Canfor Corporation · TSX:CFP
Canfor — RBC Capital Markets Forest Products Conference (December 2020)
28 slides from Canfor's conference presentation, December 2020
Slide 1: Canfor Corporation
Canfor Corporation December 2020
Slide 2: RBC Capital Markets Forest Products Conference
RBC Capital Markets Forest Products Conference Alan Nicholl Pat Elliott CFO and Executive VP, SVP, Corporate Finance and Finance and Canfor Pulp Sustainability The presentation and answers to questions today contain forward-looking statements which involve known and unknown risks, uncertainties and
Slide 3: Lumber Supply & Demand
Lumber Supply & Demand 3
Slide 4: 2020 – US Softwood Lumber Supply & Demand
LUMBER MARKETS – US Supply and Demand 2020 – US Softwood Lumber Supply & Demand U.S. Lumber Supply U.S. Lumber Demand Supply (Bfbm) 2018 Est. 2019 Est. 2020 Fct. Segments (Bfbm) 2018 Est. 2019 Est. 2020 Fct. U.S. PRODUCTION 34.9 35.1 34.3 New Home 15.8 16.2 17.3 Imports – Canada 13.6 13.2 12.9 Repai
Slide 5: Demand Trends
Demand Trends Strong fundamentals supporting favourable outlook for lumber demand despite current economic uncertainty COVID-19 Trends Government Policy • Suburbanization • Increased Infrastructure Spend • Increased % of SFH Starts • Green Building Initiatives • Increasing Home Size* • Fiscal Stimul
Slide 6: US Housing Starts
US Housing Starts • Solid housing starts in 2020 is projected to continue in the near term • Demographics, interest rates and affordability remain supportive • Increasing shift to suburban areas supporting increased lumber consumption, higher allocation of single-family starts Analysts’ Forecast – N
Slide 7: Repair and Remodeling – Key Drivers Point to Solid Growth
Repair and Remodeling – Key Drivers Point to Solid Growth 2020: COVID Surge in Disposable Income/Time Strong Spending in the near-term before maintaining at a high level DIY is an increasingly greater proportion of projects Despite a decline in spending in 2021 as compared to 2020, we see lumber usa
Slide 8: W-SPF Declines While US South and EU Imports Gain Market Share
W-SPF Declines While US South and EU Imports Gain Market Share • As W-SPF production declines, diversified species and global operations allow us to support our US customers • Softwood imports from EU will remain heavily dependent on housing starts • German, Austrian, and Swedish manufacturers hold
Slide 9: EU Markets: Post COVID-19
EU Markets: Post COVID-19 • Lumber consumption in traditional outlets projected to decline in 2020, largely mitigated by significant increase in R&R spend • Outlooks for housing permits throughout the EU remain below pre COVID levels • Increased share of wood use is expected in most regions, resulti
Slide 10: EU Beetle Kill: Production & Trade Outlook
EU Beetle Kill: Production & Trade Outlook • Projecting modest increase in EU softwood lumber production as investments currently underway come online in response to spruce bark beetle • Projecting continued increase in EU log exports as producers harvest beetle damaged timber; log exports reaching
Slide 11: China: Markets & Supply
China: Markets & Supply Markets: • Real estate development investment growth fell sharply in early 2020 in the wake of COVID-19 • Investment steadily improving from lows in early 2020, however growth ~5% lower than 2019 average • Office and commercial buildings saw the sharpest decline, with residen
Slide 12: Commodity Lumber Prices (US$/Mfbm)
Commodity Lumber Prices (US$/Mfbm) 2017 BC Forest Fires 2018 Severe Winter Curtailment Curtailment Curtailment 1.2 M ha. (July - Sept) Railcar shortage Announcements Announcements Announcements 925 825 725 US$/Mfbm 625 525 425 325 225 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr M
Slide 13: Operations
vy Operations SEeZy
Slide 14: Canfor Operations
Canfor Operations Lumber Regional Lumber Capacity Other Operations 4% • 34 Sawmills with annual operating capacity of 6,700 MMfbm • 9 value-added facilities (packing, housing, energy) – Sweden • 10 Western Canada - 3,200 MMfbm • 3 Pellet Plants – BC 22% • 12 US South - 2,000 MMfbm • 2 Glulam Plants
