Interfor Corporation · TSX:IFP

Interfor — CIBC Institutional Investor Conference (January 2010)

41 slides from Interfor's conference presentation, Jan 21, 2010

  1. Slide 1: Positioned for Success

    Positioned for Success CIBC Institutional Investor Conference Whistler, BC Duncan Davies January 21, 2010 President and CEO

  2. Slide 2: Forward-Looking Statements

    Forward-Looking Statements Information contained herein constitutes forward-looking statements. Forward-looking statements, which include all statements that are not historical facts, are subject to certain risks and uncertainties that could cause actual results to differ materially from those antic

  3. Slide 3: Introduction

    Section 1 Introduction INTERFOR, @)

  4. Slide 4: Why Interfor?

    Why Interfor?  Clear vision and strategy  Strong lumber EBITDA margins relative to peers  Proven track record of acquiring and turning around businesses  Strong balance sheet  Significantly undervalued  Well-positioned to capitalize on market recovery Deliver Above Average Returns on Invested

  5. Slide 5: Deliver Above Average Returns on Invested Capital

    Regions and Operations: 1,575 MMbf Lumber Capacity1. Timber Tenures B.C. Interior 615 MMbf AAC 000 m3 Adams Lake 285 MMbf DFir & SPF Dimension 500 2. Castlegar 170 MMbf DFir, Cedar & SPF Dimension 500 Grand Forks 160 MMbf SPF & DFir 500 B.C. Coast 325 MMbf 2,000 Hammond 165 MMbf Cedar Specialty Acor

  6. Slide 6: Housing Outlook

    Section 2 Housing Outlook INTERFOR, G)

  7. Slide 7: The U.S. Housing Market is beginning to recover

    The U.S. Housing Market is beginning to recover The good news…  Housing starts are up 20% from the bottom  The pace of housing sales has improved 40% since early 2009  The inventory of unsold homes has dropped 24% since mid-2008  Supply is in the 7 months range, well off the peak of 11 months 

  8. Slide 8: U.S. Housing Starts

    U.S. Housing Starts  New house construction is the largest driver of lumber consumption in the U.S.  Starts peaked at 2.1 million units in 2005 and dropped to 480,000 units in early 2009  Starts are currently in the 570,000 unit range Source: U.S. Census Deliver Above Average Returns on Invested

  9. Slide 9: Sales and Inventories of New and Existing Homes

    Sales and Inventories of New and Existing Homes  Sales of new and existing homes have been increasing since early 2009 and are running at a pace of almost 7 million units (SAAR)  The inventory of unsold homes peaked in mid-2008 and has since dropped by 24% Source: NAR (National Association of Real

  10. Slide 10: U.S. Home Price Trend

    U.S. Home Price Trend  Housing prices month-over-month increased 5 consecutive months to September and were flat in October  The 10 and 20 city indices are currently back to fall 2003 levels Home Price Index Year/Year Percent Change Home Price Index: base value of 100 Jan,’00 Source: Standard & Po

  11. Slide 11: U.S. Home Affordability

    U.S. Home Affordability  Affordability rose to record highs early in the year driven by low interest rates and declining home prices; the index declined in mid-year as mortgage rates increased and the recession impacted unemployment and disposable income. Mortgage rates have dropped by 47 bp since

  12. Slide 12: Uncertainty Around the U.S. Housing Recovery

    Uncertainty Around the U.S. Housing Recovery  The estimated “Shadow Supply” of housing inventory (distressed homes) increased from 1.8 million in August „07 to 5.4 million by September ‟09 1 Additional mortgages (ALT A, Option ARM) will reset in the next 12-18 months Estimated "Shadow Supply" of Ho

  13. Slide 13: U.S. Housing Start Outlook

    U.S. Housing Start Outlook  The average of U.S. 2010 housing forecasts in the table below is 752,000 starts, a 33% increase over 2009 2009E 2009E 2009E 2009E/ 2010E 2010E/ Single-Family Multi-Family Total 2008 Total 2009E National Association of 440 117 557 -38% 804 44% Realtors National Associatio

  14. Slide 14: Industry Developments

    Section 3 Industry Developments

  15. Slide 15: Lumber Supply / Demand Balance

    Lumber Supply / Demand Balance Recent History  Producers were slow to adjust to declining demand, leading to a collapse of prices in late „08, early ‟09  Production curtailments in 2009 have rebalanced supply and demand  Prices are up 30% year-over-year December; the best producers were cash posi

