Slide 1: Company Overview
{| ie f i 1 COMPANY OVERVIEW March 2015 AS 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: Interfor Strategic Plan
INTERFOR STRATEGIC PLAN Growth by Building Value Operational Acquisition Excellence 4
Slide 5: Recent Initiatives/Current Focus
RECENT INITIATIVES/CURRENT FOCUS Simpson Acquisition • Integrate operations under Interfor ownership • Complete Georgetown kiln project • Implement Tacoma optimization plan Canadian Operations • Castlegar sawmill upgrade project US Operations • Phase-in the Thomaston 2nd shift - - additional 80 MMbf
Slide 6: Pure Play Lumber – Four Regions
PURE PLAY LUMBER – FOUR REGIONS BC Coast(Capacity 320 MMbf) • 2 mills • Cedar, Hem-Fir, Douglas-Fir • Specialty BC Interior (Capacity 720 MMbf) • 3 mills • Douglas-Fir, Hem-Fir, SPF, Cedar • Dimension US Southeast (Capacity 1,210 MMbf) • 8 mills US Northwest (Capacity 890 MMbf) • Southern Yellow Pin
Slide 7: Balanced Profile Across the Regions
BALANCED PROFILE ACROSS THE REGIONS • Approximately 2/3 of Interfor’s production capacity is in the US BC Coast BC Southern 10% Interior 23% US Southeast BC 23% Southern Interior 33% US Southeast 38% US Pacific US Pacific Northwest Northwest 29% 29% BC Coast 15% Capacity - 3.1 Bbf 7
Slide 8: Production Growth > 2.8 Bbf/Year
PRODUCTION GROWTH > 2.8 Bbf/YEAR Quarterly Lumber Production 2010 - 2014 MMbf 750 700 Pro Forma Simpson 650 600 550 500 450 400 350 300 250 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012 2013 2014 8
Slide 9: 4th Largest Lumber Producer
4th LARGEST LUMBER PRODUCER NA Lumber Production by Company 5.0 4.0 Production Pro Forma Simpson Bbf 3.0 2.0 1.0 0.0 Source: Wood Markets monthly – March 2014 Notes: (1) Interfor’s 2014 actual production. (2) GP includes Temple-Inland. 9
Slide 10: Capital Spending Profile
CAPITAL SPENDING PROFILE • Interfor has continually reinvested in its assets throughout the cycle • Current focus is on high-return projects $100.0 $90.0 $80.0 $70.0 $60.0 $ mm's $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 2008 2009 2010 2011 2012 2013 2014 Depreciation, Depletion & Amortization(1) Capital E
Slide 11: State of the Art Operations
STATE OF THE ART OPERATIONS • Interfor has invested over $350 million in various strategic capital projects over the past several years, with additional projects now underway. Adams Lake, BC Grand Forks, BC Port Angeles, Washington Tacoma, Washington Swainsboro, Georgia Thomaston, Georgia 11
Slide 12: Diverse Lumber Mix
DIVERSE LUMBER MIX Lodgepole / By Species1 Ponderosa By Dimension1 By Grade1 #3/Utility, Pine Studs #4/Economy Cedar 4% Doug Fir / Other(2) Grade 13% 14% 12% Larch 23% 26% Specialty Grade(3) 37% Boards / Southern Industrials Yellow Pine 7% 27% Hem Fir 15% Dimension Narrows #2/Standard Dimension 39%
Slide 13: Customers
CUSTOMERS • A large percentage of Interfor’s volume is currently sold into the US Pro Forma 2014(1) - Volumes C hina/Tw/ Euro & ME C anada HK 0.5% 8% 11% Japan 5% USA 76% Notes: (1) Interfor 2014 adjusted to include a full year of shipments resulting from the Tolleson and Simpson acquisitions. 13
Slide 14: Summary Income Statement
SUMMARY INCOME STATEMENT C$ millions 2014 2013 Sales $1,447 $1,105 Adjusted EBITDA1 $169 $134 Adjusted EBITDA Margin2 11.7% 12.1% Adjusted EBITDA/Mbf2 $73 $76 Notes: (1) Excludes Other Income and Long-term Incentive Compensation expense (2) Excludes impacts from discontinued Beaver operations in 201
Slide 15: Interfor's Capital Structure
INTERFOR’S CAPITAL STRUCTURE • Interfor is focused on maintaining a prudent capital structure • Subsequent to year-end, Interfor completed the acquisition of four sawmills from Simpson, as well as two related financings: • C$66 mm of equity • US$100 mm of term debt Dec. 31, Dec. 31, C$ millions 2014
Slide 16: Interfor's Debt Profile
INTERFOR’S DEBT PROFILE • Total of US$200 mm of fixed long term debt, repayable in years 2021-2026 -- average 4.17% interest rate. Debt Amortization Schedule and Available Credit (Pro Forma(1) as at Dec. 31/2014, C$ mm’s) $300 $250 Operating and Revolving Line $200 $150 US Operating Line Senior Secu
Slide 17: Key Takeaways
