Slide 1: Company Overview
COMPANY OVERVIEW May 2014 A INTERFOR Building Value..
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: The Interfor Way
THE INTERFOR WAY We conduct ourselves with honesty and integrity. We 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 success.
Slide 4: Pure Play Lumber - Four Regions
PURE PLAY LUMBER - FOUR REGIONS BC Coast 320 MMbf • 2 mills • Cedar, Hem-Fir, Douglas-Fir • Specialty BC Interior 720 MMbf • 3 mills • Douglas Fir, Hem-Fir, SPF, Cedar • Dimension US Southeast 880 MMbf • 6 mills US Pacific Northwest 655 MMbf • Southern Yellow Pine • 4 mills • Dimension • Hem-Fir, Do
Slide 5: Interfor's Strategic Plan
INTERFOR’S STRATEGIC PLAN • Lumber focus Growth by • Portfolio strategy Acquisition • Conservative capital structure • Accretion • Integration from log to customers • Fact-based business optimization Operational Excellence • Preferred customer strategy • Active reinvestment • High performance cultur
Slide 6: Interfor Transformation
INTERFOR TRANSFORMATION • The groundwork for Interfor’s recent strategic activity was established in late 2011/early 2012, with the goal of doubling the size of the company within five years. 2012 2014 • 1.6 Bbf of capacity • 2.6 Bbf of capacity • Top 10 N.A. lumber producer • Top 5 N.A. lumber prod
Slide 7: Interfor's Balanced Profile
INTERFOR’S BALANCED PROFILE 2014 2012 US BC Southern BC Southeast Interior Southern 35% 28% US Pacific BC Interior Northwest Southern 33% US Southeast 39% Interior 23% 42% BC Coast 12% BC Coast US Pacific BC Coast US Pacific 15% Northwest 19% Northwest 25% 29% Capacity - 1.6 Bbf 2.6 Bbf 7
Slide 8: Production Has Doubled
PRODUCTION HAS DOUBLED Quarterly Lumber Production 2010 - 2014 MMbf 600 Pro forma full Quarter with 100% of Tolleson1 550 * 500 450 400 350 300 250 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2010 2011 2012 2013 2014 1. Q1 quarterly production includes approximately two weeks of results f
Slide 9: Moving Up the Tiers
MOVING UP THE TIERS NA Lumber Production by Company 5.0 4.0 2013 3.0 Production Bbf 2.0 1.0 0.0 Source: Wood Markets monthly – March 2014 Note: Interfor’s 2013 production figure includes the total 2013 production of the acquired Rayonier, Keadle and Tolleson mills; GP includes Temple Inland. 9
Slide 10: History of Successful Acquisitions
HISTORY OF SUCCESSFUL ACQUISITIONS 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 sawmills 2008 Portac 1 sawmill 2010 Weyerhaeuser BC interior 275,000 m3 of tenure 2013 Rayonier sawmills 3 sawmills
Slide 11: 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 11
Slide 12: Significant Presence in US South
SIGNIFICANT PRESENCE IN US SOUTH • Interfor is the largest lumber producer in Georgia – market share >30%. Lumber Industry Capacity by Southern State 3.0 2.5 2013 2.0 Capacity Bbf 1.5 1.0 0.5 0.0 GA AL AR MS NC TX SC LA FL VA OK Source: FEA– December 2013 12
Slide 13: Georgia Operations
GEORGIA OPERATIONS Business Unit Location Regional Office Peachtree City Sawmill Eatonton Sawmill Thomaston Sawmill Perry Sawmill Preston Sawmill Swainsboro Sawmill Baxley 13
Slide 14: Favourable Log Supply in US South
FAVOURABLE LOG SUPPLY IN US SOUTH Inventory, Bbf Int’l ¼” Growth & Drain, Bbf Int’1 ¼” Source: FEA– April 2014 14
Slide 15: Diverse Product Lines
DIVERSE PRODUCT LINES Average Revenue by Product Line (by Total Value) Specialty Cedar 12% 7% Structural Specialty 11% Commodity Framing 70% 15
Slide 16: 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 smooth's the cycle. SPF/SYP Benchmark Prices Cedar/Hemlo
Slide 17: Diverse Market Profile
DIVERSE MARKET PROFILE Average Shipments By End Market Other Export 1% Canada Pacific 9% Rim 1% China US 65% 18% Japan 6% 17
