Western Forest Products Inc. · TSX:WEF
Western Forest Products — Investor Presentation (May 2023)
58 slides from Western Forest Products's investor presentation, May 2023
Slide 1: Investor Presentation May 2023
INVESTOR PRESENTATION May 2023 TSX:WEF
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 statements and estimates that may constitute forward-looking statements under applicable securities laws. Readers are cautioned against placing u
Slide 3: Western At A Glance
Western At A Glance A Sustainable, Specialty Wood Products Company
Slide 4: Western At A Glance
Western At A Glance Sustainable $1.16 Billion $139 Million 36% $330 Million Products and Last 8-years Last 8-years Of Historical Sales to Market Capitalization Practices Average Annual Average Annual International Markets and Listed on the TSX Revenue EBITDA Strong 1+ Billion Four 5.9 Million m3 2,0
Slide 5: Why Own Western
Why Own Western Supplier of sustainable wood products Strong ESG practices and policies Business of scale and leader in our key markets Superior timber asset base and secure fibre supply High-value, diverse products serving global markets Specialty products focus Margin-focused strategy with exposur
Slide 6: Western's Lumber Products Are Used In Multiple End Uses
Western’s Lumber Products Are Used In Multiple Sustainable End Uses Around The World Outdoor Exterior Interior Structural Industrial Living Appearance Living Interior Paneling, Lamstock, Packaging & Decking, Timbers, Siding, Trim & Fascia, Timbers, Framing, Interior Mouldings, Crating, Cross Arms, F
Slide 7: Wood Is Sustainable, Durable And Naturally Beautiful
Wood Is Sustainable, Durable And Naturally Beautiful 6
Slide 8: Wood Is A Sustainable Building Material
Wood Is A Sustainable Building Material Wood is the only major building material that Sustainability of Wood vs. Steel vs. Concrete(1) is renewable Total Energy Use Greenhouse Gases +140% +70% +81% +45% Wood is recyclable and biodegradable and comes from sustainably managed forests Wood Steel Concre
Slide 9: Mass Timber Buildings Further Support The Growth Of Wood
Mass Timber Buildings Further Support The Growth Of Wood As A Sustainable Building Product Increased use of wood in buildings will drive climate change benefits and increase wood products demand Maximizing wood use in both residential and commercial construction could remove an estimated 21 Million
Slide 10: Wood Products Play An Important Role in Mitigating Climate Change
Wood Products Play An Important Role in Mitigating Climate Change Growing trees absorb carbon from the air and New trees are release oxygen planted and the cycle of carbon removal continues As trees mature the When trees are rate of carbon harvested, the carbon removal decreases remains stored in wo
Slide 11: Western's Commitment To ESG
Western’s Commitment To ESG Environment Stewardship Sustainable Forestry Practices, Sustainable Products, Climate Change, Biodiversity Social Responsibility Health & Safety, People & Culture, Diversity, Stakeholder & Community Engagement Corporate Governance Best Practices, Board Composition and Div
Slide 12: Western's ESG Highlights
Western’s ESG Highlights Our 2021 Sustainability Report is available here 11
Slide 13: Advancing Our Carbon Accounting Reporting
Advancing Our Carbon Accounting Reporting Advancements made during 2022: ▪ Expanded our reporting to include Scope 1, 2, and 3 emissions assessments ▪ Forecast Western’s carbon balance 100 years into the future ▪ Received third party assurance over our 2020 carbon accounting report Western is a net
Slide 14: Environmental Stewardship
