Weyerhaeuser Company · NYSE:WY
Weyerhaeuser — Investor Day (May 2011)
83 slides from Weyerhaeuser's investor day presentation, May 24, 2011
Slide 1: Investor Meeting May 19, 2011
INVESTOR MEETING May 19, 2011 WEYERHAEUSER COMPANY Exhibit 99.1
Slide 2: Kathy McAuley, Vice President, Investor Relations
Kathy McAuley Vice President, Investor Relations
Slide 3: Forward Looking Statement
FORWARD LOOKING STATEMENT This presentation contains statements concerning the Company’s future results and performance that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on various assumptions and may not be acc
Slide 4: Agenda
AGENDA DAN FULTON : Introduction TOM GIDEON: Timberlands LARRY BURROWS: Wood Products PETER ORSER: Weyerhaeuser Real Estate Company (WRECO) SHAKER CHANDRASEKARAN: Cellulose Fibers PATTY BEDIENT: Financial Update DAN FULTON: Conclusion and Q&A
Slide 5: Introduction
INTRODUCTION Dan Fulton President and Chief Executive Officer
Slide 6: Weyerhaeuser Overview
WEYERHAEUSER OVERVIEW Valuable timberland holdings Leader in adding and extracting value from timberlands Businesses have the size and scale to compete, and generate cash and returns Positioned to benefit from the recovery in housing • Timberlands, Wood Products, Homebuilding Capturing global growth
Slide 7: Weyerhaeuser Overview
WEYERHAEUSER OVERVIEW Weyerhaeuser Company Timberlands (REIT) Taxable REIT Subsidiary Non-REIT Timber Business Wood Products Weyerhaeuser Real Estate Company (WRECO) Cellulose Fibers Lumber, OSB, Engineered Wood Products Over 6 million acres of timberlands Specialty Absorbent Pulp Single Family Home
Slide 8: Housing Market Overview
HOUSING MARKET OVERVIEW Challenging housing market expected to continue in 2011 Pace of recovery is uncertain Housing will return to long-term trend levels Focused on operating profitably at today’s level of activity
Slide 9: Timberlands
TIMBERLANDS Tom Gideon Executive Vice President, Timberlands
Slide 10: Competitive Advantages
COMPETITIVE ADVANTAGES World class timberland holdings Manage for optimum value – Innovative silviculture – Focus on sawlogs Scale and infrastructure Broad access to domestic and international markets Strong, long-standing customer relationships Well-positioned as market conditions improve
Slide 11: Timberlands Strategy
TIMBERLANDS STRATEGY Grow and manage financially attractive, sustainable forests Apply market knowledge and scale to create additional value Explore opportunities for future growth Increasing cash flow and asset value
Slide 12: U.S. Timberlands in Most Productive Regions
U.S. TIMBERLANDS IN MOST PRODUCTIVE REGIONS US West US South Nearly 2 million acres west of the Cascade Mountains, primarily high value Douglas fir Over 4 million acres in 7 states across the U.S. South, primarily loblolly pine
Slide 13: Asset Base Is Over 90% Productive Timberlands
ASSET BASE IS OVER 90% PRODUCTIVE TIMBERLANDS Timberlands Acres (000) % US West US South Uruguay China JV Total Weyerhaeuser timberlands located in most productive geographies High quality sawtimber Source of environmental and public benefits Does not include 14.0 million acres of forestland under l
Slide 14: Silviculture Optimized Through the Rotation
SILVICULTURE OPTIMIZED THROUGH THE ROTATION Genetics Stand Management Final Harvest • US West • US South • Uruguay • China Financial Optimization Site Preparation, Fertilizer, Thinning and Pruning Seedlings Silviculture practices enable objective to grow sawtimber as quickly as possible Sustainabili
Slide 15: Sustainability and Environmental Capabilities