KEY TAKEAWAYS • Pure play in lumber. • Track record of growth over the last several years. • Acquisitions • Strategic capital investments • Balanced geographic base and diverse product offering. • Conservative balance sheet with additional financial capacity for future growth. • Business upside: • I
Slide 18: Appendix
AS INTERFOR Building Value... APPENDIX 18
Slide 19: Castlegar Project
AS INTERFOR Building Value... CASTLEGAR PROJECT 19
Slide 20: Castlegar Upgrade: Project Summary
CASTLEGAR UPGRADE: PROJECT SUMMARY • Superior and secure fiber basket. • Aged infrastructure and outdated technology. • $50 million investment • Eliminate $20 mm of maintenance capex over the next 4 years • Modernize and convert from 3 line to 2 line operation • Increase recovery, production and gra
Slide 21: Castlegar Upgrade: Before and After
CASTLEGAR UPGRADE: BEFORE AND AFTER Castlegar Grand Forks and Adams Lake 21
Slide 22: Simpson Acquisition
SIMPSON ACQUISITION A INTERFOR Building Value... 22
Slide 23: Acquisition Summary
ACQUISITION SUMMARY • The Simpson assets include 4 sawmills • Meldrim, Georgia • Georgetown, South Carolina • Longview, Washington State • Commencement Bay, Washington State • Combined capacity of 750 MMBf - 2014 production estimated at 555 MMbf • Strong operational fit with Interfor’s platform • Ge
Slide 24: Simpson Mill Overview
SIMPSON MILL OVERVIEW US Southeast Operations Georgetown, SC • Project underway to add dual path kilns – would increase production from 2014E of 90 MMbf to 120 MMbf by late 2015 • Modest additional capital to increase production to 150 MMbf Meldrim, GA • Strong fit with Baxley and Swainsboro • Poten
Slide 25: Deal Terms
DEAL TERMS • Purchase price comprised of: • Cash price of US$94.7 mm plus working capital at closing (estimated at approximately US$30 mm) • Contingent future cash payments tied to the financial performance of the Commencement Bay sawmill over the next three years • Contingent future payments: • The
Slide 26: Economic Summary
ECONOMIC SUMMARY • Two separate economic assessments of the business, as follows: 1. Meldrim, Georgetown and Longview combined • 2014E production of approximately 390 MMbf • Mill level EBITDA1 (unaudited) • US$16 mm for 9 months ended 9/30/14 • Implied valuation multiples • Enterprise Value/Annualiz
Slide 27: Industry Information
INDUSTRY INFORMATION A INTERFOR Building Value... 27
Slide 28: US Housing Starts
US HOUSING STARTS Millions (SAAR) 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 Housing Starts 0.4 Underlying Demand Pent-Up Demand 0.2 0.0 Source: FEA– December 2014 28
Slide 29: North American Lumber Consumption
NORTH AMERICAN LUMBER CONSUMPTION Bbf 80 87% 86% 70 85% 84% 60 83% 82% 50 81% 80% 40 79% 30 78% US Canada US Share (R) 77% 20 76% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: FEA– December 2014 29
Slide 30: 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) 30
Slide 31: China Markets – Sectors Under Development
CHINA MARKETS – SECTORS UNDER DEVELOPMENT Public buildings Apartment infill walls / partition walls Multi-story residential Mixed-use hybrid 31
Slide 32: 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 32
Slide 33: Impact of Mountain Pine Beetle (MPB)
IMPACT OF MOUNTAIN PINE BEETLE (MPB) Million m3 Source: FEA– December 2014 33
Slide 34: 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. Interfor AAC1 MMm3 Central and Northern BC 0.0 50 – 75% Pine Adams Lake in Southern BC 0.7 28 – 30% Pine Castlegar & Grand Forks i
Slide 35: Favourable Log Supply in US South
FAVOURABLE LOG SUPPLY IN US SOUTH Growth & Drain, Bbf Int’1 ¼” Inventory, Bbf Int’l ¼” 50 300 45 290 Sawtimber Inventory 40 280 35 270 30 260 Growth Drain 25 250 20 240 15 230 Growth 10 Drain 220 Inventory 5 210 0 200 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: FEA– December 2014 35
Slide 36: US South Sawtimber Prices
US SOUTH SAWTIMBER PRICES US$/Ton (Nominal $’s) $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: FEA– December 2014 36
Slide 37: Regional Production vs Peak (Bbf)
REGIONAL PRODUCTION VS PEAK (Bbf) BC lumber Production Eastern Canada Lumber Production 16 9 14 8 12 7 6 10 Quebec Ontario Quebec Peak Ontario Peak 5 8 4 6 Inland Coast Coast Peak Inland Peak 3 4 2 2 1 0 0 00 02 04 06 08 10 12 14 16 18 20 00 02 04 06 08 10 12 14 16 18 20 US West lumber Production US