Environmental Stewardship ▪ 100% of our managed tenures ▪ Only forestry company on the are certified B.C. Coast to operate a seed orchard and tree nursery ▪ Sustainably manage and harvest the entire forest profile ▪ More than 3 trees planted for over generations every 1 tree harvested in 2021 ▪ Refo
Slide 15: Social Responsibility
Social Responsibility ▪ Our goal is a zero-incident ▪ Independent audits and inspections workplace ▪ Environmental, Health and Safety ▪ Annual safety training for all Board committee employees and contractors ▪ Comprehensive Health and Safety ▪ ISNetworld certification process Management System for
Slide 16: Reconciliation With First Nations: Western And Huu-ay-aht
Reconciliation With First Nations: Western And Huu-ay-aht First Nations, A Success Story Building a Mutually Beneficial Relationship with Huu-ay-aht First Nations 2017 ▪ Established a relationship – Sale and purchase of three properties – Long-term lease back of a dry land sort in Sarita Bay, B.C. –
Slide 17: Further Advancing Indigenous Relationships
Further Advancing Indigenous Relationships ▪ Investing time and resources in Selected Milestones(1) fostering positive working Tsawak-qin Forestry Limited relationships with Indigenous Partnership and Hišuk ma c̕awak Integrated Resource groups Management Plan – Information sharing Integrated Resourc
Slide 18: Community Involvement And Support
Community Involvement And Support Friendship Garden at Cedar Elementary in Campbell River, B.C. Contributions To Support Communities Provide access to a number of public recreation sites located in our For more company and working forests via community news, visit us on our extensive network of main
Slide 19: Corporate Governance
Corporate Governance ▪ Independent Board Chair ▪ Whistleblower hotline ▪ Annual elections ▪ Comprehensive and transparent disclosure ▪ Annual director assessments ▪ Shareholder engagement Best ▪ Annual say-on-pay voting ▪ Diversity and inclusion policy Practices ▪ Majority voting for director electi
Slide 20: Sustainability-Linked Credit Facility
Sustainability-Linked Credit Facility Western was the 1st North American public paper and forest products company to transition to a sustainability-linked credit facility $250 million Sustainability-Linked Credit Facility ▪ Increase or decrease borrowing costs by up to five basis points based on the
Slide 21: Company Snapshot
Company Snapshot Sustainably Growing and Creating Long-term Shareholder Value
Slide 22: Who We Are: Our Mission, Vision And Values
Who We Are: Our Mission, Vision And Values Our Vision: To provide the most sustainable building materials on the planet Our Mission: We safely produce high margin, targeted specialty building materials for our selected global customers in a value for service relationship Our Values: Our values guide
Slide 23: What We Do: Margin-Focused, Specialty Lumber Company
What We Do: Margin-Focused, Specialty Lumber Company ▪ Leading cedar lumber, timbers and Japan square manufacturer in North America ▪ Offer a range of appearance, structural and industrial wood products ▪ Our products are used in various outdoor living, interior living, exterior appearance, structur
Slide 24: Where Do We Do It: Serve Global Markets From Coastal B.C. And Washington
Where Do We Do It: Serve Global Markets From Coastal B.C. And Washington Canada 5.9 Million Coastal B.C. Cubic Metres In Allowable ▪ 6 Sawmills Annual Cut From Our ▪ 2 Remanufacturing Facilities Coastal B.C. Timberlands ▪ Timberlands ▪ Seedling Nursery 1+ Billion Board Feet of Annual Lumber United S
Slide 25: How We Have Performed: Financial Snapshot
