Canfor Corporation · TSX:CFP
Canfor — UBS Global Paper and Forest Products Conference 2005
40 slides from Canfor's conference presentation, Sep 14, 2005
Slide 1: UBS Global Paper and Forest Products Conference
C O R P O R A T I O N C A N F O R UBS Global Paper and Forest Products Conference September 14, 2005 Presented by: Jim Shepherd, President and CEO SHP10 PAGE 1
Slide 2: Forward-Looking Statement Disclaimer
Forward-Looking Statement Disclaimer Certain statements in this presentation, including statements regarding future results and performance, are forward-looking statements based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions th
Slide 3: Business Overview
Business Overview Pulp & Paper Lumber Fibre Panels CANFOR CORPORATION 3 SHP10
Slide 4: Fibre
Fibre ! 13 million m3 of forest tenure ! High quality, abundant spruce-pine-fir (SPF) fibre ! Commitment to sustainable forest (ISO14001 and CSA/SFI certified) ! Tenure take-back (increase purchase volume) ! Low fibre cost ! Beetle wood opportunity Fibre CANFOR CORPORATION 4 SHP10
Slide 5: Lumber
Lumber ! Primary lumber capacity of 5,000 million fbm ! Second largest lumber producer ! Largest SPF producer in the world ! 18 sawmills in BC, Alberta and Quebec ! Low cost operations Lumber Cash conversion costs 8,000 7,700 135 130 6,000 5,135 125 (MMfbm) 120 $/mfbm 4,160 4,000 115 2,300 2,273 2,1
Slide 6: Panels
Panels ! OSB capacity of 650 million msf 3/8” basis ! OSB JV a further 820 million msf 3/8” basis in Q4 2005 (50% to Canfor) ! Plywood capacity of 440 million msf 3/8” basis PolarBoard Panels Peace Valley OSB CANFOR CORPORATION 6 SHP10
Slide 7: Pulp and Paper
Pulp and Paper ! Pulp capacity of 1.2 million tonnes (1.0 mt NBSK and 0.2 mt of BCTMP) ! Kraft paper capacity of 140,000 tonnes ! 4 pulp machines and 1 paper machine ! Howe Sound Pulp & Paper (50% interest) – 400,000 tonnes NBSK and 207,000 tonnes newsprint ! Environmentally sound ! Low cost operati
Slide 8: Who we are
Who we are C$ millions June YTD 2005 Dec 2004 (1) Sales 2,033.3 4,341.9 EBITDA 242.2 676.7 EBITDA margin 12% 16% Net income 90.9 420.9 EPS - diluted $0.63 $3.22 Return on Capital Employed (%) (2) 14.9% 19.8% Net debt : Shareholders’ Equity 14:86 13:87 Duties paid to date (US$ million) $652 - Market
Slide 9: How Canfor creates value
How Canfor creates value Meeting Customer Needs Top Quartile Operations Fibre CANFOR CORPORATION 9 SHP10
Slide 10: Meeting our Customers' needs
Meeting our Customers’ needs ! Strategic relationships in major market segments ! Leveraging investment in supply chain & systems ! Delivering quality products with quality service CANFOR CORPORATION 10 SHP10
Slide 11: Our Customers are:
Our Customers are: Home Centre Pro Dealer Industrial Offshore ! Home Depot ! Stock Lumber ! Universal ! Japan ! Lowe’s ! 84 Lumber ! Centex ! China ! Rona ! Lanoga ! Boise ! Korea ! Global growth ! Consolidation ! Builder ! 2x4 growth consolidation ! New business ! Vertical ! Higher value models int
Slide 12: Wood Products strategy
Wood Products strategy ! Produce premium products for target markets ! Competitive in scale & technology ! Top quartile mills ! Low cost operations – improve margins by 35% over 5 years Achieved through non-capital and capital initiatives: • Focused/discipline investing • Getting more out of the cur
Slide 13: Canfor's Global Opportunity
Canfor’s Global Opportunity ! Global expansion of operations ! Creative in developing other markets ! Continue to expand in lumber, i.e. 2x4 construction technology ! Expansion into complementary products: – Engineered wood products – Panels – Building systems (components) CANFOR CORPORATION 13 SHP1
Slide 14: Global Fibre Baskets
Global Fibre Baskets CANFOR CORPORATION 14 SHP10
Slide 15: Pulp and Paper: Strategy
Pulp and Paper: Strategy ! Focus on reinforcement pulp Northern Bleached Softwood and the strength of the fibre Kraft Manufacturing Cost Curve ! Leveraging technical fit with As at Q4 2004 strategic customers 800 700 PGPP Pro Forma Cogen PGPP ! Profitable at the bottom of 600 Northwood Intercon the
