West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Q1 2021 Earnings Presentation
35 slides from West Fraser Timber's earnings presentation, May 2021
Slide 1: Investor Presentation May 2021
Investor Presentation May 2021
Slide 2: Forward-looking information disclaimer
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: Q1 2021 Earnings Summary
Q1 2021 Earnings Summary
Slide 4: Consolidated Financial Results
4 Consolidated Financial Results US$ Millions US$ Millions Adjusted EBITDA Q1-21 Q4-20 Q1-21 Q4-20 Lumber $ 646 $ 425 Sales $ 2,343 $ 1,294 NA EWP** 353 48 Costs and Expenses** 1,464 899 EU EWP** 11 N/A Operating earnings 879 395 Pulp & Paper 11 (20) Finance Expense, net (13) 3 Corporate/Other (13)
Slide 5: Q1 Consolidated Adjusted EBITDA Reconciliation
5 Q1 Consolidated Adjusted EBITDA Reconciliation Seasonal railcar availability and severe Q4 Adjustment to AR1 winter weather in US rates (2017, 2018) South Lumber: $420 million Results from February 1, inclusive of NA EWP: $35 million (ex Norbord) $93 million purchase price Pulp & Paper: $19 millio
Slide 6: West Fraser North America Lumber and EWP EBITDA Margin
6 West Fraser North America Lumber and EWP EBITDA Margin 55% NA Lumber Average: 16% NA EWP (proforma) Average: 20% 45% 35% 25% 15% 5% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1-21* -5% North America Lumber North America EWP (proforma) Note: Lumber EBITDA is after duties; North America
Slide 7: Q1-21 versus Q4-20
7 Q1-21 versus Q4-20 US$ millions unless Q1 2021 Q4 2020 Change otherwise indicated Negatively impacted by seasonal railcar shortages in Canada and a period Lumber Shipments (MMfbm) 1,389 1,551 (162) of extreme winter conditions in the U.S. South NA OSB Shipments (MMsf 3/8”) 1,010 n/a Inclusion of N
Slide 8: Liquidity
8 Liquidity ($millions) Available liquidity Scheduled maturities 3,000 1,500 2,500 1,200 2,000 900 1,500 2027 Notes to 600 2023 Notes to be redeemed on 1,000 be redeemed on 6 May 2021 7 June 2021 500 300 0 0 2018 2019 Q120 Q220 Q320 Q420 Q121 2021 2022 2023 2024 2025 2026 2027 Bank lines Cash Term l
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% 4 Qtr Moving rate of Change 140 $350 12% 120 $340 $330 10% M Starts 100 Seasonally adjusted: $320 8% 80 2018: 1
Slide 11: Lumber Supply Conditions
11 Lumber Supply Conditions 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 Canada US Impor
Slide 12: OSB Supply Conditions
12 OSB Supply Conditions 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 Canada US South US North
Slide 13: Total Shareholder and Capital Returns
13 Total Shareholder and Capital Returns Annualized Total Shareholder Return from January 1, 2006 to April 30, 2021* 12% 11.2% 10.5% 10.0% 10% 8% 6.9% 6.8% 6.2% 6.3% 6% 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 March 31, 2021** >
Slide 14: Summary
Summary 14 Q1 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 grows significantly, actions underway ✓ Continued focus on
Slide 15: West Fraser Overview
West Fraser Overview
Slide 16: West Fraser delivers climate-smart wood and building solutions
16 Responsible, Resourceful and Climate-Smart 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 (2019, thousands of tCO2e) cl
Slide 17: A Global Wood Products Leader
17 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 18: Operating Footprint on Two Continents
18 Operating Footprint on Two Continents
Slide 19: More Relevant, Efficient and Valuable to Principal Customer Segments
More Relevant, Efficient and Valuable to Principal Homebuilder, 19 Building Construction and Pro-Dealer Customer Segments
Slide 20: West Fraser is North America's Largest Lumber Producer
20 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 21: West Fraser is a Leading OSB Producer
21 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 22: Market Overview
Market Overview
Slide 23: Lumber and OSB Supply Overview
23 Lumber and OSB Supply Overview 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 24: This is not 2005 – Today's North American Lumber Supply
This is not 2005 – Today’s North American Lumber Supply 24 80 2.5 Lumber production growth stagnating even with strong markets in 2017 and 2018; labor, equipment and log availability challenge growth 70 2.0 60 U.S. Housing Starts (millions) Lumber Supply Demand Billion Board Feet 50 1.5 BC Other U.S
Slide 25: North American Lumber Production and Housing Starts Equivalence
25 North American Lumber Production in 2020 Housing Starts Equivalence* 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 26: North American OSB Operating Capacity
26 North American OSB Operating Capacity* 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 27: North American OSB Capacity and Housing Starts Equivalence
27 North American OSB Capacity in 2020 Housing Starts Equivalence* 1.6 0.10 0.41 1.45 1.4 U.S. Housing Starts (millions) 100,000 additional starts 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 28: North America Wood Products End-Use
North America Wood Products End-Use Driven by Demand in New Residential 28 and Lower-Volatility R&R Markets North America Lumber End Use 2020 Domestically Produced Panel Consumption 2019 22 MDF 20.9 Non-residential Other 6% 20 Particleboard SW Plywood HW Plywood OSB 22% 18 New 16 Industrial Bsf-3/8”
Slide 29: West Fraser Timber Co. Ltd.
29 West Fraser Timber Co. Ltd. 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 30: Appendix
Appendix
Slide 31: Analyst Estimates
31 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 RBC $700 RJ $800 RJ $550 RBC $799 BMO $733 BMO $807 BMO $606 BNS $802 RJ $750 RBC $820 RBC $630 RJ $840 CIBC $820 CIBC $889 CIBC $728 CIBC $858 BNS $8
Slide 32: US Housing Start Estimates
32 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 33: Analyst Coverage
33 Analyst Coverage 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 34: Sustainability Reporting
34 Sustainability Reporting 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 35: Non-IFRS Measures and External Information
35 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