West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Raymond James Lumber Super Cycle Forum (January 2013)
37 slides from West Fraser Timber's conference presentation, Jan 16, 2013
Slide 1: Raymond James Lumber Super Cycle Forum
Raymond James Lumber Super Cycle Forum January 16, 2013 Toronto, Ontario
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation and comments associated with it contain forward-looking statements including statements relating to U.S. housing recovery, the potential for constrained lumber supply, projected B.C. Interior lumber production, energy-related opportunities, earnings sensi
Slide 3: Our Goals
Our Goals To be a leading wood products manufacturer, focused on solid wood products Strong financial results through the business cycle Long-term growth and shareholder value enhancement Stable, conservative financial structure 3 3
Slide 4: Our Strategy
Our Strategy Operational excellence Diversification Product differentiation Integration 4 4
Slide 5: Operational Excellence
Operational Excellence Managing to ensure a committed workforce Cost control and efficiency Continuous reinvestment Internal and external benchmarking and competition Straightforward, consistent business model 5 5
Slide 6: Diversification
Diversification Products Geography Markets 6 6
Slide 7: Product Differentiation
Product Differentiation Wood as the best environmental choice Renewable, sustainable business Expanding applications 7 7
Slide 8: Integration
Integration Substantial fibre self-sufficiency Fuller utilization of resource Some benefits from counter-cyclicality Better able to respond to new opportunities such as bioenergy 8 8
Slide 9: Earnings Growth Drivers
Earnings Growth Drivers North American housing and economic growth Asian economic growth Western Canadian electricity demand Key sensitivities 9 9
Slide 10: U.S. Housing
U.S. Housing Pent Up Housing Demand (conventional + mobile) 2.25 Million Units 2.00 1.75 1.50 1.25 1.00 0.75 Production Underlying Demand 0.50 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Significant pent up demand bodes well for long-term recovery. 10 Source: FEA 10
Slide 11: U.S. Housing
U.S. Housing U.S. Housing Forecast (2013 & 2014) Single & Multi Family 1,400 1,200 1,000 800 000 600 400 200 0 Wells FEA RISI NAHB APA Mortgage Average Source: APA Fargo Bankers 11
Slide 12: SPF Shipments from Canada to China
SPF Shipments from Canada to China 3,500 Represents approximately 180,000 single-family homes 3,000 2,662 2,500 2,500 2,000 MMfbm 1,585 1,500 1,000 836 500 358 152 0 2007 2008 2009 2010 2011 2012 est. Source: COFI China has become a major consumer of Canadian softwood lumber 12 12
Slide 13: Pulp & Paper
Pulp & Paper Pulp & Paper Sales Mix – 2011 ($) N. America, 37% Asia, 56% Europe, 7% 13 13
Slide 14: Energy Opportunities
Energy Opportunities Woodwaste for heat and steam to dry wood and for electricity and steam for pulp mills Woodwaste for electricity to be used or sold Pulp mill effluent as a source for electricity generation Expanding opportunities to generate and sell electricity levering off current business 14
Slide 15: Earnings Sensitivity to Key Variables (2011)
Earnings Sensitivity to Key Variables (2011) (based on year-end capacities1 - $ millions except where otherwise stated) Factor Variation Change in Earnings 2,3 Lumber price US$10 (per Mfbm) 48 2,3 Plywood price Cdn$50 (per Msf) 31 3 MDF price US$50 (per Msf) 11 3 NBSK price US$50 (per tonne) 22 3 BC
Slide 16: Returns on Lumber
Returns on Lumber EBITDA margin (%) - Lumber 40.0% 35.0% 30.0% 25.0% 20.0% Average: 15% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% Ytd Q3-12 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 16 16
Slide 17: Driving the Price of Lumber
Driving the Price of Lumber Demand - North American housing Asian industrial applications Japanese housing Supply - Fibre limitations Residual offtake Mill closures People 17 17
Slide 18: Driving the Price of Pulp
Driving the Price of Pulp Demand - China’s paper, tissue and packaging demand Developing countries’ demand Price of cotton and similar products Supply - European paper capacity closures Russian and Canadian start ups Product diversification (e.g. dissolving pulp) South American production 18 18
Slide 19: Capital Strategy
Capital Strategy Reinvest profits to lower costs, improve efficiency through technology and improved processes 2011 and 1H 2012 $230 million in solid wood; anticipate additional “catch up” capital spending over next several years $88 million in Green Transformation credits on profit enhancement ener
Slide 20: Why Invest in West Fraser?
