Slide 1: Investor Presentation May 2023
INVESTOR PRESENTATION MAY 2023
Slide 2: Forward-Looking Information & Non-GAAP Measures
FORWARD-LOOKING INFORMATION & NON-GAAP MEASURES Forward-Looking Information: This presentation contains forward-looking information about Interfor Corporation’s (“Interfor” or the “Company”) business outlook, objectives, plans, strategic priorities and other information that is not historical fact.
Slide 3: Interfor Investment Highlights
INTERFOR INVESTMENT HIGHLIGHTS Pure-play North American lumber producer of scale • Top three lumber producer in North America, with 32 strategically located facilities • High exposure to US South, Eastern Canada, and Atlantic Canada with attractive log costs Compelling lumber market fundamentals • D
Slide 4: Investor Value Proposition
INVESTOR VALUE PROPOSITION Attractive Earnings Through the Cycle Consistently Growing Volumes $500 ADJUSTED EBITDA MARGIN PER UNIT ($C/MBF) 4,000 LUMBER PRODUCTION VOLUMES (MMBF) $450 3,500 $400 3,000 $350 2,500 $300 $250 2,000 $200 1,500 $150 10-year avg = $131/MBF 1,000 $100 $50 500 $- - Increasin
Slide 5: Pure-Play North American Lumber Producer
PURE-PLAY NORTH AMERICAN LUMBER PRODUCER
Slide 6: Pure-Play Lumber Producer
PURE-PLAY LUMBER PRODUCER Interfor is the only publicly traded pure-play lumber producer of scale REVENUES BY BUSINESS SEGMENT (1) PEER #1 PEER #2 PEER #3 PEER #4 PEER #5 LUMBER PULP / PAPER ENGINEERED WOOD / PANELS TIMBERLANDS OTHER (1) Based on public filings for 2022; peers include Canfor, West F
Slide 7: Industry Landscape
INDUSTRY LANDSCAPE Interfor is a top three lumber producer in North America NORTH AMERICAN LUMBER PRODUCTION BY COMPANY – 2022 (BBF) (1) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 - Source: International Wood Markets/FEA Canada Wood Markets Monthly March 2023. 7 (1) Figures are pro forma for publicly announced per
Slide 8: Interfor Operating Regions
INTERFOR OPERATING REGIONS EASTERN CANADA 985 MMBF (19%) • 4 stud mills; 3 dimension mills; 1 I-Joist BC INTERIOR facility; 1 remanufacturing facility 750 MMBF (14%) • Spruce – Pine – Fir (SPF) • 3 dimension mills; 1 remanufacturing • Efficient, well-run, well-maintained facility (Sumas, WA) • Dougl
Slide 9: Key Products & Markets
KEY PRODUCTS & MARKETS Diverse lumber species mix; high leverage to key US market LUMBER SALES BY SPECIES (1) LUMBER SALES BY MARKET (1) USA 82% Spruce-Pine-Fir 30% Southern Hem-Fir Yellow Pine 4% 47% Doug Fir/ Larch Japan 18% <1% Other Cedar <1% China/Tw/HK Canada 1% 2% 15% (1) By Volume 2023-YTD 9
Slide 10: Compelling Lumber Market Fundamentals
COMPELLING LUMBER MARKET FUNDAMENTALS
Slide 11: Lumber Prices
LUMBER PRICES Recent prices finding support at historically attractive levels NORTH AMERICAN BENCHMARK LUMBER PRICES (US$/MBF) $2,000 $1,800 $1,600 Southern Yellow Pine US Northwest Hem-Fir $1,400 Western SPF Eastern SPF $1,200 $1,000 $800 $600 $400 $200 Source: Random Lengths (includes prices up to
Slide 12: Lumber Demand
LUMBER DEMAND Diversified end-use demand drivers across R&R, industrial and housing NORTH AMERICAN LUMBER DEMAND KEY DEMAND DRIVERS BY END-USE Repair & Remodel (R&R) Repair & • Housing stock > 40 years old on 38% Remodel average • Strong household balance sheets New Home • Strong fundamentals, despi
Slide 13: Lumber Demand: Key Drivers