How We Have Performed: Financial Snapshot Annual Sales by Product(1) 58% $1.16 Billion Specialty Last 8-year Average 5% Lumber Annual Revenue (1) Specialty Lumber 17% Commodity Lumber $139 Million Last 8-year Average Logs 58% 20% Annual EBITDA (1) By-products $24.6 Million Net Debt on the Balance Sh
Slide 26: What Are Our Priorities
What Are Our Priorities: Focus On Growing Long-term Shareholder Value Strategic Priority Description ▪ Focusing on operating execution and excellence, with a mindset of continual improvement ▪ Commitment to health, safety and environmental compliance Business ▪ Improving recovery, efficiency and mar
Slide 27: Company Updates
Company Updates Sustainably Executing On Our Strategic Priorities
Slide 28: First Quarter 2023 Results
First Quarter 2023 Results Highlights ▪ Adjusted EBITDA of ($5.0) million Revenue $263.8 Million ▪ Delivered EBITDA margins in excess of 20% in our engineered wood products division ▪ Advanced $29 million in strategic capital Adjusted projects in B.C. operations ($5.0) EBITDA Million ▪ Returned $4 m
Slide 29: Calvert Acquisition: Positioning For Growth in Mass Timber
Calvert Acquisition: Positioning For Growth in Mass Timber ▪ One of the oldest glulam manufacturers in the U.S. – Products used in industrial, commercial and residential projects around the world ▪ Two facilities in Washington – Annual capacity of 35 million board feet of glulam ▪ Calvert owner will
Slide 30: Recently Announced Strategic Capital Investments
Recently Announced Strategic Capital Investments ▪ $29 million of strategic capital Strategic Capital Investments Include: investments to support: ▪ New continuous kiln at our Saltair – Value-added manufacturing sawmill $12.3 ▪ Increased capacity for continuous – Grow value-added wood million drying
Slide 31: Softwood Lumber Duties Update
Softwood Lumber Duties Update ▪ Duties on deposit of US$153.3 Combined Softwood Lumber Duties Rate (All Others Duty Rate %) million (C$207.2 million)(1) – Equates to 63% of Western’s 20.23% market capitalization(2) 17.91% – C$64.4 million included as a long-term receivable on Western’s balance sheet
Slide 32: Balanced Approach To Capital Allocation
Balanced Approach To Capital Allocation ▪ Payment of a regular quarterly dividend ($0.0125 per share) – Increased quarterly dividend 25% in May 2022 ▪ Disciplined annual capital expenditures – Approximately $30 to $40 million per year in annual maintenance of business and road capex ▪ Maintain
Slide 33: Capital Allocation: Returning Capital To Shareholders While Investing
Capital Allocation: Returning Capital To Shareholders While Growing And Investing In The Business Returning Capital Investing In To Shareholders Our Business Core Regular Quarterly Disciplined Annual Allocation Dividend Capital Expenditures Opportunistic Internal Strategic Share Repurchases Capital
Slide 34: Strategic Partnership With Huu-ay-aht In Tsawak-qin Forestry LP
Strategic Partnership With Huu-ay-aht First Nations In Tsawak-qin Forestry Limited Partnership ▪ Tsawak-qin Forestry Limited Partnership consists of certain Western assets and liabilities in its Port Alberni Forest Operation, including Tree Farm Licence (“TFL”) 44 – Current LP Ownership: Western 65%
Slide 35: Growing the Business: New Branding Initiatives To Drive Growth
Growing the Business: New Branding Initiatives To Drive Growth ▪ An exclusive Home Centre brand covering all products ▪ Targeting end-users and contractors ▪ Appearance grade residential products (decking, siding, outdoor living) ▪ Targeting end-users through the distribution and pro- dealer channel
Slide 36: Growing The Business: Strategic Acquisitions
