Western Forest Products Inc. · TSX:WEF
Western Forest Products — Investor Presentation (February 2016)
27 slides from Western Forest Products's investor presentation, February 2016
Slide 1: Investor Presentation
DRAFT Investor Presentation February 2016
Slide 2: Forward Looking Statements and Non-GAAP Financial Measures
Forward Looking Statements and Non-GAAP Financial Measures All financial references are expressed in C$ unless otherwise noted. This presentation contains forward looking statements and estimates. Actual company results could differ materially from a conclusion, forecast or projection in the f
Slide 3: Western Forest Products: Company Overview
Western Forest Products: Company Overview 6th Largest Canadian Lumber Company Operating on the coast of British Columbia, serving global markets — Largest Crown timber tenure holder in Coastal B.C. — Largest Cedar lumber manufacturer in North America — Timber resource unaffected by Mountain Pine
Slide 4: A Compelling Pure-Play, Solid Wood Products Investment
A Compelling Pure-Play, Solid Wood Products Investment -Margin-focused business strategy. -Superior timber asset base and secure fibre supply. -High-value, diverse products serving global markets. -Strong financial position with attractive cash flow profile. -Business of scale with a liqui
Slide 5: Margin-Focused, Log and Specialty Lumber Company
Western Forest Products: Margin-Focused, Log and Specialty Lumber Company Revenue from 2009 – 2015 LTM1 revenues of $1.1 billion and EBITDA of $117 million. Revenue by Product1 Revenue by Market Area1 Revenue by Currency1 (1) Last twelve months total external revenue ended December 31, 2015. 4
Slide 6: Western Forest Products: A Margin-Focused Business
Western Forest Products: A Margin-Focused Business Hemlock / Balsam Western Red Douglas Yellow Diverse and Unique Species Mix Cedar Spruce Fir Cedar Diverse and Unique Species Mix Hemlock / Balsam Yellow Cedar Annual Allowable Log Cut (AAC) for Logs Purchases1 ~ 6.3 million m3 ~ 1.3 million m3 ~60%
Slide 7: Log Strategy: Directing Volume to Highest Margin Opportunity
Log Strategy: Directing Volume to Highest Margin Opportunity Primary Target Log End Market Description Geographies % Value1 % Volume1 All five species of Western’s sawlogs consumed by Canada internal manufacturing operations. WFP Sawmills Internal log supply supplemented by open market purchas
Slide 8: Western's Scale Creates Unique Marketing Opportunity
Western’s Scale Creates Unique Marketing Opportunity Log Supply Marketing Strategy Manufacturing Strategy Sales Strategy 24”+ 20 - 30” 16 - 22” 11 - 18” 5 – 11” Log Cutting Patterns WFP Product Narrow Wide Squares Timbers Grade & Group Dimension Dimension Appearance WFP Marketing Commodity Commodity
Slide 9: Diversified Lumber Product Offering Allows Western to Profitably Serve Multiple Markets
Diversified Lumber Product Offering Allows Western to Profitably Serve Multiple Markets Throughout the Cycle Primary Target Lumber Segment Description Geographies Example Products % Value1 % Volume1 Consumer-orientated U.S. Western Red products. Canada Naturally durable. Cedar Ideal for ou
Slide 10: Specialty Products Reduce EBITDA Volatility
Specialty Products Reduce EBITDA Volatility 80% of Western’s lumber revenue is WFP Lumber Sales/mfbm vs. Lumber Price1,3 generated from non-commodity products. Specialty lumber sells at a significant premium to commodity lumber. Specialty products provide more stable margins. EBITDA Margins2,3
Slide 11: Western's Business to Benefit from Global Supply/Demand Factors
Western’s Business to Benefit from Global Supply/Demand Factors Highly Attractive Underlying Supply/Demand Dynamics 1 Housing market and repair and remodel activity recovering U.S. Economic from trough levels. and Housing Transition from supply driven to demand driven market Market Recovery expe
Slide 12: New Supply/Demand Dynamics Will Positively Impact Lumber Pricing
New Supply/Demand Dynamics Will Positively Impact Lumber Pricing Reduced supply from traditional sources combined with increased demand from U.S. and Asian markets is expected to benefit lumber prices. Housing Starts (North American and Lumber Export Equivalent) vs. Western SPF Lumber Pricing Sour
Slide 13: Competitive Strengths
Competitive Strengths 1. A sustainable, diverse Timber Base providing a unique range of products. 2. Customer of choice for other coastal log producers due to competitive advantages of scale, financial strength and proximity. 3. Flexible manufacturing platform that can target a variety of global mar