Slide 18: Summary Income Statement
SUMMARY INCOME STATEMENT • The Q1 2014 results were impacted by: • Transportation disruptions – approximately 70 MMbf of trapped inventory • One-time costs of the Tolleson acquisition – C$1.1 mm • Only two weeks of results from Tolleson (closed March 14, 2014) C$ millions Q1 2014 Q4 2013 2013(2) Sal
Slide 19: Sensitivities
SENSITIVITIES Annual EBITDA Sensitivity Variable Change impact C$ million Mill net lumber price + US$10/Mbf $11.6 FX Rate (US$/C$) - $0.01 $4.4 19
Slide 20: Strong Capital Structure
STRONG CAPITAL STRUCTURE • Interfor’s balance sheet remains strong following the Tolleson acquisition. C$ millions March 2014 Net debt $270 Book Equity $609 Invested capital $879 Net debt / invested capital 31% 20
Slide 21: Low Cost Debt Structure
LOW COST DEBT STRUCTURE • The Company has significant liquidity and flexibility, with a low cost debt structure. • Average interest rate of approximately 3% Prudential CAD US $ millions (March 2014) Senior Bank Operating Total Secured Lines Line Notes Maturity 2017 2015 2023 Available credit1 C$315
Slide 22: Strong Support from the Investment Community
STRONG SUPPORT FROM THE INVESTMENT COMMUNITY Price Firm Recommendation Target BNS Sector Outperform $19.50 CIBC Sector Outperformer $22.50 National Bank Outperform $20.00 Raymond James Strong Buy $23.00 RBC Outperform $19.00 Salman Partners Buy $20.00 TD Buy $22.00 The firm recommendations and price
Slide 23: Key Takeaways
KEY TAKEAWAYS • Interfor has grown significantly over the last several years. • Significant strategic capital investments over past several years. • Balanced geographic base and product offering. • Conservative balance sheet with additional financial capacity for future growth. • Strong track record
Slide 24: Appendix
APPENDIX AS INTERFOR Building Value...
Slide 25: US Housing Starts
US HOUSING STARTS Millions (SAAR) Source: FEA– April 2014 25
Slide 26: North American Lumber Consumption
NORTH AMERICAN LUMBER CONSUMPTION Bbf Source: FEA– April 2014 26
Slide 27: North American Lumber Exports to China
NORTH AMERICAN LUMBER EXPORTS TO CHINA Source: Wood Markets International Monthly Report – March 2014 27
Slide 28: China Markets – Wood Frame Construction
CHINA MARKETS – WOOD FRAME CONSTRUCTION Wood truss re-roofing Suburban villas (east and north China) (east, north, n-east, s-west) Low cost rural housing (south-west) Resort homes (north) 28
Slide 29: China Markets – Sectors Under Development
CHINA MARKETS – SECTORS UNDER DEVELOPMENT Public buildings Apartment infill walls / partition walls Multi-story residential Mixed-use hybrid 29
Slide 30: China Markets – Use of BC Wood
CHINA MARKETS – USE OF BC WOOD House framed with SPF lumber SPF used for furniture frames Cedar used as siding Cedar used as siding and for outdoor structures and for outdoor structures 30
Slide 31: Impact of Mountain Pine Beetle (MPB)
IMPACT OF MOUNTAIN PINE BEETLE (MPB) MMm3 Source: FEA– April 2014 31
Slide 32: MPB – Area Affected
MPB – AREA AFFECTED • Interfor’s southern BC Interior wood baskets are less exposed to the MPB than BC’s central and northern interior regions; the Coast is not exposed. AAC1 MMm3 Central and Northern BC 0.0 50 – 75% Pine Adams Lake in Southern BC 0.5 28 – 30% Pine Castlegar & Grand Forks in Souther
Slide 33: US South Sawtimber Prices
US SOUTH SAWTIMBER PRICES US$/Ton (Nominal $’s) $60 $50 $40 $30 $20 $10 $0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: FEA– April 2014 33
Slide 34: Regional Production vs Peak
REGIONAL PRODUCTION VS PEAK (Bbf) BC lumber Production Eastern Canada Lumber Production 34 Source: FEA– March 2014