LUMBER DEMAND: KEY DRIVERS Underlying housing fundamentals remain favourable, despite near-term volatility US HOUSING STARTS 43 AGE OF US HOUSING STOCK (MILLIONS SEASONALLY ADJUSTED) (MEDIAN AGE IN YEARS) 1.9 41 Single-Family Multi-Family 1.8 1.7 39 1.6 1.5 1.4 37 1.3 1.2 35 1.1 1.0 33 0.9 0.8 0.7 3
Slide 14: Lumber Supply
LUMBER SUPPLY Measured supply growth in the US South, offset by ongoing declines in BC US SOUTH Measured growth (five-year CAGR of NORTH AMERICAN LUMBER PRODUCTION (BBF) 3%), limited by labour availability and long equipment lead times (1) Region 2019 2020 2021 2022 2023 US WEST & CANADA (NON-BC) Re
Slide 15: Lumber Supply: BC Interior
LUMBER SUPPLY: BC INTERIOR Declining log supply across BC, but Interfor well-positioned in southern BC Mountain Pine Beetle BC INTERIOR ALLOWABLE Cumulative Percentage 70.0 ANNUAL CUT (MM M3) of Merchantable Forest Volume Killed Since 23% reduction from 2010 to 1999 60.0 2023; additional 18% reducti
Slide 16: Softwood Lumber Dispute
SOFTWOOD LUMBER DISPUTE Moderate exposure to duties with 60% of lumber capacity based in the US U.S. COUNTERVAILING & INTERFOR SOFTWOOD LUMBER ANTI-DUMPING CASH DEPOSIT RATES DUTIES HIGHLIGHTS COMPANY 2017-20(1) 2020-21(2) 2021-22(3) 2022-23(4) 2023-24(5) US$521 MM Duties on Deposit West Fraser 23.5
Slide 17: Value Creation: Guiding Principles
VALUE CREATION: GUIDING PRINCIPLES
Slide 18: Guiding Principles to Value Creation
GUIDING PRINCIPLES TO VALUE CREATION Multi-pronged approach to creating value Principle Comments • Rationale: Achieving operational excellence maximizes the earnings potential of the business. Drive Operational 1 • Approach: Orientate the organization around operations and stay focused on executing
Slide 19: Guiding Principle 1: Drive Operational Excellence
GUIDING PRINCIPLE: 1 DRIVE OPERATIONAL EXCELLENCE
Slide 20: Operational Excellence: Margins
1 DRIVE OPERATIONAL EXCELLENCE OPERATIONAL EXCELLENCE: MARGINS Focus on operational excellence reflected in superior margin performance LUMBER SEGMENT ADJ. EBITDA MARGINS – 2020 TO 2022 (C$/MBF) (1) $350 $300 $250 $200 $150 $100 $50 $- Interfor Peer #1 Peer #2 Peer #3 (1) Peers include Canfor North
Slide 21: Operational Excellence: Product Optimization
1 DRIVE OPERATIONAL EXCELLENCE OPERATIONAL EXCELLENCE: PRODUCT OPTIMIZATION Margin improvements driven by all aspects of manufacturing excellence, including product quality, product mix optimization, improved log-to-lumber recovery, and conversion cost improvements INTERFOR US SOUTH 90% PRODUCT MIX
Slide 22: Guiding Principle 2: Increase Scale in Lumber
GUIDING PRINCIPLE: 2 INCREASE SCALE IN LUMBER
Slide 23: Transformational Growth
2 INCREASE SCALE IN LUMBER TRANSFORMATIONAL GROWTH Aspirational goal to transform into THE major global lumber producer 9.0 LUMBER PRODUCTION VOLUMES (BBF) (1) Additional 8.0 M&A or TBD capex Full year impact 7.0 7.0 of EACOM and In-progress Chaleur and acquisitions approved 6.0 and DeQuincy, capex
Slide 24: Growth Opportunities
2 INCREASE SCALE IN LUMBER GROWTH OPPORTUNITIES The North American lumber industry remains highly fragmented, with significant consolidation opportunity N.A. SOFTWOOD LUMBER MILLS % SHARE TOP 30 N.A. PRODUCERS 80% 67% 70% 70% 62% 62% 63% 63% 64% 65% 58% 60% 54% 55% 56% 50% 40% 30% 20% 10% 0% # OF N.