Slide 14: Balanced Capital Allocation Enhances Shareholder Value
Balanced Capital Allocation Enhances Shareholder Value Annualized Total Return % January 1, 2011 to February 17, 2016 Quarterly dividend of $0.02/share (4% yield). Capital investments to deliver improved cash flow. (1) WFP competitors' return includes West Fraser, Canfor and Interfor and is weig
Slide 15: Strong Financial Position Provides Flexibility to Grow
Strong Financial Position Provides Flexibility to Grow Low leverage and strong liquidity: – Net debt / LTM EBITDA of 0.46x – $178 million of liquidity Financial flexibility to invest in the business, pursue high-return growth initiatives, and return capital to shareholders. Non-core assets pro
Slide 16: Strategic Capital & Margin Improvement Plan Contributes Significant EBITDA
Strategic Capital & Margin Improvement Plan Contributes Significant EBITDA $125 million of projects Investments 2012- are focused on: 2015 2016 Total ($ millions) 2014 – Reducing costs – Increasing efficiency Approved $58.9 $35.1 $3.0 $97.0 – Improving product Projects flexibility Future – Growing
Slide 17: Investing in the Future: Proven Technology - Saltair Sawmill
Investing in the Future: Proven Technology Saltair Sawmill Sawmill Phase 1 – $25M Completed in 2013. Optimizes lumber handling. New equipment: trimmer, sorter and stacker. Transforms specialty product manufacturing. Sawmill Phase 2 – $15M Start up began September 2015. Installation of fu
Slide 18: Investing in the Future: Proven Technology - Duke Point Sawmill
Investing in the Future: Proven Technology Duke Point Sawmill Phased Installation of $27M of Strategic Capital: Phase 1 & 2 - $11M, completed in 2014. Phase 3 - $16M, in progress with completion Q2/16. Installation of multi-generational technological advancements. Supports manufacturing plat
Slide 19: Investing in the Future: Proven Technology - Duke Point Planer
Investing in the Future: Proven Technology Duke Point Planer Phased Installation of $17M of Strategic Capital: Phase 1 - $5M, in progress with completion Q4/15. Phase 2 - $12M, commences Q4/15 with completion in 2016. Consolidates specialty planing at Duke Point. Improves utilization of comp
Slide 20: Investing in the Future: Proven Technology - Chemainus Sawmill
Investing in the Future: Proven Technology Chemainus Sawmill Installation of $1.4M of Strategic Capital: Sawmill timber deck upgrade. Completion December 2015. Removes the production constraints associated with the timber deck . Increase in production and an increase of higher value Western
Slide 21: Appendix
VAY Appendix WESTERN FOREST PRODUCTS INC.
Slide 22: Non-Core Assets
Non-Core Assets Asset Description Woodfibre Pulp Mill Site Sold to Woodfibre LNG for $21.8 Million. Transaction finalized in February 2015. Orca Quarry Project Lands JV between Polaris and ‘Namgis on Western fee simple lands. Royalty stream based on production. Opportunity to monetize. HBU
Slide 23: Demand Drivers: U.S. Economic and Housing Market Recovery
1 Demand Drivers: U.S. Economic and Housing Market Recovery U.S. Housing Starts U.S. Repair & Remodel Expenditures Poised to increase shipments to the U.S. as demand and pricing recover. Source: Forest Economic Advisors (February 2016) 22
Slide 24: Demand Drivers: China Growth Has Changed Global Wood Products Demand Dynamics
2 Demand Drivers: China Growth Has Changed Global Wood Products Demand Dynamics A deficit of domestic fibre will require China to rely on imports. Rising wealth/urbanization trends expected to increase demand for structural and higher grade lumber: – 300 million Chinese people (roughly equivalen
Slide 25: Demand Drivers: U.S. Supply Exit From Japan Will Create Market Opportunity
3 Demand Drivers: U.S. Supply Exit From Japan Will Create Market Opportunity Japan continues to be a major source of demand for wood products and lumber from North America: – In recent years, suppliers in the U.S. West have increased export activities to Japan due to a lack of domestic demand in t
Slide 26: Supply Drivers: Canadian Fibre Supply Reduction
4 Supply Drivers: Canadian Fibre Supply Reduction B.C. Interior AAC Quebec AAC Mountain Pine Beetle epidemic and lower AAC in B.C. and Eastern Canada are expected to have significant negative impact on North American lumber capacity. Source: Q4 2015 Forest Economic Advisors 25
Slide 27: Investor Relations Contacts
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 securities of the Company and shall not constitute an
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