West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Investor Presentation (April 2019)
29 slides from West Fraser Timber's investor presentation, April 2019
Slide 1: Investor Presentation April 2019
Investor Presentation April 2019
Slide 2: General, Forward-looking Statements and Non-IFRS Measures
2 General: This presentation and comments associated with it contains securities regulatory authorities. Accordingly, readers should exercise historical information, descriptions of current circumstances and caution in relying upon forward-looking- statements and WFT undertakes statements about pote
Slide 3: West Fraser Overview
West Fraser Overview
Slide 4: We Attain Value from 100% of Our Resources
We Attain Value from 100% of Our Resources 4 Sustainably managed forest lands Plywood & LVL Lumber Reforestation Sawdust & shavings Chips Bark (fuel) MDF Supply agreements BCTMP Pulp NBSK Pulp Bioproducts Heat & (e.g. pellet plants Electricity Integrated fiber strategy to maximize the value of the l
Slide 5: Product & Geographic Diversification
Product & Geographic Diversification 5 Lumber Panels Pulp & Paper 34 mills 7 mills 5 mills SPF 3.9 Bfbm Plywood: 860 MMsf3/8” NBSK: 570 Mtonnes SYP 3.2 Bfbm MDF: 250 MMsf3/4” BCTMP: 690 Mtonnes Total 7.1 Bfbm LVL: 2.6 MMcf Newsprint: 135 Mtonnes 2018 Revenue Mix by Business Segment Lumber Panels Pul
Slide 6: Operations Diversification
Operations Diversification 6 Strong presence in key lumber producing regions and forest product markets
Slide 7: North American Lumber Capacity
North American Lumber Capacity 7 West Fraser Lumber Capacity 2004 2.8 Billion feet West Fraser US South 11% Canfor Alberta 12% Weyco Interfor Top 10 represent British 48% of capacity Columbia GP 77% Sierra Pacific West Fraser Lumber Capacity 2018 7.1 Billion feet Resolute British Hampton Columbia 31
Slide 8: Consolidated Financial Results
Consolidated Financial Results 8 $ Millions 2018 2017 Adjusted EBITDA 2018 2017 Lumber $ 1,156 $ 884 Sales $ 6,118 $ 5,134 Panels 127 113 Cost and Expenses 5,046 4,264 Operating earnings 1,072 870 Pulp & Paper 258 172 Finance Expense (37) (31) Corporate/Other (3) (9) Other 37 7 Total $ 1,538 $ 1,160
Slide 9: Total liquidity and Debt/EBITDA
Total liquidity and Debt/EBITDA 9 Total Liquidity $1,000 $900 $800 $700 $258 $302 $282 $231 $600 $50 $132 $160 $500 $86 $100 $400 $300 $553 $553 $551 $551 $562 $556 $200 $444 $491 $400 $100 $- Q4/2016 Q1/2017 Q2/2017 Q3/2017 Q4/2017 Q1/2018 Q2/2018 Q3/2018 Q4/2018 Undrawn Bank Lines Cash Debt/EBITDA
Slide 10: Capital Investment
Capital Investment 10 Capital Expenditure vs Amortization $400 200% Grade $350 $300 150% Capacity / $250 Recovery Production $200 100% $150 $100 50% $50 Modernization $0 0% initiatives 2015 2016 2017 2018 Capital Depreciation Percent Segment Capital Expenditure Capital Expenditure by type $10 $17 $6
Slide 11: Balanced Capital allocation
Balanced Capital allocation 11 2015 through 2018 $3,000 $2,801 $1,199 $2,500 $1.1B returned to shareholders $2,000 $602 $1,500 $100 $110 $942 $1,000 $500 $1.8B Reinvested in the business $42 $90 $0 Cash from Capital Acquisitions Debt service Dividends Buybacks Other Retained cash operations Expendit
Slide 12: Share repurchases
Share repurchases 12 Cumulative investment in repurchases Average repurchase price: (millions of dollars) $1,200 $1,108 2013 $44.60 $1,057 $1,000 2014 $51.86 $800 $600 2015 $55.57 $364 $381 $400 $174 2016 $44.06 $200 $115 $3 $0 2017 $68.45 2013 2014 2015 2016 2017 2018 2019 2018 $83.13 2019 $70.75 T
Slide 13: West Fraser Total Shareholder Return
West Fraser Total Shareholder Return 13 TSR June 2006 to February 2019 Cdn$ Million Share Value Traded 14% Source: TD 10,000 12% 11.3% 11.1% 8,000 10% 8% 6,000 6.2% 5.4% 5.7% 6% 5.0% 4,000 4.2% 4% 2,000 2.7% 2% 0 0% 2018 2017 2016 West Dow DAX S&P/TSX FTSE Competitor Competitor Competitor Fraser A B
Slide 14: Market Overview
Market Overview
Slide 15: North America Lumber End Use and Consumption
North America Lumber End Use and Consumption 15 North America Lumber End Use 2018 Non-residential Other 6% New Residential Residential improvements 29% and industrial demand Industrial 25% are lower volatility demand drivers Residential Improvements 40% North America Lumber Consumption 35 30 25 Bill
Slide 16: Demand conditions U.S.