SUSTAINABILITY AND ENVIRONMENTAL CAPABILITIES Meet ecological and sustainability requirements – Enable higher yields throughout a rotation – Satisfy customer requirements – Improve sustainability performance through collaboration with partners and investment in research Leads to increased value
Slide 16: All Lands Independently Certified
ALL LANDS INDEPENDENTLY CERTIFIED Key stakeholder involvement Based on sound science – Open, independent, peer reviewed research Program broad in scope – Lands managed for productivity and ecosystem values Recognized by the Dow Jones Sustainability Index
Slide 17: Harvest Mix % Grade Logs
HARVEST MIX % GRADE LOGS TIMBERLANDS NOW 2020-2030 Weyerhaeuser’s timber resource and tree-growing strategy enables a high proportion of high value grade logs – improving over time. South 60% 65% 70% West 93% Steady International 30% 40% 50%
Slide 18: Value of Sawtimber Grade Logs Is Higher
VALUE OF SAWTIMBER GRADE LOGS IS HIGHER Sawtimber logs consistently trade at a higher price than chip-n-saw and pulpwood Delivered Southern Average Prices $/Green Ton Delivered Quarterly Source: Timber Mart-South, Wood Biomass Market Report Pulpwood Sawtimber Chip-N-Saw
Slide 19: Harvest Volume Outlook Is Positive
HARVEST VOLUME OUTLOOK IS POSITIVE More productivity per acre Weyerhaeuser Global Fee Harvest Volume INTERNATIONAL U.S.
Slide 20: U.S. Trend Log Demand Exceeds Domestic Supply
U.S. TREND LOG DEMAND EXCEEDS DOMESTIC SUPPLY U.S. lumber demand starting recovery from cyclic low Canadian lumber imports will not return to prior peaks Rising lumber / log demand should lead to higher prices BBF US Lumber Consumption by Source Offshore Imports Canadian Imports US Production Foreca
Slide 21: Asian Demand Pulling Additional U.S. Supplies
ASIAN DEMAND PULLING ADDITIONAL U.S. SUPPLIES Japan is a premium market for logs China imports of U.S. timber significantly higher, helping offset weak domestic demand Western Douglas Fir Log Prices $/MBF Quarterly Source: Log Lines Korea Japan China U.S. Off-Shore Softwood Log Exports Cubic Meters
Slide 22: Uniquely Advantaged to Serve Asian Export Markets
UNIQUELY ADVANTAGED TO SERVE ASIAN EXPORT MARKETS Strategically located timberlands Well-developed infrastructure and sales relationships 19% of timberlands revenue from export log sales – Japan is a premium market for Weyerhaeuser logs – China represents an increasingly large and attractive opportu
Slide 23: U.S. Log Prices Have Bottomed
U.S. LOG PRICES HAVE BOTTOMED 2011 Q1 Western prices up significantly, helped by export markets Southern markets more dependent on U.S. housing, delaying improvement DF #2 Log Price SYP Sawlog Douglas Fir #2 Sawlog Price vs. Southern Average Pine Sawlog Price $/MBF Quarterly Source: Log Lines, Timbe
Slide 24: U.S. Oil, Natural Gas, Aggregates and Minerals
U.S. OIL, NATURAL GAS, AGGREGATES AND MINERALS 7.1 million net mineral acres Oil and gas – $30-50 million annual business – Revenue interest in >1,000 producing wells – Haynesville Shale (LA) • ~12,000 acres under lease in core Aggregates and minerals – $10+ million annual business • Economic downtu
Slide 25: New Opportunities
NEW OPPORTUNITIES Biomass – Catchlight Energy • KIOR agreement Wind Geothermal
Slide 26: Competitive Advantages
COMPETITIVE ADVANTAGES World class timberland holdings Manage for optimum value – Innovative silviculture – Focus on sawlogs Scale and infrastructure Broad access to domestic and international markets Strong, long-standing customer relationships Well-positioned as market conditions improve