Slide 15: Western Canada
Western Canada • Significant action taken over the past 2 years in response to challenging market conditions and elevated log costs in British Columbia • Approx. 2.2 billion board feet of permanent industry rationalization to-date (~1.0 billion board feet of additional rationalization required to ba
Slide 16: US South
US South • Benefitting from unprecedented demand from home centers and lumber treaters in the wake of COVID-19 • Total lumber capacity of 2.0 billion board feet with full run-rate achieved in 2021 • Over 300% growth since 2013, including 2019 acquisition of Elliott Lumber Company (210 MMfbm) • 300 M
Slide 17: Customer Channels – Aligned for the Future
Customer Channels – Aligned for the Future SPF CUSTOMER CHANNELS WHOLESALE DISTRIBUTION • SPF customer channels heavily aligned with key pro-dealer accounts able to respond to housing demand PRO DEALER • Strong alignment with Home Centers continues as we support programs with Euro supply • Key indus
Slide 18: Diversified Customers and Markets
Diversified Customers and Markets • Strong lumber pricing in 2020 supported by unprecedented R&R and Home Center demand in North America (segment represents approx. 20% of WSPF production) • Company’s high-value product mix and diversification efforts supporting sales realizations • Steady takeaway
Slide 19: Canfor High Value Product Diversification
Canfor High Value Product Diversification Products that unlock incremental value with stabilized pricing J grade & Square Edge Dimension Appearance Boards, Pattern, Fascia, Clear Visual appearance is primary purchase variable SYP Long Length 22’/24’/26’ Application SPF & Spruce Metric Sizes Matching
Slide 20: Europe
Europe • Total of 12 sawmills following Vida’s recent acquisition of Bergs Timber; proforma lumber capacity of 1.5 billion board feet • Vida’s 9 sawmills operating at annualized rate of 1.2 billion board feet • Production primarily focused on structural timber, mostly exported to markets other than
Slide 21: VIDA Acquisition Enhancing Market & Product Diversification
VIDA Acquisition Enhancing Market & Product Diversification SALES OFFICES 21
Slide 22: Liquidity Update - Canfor
Liquidity Update - Canfor Scheduled Maturities* Available Liquidity (Canfor Excl. Vida and Canfor Pulp) (Canfor Excl. Canfor Pulp) $600 $1,000 $500 $800 $400 ($ millions) ($ millions) $600 $300 $400 $200 $200 $100 $- $- 2017 2018 2019 Q1 2020 Q2 2020 Q3 2020 2021 2022 2023 2024 Beyond Operating Loan
Slide 23: Canfor Pulp
Canfor Pulp 23
Slide 24: Pulp Market Outlook
Pulp Market Outlook Supply Demand • Softwood capacity in 2021 projected to be flat with increased • Global tissue demand up 3.2% YTD August 2020 reflecting increased supply at Nordic Kraft and Domtar Ashdown mitigated by Paper “At Home” demand, offset in part by lower “Away From Home” usage Excellen
Slide 25: 2008-2020 Global Market Pulp Demand
2008-2020 Global Market Pulp Demand China is the largest consumer of pulp Europe Asia N.America Other 40,000 35,000 30,000 Million Tonnes 25,000 20,000 15,000 10,000 5,000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: PPPC 25
Slide 26: Liquidity Update – Canfor Pulp
Liquidity Update – Canfor Pulp Available Liquidity Scheduled Maturities Canfor Pulp Canfor Pulp $200 $120 $100 $160 $80 ($ millions) $120 ($ millions) $60 $80 $40 $40 $20 $- $- 2017 2018 2019 Q1 2020 Q2 2020 Q3 2020 2021 2022 2023 2024 Beyond Operating Loan Facility Total Cash Term Loan Operating Lo
Slide 27: Canfor / Canfor Pulp – Value Proposition
Canfor / Canfor Pulp – Value Proposition High Quality Products Sustainable, High-Quality Well Capitalized Top Performing Strong Balance & Customers Fibre Supply Mills Pulp, Lumber Business Sheet 27
Slide 28: Investor Contacts
Investor Contacts Pat Elliott Alan Nicholl SVP, Corporate Finance and Sustainability CFO and Executive Vice President, Finance and Canfor Pulp patrick.elliott@canfor.com 604-661-5441 alan.nicholl@canfor.com 604-661-5370 28
Canfor — RBC Capital Markets Forest Products Conference (December 2020) on 6ix