Growing The Business: Strategic Acquisitions To Geographically Diversify And Grow the Business 1 Arlington Distribution and Processing Centre Arlington, WA Overview Strategic Rationale ▪ 18-acre distribution and processing facility ▪ Centralized warehousing and distribution near the high ▪ 170,000 s
Slide 37: Company Overview
Company Overview Sustainable Product Lifecycle, From Forest To Customer
Slide 38: Margin Strategy / Fibre And Processing Flow Chart
Margin Strategy / Fibre And Processing Flow Chart Standing Timber Log Availability Margin Decision Market Segments Log Markets Domestic Log Markets External Log Export Log Allowable Sales Markets Annual Cut(1) Diverse and Unique Species Mix Hemlock / (AAC) For Logs Pulp Log Balsam ~34% of Logs Sold
Slide 39: External Log Sales
Log Markets Determine Margin Decision Primary Target Logs by Value Log End Market Description Geographies Historical Average(1) 28% ▪ Western’s sawlogs consumed by External internal manufacturing operations Log WFP 20% Sales ▪ Internal log supply supplemented by Sawmills open market purchases to max
Slide 40: Manufacturing And Sales
Manufacturing And Sales Log Marketing Manufacturing Sales Supply Strategy Strategy Strategy Log diameter and margin determines lumber products manufactured Log Cutting Patterns Log Dimension 5 – 11” 11 - 18” 16 - 22” 20 - 30” 24”+ Product Narrow Wide Grade & Squares Timbers Dimension Dimension Appea
Slide 41: Specialty Products
Diversified Lumber Product Offering Primary Target Lumber by Value Lumber Products Description Historical Average(1) Geographies ▪ Consumer-orientated products ▪ Premier softwood for external 25% Cedar applications Global $897 45% ▪ Naturally durable Specialty Products 11% million ▪ Specialized prod
Slide 42: Specialty Products Focus
Specialty Products Focus ▪ Approximately 75% of WFP Average Lumber Price vs. Commodity Lumber Price (C$ per mfbm) lumber revenue is $1,800 generated from non- Strike Impacted $1,400 commodity products $1,000 ▪ Typically a significant $600 price premium to $200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 43: Seasonality Of The Business
Seasonality Of The Business ▪ Weather (snow pack, heat) Harvest Volume(1) Closing Log Inventory(1) (000 m3) (000 m3) and daylight can impact harvest volumes and costs 1,190 1,041 948 904 ▪ Inventory levels can 971 955 928 884 fluctuate through the year, impacting working capital Q1 Q2 Q3 Q4 Q1 Q2 Q3
Slide 44: Prior Strategic Capital Investments
Prior Strategic Capital Investments ▪ Initiatives focused on: – Reducing costs – Increasing efficiency Duke Point Sawmill Duke Point Planer Duke Point Planer: Auto grading – Increasing production of targeted products – Growing volumes ▪ Applying proven Chemainus: Timber grading station Chemainus: Ti
Slide 45: Appendix
Appendix Supplemental Materials
Slide 46: Repair And Remodelling Statistics
Repair And Remodelling Statistics U.S. Repair & Remodelling Expenditures Remodelling Market Index (US$ billions) $201 $189 $192 $199 90 $175 $180 $185 $168 Above 50 $158 means majority $147 of survey $139 $137 $130 70 participants are $122 $115 $115 reporting better activity than prior quarter 50 30
Slide 47: Western Red Cedar Illustrative Price Trends
Western Red Cedar (“WRC”) – Illustrative Price Trends WRC High Value Clears WRC Timbers (C$ per mfbm) (US$ per mfbm) $12,000 $3,500 $10,000 $3,000 $8,000 $2,500 $6,000 $2,000 $4,000 $1,500 $2,000 $1,000 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 S
Slide 48: North America Statistics: Supply / Demand
North America Statistics: Supply / Demand North American Housing Starts B.C. Interior Allowable Annual Cut (million) (million cubic metres) Forecast 45% U.S. 1.9 68 2.0 1.9 1.8 1.8 1.8 decline Canada 1.7 0.2 1.6 0.3 0.3 0.2 0.2 1.5 1.5 1.4 1.5 0.2 56 1.5 1.4 0.2 1.3 0.2 0.2 1.2 0.2 0.2 50 50 1.1 0.2