Slide 27: Wood Products
WOOD PRODUCTS Larry Burrows Senior Vice President, Residential Wood Products
Slide 28: Weyerhaeuser Wood Products
21% 49% WEYERHAEUSER WOOD PRODUCTS 2010 Wood Products Net Sales $2.6 billion 13% 17% Lumber Engineered Wood Products OSB / Plywood Panels Other • Primarily new residential • Modest export • Primarily new residential • Modest repair & remodel • Modest export • New residential • Repair & remodel • Exp
Slide 29: Strategic Imperatives: Generate Cash and Improve Margins
2011 2009 Q1 2011 Q1 STRATEGIC IMPERATIVES: GENERATE CASH AND IMPROVE MARGINS Generate cash in 2011 in today ’ s market Continued focus on cost reduction – SG&A down additional 20% (2011 Q1 vs. Q1 ) – Operating costs 10% lower (2011 Q1 vs. Q1 ) Rationalize and optimize capacity Capacity Utilization
Slide 30: Strategic Imperatives: Generate Cash and Improve Margins
STRATEGIC IMPERATIVES: GENERATE CASH AND IMPROVE MARGINS Profitably grow revenue – Develop and diversify markets (domestic & international) – Improve pricing – Customer selection – Improve product mix
Slide 31: Lumber: Market Demand Drives Mill and Log Alignment
LUMBER: MARKET DEMAND DRIVES MILL AND LOG ALIGNMENT Grande Prairie Drayton Valley Princeton Raymond Longview Santiam Cottage Grove SPF EXPORT SPF DOUG-FIR GREEN HEM-FIR DOUG-FIR KD SO. PINE WEST SO. PINE CENTRAL SO. PINE EAST DOUG-FIR GREEN Idabel Dierks Zwolle Dodson Holden McComb Millport Bruce Ph
Slide 32: OSB: Focused Market and Mill Alignment
OSB: FOCUSED MARKET AND MILL ALIGNMENT Hudson Bay Grayling Arcadia Sutton Elkin Edson EdgeGold Flooring Markets Web, Sheathing, Edge, and RBS Markets
Slide 33: Engineered: Superior Brand Performance and Recognition
ENGINEERED: SUPERIOR BRAND PERFORMANCE AND RECOGNITION 5.96 5.58 5.55 21% 12% 10% *Quality rated on scale of 1 to 7 with 7 being excellent Source: 2011 Brand Use Study, Builder Magazine TJI (WY) GP Boise Brand Most Used by Builders Highest Quality* TJI (WY) GP Boise
Slide 34: Illustration of Weyerhaeuser Wood Products in a Home
ILLUSTRATION OF WEYERHAEUSER WOOD PRODUCTS IN A HOME
Slide 35: Weyerhaeuser Wood Products Used in Floors
WEYERHAEUSER WOOD PRODUCTS USED IN FLOORS LUMBER Solid Sawn Joists OSB OSB Floor Panels Rim Board ENGINEERED LUMBER I-Joists Stair Treads Engineered Lumber Beams
Slide 36: Weyerhaeuser Wood Products Used in Walls
WEYERHAEUSER WOOD PRODUCTS USED IN WALLS LUMBER Framer Series ® and Pro Series ™ Lumber Studs Treated Sill Plate OSB OSB Wall Sheathing ENGINEERED LUMBER Shear Brace Engineered Headers Engineered Wall Framing
Slide 37: Weyerhaeuser Wood Products Used in Roofs
WEYERHAEUSER WOOD PRODUCTS USED IN ROOFS LUMBER Framer Series ® and Pro Series ™ Lumber Solid Sawn Lumber OSB Radiant Barrier Sheathing OSB Roof Sheathing ENGINEERED LUMBER Engineered Beams Truss Chords TJI ® Joists Timberstrand ® Roof Framing
Slide 38: Significant Long-Term Opportunity in Wood Products
SIGNIFICANT LONG-TERM OPPORTUNITY IN WOOD PRODUCTS Improving demand – U.S. housing returns to trend – Increasing Asian consumption of North American lumber Lower Canadian lumber imports, due to pine beetle and increased exports to Asia Earnings upside from additional available capacity Well-position
Slide 39: Weyerhaeuser Real Estate Company (WRECO)
WEYERHAEUSER REAL ESTATE COMPANY (WRECO) Peter Orser President, Weyerhaeuser Real Estate Company
Slide 40: WRECO homebuilding brands
) | WINCHESTER HOMES Noun sake @ioce war CAMBERLEY HOMES above & beyond Maracay Homes Flex designe a A vexas (aswel co ivces
Slide 41: Near-Term Strategies
