Slide 1: Company Update June 2016
: Mm COMPANY UPDATE JUNE 2016 A INTERFOR Building Value..
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION This presentation contains information and statements that are forward- looking in nature, including, but not limited to, statements containing the words “will”, “is expected”, “forecast”, “annualized”, “target” and similar expressions. Such statements involve known and u
Slide 3: Interfor's Four Regions
INTERFOR’S FOUR REGIONS BC Coast Pesce cess eenaseseeenee : Pree erree rrr ryy : : 320 MMbf (11%) BC Interior i - 2 mills o - Cedar, Hem-Fir, : peo MMpt (25%) Douglas-Fir - Douglas-Fir, Hem-Fir, - Specialty SPF, Cedar vedussenveesaverienesees - Dimension : US Northwest : 625 MMbf (20%) : -4 mills -
Slide 4: 4th Largest Lumber Producer
4th LARGEST LUMBER PRODUCER Bbf North American Lumber Production by Company - 2015 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 - Source: Wood Markets Monthly – March 2016 4
Slide 5: Interfor Strategic Plan
INTERFOR STRATEGIC PLAN Growth by Acquisition Building Value Operational Excellence 5
Slide 6: Lumber Markets
RAYMOND JAMES U.S. SOUTH CONFERENCE - PERRY SAWMILL TOUR LUMBER MARKETSSeptember 30, 2015
Slide 7: Interfor's Diverse Lumber Mix
INTERFOR’S DIVERSE LUMBER MIX Cedar Lumber Sales By Species 1 Hem-Fir 10% Spruce-Pine-Fir Western Dimension 11% Doug Fir/Larch 30% Southern Yellow Pine Southern Yellow Pine 34% Lodge Pole Pine Lodge Pole/ Ponderosa Pine Cedar 4% 11% (1) By value for 2015 7
Slide 8: North American Driven Business
NORTH AMERICAN DRIVEN BUSINESS Lumber Sales By Market 1 USA Canada 73% 8% China/Tw/HK 5% Other 4% Japan 10% (1) By value for 2015 8
Slide 9: Benchmark Lumber Price Trends
BENCHMARK LUMBER PRICE TRENDS US/Mbf US/Mbf $500 $500 WSPF #2 2x4 SYP (East) #2 2x4 WSPF Composite SYP Composite $450 $450 $400 $400 $350 $350 $300 $300 $250 $250 2X4 $356 2X4 $349 2X4 $278 2X4 $288 2X4 $413 2X4 $418 2X4 $382 2X4 $420 COM $350 COM $350 COM $279 COM $278 COM $385 COM $400 COM $357 CO
Slide 10: Key Market Drivers
KEY MARKET DRIVERS (1) 2014(1) 2015 2016E(1) 2017E(1) US Housing Starts - Total (mm) 1.0 1.1 1.2 1.4 Change +11% +6% +15% US Housing Starts - Single Family (mm) 0.6 0.7 0.8 0.9 Change +10% +13% +16% NA Lumber Consumption (Bft) 48.9 51.6 53.8 57.0 Change +6% +4% +6% NA Offshore Exports (Bft) 7.6 6.9
Slide 11: Operations Overview
A INTERFOR Building Value.. 11
Slide 12: Business Comparisons
BUSINESS COMPARISONS BC Interior Dimension Mills • 3 dimension mills in BC southern interior • Modern/low cost operations • Good fiber supply/limited exposure to pine beetle US South Dimension Mills • 9 dimension mills in Georgia, S. Carolina and Arkansas • Low cost wood baskets • Strong geographic
Slide 13: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS A INTERFOR Building Value...
