Canfor Corporation · TSX:CFP
Canfor — Canfor Pulp Income Fund — Investor Presentation (September 2007)
29 slides from Canfor's investor presentation, September 2007
Slide 1: Investor Presentation
Investor Presentation September 2007 PAGE 1
Slide 2: Disclosure of Risk Factors
Disclosure of Risk Factors Certain statements in this presentation constitute "forward-looking statements" which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or
Slide 3: Overview
Overview 3 mills in the central interior of British Columbia – Pulp capacity of 1.0 million tonnes – Kraft paper capacity of 135,000 tonnes – 4 pulp machines and 1 paper machine Business spun out from Canfor Corporation on July 1, 2006 Northwood – Canfor currently owns 50.2% – Canfor Pulp Income Fun
Slide 4: Why Canfor Pulp?
Why Canfor Pulp? • Market leadership – Size – Premium Product – Customer Base • Low cost producer • Financial strength • Experienced management team * • Abundant fibre supply * Refer to Appendix for Officer Biographies PAGE 4
Slide 5: Market Leadership
Market Leadership No. 3 in NBSK Globally / Largest NSK Seller 1500 HSLP PG 1250 1000 000's tonnes 750 500 250 0 Mercer Sodra Cell Ilim Canfor Pulp Stora Enso Pope & Talbot Domtar Weyerhaeuser Tembec West Fraser Source: PPPC & Management Estimates PAGE 5
Slide 6: Market Conditions: Low Inventory Levels
Market Conditions: Low Inventory Levels Softwood Supplier Inventories Are at 26 Days (near historical low) World-19* Pulp Inventories in Days Bleached Kraft Softwood vs Hardwood 70 70 65 65 60 60 55 55 50 50 45 45 # of days 40 40 35 35 Softwood Hardwood 30 30 25 25 20 20 15 15 10 10 5 5 0 0 1999 200
Slide 7: Market Conditions (continued)
Market Conditions (continued) NBSK list prices continue to be strong, although mill net realization down NBSK List Prices in $US Delivered to North America vs. Foreign Exchange 1995 - Current $1,400 $1.50 $1.40 $1,200 $1.30 $1,000 $1.20 $1.10 Pulp Price $800 $1.00 $600 $0.90 $0.80 $400 $0.70 $200 $0
Slide 8: Premium Products: Reinforcing Pulp
Premium Products : Reinforcing Pulp • Not all pulps are the same: Northern spruce and pine fibre produced in the central interior of British Columbia is recognized as being the strongest in the world due to the long, slender fibres. Provides for a better printing surface, better softness and better
Slide 9: End-Use Mix: Target Customers That Need Reinforcing Pulp
End-Use Mix Target Customers That Need Reinforcing Pulp 600,000 Examples include: Printing & Writing 500,000 • Magazines • Catalogues 400,000 Specialty • Adhesive labels (beer) Tonnes 300,000 • Masking tape Tissue 200,000 • Branded top quality “Use at-home” tissues Commodity 100,000 • Photocopy pape
Slide 10: Diversified Sales by Region
Diversified Sales by Region Maintain high mill nets with diversified sales 500 400 000's tonnes 300 200 100 0 Americas Europe Japan APAC 2005 2006 2007-F PAGE 10
Slide 11: Low Cost Producer
Low Cost Producer Northern Bleached Softwood Kraft Manufacturing Costs As at Q4/06 800 700 Nordic Countries 600 Western Europe 500 Eastern Europe 400 USA 300 Canada, BC Interior 200 Rest of Canada 100 1 EUR = 1.321 USD 0 1 USD = 1.150 CAD PAGE 11
Slide 12: Abundant and low cost fibre
Abundant and low cost fibre Conifer Chips - Delivered Prices Q4 / 06 vs. Q1 / 07 $150 $125 $100 ($US/ODT) $75 $50 $25 $0 Germany Australia Canada East Norway US South Brazil Spain Japan France Canada West Chile (roundwood) (roundwood) US Northwest New Zealand Sweden Finland NBSK Producing Region Q1-
Slide 13: High Margin Producer
High Margin Producer Top Quartile EBITDA per tonne producer due to: • Revenues – Selling into the highest margin regions to targeted customers • Low costs – Competitive fibre costs – Strong operations which drives down production costs Per PwC 2006 benchmarking study of 13 Canadian NBSK mills, Canfo
Slide 14: Financials
Financials Strong margins: increasing pulp prices offset against the strengthening dollar and rising fibre costs $ millions unless otherwise noted 6 months ended 6 months ended June 2007 Dec 2006 Sales 477.6 443.3 EBITDA 111.8 124.4 - ebitda margin% 23% 28% Net Income 84.5 86.7 - per unit $1.19 $1.2
Slide 15: Balance Sheet
Balance Sheet Maintain a strong balance sheet $ millions As at June 2007 $ millions As at June 2007 Cash 34.1 Current & Other Liabilities 224.0 Current Assets 315.5 Long Term Debt 117.0 Fixed Assets & Other 596.5 Equity 605.1 Total 946.1 Total 946.1 • Net Debt/EBITDA (LTM) = 0.35 • Net Debt/Equity =
Slide 16: Distributable Cash
Distributable Cash Calculation of Distributable Cash 6 months ended 6 months ended $ millions unless otherwise noted June 2007 Dec 2006 Cash flow from Operations 97.9 99.9 Changes in working capital 6.2 22.8 Less: capital expenditures and (10.4) (11.1) others items (3.4) (1.6) Distributable Cash 90.