Slide 49: North American Statistics: Lumber Prices
North American Statistics: Lumber Prices North American Commodity Lumber Prices Hem-Fir, Coast Commodity Lumber Price (US$ per mfbm) (US$ per mfbm) Forecast $1,800 $916 Average ('23 - '27): $614 $846 $1,400 Average ('16 - '20): $446 $754 $721 $640 $1,000 $597 $518 $488 $600 $425 $437 $377 $341 $200
Slide 50: Japan Statistics
Japan Statistics Japan Housing Starts Douglas Fir Lumber Prices to Japan (000s) (US$ per mfbm) $2,300 980 967 965 942 883 892 909 905 880 815 860 860 860 860 $2,000 $1,700 $1,400 $1,100 $800 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23E '24E '25E So
Slide 51: China Log And Lumber Statistics
China Log And Lumber Statistics China Lumber Imports China Commodity Lumber Price (million m3) (US$ per mfbm) 40 37 37 37 $800 34 31 29 $700 30 26 27 27 27 24 21 $600 20 $500 10 $400 0 $300 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 LTM '16 '17 '18 '19 '20 '21 '22 '23 Mar-31 Russia North America Ne
Slide 52: Historical Financial Snapshot – Annual
Western Forest Products: Historical Financial Snapshot – Annual Revenue ($ millions) Adjusted EBITDA ($ millions) Strike $1,418 $1,444 $302 1,348 Impacted (1) $1,187 $1,143 $1,197 $1,037 $1,082 Strike $965 Impacted (1) $808 $148 $153 $144 $137 $109 $117 $117 $67 ($2) '14 '15 '16 '17 '18 '19 '20 '21
Slide 53: Historical Financial Snapshot – Last 8 Quarters
Western Forest Products: Historical Financial Snapshot – Last 8 Quarters Revenue ($ millions) Adjusted EBITDA ($ millions) $437 $120 $414 $353 $360 $356 $328 $291 $66 $65 $66 $264 $53 $17 ($5) ($12) Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Q2/21 Q3/21 Q4/21 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23 Lumbe
Slide 54: Historical Cash Flow, Capital Allocation And Debt
Western Forest Products: Historical Cash Flow, Capital Allocation And Debt Cash Flow from Operations(1) ($ millions) Capex(2) ($ millions) $282 Strike Impacted (3) $84 $128 $134 $118 $87 $99 $62 $80 $56 $55 $50 $46 $44 $37 $32 $11 $19 ($10) ($0) '14 '15 '16 '17 '18 '19 '20 '21 '22 LTM '14 '15 '16 '1
Slide 55: Historical Share Price Performance And Price to Book
Western Forest Products: Historical Share Price Performance And Price to Book Historical Share Price Relative to Adjusted EBITDA ($ per share | $ millions) $3.50 $302 $3.00 $2.50 Strike Impacted (1) ($ per share) $2.00 $148 $153 $144 $137 $109 $117 $117 $1.50 $67 $1.00 Current Share Price: $1.04(2)
Slide 56: Western Forest Products: Facilities
Western Forest Products: Facilities Sawmills Production 2022 Production Mix Log Diameter Sawmill Location Capacity(1) Douglas Yellow Focus 2022 2021 WRC(2) Hemlock Fir Cedar Ladysmith Ladysmith, BC Small 90 80 88 -- 86% 14% -- Cowichan Bay Duncan, BC Medium 215 95 131 36% 55% 9% -- Saltair Ladysmith
Slide 57: Analyst Coverage
Analyst Coverage Analyst & Firm Contact Information Hamir Patel 604-331-3047 CIBC hamir.patel@cibc.com Daryl Swetlishoff 604-659-8246 Raymond James daryl.swetlishoff@raymondjames.ca Paul Quinn 604 257-7048 RBC paul.c.quinn@rbccm.com Benoit Laprade 514-287-3627 Scotiabank benoit.laprade@scotiabank.co
Slide 58: Investor Relations Contacts
Investor Relations Contacts Stephen Williams Executive Vice President & Chief Financial Officer 604-648-4500 swilliams@westernforest.com Glen Nontell VP, Corporate Development 604-648-4630 gnontell@westernforest.com These materials have been prepared by Management of the Company. No regulatory autho
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