Interfor Corporation · TSX:IFP
Interfor — Investor Presentation (February 2021)
30 slides from Interfor's investor presentation, February 2021
Slide 1: Company Update February 2021
COMPANY UPDATE FEBRUARY 2021
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 (the “Company”), including its business outlook, objectives, plans, strategic priorities and other information that is not historical fact. A
Slide 3: Company Overview
COMPANY OVERVIEW
Slide 4: Operating Regions
OPERATING REGIONS BC COAST 140 MMBF (4%) (1) • 1 mill • Hem-Fir, Douglas-Fir • Specialty • Woodlands logging business BC INTERIOR 750 MMBF (24%) (1) • 3 mills • Douglas-Fir, Hem-Fir, SPF, Cedar • Dimension US NORTHWEST 550 MMBF (17%) (1) • 3 mills • Hem-Fir, Douglas-Fir • Studs US SOUTH 1,715 MMBF (
Slide 5: Industry Landscape
INDUSTRY LANDSCAPE NORTH AMERICAN LUMBER PRODUCTION BY COMPANY – 2019 (BBF) 6.0 5.0 4.0 3.0 2.0 1.0 - Source: International Wood Markets/FEA Canada Wood Markets Monthly March 2020 5
Slide 6: Key Products & Markets
KEY PRODUCTS & MARKETS LUMBER SALES BY SPECIES (1) LUMBER SALES BY MARKET (1) USA Spruce-Pine-Fir 86% 9% Hem-Fir 9% Southern Yellow Pine 47% Doug Fir/ Larch 30% Canada Cedar Japan 6% 5% 4% Other China/Tw/HK 2% 2% (1) By Value for 2020, excluding Gilchrist, OR facility which was sold in 2020 6
Slide 7: Lumber Markets
A & INTERFOR INTERFOI ~ INTERFOF INTERFOR INTERFOR IN| INTERFOR INTERFOR
Slide 8: Lumber Prices
LUMBER PRICES 2017-2021 NORTH AMERICAN BENCHMARK LUMBER PRICES (US$/MBF) $1,200 $1,100 $1,000 $900 SYP Composite Hem-Fir Stud #2 2x4 $800 WSPF Composite $700 $600 $500 $400 $300 $200 Source: Random Lengths (includes prices up to February 4, 2021) 8
Slide 9: Lumber Demand
LUMBER DEMAND NORTH AMERICAN LUMBER DEMAND BY END-USE (BBF) 80 Domestic Residential Repair & Remodel Domestic Industrial/Commercial 70 Domestic Residential New Home Construction Offshore Exports 60 50 40 30 20 10 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Sourc
Slide 10: Lumber Demand: Key Drivers
LUMBER DEMAND: KEY DRIVERS US HOUSING STARTS AGE OF US HOUSING STOCK (MILLIONS SEASONALLY ADJUSTED) (MEDIAN AGE IN YEARS) 1.7 Single-Family Multi-Family 43 1.6 1.5 41 1.4 1.3 39 1.2 1.1 37 1.0 35 0.9 0.8 33 0.7 0.6 31 0.5 0.4 29 0.3 0.2 27 0.1 - 25 Jan Apr Oct Jan Apr Oct Jan Apr Oct Jan Apr Oct Jan
Slide 11: Lumber Supply
LUMBER SUPPLY NORTH AMERICAN LUMBER PRODUCTION BY REGION (BBF) Y/Y Variance (1) Region 2017 2018 2019 2020 '18 vs. '17 '19 vs. '18 '20 vs. '19 South 18.3 18.8 19.3 20.2 3% 3% 4% West 13.9 14.4 14.3 14.2 4% -1% -1% Other 1.6 1.6 1.7 1.6 3% 1% -5% USA 33.8 34.9 35.3 36.0 3% 1% 2% BC 13.0 12.4 9.8 8.8
Slide 12: Softwood Lumber Dispute
SOFTWOOD LUMBER DISPUTE • Interfor’s Canadian operations’ shipments to the U.S. represent approx. 15% of company- wide lumber shipments. • Approx. 70% of Interfor’s lumber production is US-based. • Significant differences in accounting treatment for duties between publicly traded companies; limits r
Slide 13: Operations Overview
OPERATIONS OVERVIEW mA
Slide 14: Business Comparisons
BUSINESS COMPARISONS BC INTERIOR US SOUTH DIMENSION MILLS DIMENSION MILLS • 3 dimension mills in southern interior • 10 dimension mills in Georgia, • Modern/low cost operations South Carolina and Arkansas (1) • Good fiber supply/limited exposure • Low cost wood baskets to pine beetle • Strong geogra
Slide 15: Regional Log Cost Trends