Slide 16: Other comments
Other comments Trade File ! Over US$652 million in deposits (to June 2005) ! Committed to a dual track process : litigation and negotiation People ! Experience, dedicated employees ! Stable union relationship ! Strong safety orientation ! Training, development and retention Use of cash ! Growing our
Slide 17: Our Focus
Our Focus Meeting customer needs ! Being closer to our customers ! Leveraging supply chain investments Improving our operations ! Capital and non-capital initiatives ! Improving margins / low cost Getting the Fibre ! High quality / quantity fibre basket Financial flexibility ! Conservative in approa
Slide 18: Canfor Corporation "CFP"
Canfor Corporation “CFP” www.canfor.com Contact: David Jan – Manager, Investor Relations ! 604-661-5424 ! David.Jan@canfor.com CANFOR CORPORATION 18 SHP10
Slide 19: Supplemental Information
C O R P O R A T I O N C A N F O R Supplemental Information A. Business Overview B. Q2-2005 summary of results SHP10 PAGE 19
Slide 20: Forward-Looking Statement Disclaimer
Forward-Looking Statement Disclaimer Certain statements in this presentation, including statements regarding future results and performance, are forward-looking statements based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions th
Slide 21: A. Business Overview
C O R P O R A T I O N C A N F O R A. Business Overview SHP10 PAGE 21
Slide 22: Business Overview
Business Overview ! 13 million m3 of forest tenure Fibre ! High quality, abundant spruce-pine-fir (SPF) fibre ! ISO14001 certified ! CSA/SFI certified ! Primary lumber capacity of 5,000 million fbm Lumber ! Second largest lumber producer and largest SPF producer in the world ! 18 sawmills in BC, Alb
Slide 23: Canfor's Operations
Canfor’s Operations CANFOR CORPORATION 23 SHP10
Slide 24: Who we are
Who we are C$ millions June YTD 2005 Dec 2004 (1) Sales 2,033.3 4,341.9 EBITDA 242.2 676.7 EBITDA margin 12% 16% Net income 90.9 420.9 EPS - diluted $0.63 $3.22 Return on Capital Employed (%) (2) 14.9% 19.8% Net debt : Shareholders’ Equity 14:86 13:87 Duties paid to date (US$ million) $652 - Market
Slide 25: Contributions by segment
Contributions by segment June YTD 2005 June YTD 2005 EBITDA by Segment Sales by Segment 1% 2% 12% 23% 13% 66% 74% 9% Lumber Panels Lumber Panels Pulp & Paper Coast Pulp & Paper Coast CANFOR CORPORATION 25 SHP10
Slide 26: Sensitivities
Sensitivities Impact on earnings Lumber – US$10/mfbm change $0.25 per share OSB – US$10/msf change $0.03 Pulp – US$10/tonne change $0.05 Cdn dollar – US$0.01 change $0.16 Duties – 1% change in rates $0.07 Log costs – Cdn$1 change per m3 $0.10 CANFOR CORPORATION 26 SHP10
Slide 27: Global market place
Global market place 2004 Sales distribution 100 % 80 60 40 20 0 TOTAL Lumber Panels Pulp USA Canada Far East Europe CANFOR CORPORATION 27 SHP10
Slide 28: Our Size: Lumber capacity
Our Size: Lumber capacity 8,000 7,700 6,000 5,135 (MMfbm) 4,160 4,000 2,300 2,273 2,135 2,099 2,000 1,445 1,152 1,138 Abitibi Tolko Sierra Pacific Georgia Pacific Canfor West Fraser International Paper Weyerhaeuser Tembec Domtar CANFOR CORPORATION 28 SHP10
Slide 29: Our size: Pulp capacity
Our size: Pulp capacity Global Capacity of Market Pulp North American Capacity of Market Pulp 3,000 3,000 2,515 2,515 2,425 2,300 2,250 2,250 2,080 2,045 1,945 1,920 1,900 1,545 (Mt) 1,355 (Mt) 1,500 1,355 1,310 1,500 1,210 1,210 1,200 1,200 1,115 990 935 825 735 750 750 International Paper APRIL Te
Slide 30: B. Q2-2005 summary of results
C O R P O R A T I O N C A N F O R B. Q2-2005 summary of results SHP10 PAGE 30
Slide 31: Q2 Review : Summary
Q2 Review : Summary $ millions Q2 2005 Q1 2005 Q2 2004 Sales 1,067.4 965.9 1,180.6 EBITDA Lumber 87.5 101.3 158.4 Panels 11.8 20.6 62.2 Pulp & Paper 8.3 21.3 47.0 Coast 3.5 (0.3) 6.9 Corporate (6.1) (5.7) (26.7) Total EBITDA 105.0 137.2 247.8 EBITDA margin 10% 14% 21% Operating income 67.1 95.6 211.
