Western Forest Products Inc. · TSX:WEF
Western Forest Products — Shareholder Meeting (June 2006)
21 slides from Western Forest Products's shareholder meeting presentation, Jun 16, 2006
Slide 1: Executing our Consolidation Strategy
Executing our Consolidation Strategy To Build a margin focused coastal lumber business of sufficient scale to compete in global softwood lumber markets Western Forest Products Annual and Special Meeting June 16, 2006
Slide 2: Forward Looking Statements
This presentation includes statements that may constitute forward-looking statements or information, including statements regarding the acquisitions of Cascadia Forest Products and TFL 37. Forward-looking statements or information, which include all statements that are not historical facts, are subj
Slide 3: Overview
Overview • Financial Highlights – 2005 and 2006 1st Quarter • Setting the Base – Accomplishments in the last 12 months • Strategy and the fit of the Englewood and Cascadia Acquisitions • Moving Forward – Integration and Creating a Successful Coastal Lumber Business Western Forest Products Annual and
Slide 4: Financial Review
Financial Review Q1 Year $ Millions 2006 2005 2004 Sales $ 118.2 $ 499.8 $ 578.3 EBITDA $ (0.1) $ (11.6) $ 64.0 Net loss $ (53.6) $ (139.6) $ (101.6) Net loss per share $ (2.09) $ (5.45) n/a Sales & EBITDA have been restated for 2004 and 2005 to treat the pulp segment as discontinued operations 2004
Slide 5: Financial Resources
Financial Resources • Cash and availability under revolving credit facility of $68.7 million at March 31, 2006 • $76.4 million Cash received on May 1, 2006 from $295 million rights offering after payment for shares of Cascadia • Balance sheet strengthened with debt to equity of 47% compared to 84% p
Slide 6: Sensitivity to External Factors
Sensitivity to External Factors Lumber prices • A $10 change in the price of lumber per thousand board feet impacts operating earnings by approximately $12 million Approximately 49% of Sales are made in US dollars • A 1% change in the value of the Canadian dollar relative to the US dollar impacts op
Slide 7: Setting the Base
Setting the Base • The last year has been focused on basic business improvements and restructuring through our strategic plan • Safety has improved substantially. Our injury rate from 2004 to year to date 2006 has decreased by 65%. • Our operations have been refinanced • Two major acquisitions have
Slide 8: Setting the Base
Setting the Base • We have restructured operations by closing the Silvertree sawmill and moving the production to our other mills for increased efficiencies • We have exited the pulp business by closing the Squamish pulp mill • The base has been set for achieving the synergies and continued business
Slide 9: Safety
Safety Medical Incident Rate & Lost Time Frequency Rate 25.00 19.11 20.00 15.00 10.02 10.00 6.73 6.00 3.25 5.00 2.69 0.00 Medical Incident Rate Lost Time Frequency 2004* 2005 2006 Q1 * Includes Western predecessor to July 27, 2004 Western Forest Products Annual and Special Meeting June 16, 2006
Slide 10: Strategy
Strategy KEY ELEMENTS IMPLICATIONS ¾ Owning the rights to a large, high • Lead a consolidation of the B.C. coastal forest industry quality portfolio of crown and assemble an optimal portfolio of harvest rights. Our objective is timberlands on Vancouver Island. to create superior value for ¾ Owning a
Slide 11: Optimal Configuration
Optimal Configuration As we developed our strategy, we identified an optimum fibre basket configuration and implemented a strategy to acquire these core TFL’s in a multi-step strategy. The most attractive opportunities were Cascadia’s Tenures and Canfor’s TFL 37 (Englewood). With the acquisitions of
Slide 12: Western Optimal Configuration – The New Western
Western Optimal Configuration – The New Western Western Forest Products Annual and Special Meeting June 16, 2006
Slide 13: Cascadia Rationale
Cascadia Rationale Margin Focused Business Opportunity • Cascadia has superior expertise in wood products marketing and sales that has consistently achieved higher realizations from a similar fibre basket but lower EBITDA margins due to higher cost converting facilities. Fibre Basket 2004 Lumber 200
Slide 14: Cascadia Rationale
Cascadia Rationale A combined Cascadia, Englewood and WFP is expected to create a low cost, margin focused lumber producer with rights to high quality crown coastal timberlands. The combined operations should be positioned to compete in global softwood markets, especially cedar. 9 • 7.7 million m3 o
Slide 15: Cascadia Rationale
Cascadia Rationale The acquisition of Cascadia positions Western within the largest producers in North America with sufficient scale to pursue additional opportunities. North American Lumber Producers 8,000 Annual Capacity (mmfbm) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 WFP Proforma WFP Pope & T
Slide 16: Key Investment Highlights
Key Investment Highlights With the closing of these transactions, Western Forest Products is now the largest lumber company on the coast of British Columbia with the necessary size and scope to better compete in global softwood markets. 80% of current harvest will be older, higher value areas alon
Slide 17: Significant Synergy Potential
Significant Synergy Potential WFP Management's Preliminary Estimate of Synergies (in millions) TFL 30 Total Cascadia (Englewood) Company Sawmill $25 $25 Product optimization $18 $18 Logging $12 $6 $18 Personnel and office consolidation $10 $10 Total Synergies $65 $6 $71 Significant upside potentia
Slide 18: Moving Forward
Moving Forward • Integration teams were established to manage changes. • Cascadia was amalgamated into Western upon closing. • Amalgamation enabled synergies in log and lumber movement between facilities and inventory management. • Log optimization to the mills began immediately after closing. • The
Slide 19: Moving Forward
Moving Forward • The corporate overhead and operating management organization has been determined. • Corporate and operating staff reductions will be about 110 people or 15% over the next year, with the majority of the changes occurring from the end of June to November. • Changes in the Timberlands
Slide 20: Beyond Synergies
Beyond Synergies Although the organization is working to deliver the $71 million in synergies, effort also continues on normal operational improvements. • We have announced the 12.5 million dollar capital improvement at the Cow Bay sawmill to lower costs and increase value extraction • Lumber recove
Slide 21: Our Challenge
Our Challenge • Effectively use the liquidity raised to quickly make fundamental changes to the business to become cash positive and then profitable • Our people know the challenge, and are aware that we are going to be implementing significant changes early in the transition involving difficult dec
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