Slide 1: Company Update September 2017
COMPANY UPDATE SEPTEMBER 2017
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION This presentation contains information and statements that are forward- looking in nature, including, but not limited to, statements containing the words “will”, “is expected”, “forecast”, “annualized”, “target” and similar expressions. Such statements involve known and u
Slide 3: Interfor's Four Regions
INTERFOR’S FOUR REGIONS BC Coast rn s eee eeeeeenaeees : : 320 MMbf (11%) BC Interior i - 2 mills 9, - Cedar, Hem-Fir, : paver taal (25%) Douglas-Fir - Douglas-Fir, Hem-Fir, - Specialty SPF, Cedar ceevecoeeencesececvscoes - Dimension : US Northwest : 635 MMbf (20%) > -4 mills - Hem-Fir, Douglas-Fir,
Slide 4: 4th Largest Lumber Producer
4th LARGEST LUMBER PRODUCER Bbf North American Lumber Production by Company – 2016 6.0 5.0 4.0 3.0 2.0 1.0 - - Capacity Source: Wood Markets Monthly March 2017 4
Slide 5: Interfor Strategic Plan
INTERFOR STRATEGIC PLAN Growth by Acquisition Building Value Operational Excellence 5
Slide 6: Summary
SUMMARY • Q2-2017 results were the best in Interfor’s history • Sales >$500 mm • EBITDA of $77 mm • Strong free cash flow • Delivered on commitments made in late 2015/early 2016 • Castlegar rebuild project • >$35 mm in margin improvements from the South • Leverage reduced to 21% ND/IC • Interfor is
Slide 7: Lumber Markets
" ius r i | se aa LUMBER MARKETS A INTERFOR Building Value..
Slide 8: Interfor's Diverse Lumber Mix
INTERFOR’S DIVERSE LUMBER MIX Cedar Lumber Sales By Species 1 Hem-Fir Spruce-Pine-Fir 8% 10% Western Dimension Doug Fir/ Larch Southern 28% Southern Yellow Pine Yellow Pine 38% Lodge Pole Pine Lodge Pole/ Ponderosa Pine Cedar 4% 12% (1) By value for YTD Q2-2017 8
Slide 9: North American Driven Business
NORTH AMERICAN DRIVEN BUSINESS Lumber Sales By Market 1 Canada 7% China/Tw/HK 5% USA 74% Other 5% Japan 9% (1) By value for YTD Q2-2017 9
Slide 10: Benchmark Lumber Price & FX Trends
BENCHMARK LUMBER PRICE & FX TRENDS US$/Mbf $C/US$ $500 2016 1.00 2014 2015 Q1 Q2 Q3 (1) $475 2017 2017 2017 CAD/USD FX Rate (Right Axis) 0.95 SYP Composite Price (Left Axis) $450 WSPF Composite Price (Left Axis) $425 0.90 $400 0.85 $375 $350 0.80 $325 0.75 $300 $275 0.70 $250 0.65 $225 $400 $357 $38
Slide 11: Key Market Drivers
KEY MARKET DRIVERS 2016(1) 2017E(1) 2018E(1) US Housing Starts - Total (mm) 1.18 1.22 1.34 Change +4% +10% US Housing Starts - Single Family (mm) 0.78 0.85 0.92 Change +8% +9% NA Lumber Consumption (Bft) 55.3 57.2 59.2 Change +3% +4% NA Offshore Exports (Bft) 6.3 6.3 6.2 Change -1% -1% NA Offshore I
Slide 12: Operations Overview
A INTERFOR Building Value...
Slide 13: Business Comparisons
BUSINESS COMPARISONS BC Interior Dimension Mills • 3 dimension mills in BC southern interior • Modern/low cost operations • Good fiber supply/limited exposure to pine beetle US South Dimension Mills • 9 dimension mills in Georgia, S. Carolina and Arkansas • Low cost wood baskets • Strong geographic
Slide 14: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS A INTERFOR Building Value...
Slide 15: BC Interior: Overview
BC INTERIOR: OVERVIEW Mountain Pine Beetle Cumulative Percentage of Merchantable Forest Volume Killed Since 1999 Adams Lake Very High (>45%) High (31-45%) Moderate (16-30%) Castlegar Low (<16%) None (0%) Grand Forks Source: BC Ministry of Forests 15
Slide 16: BC Interior: Case Study
BC INTERIOR: CASE STUDY 2008-09 2012 2015 Adams Lake, BC Grand Forks, BC Castlegar, BC • 3 MILLS IN GOOD FIBER BASKETS • SIGNIFICANTLY REPOSITIONED THE ASSETS • RE-INVESTMENTS ARE COMPLETE • STRONG CASH FLOW AND ROI • TOP DECILE/QUARTILE EBITDA MARGINS FOR THE BC INTERIOR 16
Slide 17: US South Dimension Mills
ai +P s _.US soutH DIMENSION MILLS A INTERFOR Building Value..
Slide 18: US South: Overview
US SOUTH: OVERVIEW • 1.3 Billion feet of lumber capacity across 3 States • Largest lumber producer in Georgia • 44% of Interfor’s capacity is in the South 18
Slide 19: US South: Multiple Phases
US SOUTH: MULTIPLE PHASES Phase 1 Phase 2 Phase 3 Phase 4 5 Acquisitions Build Team/ Mill Improvements/ Targeted Infrastructure Optimization Investments 2013-15 2016-17 2017-20 >$35 million Annual EBITDA Impact 19
Slide 20: US South: Right Log to Right Mill
US SOUTH: RIGHT LOG TO RIGHT MILL Each circle is a 50 mile radius. 20
Slide 21: Financial Review
FINANCIAL REVIEW
Slide 22: Historical Financial Results
HISTORICAL FINANCIAL RESULTS Benchmark Lumber Prices ($/Mbf) Production Volumes (Mmbf) $525 800 $500 WSPF Composite (US$/Mbf) 672 700 655 639 618 618 637 628 607 640 $475 WSPF Composite (C$/Mbf) 582 567 578 568 $450 600 SYP Composite (US$/Mbf) 495 $425 500 447 470 418 $400 390 400 $375 $350 300 $325
Slide 23: Capital Spending Profile
CAPITAL SPENDING PROFILE $mm $140 $120 $100 $80 $60 $40 $20 $0 Depreciation, Depletion & Amortization(1) Capital Expenditures(2,3) (1) Includes depreciation of plant & equipment and depletion & amortization of logging roads, timbers and other. (2) Includes additions to property, plant and equipment,
Slide 24: Free Cash Flow Considerations
FREE CASH FLOW CONSIDERATIONS C$mm LTM Adjusted EBITDA (as of 6/30/17) $247 • Significant additional margin uplift opportunities in the US South. Less: Annualized Cash Interest Expense $(14) • Average interest rate ~ 4%. 2017E Maintenance Capex $(55) • 2017E total capex outlook of C$85mm; (Maint. $5
Slide 25: Capital Structure
CAPITAL STRUCTURE Capital Structure Debt Maturity Schedule (C$mm) As of June 30, 2017 As of June 30, 2017 Cash (C$mm) $(41) $100 $90 Debt (C$mm) $259 $80 Prudential Notes (4.17%) Net Debt (C$mm) $218 $70 Book Equity (C$mm) $816 $60 $50 Invested Capital (C$mm) $1,034 $40 Net Debt / Invested Capital 2