Slide 1: Investor Presentation March 2023
INVESTOR PRESENTATION MARCH 2023
Slide 2: Forward-Looking Information & Non-GAAP Measures
FORWARD-LOOKING INFORMATION & NON-GAAP MEASURES Forward-Looking Information: This presentation contains forward-looking information about Interfor Corporation’s (“Interfor” or the “Company”) business outlook, objectives, plans, strategic priorities and other information that is not historical fact.
Slide 3: Interfor Investment Highlights
INTERFOR INVESTMENT HIGHLIGHTS Pure-play North American lumber producer of scale • Top three lumber producer in North America, with 32 strategically located facilities • High exposure to US South, Eastern Canada, and Atlantic Canada with attractive log costs Compelling lumber market fundamentals • D
Slide 4: Investor Value Proposition
INVESTOR VALUE PROPOSITION Attractive Earnings Through the Cycle Consistently Growing Volumes $500 4,000 ADJUSTED EBITDA MARGIN PER UNIT ($C/MBF) LUMBER PRODUCTION VOLUMES (MMBF) $450 3,500 $400 3,000 $350 $300 2,500 $250 2,000 $200 1,500 $150 10-year avg = $134/MBF 1,000 $100 500 $50 $- - Increasin
Slide 5: Pure-Play North American Lumber Producer
PURE-PLAY NORTH AMERICAN LUMBER PRODUCER
Slide 6: Pure-Play Lumber Producer
PURE-PLAY LUMBER PRODUCER Interfor is the only publicly traded pure-play lumber producer of scale REVENUES BY BUSINESS SEGMENT (1) (2) PEER #1 PEER #2 PEER #3 PEER #4 PEER #5 LUMBER PULP / PAPER ENGINEERED WOOD / PANELS TIMBERLANDS OTHER (1) Based on public filings for 2021; peers include West Frase
Slide 7: Industry Landscape
INDUSTRY LANDSCAPE Interfor is a top three lumber producer in North America NORTH AMERICAN LUMBER PRODUCTION BY COMPANY – 2021 (BBF) (1) 7.00 6.00 5.00 4.00 3.00 2.00 1.00 - Source: International Wood Markets/FEA Canada Wood Markets Monthly March 2022. 7 (1) Figures are pro forma for publicly announ
Slide 8: Interfor Operating Regions
INTERFOR OPERATING REGIONS EASTERN CANADA 985 MMBF (19%) • 4 stud mills; 3 dimension mills; 1 I-Joist BC INTERIOR facility; 1 remanufacturing facility 750 MMBF (14%) • Spruce – Pine – Fir (SPF) • 3 dimension mills; 1 remanufacturing • Efficient, well-run, well-maintained facility (Sumas, WA) • Dougl
Slide 9: Key Products & Markets
KEY PRODUCTS & MARKETS Diverse lumber species mix; high leverage to key US market LUMBER SALES BY SPECIES (1) LUMBER SALES BY MARKET (1) USA 83% Spruce-Pine-Fir 33% Hem-Fir 4% Southern Yellow Pine 42% Doug Fir/ Larch 20% Japan <1% Cedar China/Tw/HK Canada Other 1% 1% 15% <1% (1) By Volume for 2022,
Slide 10: Compelling Lumber Market Fundamentals
COMPELLING LUMBER MARKET FUNDAMENTALS
Slide 11: Lumber Prices
LUMBER PRICES Recent prices finding support at historically attractive levels NORTH AMERICAN BENCHMARK LUMBER PRICES (US$/MBF) $2,000 $1,800 $1,600 Southern Yellow Pine US Northwest Hem-Fir $1,400 Western SPF Eastern SPF $1,200 $1,000 $800 $600 $400 $200 Source: Random Lengths (includes prices up to
Slide 12: Lumber Demand
LUMBER DEMAND Diversified end-use demand drivers across R&R, industrial and housing NORTH AMERICAN LUMBER DEMAND BY END-USE (BBF) 80 Domestic Residential Repair & Remodel (R&R) Domestic Industrial/Commercial 70 Domestic Residential New Home Construction Offshore Exports 60 50 40 30 20 10 - 2010 2011
Slide 13: Lumber Demand: Key Drivers
LUMBER DEMAND: KEY DRIVERS Underlying housing fundamentals remain favourable, despite near-term volatility US HOUSING STARTS 43 AGE OF US HOUSING STOCK (MILLIONS SEASONALLY ADJUSTED) (MEDIAN AGE IN YEARS) 1.9 41 Single-Family Multi-Family 1.8 1.7 39 1.6 1.5 1.4 37 1.3 1.2 35 1.1 1.0 33 0.9 0.8 0.7 3