Demand conditions U.S. 16 U.S. Housing Starts (not seasonally adjusted) Leading indicator of Remodeling Activity Monthly $B 4 Qtr Moving Improvements and Repairs 160 $340 Repair and renovation growth 8.0% 140 $330 continues 7.0% 4 Qtr Moving rate of Change 120 $320 6.0% 100 5.0% $310 80 4.0% $300 60
Slide 17: U.S. Housing Starts
U.S. Housing Starts 17 US New Housing construction remains at tempered levels
Slide 18: North American Lumber Consumption
North American Lumber Consumption 18 80 75 72 70 64 64 62 60 60 58 59 56 53 51 50 50 48 45 43 43 Billion Feet 39 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F US Consumption Canadian Consumption Lumber demand growth trending at ~ 2 billion boar
Slide 19: Precipitation Fallout
Precipitation Fallout 19 5 Adverse weather one factor tempering demand
Slide 20: Demand Conditions Offshore
Demand Conditions Offshore 20 North American Offshore Lumber North American Offshore Lumber Imports Exports (Billion BF) 7 $600 7 6 $500 6 5 5 $400 US$/Mfbm Billion BF 4 4 $300 3 3 $200 2 2 1 $100 1 0 0 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 200520062007200820092010
Slide 21: Chinese Lumber Demand
Chinese Lumber Demand 21 30,000 25,000 20,000 M cubic meters 15,000 10,000 5,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 North America Russia Europe Other 1 million cubic meters = ~ 295 million board feet Although price sensitive, China continues to import significant lumber Source: FEA
Slide 22: Supply conditions
Supply conditions 22 Billion fbm Lumber Supply MMfbm Western Canada Curtailments 70 350 Up .3% 60 300 50 250 Up 3.3% 40 Mix of Down 200 temporary 3.2% and 30 150 permanent 20 Down 5.5% 100 10 50 0 0 BC Canada US Total NA 2018Q4 2019 Q1 2017 2018 Source: Western Wood Products Association, management
Slide 23: Annual Allowable Cut on the decline in BC Interior
Annual Allowable Cut on the decline in BC Interior 23 British Columbia Interior British Columbia Interior Purchase Log 70 14 Cost $110 Billion BF (softwood lumber production) 65 12 $100 Million m3 (AAC & Harvest) 60 10 55 $90 8 50 $/M3 $80 6 45 Log supply $70 constraints will 4 40 create price press
Slide 24: Share of North American Lumber Production
Share of North American Lumber Production 24 32% 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Canada West Canada East US South US West Western Canada a key supply region, facing fibre cost and availability headwinds Source: US Census B
Slide 25: North American Lumber Production
North American Lumber Production 25 North America Softwood Lumber Production Millions of Board Feet US Other (25%) US South BC (30%) Eastern Canada (18%) Alberta 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 MMfbm 2005 2018 Growth constrained in several significant lumbe
Slide 26: Market Pulp Supply and Demand
Market Pulp Supply and Demand 26 BCTMP Chemical Pulp Chemical Pulp Demand (M tonnes) • No new major capacity additions 2018 to 2020 30,000 40% • Pulp demand projected to grow 2.3% over next 25,000 38% 36% 5 years 20,000 34% 32% • Demand growth driven by tissue and packaging 15,000 30% demand 28% 10,
Slide 27: West Fraser Timber Co. Ltd.
West Fraser Timber Co. Ltd. 27 These materials have been prepared by Management of the Company. No regulatory authority has approved or disapproved of the contents of these materials. These materials do not constitute an offer to sell or the solicitation of an offer to buy any securities of the Comp
Slide 28: Appendix
re] West Fraser - i; “PARPENDIX /
Slide 29: Earnings Sensitivity to Key Variables
Earnings Sensitivity to Key Variables 29 Estimated Earnings Sensitivity to Key Variables1 (2018) (based on 2018 production - $ millions) Factor Variation Change in pre-tax earnings Lumber price US$10 (per Mfbm) 90 Plywood price Cdn$10 (per Msf) 8 NBSK price US$10 (per tonne) 7 BCTMP price US$10 (per
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