NEAR-TERM STRATEGIES Control the controllables Reposition product Rebalance land portfolio Focused on generating cash
Slide 42: Targeted Value Propositions Sustain Competitiveness
TARGETED VALUE PROPOSITIONS SUSTAIN COMPETITIVENESS Sales Per Community Per Month Source: SEC filings +14%
Slide 43: Controlling the Controllables: Cost of Production
CONTROLLING THE CONTROLLABLES: COST OF PRODUCTION Disciplined production cost-control provides margin support – Cost effective product designs – National contract leverage – Subcontractor selection and supervision – Reduced cycle time (1) Single-family margins equal revenue less cost of sales and pe
Slide 44: Controlling the Controllables: Reducing Expenses
CONTROLLING THE CONTROLLABLES: REDUCING EXPENSES Took immediate steps to substantially reduce costs Organization adjusting to local market conditions Reduced marketing expense through increased usage of digital media $0 $50 $100 $150 $200 $250 $300 SG&A
Slide 45: Controlling the Controllables: Increased Referrals
CONTROLLING THE CONTROLLABLES: INCREASED REFERRALS Maintaining industry leading customer- satisfaction ratings Leads to lower marketing costs and increased conversion rates Source: Woodland-O ’ Brien Industry Average 86-90%
Slide 46: Re-Positioning Initiatives
RE-POSITIONING INITIATIVES Launched new townhome product line directed at mid-to-upper price segment in north San Diego County Sustained absorption of 5 units per month at average sales price of $550,000
Slide 47: Re-Positioning Initiatives
RE-POSITIONING INITIATIVES “Living Smart” product line offering sustainable features became the best selling new home series in the Inland Empire Named Green Building Advocate of the Year for 2010 by NAHB Features that either reduce consumption or actually generate energy. The extensive use of susta
Slide 48: Re-Positioning Initiatives
RE-POSITIONING INITIATIVES Re-branded from “ More House. Less Money ” to “ Built Your Way ” Expanded market reach to first-time move-up segment New orders increased 5% year-over-year in first quarter and average sales price increased 7%
Slide 49: Re-Positioning Initiatives
RE-POSITIONING INITIATIVES Successfully introduced Texas Casual Cottage product line Opened second location in response to strong market interest
Slide 50: Re-Positioning Initiatives
RE-POSITIONING INITIATIVES Re-designed townhome product line to seamlessly integrate affordable dwelling units with market rate homes Continued expansion of Camberley Homes brand
Slide 51: Re-Positioning Initiatives
RE-POSITIONING INITIATIVES Re-designed product line to appeal more broadly to move-up market segment and reduce costs Improved point of sale experience
Slide 52: Controlling the Controllables: Disciplined Land Spending
CONTROLLING THE CONTROLLABLES: DISCIPLINED LAND SPENDING Lot acquisition activity linked to market demand Focused on “how” we buy, as well as “what” we buy
Slide 53: Strategically Re-Position Land Portfolio
STRATEGICALLY RE-POSITION LAND PORTFOLIO Align land value proposition with sub-market opportunity Land Designated for Sale Lots Owned as of 12/31/10 or Closest Reporting Period
Slide 54: Longer-Term Strategies
LONGER-TERM STRATEGIES Control the controllables Capitalize on opportunities in existing markets Realign land portfolio
Slide 55: Cellulose Fibers
CELLULOSE FIBERS Shaker Chandrasekaran Senior Vice President, Cellulose Fibers
Slide 56: Favorable Market Conditions
FAVORABLE MARKET CONDITIONS Fluff market is tight Despite additional capacity entering the market, fluff demand expected to exceed supply in next 3-4 years Global inventories remain low Favorable exchange rate
