Slide 1: Building Value in Everything We Do, Every Day
BUILDING VALUE IN EVERYTHING WE DO, EVERY DAY INVESTOR UPDATE January 2014
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Information contained herein constitutes forward-looking statements. Forward-looking statements, which include all statements that are not historical facts, are subject to certain risks and uncertainties that could cause actual results to differ materially from those antic
Slide 3: Our Core Values
OUR CORE VALUES We will conduct ourselves with honesty and integrity. We will respect, value and engage our employees. We embrace world-leading safety and environmental standards. We are strategic, fact-based and proactive. We strive for excellence in everything we do. We are responsible for our own
Slide 4: Our Promise
OUR PROMISE We build value for: EMPLOYEES by providing a career where they can contribute, grow and prosper. CUSTOMERS by delivering quality products “on spec, on time, every time”. SHAREHOLDERS by providing attractive returns on their investment. COMMUNITIES by supporting a healthy economy and envi
Slide 5: Four Operating Regions
FOUR OPERATING REGIONS Interfor is a pure play lumber company with operations in the four key regions of North America. BC Interior 735 MMbf Adams Lake 350 MMbf Douglas-Fir & SPF Dimension Castlegar 225 MMbf Douglas-Fir, Hem-Fir, SPF Dimension, Western Red Cedar Specialty Grand Forks 160 MMbf SPF &
Slide 6: Interfor's Strategic Plan
INTERFOR’S STRATEGIC PLAN • Lumber focus Growth by • Portfolio strategy Acquisition • Conservative capital structure • Accretion • Integration; log to customers • Fact-based business optimization Operational Excellence • Preferred customer strategy • Active reinvestment • Branding/high performance c
Slide 7: Interfor's Growing Profile
INTERFOR’S GROWING PROFILE The groundwork for Interfor’s strategic direction was established in 2011, with the goal of doubling the size of the company within five years. 2011 2013 BC BC US Southeast US Pacific Southern Southern 23% Northwest Interior 39% Interior 33% 42% US Pacific Northwest 29% BC
Slide 8: Recent Growth
RECENT GROWTH Interfor’s lumber production has increased substantially since early 2010. Quarterly Lumber Production 2010 - 2013 500 450 MMbf 400 350 300 250 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 (Q1-Q3) 8
Slide 9: History of Successfully Completing Acquisitions
HISTORY OF SUCCESSFULLY COMPLETING ACQUISITIONS Over the past number of years, Interfor has completed nine acquisitions totaling over $500 million. Year Business Acquired Assets 2001 Primex 2 sawmills 2 reman facilities 2004 Crown Pacific 3 sawmills 2005 Floragon 1 sawmill 2008 Pope and Talbot 2 saw
Slide 10: State of the Art Operations
STATE OF THE ART OPERATIONS Interfor has invested over $300 million in various strategic capital projects over the past several years, with additional projects now underway. Adams Lake, BC Grand Forks, BC Port Angeles, Washington Gilchrist, Oregon Swainsboro, Georgia Baxley, Georgia 10
Slide 11: Moving Up the Tiers
MOVING UP THE TIERS Interfor has moved into the second tier of North American Lumber Producers, with production approaching 2 Bbf. 2012 Production Bbf Source: Wood Markets monthly – March 2013 Note: Interfor includes the total 2012 production of the acquired US Southeast mills; GP includes Temple In
Slide 12: The Broadest Product Line
THE BROADEST PRODUCT LINE Specialty 13% Cedar 7% Structural Specialty 20% Commodity 12 Framing 60%
Slide 13: Product Diversification Rationale
PRODUCT DIVERSIFICATION RATIONALE Interfor’s product diversification strategy is unique in that the volatility of the commodity lumber grades (left chart) is moderated by lower volatility in specialty lumber prices (right chart), and thereby smooths the cycle. SPF/SYP Benchmark Prices Cedar/Hemlock
Slide 14: Our Products Are Sold in Over 30 Countries
OUR PRODUCTS ARE SOLD IN OVER 30 COUNTRIES 2013 Shipments By End Market US – from Cdn Mills 16% Japan 10% US – from US Mills 41% China 16% Pacific Rim 2% Europe <1% Canada 15% 14
