Slide 1: Investor Update
Investor Update Duncan Davies, November 16, 2010 President and CEO
Slide 2: Introduction
Section 1 Introduction INTERFOR, G)
Slide 3: Timber Tenures
Investor Update Timber Tenures AAC 000 m3 B.C. Interior 640 MMbf Adams Lake 310 MMbf DFir & SPF Dimension 500 Castlegar 170 MMbf DFir, Cedar & SPF Dimension 500 Grand Forks 160 MMbf SPF & DFir 500 B.C. Coast 325 MMbf Hammond 165 MMbf Cedar Specialty 2,000 Acorn 160 MMbf Hem & DFir Japan/Specialty 3,
Slide 4: Production Capacity
Investor Update 2002 2007 2010 Southern B.C. Southern B.C. Southern B.C. Interior Interior Interior 21% 22% 39% U.S. U.S. 38% 40% B.C. Coast 79% B.C. Coast 40% B.C. Coast 21% Production Capacity Production Capacity Production Capacity 772 MMbf 1,345 MMbf 1,600 MMbf Including Crown Pacific and Includ
Slide 5: Capital Investment
Investor Update Interfor has spent more than $250 million in the last 8 years to upgrade its assets. Major projects were completed at Adams Lake, Molalla and Port Angeles. In addition $270 million was spent on acquisitions during the same period . Discretionary Capex (excluding acquisitions) 80 70
Slide 6: Product Mix
Investor Update Cedar siding Rough cedar Cedar decking Japan structural Lumber Studs Structural dimension Facia & trim Millwork Interfor‟s strengths include a diversified product mix of both commodity and specialty products 5
Slide 7: Benchmark Prices
Investor Update Benchmark Prices, January ‟03 to October‟10 2X6 Knotty S4S Cedar US$/Mbf Hemlock 4 1/8” grn squares 13’ HF 9’ 2X4 Stud SPF 2X4 #2&Btr Random Dimension Source: Random Lengths Publications Inc. Interfor‟s key product lines function independently from a pricing standpoint 6
Slide 8: Lumber Production
Investor Update Lumber Production - 2005 to 2011 Billion 1.4 bf 1.2 1.0 0.8 0.6 0.4 0.2 0.0 '05 '06 '07 '08 '09 '10 E '11 Plan Interfor‟s production volume will exceed 1.1 Bbf in 2010 (up 70% from 2009); production in 2011 is expected to exceed 1.2 Bbf 7
Slide 9: Geographic Sales Mix
Investor Update 2009 * Q3 2010, YTD * Japan 6% U.S. Japan 7% 60% China 5% China 17% U.S. Pacific Rim 7% 52% Pacific Rim 2% Canada 18% Canada 21% Europe & Europe & Other 3% Other 2% Total Lumber Sales $289 million Total Lumber Sales $306 million (647 MMbf) (789 MMbf) * Based on volume Interfor has a
Slide 10: Lumber Volumes to China & Pacific Rim
Investor Update Lumber Volumes to China & Pacific Rim (ex. Japan) MMbf Interfor‟s sales to China have ramped up quarter-over-quarter; sales to China could exceed 350 MMbf in 2011 9
Slide 11: Mill Productivity
Investor Update Castlegar Grand Forks Mbf/Manday * Mbf/Manday * * Indexed to 2005 Significant improvements in productivity have been achieved at Grand Forks and Castlegar. Both mills are well-positioned to achieve strong results in the years ahead 10
Slide 12: Bank Facilities
Investor Update Interfor‟s bank facilities have been modified and extended, effective Aug „10 Tranche Prior Revised Amount Maturity Amount Maturity A C$ 65 Feb ’11 C$ 65 July ’12 B C$ 200 Feb ’12 C$ 200 July ’13 Total C$ 265 C$ 265 Interfor currently has more than $100 million in unused credit ava
Slide 13: Peer Comparison
Section 2 Peer Comparison
Slide 14: EBITDA Margin
Investor Update EBITDA Margin 2004 – YTD Q3 „10 1. 20% 15% Interfor 10% 5% 0% -5% Peer Group 2. -10% 2004 2005 2006 2007 2008 2009 2010 9 mos Interfor Average of peer group Interfor outperformed its peers during the 2005-9 period 1 Excludes impact of lumber duty refunds 2 Peer group includes Canfor,
Slide 15: Share Price Performance
Peer Comparison – Share Price Performance Share Prices Indexed from Jan ‟07 to Nov 15, „10 150 125 100 75 50 25 0 Interfor „s share price has lagged behind its peers since mid-2008 14
Slide 16: Key Takeaways
Section 3 Key Takeaways
Slide 17: Key Takeaways
Key Takeaways Interfor has been radically transformed over the last 5 - 7 years Interfor has a balanced geographic manufacturing base and diversified product lines and market exposure Interfor is positioning its assets to be top quartile (top decile) Interfor has outperformed its peers in re
Slide 18: Appendix
APPENDIX Impact of Mountain Pine Beetle in B.C. China: Wood Frame Construction Markets U.S. Housing Market Softwood Lumber Indicators 17
Slide 19: Impact of Mountain Pine Beetle in B.C.