  16. Slide 16: Positioned for Success

    Section 4 Positioned for Success

  17. Slide 17: Transformation of Interfor's Operating Platform

    Transformation of Interfor‟s Operating Platform 2002 2007 2009 Southern B.C. Southern B.C. Southern B.C. Interior Interior Interior 21% 22% 39% U.S. U.S. 38% 40% B.C. Coast 79% B.C. Coast 40% B.C. Coast 21% Production Capacity Production Capacity Production Capacity 772 MMbf 1,345 MMbf 1,575 MMbf In

  18. Slide 18: Relative Position in North America's Lumber Industry

    Relative Position in North America‟s Lumber Industry North America‟s Largest Lumber Producers in 20071. (billion bf) Proforma2. Actual Source: Wood Markets monthly – March 2008 1. 2007 was used since the 2008 NA industry production was impacted by the severe economic downturn 2. Pro forma excludes I

  19. Slide 19: Investing in Core Assets

    Investing in Core Assets  Interfor has spent $225 million over the last five years to upgrade its assets. Major projects have been completed at Molalla, Port Angeles and Adams Lake Discretionary Capex (excluding acquisitions) $100 million investment in a new sawmill at Adams Lake, completed April „

  20. Slide 20: Investment in Core Assets – Molalla, Oregon

    Investment in Core Assets – Molalla, Oregon  Molalla‟s new high speed planer is one of the most efficient single line stud planers in North America. The planer start-up was excellent 120% Actual 100% Target 80% 60% 40% 20% 0% Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul-07 Aug- Sep- O

  21. Slide 21: Investment in Core Assets – Port Angeles

    Investment in Core Assets – Port Angeles  Port Angeles new primary breakdown line exceeded target proforma in the 3rd month Port Angeles New Canter Line Start up: (Mbf/day) PA Target: 558 Mbf/day Actual Target Wave Log Feeders and Full Line Double Length Infeed Canter Line Deliver Above Average Ret

  22. Slide 22: Investment in Core Assets – Adams Lake

    Investment in Core Assets – Adams Lake  New Wood Waste Energy System replaced a liquid natural gas system Thermal Plant Dry / Wet Fuel Bin Pump Heat Dump Units Deliver Above Average Returns on Invested Capital 21

  23. Slide 23: The New Adams Lake Sawmill started on-time and on-budget

    The New Adams Lake Sawmill started on-time and on-budget 6” canter line Outflow from edger 10” double arbour edger Trimmer infeed Deliver Above Average Returns on Invested Capital 22

  24. Slide 24: New Adams Lake Sawmill – Startup

    New Adams Lake Sawmill – Startup  The startup at Adams Lake has been highly successful; the mill is currently running at 10-15% above proforma Adams Lake Sawmill Startup (Mbf / hour) Proforma Actual Mbf / hour Original Startup Target Number of Days Adams Lake exceeded proforma on its 17th shift Del

  25. Slide 25: Acquisition of Weyerhaeuser's Tenure

    Acquisition of Weyerhaeuser‟s Tenure  Interfor is in the process of acquiring a portion of Weyerhaeuser‟s (WY) timber tenure located in Adams Lake‟s timber basket  AAC of approximately 275,000 m3  Increases Adams Lake‟s tenured wood supply to ~80% for the next 10 years and >50% long term  Expect

  26. Slide 26: Growing in Regions with Attractive Fundamentals - 2008

    Growing in Regions with Attractive Fundamentals - 2008 Portac (Olympic Peninsula, WA), September 2008  Annual capacity: 165 MMbf  Purchase price of US$29 million (plus inventories) is equivalent to 1.7 X 2004/5 peak EBITDA  Significant synergies have been achieved with Interfor‟s Port Angeles mil

  27. Slide 27: Diversified Product Mix

    Diversified Product Mix  Interfor‟s strengths‟ include a diversified product mix of both commodity and specialty products Cedar siding Rough cedar Cedar decking Japan structural Lumber Studs Structural dimension Facia & trim Millwork Higher % of specialty items greater stability of prices & profita

  28. Slide 28: Diversified Product Mix

    Diversified Product Mix  Interfor‟s diversified lumber product mix helps to stabilize earnings Benchmark Prices, January ‟03 to December ‟09 1400 US$/Mbf 1200 2X6 Knotty S4S Cedar 1000 800 Hemlock 4 1/8” grn squares 13’ 600 HF 9’ 2X4 Stud 400 200 SPF 2X4 #2&Btr Random Dimension 0 Source: Random Len