Slide 15: Interfor Share Price Performance
INTERFOR SHARE PRICE PERFORMANCE Interfor’s share price has tripled over the past two years. • One of the best performing stocks on the Toronto stock exchange. 15
Slide 16: Strong Support from the Investment Community
STRONG SUPPORT FROM THE INVESTMENT COMMUNITY All of the research analysts that follow Interfor rate it as a Buy: Price Firm Recommendation Target Raymond James Strong Buy $19.00 RBC Outperform $16.00 BNS Sector Outperform $16.50 TD Action List Buy $17.00 CIBC Sector Outperform $17.50 BMO Outperform
Slide 17: Strong Capital Structure with Significant Liquidity for Growth
STRONG CAPITAL STRUCTURE WITH SIGNIFICANT LIQUIDITY FOR GROWTH In the 3rd quarter, Interfor completed an $86 million equity offering that further strengthened the balance sheet. C$ millions Sep ’13 Unaudited Net debt $150 Book Equity $499 Invested capital $649 Net debt / invested capital 23% 17
Slide 18: Low Cost Debt Structure
LOW COST DEBT STRUCTURE The company’s consolidated capital structure is very strong: • Secured debt structure with limited covenants. • Average interest rate of 3.1%. • Dry powder of $182 million. Prudential Cdn US $ millions Senior Bank Operating Total 1. (at Sept 30 ‘13) Secured Lines Line Notes M
Slide 19: Summary Income Statement
SUMMARY INCOME STATEMENT The company’s most recent twelve months’ results recorded sales of >$1 billion. LTM Q3 YTD C$ millions 2012 Sept 30, 2013 2013 Sales $1,012.3 $789.9 $849.2 Adjusted EBITDA 1. 117.1 97.8 60.5 Adjusted EBITDA Margin 11.6% 12.4% 7.1% 1. Excluding other income and Long Term Ince
Slide 20: Key Takeaways
KEY TAKEAWAYS • Interfor has grown significantly over the last several years with additional opportunities being pursued. • Significant strategic capital investments over past several years. • Balanced geographic base and product offering. • Conservative balance sheet with additional financial capac
Slide 21: Appendix
APPENDIX • Impact of Mountain Pine Beetle in BC • China: Wood Frame Construction Markets • NA Lumber Market 21
Slide 22: Mountain Pine Beetle (MPB) – Area Affected
MOUNTAIN PINE BEETLE (MPB) – AREA AFFECTED Interfor’s southern BC Interior wood baskets are less exposed to the MPB than BC’s central and northern interior regions; the Coast is not exposed. AAC1 MMm3 Central and Northern BC 0.0 50 – 75% Pine Adams Lake in Southern BC 0.5 28 – 30% Pine Castlegar & G
Slide 23: China Markets – Wood Frame Construction
CHINA MARKETS – WOOD FRAME CONSTRUCTION Wood truss re-roofing Suburban villas (east and north China) (east, north, n-east, s-west) Low cost rural housing (south-west) Resort homes (north) 23
Slide 24: China Markets – Sectors Under Development
CHINA MARKETS – SECTORS UNDER DEVELOPMENT Public buildings Apartment infill walls / partition walls Multi-story residential Mixed-use hybrid 24
Slide 25: China Markets – Use of BC Wood
CHINA MARKETS – USE OF BC WOOD House framed with SPF lumber SPF used for furniture frames Cedar used as siding Cedar used as siding and for outdoor structures and for outdoor structures 25
Slide 26: North America Lumber Supply / Demand
NORTH AMERICA LUMBER SUPPLY / DEMAND Billion Board Feet 1. 2005 2012 2013 Consumption: US 64.1 37.4 39.5 Canada 11.4 8.4 8.6 Net Export 0.2 7.0 8.1 Total Production 75.7 52.8 56.2 Capacity: US 44.4 39.7 40.0 Canada 37.6 31.0 31.4 Total Capacity 82.0 70.7 71.4 Operating Rate 92% 74% 79% Average SPF P
Slide 27: US Lumber Consumption by End Use
US LUMBER CONSUMPTION BY END USE Billion Board Feet 1. 2005 2012 2013E New Home Construction 31.8 8.9 11.0 Residential Improvements 17.2 15.3 15.2 Industrial Production 13.9 11.6 11.8 Nonresidential Construction 1.2 1.6 1.5 Total US Lumber Consumption 64.1 37.4 39.5 1. FEA 2010 and Q4 2013 Lumber Fo
Slide 28: US Homebuilder Outlook vs Single Family Units
US HOMEBUILDER OUTLOOK VS SINGLE FAMILY UNITS Sources: NAHB / Wells Fargo Housing Market Index to December ‘13; US Census Bureau to November ’13 28
Slide 29: Thank You
THANK YOU A INTERFOR Building Value 29