APPENDIX Impact of Mountain Pine Beetle in B.C. 18
Slide 20: Mountain Pine Beetle (MPB) – Area Affected
Investor Update Mountain Pine Beetle (MPB) – Area Affected AAC1 MMm3 Central and Northern B.C. 0.0 50 – 75% Pine Adams Lake in Southern B.C. 0.5 28 – 30% Pine Castlegar & Grand Forks in Southern B.C. 1.0 Adams Lake 17% Pine Castlegar Coastal B.C. Vancouver Grand Forks Woodlands 2.0 No Pine 3.
Slide 21: Peer Comparison – Regional Operating Base
Peer Comparison – Regional Operating Base Productive Capacity (%) Interfor West Fraser Canfor B.C. Interior - Central & Northern 0% 43% 79% B.C. Interior - Southern 39% 0% 0% B.C. Coast 21% 0% 0% Prairies 0% 28% 5% U.S. Pacific N.W. 40% 0% 0% U.S. South 0% 28% 12% Other 0% 0% 3% 100% 100% 100% Inter
Slide 22: China: Wood Frame Construction Markets
APPENDIX China: Wood Frame Construction Markets 21
Slide 23: China Markets - Wood Frame Construction
China Markets - Wood Frame Construction Wood truss re-roofing (east and north China) Suburban villas (east, north, n-east, s-west) Low cost rural housing (south-west) Resort homes (north) 22
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 23
Slide 25: China Markets- Use of B.C. Wood in Construction
China Markets- Use of B.C. Wood in Construction House framed with SPF lumber SPF used for furniture frames Cedar used as siding and for outdoor structures 24
Slide 26: U.S. Housing Market
APPENDIX U.S. Housing Market 25
Slide 27: U.S. Housing Starts Jan. '07 – Sept. '10
U.S. Housing Starts Jan. „07 – Sept. „10 New house construction is the largest driver of lumber consumption in the U.S. Starts peaked at 2.1 million units in 2005 and dropped to 480,000 units in early 2009 Starts are currently in the 610,000 unit range (YTD „10 at 603,000 units) ANNUAL MONTHLY
Slide 28: Sales and Inventories of Total New and Existing Homes
Sales and Inventories of Total New and Existing Homes Sales of new and existing homes are back to the lows of early „09 Sales have been impacted by the U.S. gov‟t‟s new home owner subsidy (initial expiry, Nov 30th ‟09 was extended to Apr 30th ‟10, impacting pre and post months‟ sales) The inve
Slide 29: U.S. Home Price Trend – S&P's Case-Shiller Indices
U.S. Home Price Trend – S&P’s Case-Shiller Indices The annual change in house prices became positive in Q1‟10, the 1st quarterly increase since Q1‟06, however the rate of increase declined to August „10 (left chart) Month/month prices for the10 and 20 City Composites rose during late 2009 and ha
Slide 30: U.S. Home Affordability is High
U.S. Home Affordability is High Affordability has risen to record highs during 2009 and 2010 Source: Raymond James & Associates Inc., July 16, 2010 (NAR, FHFB,and Raymond James 29
Slide 31: Uncertainty Around the U.S. Housing Recovery
Uncertainty Around the U.S. Housing Recovery 1. The estimated “Shadow Supply” of housing inventory (distressed homes) increased from 1.8 million in August „07 to 5.8 million by March „10 Additional mortgages (ALT A, Option ARM) will reset during the next 12 months The vast majority of the 5.8 mi
Slide 32: U.S. Housing Starts 1947-2010 …ready for upturn?
U.S. Housing Starts 1947-2010 …ready for upturn? Housing starts have fallen to levels marginally above “scrap rates” of 3-400,000 per year (= 0.033%) How different than previous cycles will this recovery be? Housing Starts 000 Source: J.P. Morgan, April 2010 31
Slide 33: U.S. Housing Start Outlook … ready for upturn?
U.S. Housing Start Outlook … ready for upturn? New home sales typically trough when unemployment peaks. Sales were at record lows in February (rising in March) while unemployment appears to be at or close to peak Unemployment Rate % New Home Sales SAAR (inverted) 000 Source: J.P. Morgan, April 201
Slide 34: U.S. Housing Start Outlook… ready for upturn?
U.S. Housing Start Outlook… ready for upturn? New home sales and consumer confidence typically trough at the same point in the cycle. New home sales were recently at record lows and consumer confidence appears to be at or close to the bottom New Home Sales 000 Consumer confidence Source: J.P. Morg
Slide 35: U.S. Housing Start Outlook ….strong demographic
U.S. Housing Start Outlook ….strong demographic The Echo Boom (children born 1981-2000) is larger than the Baby Boom (2005 data) Millions of Persons Source: J.P. Morgan, April 2010 34
Slide 36: Investor Update
Investor Update Duncan Davies, November 16, 2010 President and CEO