor Variation Change in Earnings 2,3 Lumber price US$10 (per Mfbm) 48 2,3 Plywood price Cdn$50 (per Msf) 31 3 MDF price US$50 (per Msf) 11 3 NBSK price US$50 (per tonne) 22 3 BCTMP pri
Slide 16: Returns on Lumber
Returns on Lumber EBITDA margin (%) - Lumber 40.0% 35.0% 30.0% 25.0% 20.0% Average: 16% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 16 16
Slide 17: Driving the Price of Lumber
Driving the Price of Lumber Demand - North American housing Asian industrial applications Japanese housing Supply - Fibre limitations Residual offtake Mill closures People 17 17
Slide 18: Driving the Price of Pulp
Driving the Price of Pulp Demand - China’s paper, tissue and packaging demand Developing countries’ demand Price of cotton and similar products Supply - European paper capacity closures Russian and Canadian start ups Product diversification (e.g. dissolving pulp) South American production 18 18
Slide 19: Capital Strategy
Capital Strategy Reinvest profits to lower costs, improve efficiency through technology and improved processes Improve returns by lowering costs, improve outturn and profitability without necessarily expanding capacity 2011 and 1H 2012 $230 million in solid wood $88 million in Green Transformation c
Slide 20: Why Invest in West Fraser?
Why Invest in West Fraser? Proven ability to generate strong cash flow even in worst markets Consistent, straightforward business plan Loyal, long-term employee and management base Conservative financial management coupled with proven ability to grow strategically 20 20
Slide 21: "WFT" – Toronto Stock Exchange
“WFT” – Toronto Stock Exchange www.westfraser.com These materials have been prepared by Management of the Company. No regulatory authority has approved or disapproved of the contents of these materials. These materials do not constitute an offer to sell or the solicitation of an offer to buy any sec
Slide 22: Appendix
22 Appendix i West Fraser
Slide 23: Product Diversification
Product Diversification . Lumber Panels Pulp & Paper 26 Mills 6 Mills 5 Mills SPF 3.7 Bfbm Plywood: 830 MMsf3/8” NBSK: 590 Mtonnes SYP 2.0 Bfbm MDF: 300 MMsf3/4” BCTMP: 640 Mtonnes Total 5.7 Bfbm LVL: 3.2 MMcf Newsprint: 135 Mtonnes North America’s largest Largest plywood Third largest pulp lumber p
Slide 24: Trend Sales Mix
Trend Sales Mix ($) Pulp & Paper 24% Panels Lumber 13% 63% We are an integrated forest products company primarily focused on solid wood products 24 24
Slide 25: Geographic Diversification
Geographic Diversification 25 25
Slide 26: Lumber Capacity Location
Lumber Capacity Location U.S. 35% B.C. 46% Alberta 19% Geographic diversification in lumber 26 26
Slide 27: Total Shareholder Return (Cdn$)
Total Shareholder Return (Cdn$) (June 2006* – August 27, 2012) 80% 62% 60% 40% 28% 20% 2% 5% 0% -5% -20% -24% -40% West Fraser S&P/TSX Dow Competitor A Competitor B Competitor C * June 2006 marked the beginning of the steep decline in U.S. housing starts 27 Source TD Bank 27
Slide 28: Strong Cash Generation ($millions)
Strong Cash Generation ($millions) Total 2011 2010 2009 2008 Cash from Operations 788 85 421 96 186 Capital Expenditures * 367 213 89 18 47 Dividends 66 24 8 10 24 * 2011 and 2010 includes pulp Green Transformation projects 28 28
Slide 29: Strong Balance Sheet
Strong Balance Sheet 800 Reduced debt by $460 million during the worst lumber market since the Great Depression 700 600 500 $ millions 400 300 200 100 0 Dec - 2007 Dec - 2011 25% Net Debt to Capital 14% Net Debt to Capital 29 29
Slide 30: Lumber Operating Rate - 2011
Lumber Operating Rate - 2011 110% 100% 97% % of Capacity 90% 80% 78% 75% 72% 71% 70% 67% 60% 50% WFT WFT B.C. U.S. U.S. Canada Canada U.S. Interior South Low-cost structure allows for higher operating rates in down market 30 30
Slide 31: SPF Lumber Geographic Sales Mix
SPF Lumber Geographic Sales Mix ($) 2005 2011 Non U.S., 38% Non U.S., U.S., 45% 55% U.S., 62% 31 31
Slide 32: Lumber Opportunity
Lumber Opportunity B .C . Interior Lumber P roduction 17,000 2,300 Fore ca st 2,100 15,000 S tarts (thousands) 1,900 13,000 1,700 MMfbm 1,500 11,000 1,300 9,000 1,100 900 7,000 700 5,000 500 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 P roduction U.S . Housing S ta rts (R a x is) For
Slide 33: Pulp - NBSK End-Use Products
Pulp - NBSK End-Use Products Specialty Coated 10% Paper 11% Tissue/Towel 55% Uncoated Paper 10% Board 14% West Fraser 2011 shipments: 489,199 Metric Tonnes 33 33
Slide 34: Pulp - BCTMP End-Use Products
Pulp - BCTMP End-Use Products Tissue/Towel Specialty 1% 8% Uncoated Paper Board 23% 47% Coated Paper 21% West Fraser 2011 shipments: 642,284 Metric Tonnes 34 34
Slide 35: Paper - Newsprint
Paper - Newsprint North American Newsprint Cost Structure Exchange at $.97 Source: PPPC Cost Survey 2010 Cdn$/tonne ANC Alberta Newsprint is the lowest cost newsprint producer in North America and a positive contributor to the profitability of our pulp and 35 paper business 35
Slide 36: Bio-Energy
Bio-Energy Power generation from biomass Cariboo pulp mill turbo generator (completed) Will become energy self-sufficient and sell power to the grid Slave Lake pulp mill biomethanation project Estimated startup late 2014 BC Hydro (Phase II) power generation projects (at 2 sawmills) Estimated startup
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