Why Invest in West Fraser? Proven ability to generate strong cash flow even in worst markets Consistent, straightforward business plan Loyal, long-term employee and management base Conservative financial management coupled with proven ability to grow strategically 20 20
Slide 21: Trading Liquidity (Share Value Traded)
Trading Liquidity (Share Value Traded) $1,200 $1,000 $800 $ Million $600 $400 $200 $0 2010 2011 2012 West Fraser Canfor 21
Slide 22: “WFT” – Toronto Stock Exchange
“WFT” – Toronto Stock Exchange www.westfraser.com These materials have been prepared by Management of the Company. No regulatory authority has approved or disapproved of the contents of these materials. These materials do not constitute an offer to sell or the solicitation of an offer to buy any sec
Slide 23: Appendix
23 Appendix @ West Fraser
Slide 24: Product Diversification
Product Diversification . Lumber Panels Pulp & Paper 27 Mills 6 Mills 5 Mills SPF 3.8 Bfbm Plywood: 830 MMsf3/8” NBSK: 590 Mtonnes SYP 2.0 Bfbm MDF: 300 MMsf3/4” BCTMP: 640 Mtonnes Total 5.8 Bfbm LVL: 3.2 MMcf Newsprint: 135 Mtonnes North America’s largest Largest plywood Third largest pulp lumber p
Slide 25: Trend Sales Mix
Trend Sales Mix ($) Pulp & Paper 24% Panels Lumber 13% 63% We are an integrated forest products company primarily focused on solid wood products 25 25
Slide 26: Geographic Diversification
Geographic Diversification 26 26
Slide 27: Lumber Capacity Location
Lumber Capacity Location U.S. 34% B.C. 45% Alberta 21% Geographic diversification in lumber 27 27
Slide 28: Annualized Shareholder Return (Cdn$)
Annualized Shareholder Return (Cdn$) (June 2006* – January 10, 2013) 16% 14% 12.9% 12% 10% 9.4% 8% 6% 4% 2.7% 1.9% 2% 0.9% 1.0% 0% West Fraser S&P/TSX Dow Competitor A Competitor B Competitor C * June 2006 marked the beginning of the steep decline in U.S. housing starts 28 Source TD Bank 28
Slide 29: Strong Cash Generation
Strong Cash Generation ($millions) Ytd Total Q3-12 2011 2010 2009 2008 Cash from Operations 962 174 85 421 96 186 Capital Expenditures * 473 106 213 89 18 47 Dividends 84 18 24 8 10 24 * Ytd 2012, 2011 and 2010 includes pulp Green Transformation projects 29 29
Slide 30: Strong Balance Sheet
Strong Balance Sheet 800 Reduced debt by $460 million during the worst lumber market since the Great Depression 700 600 500 $ millions 400 300 200 100 0 Dec - 2007 Dec - 2011 25% Net Debt to Capital 14% Net Debt to Capital 30 30
Slide 31: Lumber Operating Rate - 2011
Lumber Operating Rate - 2011 110% 100% 97% % of Capacity 90% 80% 78% 75% 72% 71% 70% 67% 60% 50% WFT WFT B.C. U.S. U.S. Canada Canada U.S. Interior South Low-cost structure allows for higher operating rates in down market 31 31
Slide 32: SPF Lumber Geographic Sales Mix
SPF Lumber Geographic Sales Mix ($) 2005 2011 Non U.S., 38% Non U.S., U.S., 45% 55% U.S., 62% 32 32
Slide 33: Lumber Opportunity
Lumber Opportunity B .C . Interior Lumber P roduction 17,000 2,300 Fore ca st 2,100 15,000 S tarts (thousands) 1,900 13,000 1,700 MMfbm 1,500 11,000 1,300 9,000 1,100 900 7,000 700 5,000 500 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 P roduction U.S . Housing S ta rts (R a x is) For
Slide 34: Pulp - NBSK End-Use Products
Pulp - NBSK End-Use Products Specialty Coated 10% Paper 11% Tissue/Towel 55% Uncoated Paper 10% Board 14% West Fraser 2011 shipments: 489,199 Metric Tonnes 34 34
Slide 35: Pulp - BCTMP End-Use Products
Pulp - BCTMP End-Use Products Tissue/Towel Specialty 1% 8% Uncoated Paper Board 23% 47% Coated Paper 21% West Fraser 2011 shipments: 642,284 Metric Tonnes 35 35
Slide 36: Paper - Newsprint
Paper - Newsprint North American Newsprint Cost Structure Exchange at $.97 Source: PPPC Cost Survey 2010 Cdn$/tonne ANC Alberta Newsprint is the lowest cost newsprint producer in North America and a positive contributor to the profitability of our pulp and 36 paper business 36
Slide 37: Bio-Energy Power Generation from Biomass
Bio-Energy Power Generation from Biomass Cariboo pulp mill turbo-generator (completed) Will make mill energy self-sufficient and excess power will be sold to B.C. Hydro Slave Lake pulp mill biomethanation project Estimated startup late 2014 B.C. Hydro (Phase II) power generation projects (at two saw
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