West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Investor Presentation (December 2020)
31 slides from West Fraser Timber's investor presentation, December 2020
Slide 1: Investor Presentation December 2020
Investor Presentation December 2020
Slide 2: Forward-Looking Statements
2 Forward-Looking Statements General: This presentation and comments associated with it contains historical information, descriptions of current circumstances and statements about potential future developments and anticipated financial results. Readers are cautioned that this presentation is qualifi
Slide 3: West Fraser Overview
West Fraser Overview
Slide 4: Benefits of Wood | Reducing GHGs
4 Benefits of Wood | Reducing GHGs West Fraser’s Actions: • Carbon stored in products: 9.4 million tonnes of CO2e (2019) • 75% of energy renewable • 69% from biomass • Reduced absolute GHGs 5% (vs. baseline 2005) • GHG emissions intensity reduced 9% since 2005 in solid wood manufacturing • GHGs redu
Slide 5: Sustainable Forestry, Renewable Resource
Sustainable Forestry, Renewable Resource 5 West Fraser is well-positioned to successfully transition to a lower-carbon global economy. ESG reporting & SASB disclosures: Westfraser.com/ESG-report
Slide 6: Product & Geographic Diversification
6 Product & Geographic Diversification Lumber - 33 mills Panels - 7 mills Pulp and Paper - 5 mills SPF 3.5 Bfbm Plywood: 860 MMsf3/8” NBSK: 570 Mtonnes BCTMP: 690 Mtonnes SYP 3.2 Bfbm MDF: 250 MMsf3/4” Newsprint: 135 Mtonnes Total 6.7 Bfbm LVL: 2.6 MMcf Energy 870 GWhrs Lumber Panels Pulp 2019 Reven
Slide 7: Operations Diversification
7 Operations Diversification Strategically located close to key timber regions and product markets
Slide 8: West Fraser Evolving Lumber Capacity
8 West Fraser Evolving Lumber Capacity Capacity 2004 2.8 Billion feet Capacity 2020E 6.7 Billion feet US South 11% British Columbia 27% Alberta 12% US South 47% British Columbia 77% Alberta 26% 4.0 3.1 3.2 3.2 Capacity BBF 3.0 2.4 2.5 2.4 2.5 2.3 2.2 1.6 1.6 1.7 1.7 1.8 1.7 2.0 1.0 0.0 2015 2016 201
Slide 9: Consolidated Financial Results
9 Consolidated Financial Results CAD$ Millions CAD$ Millions Adjusted EBITDA Q3-20 Q2-20 Q3-20 Q2-20 Lumber $ 552 $ 156 Sales $ 1,690 $ 1,276 Panels 51 20 Costs and Expenses 1,203 1,193 Pulp & Paper 5 10 Operating earnings 487 83 Corporate/Other (3) (2) Finance Expense (11) (13) Total $ 605 $ 184 Ot
Slide 10: Lumber EBITDA Margin (net of duties)
10 Lumber EBITDA Margin (net of duties) 3 of last 4 years > 20% 25% Actual 20% 10 year average 15% Trend 10% Strategic Pillars: • Strategically position capacity in low cost 5% jurisdictions, accessible to end markets • Modernize operations and leverage capital investment for efficiency • Manage ris
Slide 11: Capital Investment
11 Capital Investment Capital Expenditure vs Amortization $500 200% Grade $400 150% Capacity / $300 Recovery Production 100% $200 $100 50% $0 0% Modernization 2015 2016 2017 2018 2019 Ytd initiatives Q3-20 Capital Depreciation Percent 2019 Segment Capital Expenditure 2019 Capital Expenditure by type
Slide 12: Liquidity
12 Liquidity Available liquidity Scheduled maturities $1,500 $900 $800 $700 $1,000 $600 $500 $400 $500 $300 $200 $100 $0 $0 2017 2018 2019 Q119 Q419 Q120 Q220 Q320 2020 2021 2022 2023 2024 Bank lines Cash Term loan Notes Revolvers Debt to capitalization 60% 40% 20% 0% 2017 2018 2019 Q219 Q419 Q120 Q
Slide 13: Balanced Capital Allocation
13 Balanced Capital allocation Debt service, 4% Net Cash, 6% Dividends & Buybacks, 32% Capital Consistently deploying Expenditure, capital to create value 43% Acquisitions, 15%
Slide 14: Final AR1 Duty Rates
Final AR1 Duty rates 14 Duties Assessed as a portion of Total Expense (CAD) Excess Duties Paid (USD) $80 $120 $70 $104 $60 $100 $50 $30 $30 $80 $40 $30 $22 $60 $19 $21 $20 $24 $36 $44 $28 $10 $20 $40 $13 $17 $8 $4 $0 Q217 Q317 Q417 Q118 Q218 Q318 Q418 $20 ($10) ($22) ($20) $0 ($30) 2017 2018 Duties
Slide 15: Market Overview
Market Overview
Slide 16: North America Lumber End Use and Consumption
16 North America Lumber End Use and Consumption North America Lumber End Use 2019 Non-residential Other 6% New Residential Residential improvements 30% and industrial demand Industrial 26% are lower volatility demand drivers Residential Improvements 38% North America Lumber Consumption 35 30 25 Bill