Slide 14: Lumber Supply
LUMBER SUPPLY Measured supply growth in the US South, offset by ongoing declines in BC NORTH AMERICAN LUMBER PRODUCTION (BBF) (1) Region 2018 2019 2020 2021 2022 US SOUTH Measured growth (five-year CAGR of 3%), limited by labour availability South 18.8 19.4 20.8 20.9 22.1 and long equipment lead tim
Slide 15: Lumber Supply: BC Interior
LUMBER SUPPLY: BC INTERIOR Declining log supply across BC, but Interfor well-positioned in southern BC Mountain Pine Beetle Cumulative Percentage of Merchantable Forest Volume Killed Since 1999 Very High (>45%) High (31-45%) Moderate (16-30%) Low (<16%) None (0%) Adams Lake Castlegar Grand Forks Sou
Slide 16: Softwood Lumber Dispute
SOFTWOOD LUMBER DISPUTE Moderate exposure to duties with 60% of lumber capacity based in the US U.S. COUNTERVAILING & INTERFOR SOFTWOOD LUMBER ANTI-DUMPING CASH DEPOSIT RATES DUTIES HIGHLIGHTS COMPANY 2017-20(1) 2020-21(2) 2021-22(3) 2022-23(4) 2023-24(5) US$512 MM Duties on Deposit West Fraser 23.5
Slide 17: Value Creation: Guiding Principles
VALUE CREATION: GUIDING PRINCIPLES
Slide 18: Guiding Principles to Value Creation
GUIDING PRINCIPLES TO VALUE CREATION Multi-pronged approach to creating value Principle Comments • Rationale: Achieving operational excellence maximizes the earnings potential of the business. Drive Operational 1 • Approach: Orientate the organization around operations and stay focused on executing
Slide 19: Guiding Principle 1: Drive Operational Excellence
GUIDING PRINCIPLE: 1 DRIVE OPERATIONAL EXCELLENCE
Slide 20: Operational Excellence: Margins
1 DRIVE OPERATIONAL EXCELLENCE OPERATIONAL EXCELLENCE: MARGINS Focus on operational excellence reflected in superior margin performance LUMBER SEGMENT ADJ. EBITDA MARGINS – 2019 TO 2022 (C$/MBF) (1) $300 $250 $200 $150 $100 $50 $- Interfor Peer #1 Peer #2 Peer #3 (1) Peers include Canfor North Ameri
Slide 21: Operational Excellence: Product Optimization
1 DRIVE OPERATIONAL EXCELLENCE OPERATIONAL EXCELLENCE: PRODUCT OPTIMIZATION Margin improvements driven by all aspects of manufacturing excellence, including product quality, product mix optimization, improved log-to-lumber recovery, and conversion cost improvements INTERFOR US SOUTH 90% PRODUCT MIX
Slide 22: Guiding Principle 2: Increase Scale in Lumber
GUIDING PRINCIPLE: 2 INCREASE SCALE IN LUMBER
Slide 23: Transformational Growth
2 INCREASE SCALE IN LUMBER TRANSFORMATIONAL GROWTH Aspirational goal to transform into THE major global lumber producer 9.0 LUMBER PRODUCTION VOLUMES (BBF) (1) Additional 8.0 M&A or TBD capex Full year impact 7.0 7.0 of EACOM and In-progress Chaleur and acquisitions approved 6.0 and DeQuincy, capex
Slide 24: Growth Opportunities
2 INCREASE SCALE IN LUMBER GROWTH OPPORTUNITIES The North American lumber industry remains highly fragmented, with significant consolidation opportunity N.A. SOFTWOOD LUMBER MILLS % SHARE TOP 30 N.A. PRODUCERS 80% 65% 67% 70% 62% 62% 63% 63% 64% 55% 56% 58% 60% 54% 50% 40% 30% 20% 10% 0% 2011 2012 2
Slide 25: Chaleur Acquisition
2 INCREASE SCALE IN LUMBER CHALEUR ACQUISITION 35% increase to Interfor’s Eastern Canada platform capacity • Acquisition of top quartile New Brunswick, Canada operations that closed on November 30, 2022, including: • Two well-capitalized sawmills located in Belledune and Bathurst with capacity of 35
Slide 26: EACOM Acquisition