Slide 17: Operations Strategy
Operations Strategy Remain Top Quartile EBITDA per tonne Producer – Continue to improve reliability / productivity – Focus on controllable costs – Grow targeted end-use businesses – Position right products / customers PAGE 17
Slide 18: Challenges and Opportunities
Challenges and Opportunities • Continued Strengthening of Canadian Dollar • Low U.S. Housing Starts – Sawmill Residual Chips • Mountain Pine Beetle • Growth of Southern Hemisphere Pulps • New Green Energy Power Generation PAGE 18
Slide 19: Summary
Summary • Market leadership – Size – Premium Product – Customer Base • Low cost producer • Financial strength • Experienced management team • Abundant fibre supply PAGE 19
Slide 20: Questions?
Questions? CFX.UN Contact: David Jan David.Jan@Canforpulp.com 604-312-9457 www.canforpulp.com PAGE 20
Slide 21: Appendix
Appendix • Management Bio’s • Business Overview • Industry dynamics PAGE 21
Slide 22: Officer Biographies
Officer Biographies Paul Richards – President & CEO • Over 35 years in the pulp & paper business • Worked at Weldwood, Repap, MacMillan Bloedel • Chemical Engineer Tom Sitar – CFO • Over 25 years of public company financial management • Forestry experience at Weldwood as VP Finance and Treasurer • C
Slide 23: Simplified Ownership Structure
Simplified Ownership Structure Unitholders Canfor Shareholders 35.494 million fund units CANFOR PULP INCOME FUND CANFOR (Ontario) CORPORATION 100% (British Columbia) CANFOR PULP 50.2% TRUST (Ontario) 35.776 million Class B LP units 49.8% 35.494 million Class A & B LP units CANFOR PULP LIMITED PARTNE
Slide 24: Our Operations
Our Operations Canfor Pulp Limited Partnership 3 mills in the BC Interior: • 1 million tonnes of NBSK pulp capacity • 135,000 tonnes of Kraft paper • 4 pulp machines and 1 paper machine MILL/LOCATION KEY PRODUCTS 1 Intercontinental NBSK Pulp 2 Northwood NBSK Pulp 3 Prince George Pulp & Paper NSK Pul
Slide 25: The Operations – Mills in Prince George
The Operations – 3 Mills in Prince George • Northwood • Intercon • Prince George Pulp & Paper Northwood Intercontinental PG&P History 1966 1968 1966 No. of employees 500 300 400 Capacity (ADMT*) 570,000 310,000 153,000 (pulp) 135,000 (paper) Operations 2-line 1-line 1-line 1-line Markets North Ameri
Slide 26: Secure Fibre Supply
Secure Fibre Supply Fibre Supply Agreement with Canfor • Purchase 1.6mm tonnes of fibre (roughly 2/3 of its needs) from Canfor at prevailing market prices • 0.9mm tonnes purchased through fibre supply agreements with other firms • All contracts based on the same pricing formula Note: Canfor’s lumber
Slide 27: Global Chemical Market Pulp Demand
Global Chemical Market Pulp Demand Unbleached Kraft Sulphite 5% 2% Bleached SBSK PRP NBSK Commodity Softwood Kraft 26% 32% 63% Bleached 46% 68% Hardwood Kraft 47% Other 11% World Chemical Pulp Demand World Softwood Pulp Demand NBSK Pulp Demand 48 million tonnes 22 million tonnes 14 million tonnes So
Slide 28: Global NBSK Supply by Region (2006)
Global NBSK Supply by Region (2006) Other 20% Canada 47% Sweden 21% Finland 12% Source: Pulp & Paper Products Council PAGE 28
Slide 29: Financials - Sensitivities
Financials - Sensitivities • Available on www.canforpulp.com and www.sedar.com are: – Annual Information Form – Annual MD&A and Audited financial statements – Quarterly MD&A and financial statements • Sensitivities (millions of dollars, unaudited) Impact on annual EBITDA Cdn dollar – US $0.01 change
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