Slide 17: Demand conditions
17 Demand conditions U.S. Housing Starts (not seasonally adjusted) Leading indicator of Remodeling Activity $B 4 Qtr Moving Improvements and Repairs 160 $340 8.0% 140 $330 7.0% 4 Qtr Moving rate of Change 120 $320 6.0% M Starts 100 $310 5.0% 80 $300 Seasonally adjusted: 4.0% 60 2018: 1,250 $290 40 2
Slide 18: Supply conditions
18 Supply conditions Total North America Lumber Supply (Production) North America Lumber Supply (Production) 20.0 2019 Canada Other Billion Board Feet 15.0 24% US South 32% 10.0 5.0 0.0 BC Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3- US Other 17% 20E 27% Canada US Imports North Am
Slide 19: North American Lumber Production
19 North American Lumber Production 90 25 US Housing US Housing Starts Starts 80 2.1 Million 1.4 Million 20 70 60 15 Billion BF Billion BF 50 40 10 30 20 5 10 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Canada US US South (R axis) Canada BC (R axis) US West (R
Slide 20: Prices trending higher
20 Prices trending higher $/Mfbm SPF 2x4 Benchmark History $1,000 $948 $800 $629 $600 $403 $400 $312 $200 $245 $153 $- 2006 2008 2010 2012 2014 2016 2018 2020 SPF 2x4 W Cycle Trough Cycle Peak Linear (SPF 2x4 W) $/Mfbm SYP 2x4 Benchmark History $1,200 $964 $1,000 $800 $589 $483 $600 $400 $332 $200 $
Slide 21: BC Interior Log Supply Conditions
21 BC Interior Log Supply Conditions 65 14 BC Interior SPF Purchase Log Cost $110 60 12 Billion BF (softwood lumber production) $100 55 10 Million m3 (AAC and Harvest) 50 8 $90 $/M3 45 6 $80 40 4 $70 35 2 $60 30 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 $50 AAC M3 Harvest M3 Softwood
Slide 22: Transaction Update
Transaction Update
Slide 23: Greater Diversity in Products, Geography and End Use
Growth, Stability, Resilience: Greater Diversity in Products, 23 Geography and End Use KEY STATISTICS 5,909 8,691 LTM MMfbm LUMBER SHIPMENTS LTM MMsf ENGINEERED WOOD SHIPMENTS(1) US$5,920mm US$1,249mm C$7,960mm C$1,679mm LTM REVENUE LTM ADJUSTED EBITDA Note: Engineered Wood includes OSB, Plywood, MD
Slide 24: Diverse Operating Footprint
24 Diverse Operating Footprint
Slide 25: Strategic Rationale: Customer Relevance | Diversification | Growth
25 Strategic Rationale: Customer Relevance | Diversification | Growth Organizational Capability – Stronger Together • Combining two highly skilled and recognized high performance teams creates a critical mass of talent and capability in key regions • Combination of leadership of both companies in ke
Slide 26: Transaction Summary
26 Transaction Summary • Will be led by existing West Fraser management team Transaction • West Fraser to acquire Norbord via Plan of Arrangement Combined • West Fraser’s Hank Ketcham as Chairman, Ray Ferris as CEO, Chris Structure • Unanimously recommended by the Board of Directors of Company Viros
Slide 27: Anticipated Timeline
27 Anticipated Timeline January 2020 • Shareholder meetings December 2020 • Mailing of Shareholder materials • Ongoing regulatory reviews November 2020 • Regulatory filings
Slide 28: West Fraser Timber Co. Ltd. – WFT, Toronto Stock Exchange
28 West Fraser Timber Co. Ltd. These materials have been prepared by Management of the Company. No regulatory authority has approved or disapproved “WFT” – Toronto Stock Exchange of the contents of these materials. These materials do not constitute an offer to sell or the solicitation of an offer to
Slide 29: Appendix
Appendix
Slide 30: Earnings Sensitivity to Key Variables
30 Earnings Sensitivity to Key Variables Estimated Earnings Sensitivity to Key Variables1 (2019) (based on 2019 production - $ millions) Factor Variation Change in pre-tax earnings Lumber price US$10 (per Mfbm) 78 Plywood price Cdn$10 (per Msf) 8 NBSK price US$10 (per tonne) 6 BCTMP price US$10 (per
Slide 31: 2019 ESG Report
31 2019 ESG Report Full 2019 ESG Report SASB, GRI & TCFD disclosures westfraser.com/ESG-Report ESG Report Highlights http://bit.ly/WF-ESG-2019 Attractive ESG attributes, significantly upgraded reporting
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