REGIONAL LOG COST TRENDS $120 BC INTERIOR (C$/M3) $110 $100 $90 $80 $70 $60 $50 2013 2014 2015 2016 2017 2018 2019 2020 $700 US NORTHWEST (US$/MFBM) $650 $600 $550 $500 $450 $400 2013 2014 2015 2016 2017 2018 2019 2020 $50 US SOUTH (US$/TON) $48 $46 $44 $42 $40 $38 $36 $34 $32 $30 2013 2014 2015 201
Slide 16: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS
Slide 17: BC Interior: Interfor Overview
BC INTERIOR: INTERFOR OVERVIEW 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 Source: BC Ministry of Forests 17
Slide 18: BC Interior: Interfor Case Study
BC INTERIOR: INTERFOR CASE STUDY ADAMS LAKE GRAND FORKS CASTLEGAR MILL REBUILD 2008-09 MILL REBUILD 2012 MILL REBUILD 2015 Adams Lake Significantly repositioned the assets STRONG RETURN ON INVESTMENT TOP DECILE/QUARTILE EBITDA MARGINS FOR THE BC INTERIOR 18
Slide 19: US South Dimension Mills
US SOUTH DIMENSION MILLS
Slide 20: US South: Overview
US SOUTH: OVERVIEW Little Rock Atlanta Georgetown Monticello Summerville Eatonton Thomaston Swainsboro Perry Meldrim Preston Baxley Acquisition of WestRock’s Summerville, South Carolina mill • Announced on Feb 9, 2021 • Closing expected in Q1-2021 1.7 BILLION FEET OF LUMBER CAPACITY (1) ACROSS 3 STA
Slide 21: WestRock Sawmill Acquisition
WESTROCK SAWMILL ACQUISITION • Acquisition of WestRock’s sawmill in INTERFOR & WESTROCK SUMMERVILLE Summerville, South Carolina APPROX. LOG PROCUREMENT AREAS announced on Feb 9, 2021. • Cash consideration of US$59 MM, includes log and lumber inventories. • Mill produced 125 MMbf in 2020. • New permi
Slide 22: US South: Investment Program
US SOUTH: INVESTMENT PROGRAM • MULTI-YEAR DISCRETIONARY CAPEX INVESTMENT PROGRAM: • Mill rebuilds, machine center upgrades, debottlenecking and optimization projects for existing assets PHASE I: Two projects totaling US$70 MM: • Meldrim, GA and Monticello, AR; • Completed in 2019. PHASE II: Three pr
Slide 23: Financial Review
FINANCIAL REVIEW
Slide 24: Historical Results Snapshot
HISTORICAL RESULTS SNAPSHOT BENCHMARK LUMBER PRICES (US$/MBF) PRODUCTION VOLUMES (MMBF) $800 750 $750 700 WSPF Composite (US$/Mbf) $700 650 $650 SYP Composite (US$/Mbf) 600 $600 550 $550 $500 500 $450 450 $400 400 $350 350 $300 $250 300 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 25: Capital Spending Profile
CAPITAL SPENDING PROFILE ANNUAL CAPITAL EXPENDITURES (C$MM) $220 US SOUTH PHASE I & II & $200 Capital Expenditures - Discretionary OTHER STRATEGIC PROJECTS MILL UPGRADES Capital Expenditures - Maintenance (Includes Woodlands Roads) $180 Depreciation, Depletion & Amortization $160 $140 CASTLEGAR, BC
Slide 26: Capital Structure
CAPITAL STRUCTURE CAPITAL STRUCTURE DEBT MATURITY SCHEDULE AS OF DEC 31, 2020 AS OF DEC 31, 2020 (C$MM) Cash ($MM) $457 $140 Prudential Notes (4.08%) $120 Debt ($MM) $382 $100 Net Debt (Cash) ($MM) $(75) $80 Book Equity ($MM) $1,080 $60 Invested Capital ($MM) $1,005 $40 NET DEBT/INVESTED CAPITAL (%)
Slide 27: Return on Invested Capital
RETURN ON INVESTED CAPITAL ADJ. EBITDA RETURN ON INVESTED CAPITAL (%/YEAR) 60% 53% 50% 40% 30% 28% 28% 23% 23% Average 24% 20% 18% 10% 9% 6% 0% 2013 2014 2015 2016 2017 2018 2019 2020 Annualized Adj. EBITDA/Average Net Debt + Book Equity 27
Slide 28: Contact Information
= vi a L | || | CONTACT INFORMATION
Slide 29: Investor Contacts
INVESTOR CONTACTS RICK POZZEBON MIKE MACKAY SVP & Chief Financial Officer VP, Corporate Development & Strategy 604-689-6804 604-689-6846 richard.pozzebon@interfor.com mike.mackay@interfor.com 29
Slide 30: Analyst Coverage
ANALYST COVERAGE BMO CAPITAL MARKETS Mark Wilde (212) 883-5102 mark.wilde@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) 659-8246 daryl.swetli