Slide 1: Company Update March 2016
: Mm COMPANY UPDATE MARCH 2016 A INTERFOR Building Value..
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION This presentation contains information and statements that are forward- looking in nature, including, but not limited to, statements containing the words “will”, “is expected”, “forecast”, “annualized”, “target” and similar expressions. Such statements involve known and u
Slide 3: Interfor's Four Regions
INTERFOR’S FOUR REGIONS BC Coast Pesce cess eenaseseeenee : Pree erree rrr ryy : : 320 MMbf (11%) BC Interior i - 2 mills o - Cedar, Hem-Fir, : peo MMpt (25%) Douglas-Fir - Douglas-Fir, Hem-Fir, - Specialty SPF, Cedar vedussenveesaverienesees - Dimension : US Northwest : 625 MMbf (20%) : -4 mills -
Slide 4: 4th Largest Lumber Producer
4th LARGEST LUMBER PRODUCER Bbf North American Lumber Production by Company - 2015 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 - Source: Wood Markets Monthly – March 2016 4
Slide 5: Interfor Strategic Plan
INTERFOR STRATEGIC PLAN Growth by Acquisition Building Value Operational Excellence 5
Slide 6: Lumber Markets
RAYMOND JAMES U.S. SOUTH CONFERENCE - PERRY SAWMILL TOUR LUMBER MARKETSSeptember 30, 2015
Slide 7: Interfor's Diverse Lumber Mix
INTERFOR’S DIVERSE LUMBER MIX Cedar Lumber Sales By Species 1 Hem-Fir 10% Spruce-Pine-Fir Western Dimension 11% Doug Fir/Larch 30% Southern Yellow Pine Southern Yellow Pine 34% Lodge Pole Pine Lodge Pole/ Ponderosa Pine Cedar 4% 11% (1) By value for 2015 7
Slide 8: North American Driven Business
NORTH AMERICAN DRIVEN BUSINESS Lumber Sales By Market 1 USA Canada 73% 8% China/Tw/HK 5% Other 4% Japan 10% (1) By value for 2015 8
Slide 9: Benchmark Lumber Price Trends
BENCHMARK LUMBER PRICE TRENDS US/Mbf US/Mbf $500 $500 SPF #2 2x4 SYP (East) #2 2x4 Western SPF Composite SYP Composite $450 $450 $400 $400 $350 $350 $300 $300 $250 $250 2X4 $356 2X4 $349 2X4 $278 2X4 $268 2X4 $413 2X4 $418 2X4 $382 2X4 $404 COM $350 COM $350 COM $279 COM $259 COM $385 COM $400 COM $
Slide 10: Key Market Drivers
KEY MARKET DRIVERS (1) 2014(1) 2015 2016E(1) 2017E(1) US Housing Starts - Total (mm) 1.0 1.1 1.2 1.4 Change +11% +11% +15% US Housing Starts - Single Family (mm) 0.6 0.7 0.8 1.0 Change +10% +16% +16% NA Lumber Consumption (Bft) 48.8 51.5 54.0 57.5 Change +6% +5% +7% NA Offshore Exports (Bft) 7.6 6.9
Slide 11: Operations Overview
A INTERFOR Building Value.. 11
Slide 12: Business Comparisons
BUSINESS COMPARISONS US South Dimension Mills • 9 dimension mills in Georgia, S. Carolina and Arkansas • Low cost wood baskets • Strong geographic fit/significant operational upside BC Interior Dimension Mills • 3 dimension mills in BC southern interior • Modern/low cost operations • Good fiber supp
Slide 13: US South Dimension Mills
a +P a : _.US soute’ DIMENSION MILLS A INTERFOR Building Value..
Slide 14: US South Overview
US SOUTH OVERVIEW • Invested over US$400 million since March 2013 • 5 acquisitions • 9 mills • 1.3 Billion feet of lumber capacity across 3 States • Largest lumber producer in Georgia • 44% of Interfor’s capacity is in the South 14
Slide 15: US South: Started Up in 2013
US SOUTH: STARTED UP IN 2013 ACQUIRED ASSETS...NOW REPOSITIONING A BUSINESS Phase 1 Phase 2 Phase 3 • Acquire Assets • Build Team/Infrastructure • Mill Improvements • Mill Improvements • Optimization • Targeted Capex • Modest Capex 2013-15 2016-17
Slide 16: Logistics – Right Log to Right Mill
LOGISTICS – RIGHT LOG TO RIGHT MILL Each circle is a 50 mile radius. 16
Slide 17: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS A INTERFOR Building Value...