2 INCREASE SCALE IN LUMBER EACOM ACQUISITION 25% increase to Interfor’s capacity at an attractive valuation • 100% equity acquisition of high-quality Canadian operations which closed on February 22, 2022. • Includes 7 sawmills, 1 I-joist plant, 1 reman plant; • 985 MMbf of production capacity; 25% i
Slide 27: Multi-Year Strategic Capex Plan
2 INCREASE SCALE IN LUMBER MULTI-YEAR STRATEGIC CAPEX PLAN Multi-year strategic capex plan underway, primarily focused in the US South, adding ~0.6 Bbf of production between 2022 – 2025, as well as cost, efficiency and product quality improvements 2018 2019 2020 2021 2022 2023 2024 2025 Q3 Q4 Q1 Q2
Slide 28: Multi-Year Strategic Capex Plan
2 INCREASE SCALE IN LUMBER MULTI-YEAR STRATEGIC CAPEX PLAN Mill rebuilds, machine center upgrades, debottlenecking & optimization projects Molalla, Oregon Eatonton, Georgia Continuous Kilns Thomaston, Georgia Adams Lake, British Columbia 28
Slide 29: Capital Spending Profile
2 INCREASE SCALE IN LUMBER CAPITAL SPENDING PROFILE Strategic investments resulting in a well-capitalized, high-margin sawmill portfolio HISTORICAL CAPITAL EXPENDITURES & OUTLOOK ($MM) $320 Capital Expenditures - Discretionary $300 Capital Expenditures - Maintenance (Includes Woodlands Roads) $280 D
Slide 30: US South: Current Platform
2 INCREASE SCALE IN LUMBER US SOUTH: CURRENT PLATFORM In under 10 years the platform has evolved from an idea to now being one of the largest in the US South • 13 sawmills, across 6 states covering all • 2.3 Bbf of capacity, with additional of the east, west and central regions upside opportunity •
Slide 31: US South: Past, Present & Future State
2 INCREASE SCALE IN LUMBER US SOUTH: PAST, PRESENT & FUTURE STATE Platform-wide transformation by 2025, with benefits being realized throughout the entire improvement period INTERFOR US SOUTH PRODUCTION VOLUME BY MILL (MMBF) 300 2016 or As At Acquisition Date for Summerville/GP Assets 2022 Run Rate
Slide 32: Guiding Principle 3: Reduce Volatility via Diversification
GUIDING PRINCIPLE: 3 REDUCE VOLATILITY VIA DIVERSIFICATION
Slide 33: Growth & Diversification Strategy
3 REDUCE VOLATILITY VIA DIVERSIFICATION GROWTH & DIVERSIFICATION STRATEGY Long-standing strategy of growth and geographic lumber diversification (1) 2001 2012 2021 2023 19% 14% 4% 19% 17% 45% 39% 42% 57% 83% 20% 19% 7% 15% 0.8 BBF 1.7 BBF 3.9 BBF 5.2 BBF BC Interior US Northwest Eastern Canada BC Co
Slide 34: Regional Performance
3 REDUCE VOLATILITY VIA DIVERSIFICATION REGIONAL PERFORMANCE Consistent margins across regions over time, but achieved via different routes INTERFOR CASH MARGIN (AVG. OF 2016-2022) (C$/MBF) Mill Net Selling Price Net Log Costs Conversion Costs MARGIN (1) (2) BC Interior US Northwest US South Eastern
Slide 35: Guiding Principle 4: Deliver Track Record of Leading Returns on Capital
GUIDING PRINCIPLE: 4 DELIVER TRACK RECORD OF LEADING RETURNS ON CAPITAL
Slide 36: Top Tier Return on Capital
4 DELIVER A TRACK RECORD OF LEADING RETURNS ON CAPITAL TOP TIER RETURN ON CAPITAL Disciplined and balanced capital deployment is having an impact EBIT RETURN ON CAPITAL EMPLOYED (%) (1) 65% 60% 55% 50% 45% 40% 35% 30% = 30% 25% Peer #1 = 28% 20% Peer #2 = 20% 15% 10% 5% 0% -5% -10% 2016 2017 2018 20
Slide 37: Portfolio Optimization
4 DELIVER A TRACK RECORD OF LEADING RETURNS ON CAPITAL PORTFOLIO OPTIMIZATION Proactive and regular portfolio management and optimization based on disciplined return hurdles and profitability metrics ILLUSTRATIVE MILL-BY-MILL RETURN ON CAPITAL (%/YEAR) & MARGINS (C$/MBF) $160 $140 <-----------------
Slide 38: Guiding Principle 5: Balanced Approach to Capital Allocation
GUIDING PRINCIPLE: 5 TAKE A BALANCED APPROACH TO CAPITAL ALLOCATION