Slide 25: Multi-Year Strategic Capex Plan
2 INCREASE SCALE IN LUMBER MULTI-YEAR STRATEGIC CAPEX PLAN Multi-year strategic capex plan underway, primarily focused in the US South, adding ~0.6 Bbf of production between 2022 – 2025, as well as cost, efficiency and product value improvements 2018 2019 2020 2021 2022 2023 2024 2025 Q3 Q4 Q1 Q2 Q3
Slide 26: Multi-Year Strategic Capex Plan
2 INCREASE SCALE IN LUMBER MULTI-YEAR STRATEGIC CAPEX PLAN Mill rebuilds, machine center upgrades, debottlenecking & optimization projects Molalla, Oregon Eatonton, Georgia Continuous Kilns Thomaston, Georgia Adams Lake, British Columbia 26
Slide 27: Capital Spending Profile
2 INCREASE SCALE IN LUMBER CAPITAL SPENDING PROFILE Strategic investments resulting in a well-capitalized, high-margin sawmill portfolio HISTORICAL CAPITAL EXPENDITURES & OUTLOOK ($MM) $320 Capital Expenditures - Discretionary $300 Capital Expenditures - Maintenance (Includes Woodlands Roads) $280 D
Slide 28: US South: Current Platform
2 INCREASE SCALE IN LUMBER US SOUTH: CURRENT PLATFORM Over the past decade the platform has evolved from an idea to now being one of the largest in the US South • 13 sawmills, across 6 states covering all • 2.3 Bbf of capacity, with additional of the east, west and central regions upside opportunity
Slide 29: US South: Past, Present & Future State
2 INCREASE SCALE IN LUMBER US SOUTH: PAST, PRESENT & FUTURE STATE Platform-wide transformation by 2025, with benefits being realized throughout the entire improvement period INTERFOR US SOUTH PRODUCTION VOLUME BY MILL (MMBF) 300 2016 or As At Acquisition Date for Summerville/GP Assets 2022 Run Rate
Slide 30: Guiding Principle 3: Reduce Volatility Via Diversification
GUIDING PRINCIPLE: 3 REDUCE VOLATILITY VIA DIVERSIFICATION
Slide 31: Growth & Diversification Strategy
3 REDUCE VOLATILITY VIA DIVERSIFICATION GROWTH & DIVERSIFICATION STRATEGY Long-standing strategy of growth and geographic lumber diversification (1) 2001 2012 2021 2023 19% 14% 4% 19% 17% 45% 39% 42% 57% 83% 20% 19% 7% 15% 0.8 BBF 1.7 BBF 3.9 BBF 5.2 BBF BC Interior US Northwest Eastern Canada BC Co
Slide 32: Regional Performance
3 REDUCE VOLATILITY VIA DIVERSIFICATION REGIONAL PERFORMANCE Consistent margins across regions over time, but achieved via different routes INTERFOR CASH MARGIN (AVG. OF 2016-2022) (C$/MBF) Mill Net Selling Price Net Log Costs Conversion Costs MARGIN (1) (2) BC Interior US Northwest US South Eastern
Slide 33: Guiding Principle 4: Leading Returns on Capital
GUIDING PRINCIPLE: 4 DELIVER TRACK RECORD OF LEADING RETURNS ON CAPITAL
Slide 34: Top Tier Return on Capital
4 DELIVER A TRACK RECORD OF LEADING RETURNS ON CAPITAL TOP TIER RETURN ON CAPITAL Disciplined and balanced capital deployment is having an impact EBIT RETURN ON CAPITAL EMPLOYED (%) (1) 65% 60% 55% 50% 45% 40% 35% 30% = 30% 25% Peer #1 = 28% 20% Peer #2 = 20% 15% 10% 5% 0% -5% -10% 2016 2017 2018 20
Slide 35: Portfolio Optimization
4 DELIVER A TRACK RECORD OF LEADING RETURNS ON CAPITAL PORTFOLIO OPTIMIZATION Proactive and regular portfolio management and optimization based on disciplined return hurdles and profitability metrics ILLUSTRATIVE MILL-BY-MILL RETURN ON CAPITAL (%/YEAR) & MARGINS (C$/MBF) $160 $140 <-----------------
Slide 36: Guiding Principle 5: Balanced Approach to Capital Allocation
GUIDING PRINCIPLE: 5 TAKE A BALANCED APPROACH TO CAPITAL ALLOCATION
Slide 37: Balanced Capital Allocation