  29. Slide 29: Diversified Geographic Sales Mix Stabilizes Earnings

    Diversified Geographic Sales Mix Stabilizes Earnings 2008 Pacific Rim 17% Europe & U.S. Other 47% 20% Canada 16% Total Lumber Sales $297 million Interfor’s diversified geographic sales mix provides greater sales and earnings stability than other North American competitors Deliver Above Average Retur

  30. Slide 30: Minimal Exposure to the Mountain Pine Beetle

    Minimal Exposure to the Mountain Pine Beetle Mountain Pine Beetle (MPB) – Area Affected AAC1 MMm3 Central and Northern B.C. 0.0 50 – 75% Pine Adams Lake in Southern B.C. 0.5 (2) 28 – 30% Pine Castlegar & Grand Forks in Southern B.C. 1.0  Adams Lake 17% Pine   Castlegar Coastal B.C. Vancouver Gra

  31. Slide 31: Strong Financial Position – Record of Deleveraging

    Strong Financial Position – Record of Deleveraging  Interfor has a track record of deleveraging following major investments or acquisitions  After peaking at $168 million in 2008, net debt at September 30, 2009 was $129 million, or 26% of invested capital Net Debt 1. C$ Millions $300 Crown Florago

  32. Slide 32: Strong Financial Position – Credit Update

    Strong Financial Position – Credit Update  Interfor‟s bank facilities have been modified and extended, effective Jan „10 Tranche Prior Revised Amount Maturity Amount Maturity A C$ 65 April ‟10 C$ 65 Feb ‟11 B C$ 150 April ‟11 C$ 200 Feb ‟12 C US$ 35 Sept „10 Total C$ 251 C$ 265  The Company curren

  33. Slide 33: Peer Comparison

    Section 5 Peer Comparison

  34. Slide 34: Peer Comparison – EBITDA Margins

    Peer Comparison – EBITDA Margins  Interfor was the only publicly-traded lumber company in North America to achieve positive EBITDA margins in 2007 and 2008  After dipping in early 2009, Interfor was EBITDA positive in Q3 EBITDA Margin 2004 – YTD Q3 „09 1. 20% 15% Interfor 10% 5% 0% Peer Group 2. -

  35. Slide 35: Peer Comparison – IFP.A, WFT and CFP

    Peer Comparison – IFP.A, WFT and CFP  Interfor‟s share price kept pace with WFT and CFP from January ‟07 to September „08 before collapsing in Q4,‟08. Share Prices Indexed from Jan ‟07 to Jan 18, „10 (15%) (19%) (33%) The stock has recovered $3.65 per share since bottoming at $1.20 in March ’09, bu

  36. Slide 36: Geographic Diversity in Key Regions

    Geographic Diversity in Key Regions Productive Capacity (%) Interfor West Fraser Canfor B.C. Interior - Central & Northern 0% 43% 79% B.C. Interior - Southern 39% 0% 0% B.C. Coast 21% 0% 0% Prairies 0% 28% 5% U.S. Pacific N.W. 40% 0% 0% U.S. South 0% 28% 12% Other 0% 0% 3% 100% 100% 100% Interfor ha

  37. Slide 37: Peer Comparison – IFP.A, WFT and CFP

    Peer Comparison – IFP.A, WFT and CFP  IFP.A currently trades at a 37% discount to NBV, which is well below CFP (10%) and WFT (7%) Share Price Lumber EBITDA Margin Discount to 1. 2. Performance Leverage YTD Q3 ‘09 2008 Book Value (33%) 26.0% (4.6%) 2.8% 37% (19%) 13.7% (6.4%) (3.7%) 10% (15%) 22.7%

  38. Slide 38: Key Takeaways

    Section 6 Key Takeaways

  39. Slide 39: Key Takeaways

    Key Takeaways  Interfor has been radically transformed over the last 5 - 7 years  Interfor has a balanced geographic manufacturing base and diversified product lines  Interfor has top quartile (top decile) assets  Interfor has taken advantage of the downturn to acquire assets at attractive price

  40. Slide 40: APPENDIX

    APPENDIX INTERFOR, ©

  41. Slide 41: Financial Position

    Financial Position Sep 09 Dec 08 Dec 07 ($millions except ratios) Total Debt $130.8 $168.0 $34.7 Less Cash & Deposits $(2.2) $(0.2) $(26.6) Net Debt $128.6 $167.8 $8.1 Equity $365.6 $406.8 $430.6 Net Debt / IC 26% 29.2% 1.9% Book Value / Share $7.76 $8.63 $9.14 Period-end Share Price $3.13 $1.70 $6.

Interfor — CIBC Institutional Investor Conference (January 2010) on 6ix