Slide 18: BC Interior Overview
BC INTERIOR OVERVIEW Cumulative Percentage of Merchantable Forest Volume Killed Since 1999 Adams Lake Very High (>45%) High (31-45%) Moderate (16-30%) Castlegar Low (<16%) None (0%) Grand Forks Source: BC Ministry of Forests 18
Slide 19: BC Interior Modernization
BC INTERIOR MODERNIZATION 2008-09 2012 October 2015 Start-up Adams Lake, BC Grand Forks, BC Castlegar, BC • 3 MODERN MILLS IN GOOD FIBER BASKETS • RE-INVESTMENTS ARE COMPLETE • CONTRUCTION: ON-TIME AND ON BUDGET 19
Slide 20: BC Interior Modernization – Impact
BC INTERIOR MODERNIZATION – IMPACT 2007 2015 (1) Change Primary Breakdown Lines 8 5 -38% Annual Production, MMbf 549 690 +26% Lumber Recovery, bf/m3 279 307 +10% Hourly Headcount, FTE 602 406 -33% (1) Adams Lake & Grand Forks – 2015; Castlegar – Mill Upgrade Proforma. 20
Slide 21: Financial Review
FINANCIAL REVIEW
Slide 22: 2015 Results in Context
2015 RESULTS IN CONTEXT EBITDA $mm (US$/Mbf) $80 $450 $70 $400 $350 $60 $300 $50 $47.3 $45.4 $250 $39.2 $40 $37.1 $36.1 $36.2 $37.4 $35.8 $31.8 $200 $30 $24.6 $150 $20 $100 $12.7 $11.5 $10 $50 $0 $- Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 Interfor Adjusted EBITDA ($Cmm) SYP Composite Pric
Slide 23: Capital Spending Profile
CAPITAL SPENDING PROFILE $mm $140 $120 $100 $80 $60 $40 $20 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016E Depreciation, Depletion & Amortization(1) Capital Expenditures(2,3) (1) Includes depreciation of plant & equipment and depletion & amortization of logging roads, timbers and other. (2) Includ
Slide 24: Capital Structure
CAPITAL STRUCTURE • Interfor has a prudent capital structure. • Weighted average interest rate < 4%. • At Dec 31, 2015 - Available liquidity of $147 mm. $mm Capital Structure Debt Maturity Schedule As of Dec 31, 2015 $300 As of Dec 31, 2015 Net Debt (C$mm) $452 $250 Book Equity (C$mm) $725 Invested
Slide 25: Net Debt Profile
NET DEBT PROFILE • Substantially all of Interfor’s debt is denominated in US$. $400 Net Debt – US$ mm $345 $344 $350 $327 $(1) • Free cash $300 $281 flow (net of • Free cash Castlegar flow • Monticello capex) acquisition $250 • Castlegar capex $200 $175 • Simpson acquisition $150 $100 ND/Cap ND/Cap
Slide 26: Summary
SUMMARY • 3 modern mills in BC Interior (Castlegar capex is complete) - $10 mm annualized EBITDA impact (1) Strong Asset Base With • Targeted margin improvement initiatives underway Significant Upside (primarily focused on US South) - $40 mm annualized EBITDA improvement by 2016/17 (1) • “Capital li
Slide 27: Industry Information
INDUSTRY INFORMATION A INTERFOR Building Value.. 27
Slide 28: US Housing Starts
US HOUSING STARTS Millions 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 Housing Starts Pent-Up Demand 0.4 Underlying Demand 0.2 0.0 Source: FEA Q4-2015 Forecast; Published December 2015 28
Slide 29: Demand on North American Mills
DEMAND ON NORTH AMERICAN MILLS BBF 85 80 75 70 65 60 55 50 45 40 35 30 25 US Canada Net Exports 20 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Source: FEA Q4-2015 Forecast; Published December 2015 29
Slide 30: Favourable Log Supply in US South
FAVOURABLE LOG SUPPLY IN US SOUTH Growth & Drain, BBF Int’l ¼” Inventory, BBF Int’l ¼” 50 300 45 290 Sawtimber Inventory 40 280 35 270 30 260 Growth Drain 25 250 20 240 15 230 Growth 10 Drain 220 5 Inventory 210 0 200 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: FEA Q4-2015 Forecas
Slide 31: US South Sawtimber Prices
US SOUTH SAWTIMBER PRICES US$/Ton (Nominal $’s) $60 $50 $40 $30 $20 $10 $- 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: FEA Q4-2015 Forecast; Published December 2015 31
Slide 32: Regional Production vs Peak (Bbf)
REGIONAL PRODUCTION VS PEAK (Bbf) BC lumber Production Eastern Canada Lumber Production 16 9 14 8 12 7 Quebec Ontario Quebec Peak Ontario Peak 6 10 5 8 4 6 Inland Coast Coast Peak Inland Peak 3 4 2 2 1 0 0 00 02 04 06 08 10 12 14 16 18 20 00 02 04 06 08 10 12 14 16 18 20 US West lumber Production US