5 TAKE A BALANCED APPROACH TO CAPITAL ALLOCATION BALANCED CAPITAL ALLOCATION Disciplined and multi-faceted capital allocation tailored to maximize returns HISTORICAL CAPITAL DEPLOYMENT ($MM) $1,600 Capex M&A Share Buy-Backs Special Dividend $1,400 $1,200 $1,000 $800 $600 $400 $200 $- (1) 2012 2013 2
Slide 38: Capital Deployment Summary
5 TAKE A BALANCED APPROACH TO CAPITAL ALLOCATION CAPITAL DEPLOYMENT SUMMARY Capital deployed in a disciplined and balanced manner CAPITAL DEPLOYMENT SUMMARY – 2020 TO 2023 ($MM) (1) $3,000 $99 ~C$2.2 B Reinvested $655 $67 $23 $2,500 $2,180 $656 $2,000 $1,500 $1,000 ~C$632 MM Returned $500 $1,564 $50
Slide 39: Guiding Principle 6: Optimize Capital Structure & Cost
GUIDING PRINCIPLE: 6 OPTIMIZE CAPITAL STRUCTURE & COST
Slide 40: Optimized & Low-Cost Capital Structure
6 OPTIMIZE CAPITAL STRUCTURE & COST OPTIMIZED & LOW-COST CAPITAL STRUCTURE Focused on maintaining an efficient, flexible and low-cost capital structure. Combination of long-term fixed-rate debt with no significant near-term maturities and flexible variable-rate revolving facility CAPITAL STRUCTURE S
Slide 41: Conservative Leverage Maintained
6 OPTIMIZE CAPITAL STRUCTURE & COST CONSERVATIVE LEVERAGE MAINTAINED Conservative leverage maintained to provide flexibility through all markets HISTORICAL NET DEBT – TO – INVESTED CAPITAL RATIO (%) (1) 50% Lender Covenant = 50% 40% 30% 20% 10% 0% Q1 -10% 2008 2009 2010 2011 2012 2013 2014 2015 2016
Slide 42: Positive ESG & Carbon Story
~~ & POSITIVE ESG & CARBON STORY
Slide 43: Enhancing the Natural Carbon Cycle
ENHANCING THE NATURAL CARBON CYCLE Responsible forest management increases long-term carbon storage CO2 CO2 Growing Forest CO2 CO2 CO2 Seedling Mature Forest Decaying / Vulnerable Forest Releases stored carbon CO2 CO2 Comprehensive Replanting Responsible Harvesting in 2021 Interfor planted 10.3 Enab
Slide 44: Sustainable Manufacturing
SUSTAINABLE MANUFACTURING Interfor’s lumber stores more carbon that is emitted during its production 82% Of Interfor’s energy needs come from renewable sources PART OF THE CLIMATE SOLUTION ~6 MM tonnes of carbon stored in the lumber sold by Interfor in 2022 TARGET to reduce Scope 1 and 2 GHG emissio
Slide 45: Lumber: Low-Carbon Building Material
LUMBER: LOW-CARBON BUILDING MATERIAL Lumber is a climate-friendly building product vs. other alternatives Compared to the use of: CO2 CO2 Steel Emits 18.0kg CO2* 1m2 of a building constructed using CO2 wood wall studs Stores net 16.7kg CO2* Concrete Emits 27.5kg CO2* * Carbon stored minus production
Slide 46: Responsibility at the Heart of the Company
RESPONSIBILITY AT THE HEART OF THE COMPANY Integrating ESG standards throughout our business and strategy ENVIRONMENT SOCIAL GOVERNANCE Climate: Safety: ESG Oversight: • We contribute meaningfully to the global effort to • We embrace world-leading safety standards and target • 91% of directors are i
Slide 47: Contact Information
CONTACT INFORMATION
Slide 48: Investor Contacts
INVESTOR CONTACTS RICK POZZEBON MIKE MACKAY EVP & Chief Financial Officer VP, Corporate Development & Treasury 604-689-6804 604-689-6846 richard.pozzebon@interfor.com mike.mackay@interfor.com 48
Slide 49: Analyst Coverage
ANALYST COVERAGE BMO CAPITAL MARKETS Ketan Mamtora (212) 883-5102 ketan.mamtora@research.bmo.com CIBC CAPITAL MARKETS Hamir Patel (604) 331-3047 hamir.patel@cibc.com EQUITY RESEARCH Kevin Mason (604) 886-5741 kmason@equityresearchassociates.com ASSOCIATES RAYMOND JAMES Daryl Swetlishoff (604) 659-82