Slide 57: Focused on Value Added Grades
20% 48% 18% FOCUSED ON VALUE ADDED GRADES 100% of 2010 Revenues from Fluff and Value Added Grades 14% Absorbent Pulp (Fluff) Specialty Pulp Towel and Tissue Liquid Packaging Board
Slide 58: Focused on Value Added Grades
FOCUSED ON VALUE ADDED GRADES 4 13 Global Softwood and Dissolving Wood Pulp Market Global Market Share – ~26% of Fluff – ~10% of Towel and Tissue *Dissolving Wood Pulp is from both Hardwood & Softwood $$$ $ Towel and Tissue
Slide 59: How Our Products Are Used
HOW OUR PRODUCTS ARE USED Diapers and personal care products Premium towel and tissue products Textiles and nonwovens and industrial applications Packaging for dairy, juice and premium beverage containers
Slide 60: Geographically Diverse but Strategically Located
GEOGRAPHICALLY DIVERSE BUT STRATEGICALLY LOCATED • NBSK for Towel and Tissue • Pulp for Liquid Packaging Board • NORPAC • Fluff Pulp for Absorbents and Specialty Grades COLUMBUS LONGVIEW Pulp Mills Liquid Packaging Board NORPAC Joint Venture PORT WENTWORTH NEW BERN FLINT RIVER GRANDE PRAIRIE
Slide 61: Emerging Markets Leading Growth
EMERGING MARKETS LEADING GROWTH Global Market Fluff Projected Demand Growth Rates from 2010-2015* * Source: RISI
Slide 62: Positioned to Grow in Emerging Markets
POSITIONED TO GROW IN EMERGING MARKETS EMEA 7% North America 38% Weyerhaeuser’s CF 2010 Revenues 62% of revenue from international markets Export to over 60 countries Strategically located multilingual global sales team Strategic relationships with key global market leaders Europe 14% Japan 16% Asia
Slide 63: Operational Excellence
OPERATIONAL EXCELLENCE World class reliability – Maximize uptime – Maximize quality Continue to reduce fiber, chemical and energy costs Decrease the frequency of planned shutdowns from 12 months to 18 months (target: 2013-14) – Results in “ incremental ” capacity – Reduces maintenance spending Getti
Slide 64: Innovating for Higher Margins
INNOVATING FOR HIGHER MARGINS Leading innovation in cellulose fibers – Developed and launched dissolving wood pulp extender, Pearl ® – Introduced “ next generation ” Modified Fiber for global customers – Improving proprietary fibers for specialty applications – Delivering innovative liquid packaging
Slide 65: Building on Our Strengths
BUILDING ON OUR STRENGTHS Continuing to focus on value added grades Nurturing strategic partnerships with key global customers Operational excellence Innovation
Slide 66: Financial Update
FINANCIAL UPDATE Patty Bedient Executive Vice President, and Chief Financial Officer
Slide 67: 2011 Q2 Segment Comments
2011 Q2 EARNINGS UPDATE Segment Comments Timberlands Improved selling prices for western logs and higher harvest volumes, driven by strong export demand Flat sales realizations in the South on slightly higher volumes Higher fuel, road and silviculture expenses Excluding the disposition of non-strate
Slide 68: 2011 Q2 Segment Comments
2011 Q2 EARNINGS UPDATE Segment Comments Cellulose Fibers Higher selling prices and slightly higher sales volumes Increase in the number of scheduled annual maintenance outages will result in higher maintenance costs and lower productivity Expect 2011 Q2 earnings to be higher than 2011 Q1 Real Estat
Slide 69: Dividend Payout Policy
DIVIDEND PAYOUT POLICY Targeting a dividend payout ratio of 75% of Funds Available for Distribution (FAD) over cycle FAD defined as cash flow before debt repayment and dividends Will consider repurchasing shares Current quarterly dividend of 15 cents per share, or 60 cents per share on annualized ba