Slide 32: Q2 Review: Impact of specific items
Q2 Review: Impact of specific items $ millions Q2-2005 Q1-2005 Q2-2004 Net income – as reported 25.3 65.6 143.6 Items not estimated (after-tax) ! Unrealized f/x loss on debt 14.1 3.6 21.9 ! Various restructuring costs 2.5 - 17.3 ! Incentive awards - - 5.4 ! Loss on disposal of lumber assets 4.0 - -
Slide 33: Q2-2005 comments
Q2-2005 comments Net income of $25.3 million or $0.18/ diluted share EBITDA $105.0 million ! Q2-2005 Actual prices compared to: Q2 versus Q1: ! Cash conversion costs: Q1-2005 Q2-2004 – Lumber down by 4% Lumber (8%) (16%) – OSB up by 7% OSB (16%) (29%) – Plywood down by 5% Plywood (18%) (39%) – NBSK
Slide 34: Net Income and Earnings Per Share
Net Income and Earnings Per Share $ Millions $/Share - Diluted $1.40 $250 $1.50 $1.25 $200 $1.00 $1.00 $150 $0.75 $100 200.0 $0.30 $0.46 $0.50 $0.34 142.0 $0.18 $50 $0.25 65.6 43.0 30.4 25.3 $0 $0.00 Q1.04 Q2.04 Q3.04 Q4.04 Q1.05 Q2.05 Income EPS CANFOR CORPORATION 34 SHP10
Slide 35: Summary of Financial Position
Summary of Financial Position Q2 2005 Dec 2004 Ratio of current assets to current liabilities 2.7 : 1 2.3 : 1 Ratio of net debt to common shareholders’ equity 14 : 86 11 : 89 Total Debt ($ millions) 727.5 728.6 Net Debt ($ millions) 339.9 294.6 Cash flow from operations – year to date 105.5 713.4 CA
Slide 36: Lumber
Lumber $ millions Q2-2005 Q1-2005 Q2-2004 Sales 704.9 643.5 723.6 EBITDA 87.5 101.3 158.4 Margin % 12% 16% 22% Operating income 67.4 76.0 139.8 Lumber production (mmfbm) 1,242.7 1,205.4 1,166.4 Lumber shipments (mmfbm) 1,253.8 1,088.2 1,190.3 Average Lumber Price (U$/mfbm) 365 398 437 Average Lumber
Slide 37: Panels
Panels $ millions Q2-2005 Q1-2005 Q2-2004 Sales 89.8 94.4 136.2 EBITDA 11.8 20.6 62.2 Margin % 13% 22% 45% Operating income 9.0 17.8 59.5 Production (000 Msf 3/8”) Plywood 110.9 108.3 109.1 OSB 114.9 120.6 125.8 Shipments (000 Msf 3/8”) Plywood 107.1 106.0 106.1 OSB 117.1 102.5 132.6 Ave OSB Price (
Slide 38: Pulp & Paper
Pulp & Paper $ millions Q2-2005 Q1-2005 Q2-2004 Sales 244.2 223.9 275.6 EBITDA 8.3 21.3 47.0 Margin % 3% 10% 17% Operating income (2.5) 10.0 36.4 Production (000 mt) Pulp 286.0 299.6 297.5 Paper 30.8 33.4 33.5 Shipments (000 mt) Pulp 299.0 2268.1 284.5 Paper 33.0 32.5 39.4 Average Pulp Price (U$/ton
Slide 39: Coastal Operations
Coastal Operations $ millions Q2-2005 Q1-2005 Q2-2004 Sales 28.5 6.4 45.2 EBITDA 3.5 (0.3) 6.9 Margin % 12% (5%) 15% Operating income 1.1 (1.3) 4.6 Production (000 m3) 451.3 113.8 447.3 Shipments (000 m3) 330.3 91.9 481.3 Q2-2005 comparison to Q1-2005: ! Full operations in the quarter ! Net sale pri
Slide 40: Canfor Corporation "CFP"
Canfor Corporation “CFP” www.canfor.com Contact: David Jan – Manager, Investor Relations ! 604-661-5424 ! David.Jan@canfor.com CANFOR CORPORATION 40 SHP10
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