Slide 14: BC Interior Overview
BC INTERIOR OVERVIEW Mountain Pine Beetle Cumulative Percentage of Merchantable Forest Volume Killed Since 1999 Adams Lake Very High (>45%) High (31-45%) Moderate (16-30%) Castlegar Low (<16%) None (0%) Grand Forks Source: BC Ministry of Forests 14
Slide 15: BC Interior Modernization
BC INTERIOR MODERNIZATION 2008-09 2012 2015 Adams Lake, BC Grand Forks, BC Castlegar, BC • 3 MODERN MILLS IN GOOD FIBER BASKETS • RE-INVESTMENTS ARE COMPLETE • SIGNIFICANTLY REPOSITIONED THE ASSETS • STRONG CASH FLOW AND ROI 15
Slide 16: US South Dimension Mills
ai +P s _.US soutH DIMENSION MILLS A INTERFOR Building Value..
Slide 17: US South Overview
US SOUTH OVERVIEW • Invested over US$400 million since March 2013 • 5 acquisitions • 9 mills • 1.3 Billion feet of lumber capacity across 3 States • Largest lumber producer in Georgia • 44% of Interfor’s capacity is in the South 17
Slide 18: US South: Started Up in 2013
US SOUTH: STARTED UP IN 2013 ACQUIRED ASSETS...NOW REPOSITIONING THE BUSINESS Phase 1 Phase 2 Phase 3 • Acquire Assets • Build Team/Infrastructure • Mill Improvements • Mill Improvements • Optimization • Targeted Capex • Modest Capex 2013-15 2016-17
Slide 19: Logistics – Right Log to Right Mill
LOGISTICS – RIGHT LOG TO RIGHT MILL Each circle is a 50 mile radius. 19
Slide 20: US South Opportunity
US SOUTH OPPORTUNITY US South Competitive Advantages(1) US South Relative Performance(1) - Log Costs - Lumber recovery - Labor Rates - Cash conversion costs - Product mix/quality/mills nets Non-Controllables Controllables Interfor’s 2016/17 goal is to capture a significant portion of the opportuniti
Slide 21: Financial Review
FINANCIAL REVIEW
Slide 22: Historical Results
HISTORICAL RESULTS EBITDA $mm (US$/Mbf) $80 $450 $70 $400 $350 $60 $300 $50 $47.3 $45.4 $250 $39.2 $40 $37.1 $36.1 $36.2 $37.4 $35.8 $31.8 $33.4 $200 $30 $24.6 $150 $20 $100 $12.7 $11.5 $10 $50 $0 $- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 2016 Interfor Adjusted EBITDA ($Cmm) SYP Compo
Slide 23: Capital Spending Profile
CAPITAL SPENDING PROFILE $mm $140 $120 $100 $80 $60 $40 $20 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016E Depreciation, Depletion & Amortization(1) Capital Expenditures(2,3) (1) Includes depreciation of plant & equipment and depletion & amortization of logging roads, timbers and other. (2) Includ
Slide 24: Capital Structure
CAPITAL STRUCTURE • Interfor has a prudent capital structure. • Weighted average interest rate < 4%. • At Mar 31, 2016 - Available liquidity of $148 mm. $mm Capital Structure Debt Maturity Schedule As of Mar 31, 2016 $300 As of Mar 31, 2016 Net Debt (C$mm) $428 $250 Book Equity (C$mm) $705 Invested
Slide 25: Net Debt Profile
NET DEBT PROFILE $400 Net Debt – US$ mm $345 $344 $350 $330 $327 $(1) •Free cash $3 $300 $281 flow (net of •Free cash •Seasonal Castlegar flow working capex) •Monticello capital acquisition $250 •Castlegar capex $200 $175 •Simpson acquisition $150 $100 ND/Cap ND/Cap ND/Cap ND/Cap ND/Cap ND/Cap $50 2
Slide 26: Summary
SUMMARY • 3 modern mills in BC Interior (Castlegar project is Strong Asset Base complete) - $10 mm annualized EBITDA impact (1) With Significant • Margin improvement initiatives (primarily US South) - Upside $40 mm annualized EBITDA impact by 2016/17 (1) • “Capital light” approach for 2016 • Debt ma