Slide 70: Strong Liquidity and Improving Capital Structure
STRONG LIQUIDITY AND IMPROVING CAPITAL STRUCTURE Cash balance as of 3/31/2011: ~$1.5 billion New 4-year credit facility expected by 6/30/2011 Exercised “make whole” on $518 million of 6.75% March 2012 bonds to be redeemed 6/2/2011 Strong capital structure supports sustainability of dividend 2015-201
Slide 71: Capital Spending
CAPITAL SPENDING Estimated 2011 capital spending: $250-270 million Capital investment in projects that: • Meet customer demand • Lower costs • Enhance earnings capabilities
Slide 72: Strategic Growth Priorities
STRATEGIC GROWTH PRIORITIES Increase timberland holdings to grow cash flow and earnings Apply timberland management expertise Leverage scale, infrastructure and market access
Slide 73: Conclusions / Q&A
CONCLUSIONS / Q&A Dan Fulton President and Chief Executive Officer
Slide 74: Concluding Comments
CONCLUDING COMMENTS Leader in adding and extracting value from timberlands All businesses have the ability to generate cash and returns Committed to a sustainable dividend that we expect to grow over time Target growth in timberland holdings Take advantage of future opportunities to create value for
Slide 75: Sustainability index recognition
FORTUNE sow) WORLD'S MOST @@)) Sexteinabtiny indexes SHAS eae &? GLOBALIOO ¢ sam@® as maplecroft lr oN Climate Innovation Indexes 100 Best rated by Tp NY ECPI oekom re|s\elalrch 2011 bronze class
Slide 76: Biographies
BIOGRAPHIES
Slide 77: Dan Fulton
DAN FULTON Dan Fulton was elected chief executive officer and a member of the board of directors in April 2008. He remains as president of Weyerhaeuser Company, a position he assumed in January 2008. From May 2001 until March 2008 he was president and chief executive officer of Weyerhaeuser Real Est
Slide 78: Patty Bedient
PATTY BEDIENT Patty Bedient was named Executive Vice President and Chief Financial Officer in April 2007. She became senior vice president of Finance and Strategic Planning in February 2006 and from February 2003 to 2006 she served as vice president of Strategic Planning. Prior to joining the compan
Slide 79: Tom Gideon
TOM GIDEON Tom Gideon was named executive vice president, Timberlands, in October 2010. He had been executive vice president, Forest Products, since July 2008. Gideon became senior vice president of Containerboard Packaging and Recycling in March 2007. From 2005 to 2007 he held the position of senio
Slide 80: Larry Burrows
LARRY BURROWS Larry Burrows was appointed senior vice president, Residential Wood Products, in October 2010. He had been president and CEO of Weyerhaeuser Real Estate Company (WRECO) since March 2008. Previously he was president of Winchester Homes Inc., Weyerhaeuser ’ s homebuilding operation in th
Slide 81: Peter Orser
PETER ORSER Peter Orser was appointed president and CEO of Weyerhaeuser Real Estate Company (WRECO) in October 2010. He oversees five real estate companies and the company ’ s builder financing operation. Previously he was president of Quadrant Corporation, Weyerhaeuser ’ s homebuilding operation in
Slide 82: Shaker Chandrasekaran
SHAKER CHANDRASEKARAN Shaker Chandrasekaran was appointed senior vice president, Cellulose Fibers business in December 2006. He assumed additional responsibilities for Liquid Packaging Board and Newsprint businesses in June 2007, and in 2009, Westwood Shipping and Weyerhaeuser Engineering Services w
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