Slide 39: Balanced Capital Allocation
5 TAKE A BALANCED APPROACH TO CAPITAL ALLOCATION BALANCED CAPITAL ALLOCATION Disciplined and multi-faceted capital allocation tailored to maximize returns HISTORICAL CAPITAL DEPLOYMENT ($MM) $1,600 Capex M&A Share Buy-Backs Special Dividend $1,400 $1,200 $1,000 $800 $600 $400 $200 $- (1) 2012 2013 2
Slide 40: Capital Deployment Summary
5 TAKE A BALANCED APPROACH TO CAPITAL ALLOCATION CAPITAL DEPLOYMENT SUMMARY Cash influx over last 3 years deployed in a disciplined and balanced manner CAPITAL DEPLOYMENT SUMMARY – 2020 TO 2022 ($MM) (1) $3,000 ~C$2.2 B Reinvested $94 $496 $54 $23 $2,500 $2,269 $593 $2,000 $1,500 $1,000 ~C$632 MM Re
Slide 41: Guiding Principle 6: Optimize Capital Structure & Cost
GUIDING PRINCIPLE: 6 OPTIMIZE CAPITAL STRUCTURE & COST
Slide 42: Optimized & Low-Cost Capital Structure
6 OPTIMIZE CAPITAL STRUCTURE & COST OPTIMIZED & LOW-COST CAPITAL STRUCTURE Focused on maintaining an efficient, flexible and low-cost capital structure. Combination of long-term fixed-rate debt with no significant near-term maturities and flexible variable-rate revolving facility CAPITAL STRUCTURE D
Slide 43: Target Leverage Range
6 OPTIMIZE CAPITAL STRUCTURE & COST TARGET LEVERAGE RANGE Conservative target leverage range provides significant financial flexibility HISTORICAL NET DEBT (CASH) – TO – INVESTED CAPITAL RATIO (%) (1) 50% Lender Covenant = 50% 40% Internal Limit = 35% 30% Target Range = 5-25% 20% 10% 0% Q1 Q2 Q3 Q4
Slide 44: Positive ESG & Carbon Story
~~ & POSITIVE ESG & CARBON STORY
Slide 45: Enhancing the Natural Carbon Cycle
ENHANCING THE NATURAL CARBON CYCLE Responsible forest management increases long-term carbon storage CO2 CO2 Growing Forest CO2 CO2 CO2 Seedling Mature Forest Decaying / Vulnerable Forest Releases stored carbon CO2 CO2 Comprehensive Replanting Responsible Harvesting in 2021 Interfor planted 10.3 Enab
Slide 46: Sustainable Manufacturing
SUSTAINABLE MANUFACTURING Interfor’s lumber stores more carbon that is emitted during its production 82% Of Interfor’s energy needs come from renewable sources PART OF THE CLIMATE SOLUTION ~6 MM tonnes of carbon stored in the lumber sold by Interfor in 2022 TARGET to reduce Scope 1 and 2 GHG emissio
Slide 47: Lumber: Low-Carbon Building Material
LUMBER: LOW-CARBON BUILDING MATERIAL Lumber is a climate-friendly building product vs. other alternatives Compared to the use of: CO2 CO2 Steel Emits 18.0kg CO2* 1m2 of a building constructed using CO2 wood wall studs Stores net 16.7kg CO2* Concrete Emits 27.5kg CO2* * Carbon stored minus production
Slide 48: Responsibility at the Heart of the Company
RESPONSIBILITY AT THE HEART OF THE COMPANY Integrating ESG standards throughout our business and strategy ENVIRONMENT SOCIAL GOVERNANCE Climate: Safety: ESG Oversight: • We contribute meaningfully to the global effort to • We embrace world-leading safety standards and target • 91% of directors are i
Slide 49: Contact Information
CONTACT INFORMATION
Slide 50: Investor Contacts
INVESTOR CONTACTS RICK POZZEBON MIKE MACKAY EVP & Chief Financial Officer VP, Corporate Development & Treasury 604-689-6804 604-689-6846 richard.pozzebon@interfor.com mike.mackay@interfor.com 50
Slide 51: Analyst Coverage
ANALYST COVERAGE BMO CAPITAL MARKETS Ketan Mamtora (212) 883-5102 ketan.mamtora@research.bmo.com CIBC CAPITAL MARKETS Hamir Patel (604) 331-3047 hamir.patel@cibc.com EQUITY RESEARCH Kevin Mason (604) 886-5741 kmason@equityresearchassociates.com ASSOCIATES RAYMOND JAMES Daryl Swetlishoff (604) 659-82