Slide 1: Company Update May 2020
COMPANY UPDATE MAY 2020
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: Highlights: Overview
HIGHLIGHTS: OVERVIEW LIQUIDITY & CAPITAL STRUCTURE: COVID-19 INITIATIVES: • Strong balance sheet @ 3/31/2020: • Proactively implemented measures to protect employee health & safety • 27% Net Debt/Invested Capital • Adjusted operating rates to balance market • Available liquidity of $431 MM, includin
Slide 4: Highlights: Capital Structure
HIGHLIGHTS: CAPITAL STRUCTURE CAPITAL STRUCTURE DEBT MATURITY SCHEDULE AS OF MAR 31, 2020 AS OF MAR 31, 2020 (C$MM) Cash ($MM) $104 $140 Prudential Notes (4.08%) Debt ($MM) $426 $120 Net Debt ($MM) $322 $100 Book Equity ($MM) $883 $80 Invested Capital ($MM) $1,205 $60 NET DEBT/INVESTED CAPITAL (%) 2
Slide 5: Company Overview
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Slide 6: Operating Regions
OPERATING REGIONS BC COAST 140 MMBF (4%) • 1 mill • Hem-Fir, Douglas-Fir • Specialty • Woodlands logging business BC INTERIOR 750 MMBF (25%) • 3 mills • Douglas-Fir, Hem-Fir, SPF, Cedar • Dimension US NORTHWEST 640 MMBF (21%) • 4 mills • Hem-Fir, Douglas-Fir, Ponderosa Pine, Lodgepole Pine US SOUTH
Slide 7: Industry Landscape
INDUSTRY LANDSCAPE NORTH AMERICAN LUMBER PRODUCTION BY COMPANY - 2019 6.0 5.0 4.0 3.0 2.0 1.0 - Source: International Wood Markets/FEA Canada Wood Markets Monthly March 2020 7
Slide 8: Key Products & Markets
KEY PRODUCTS & MARKETS LUMBER SALES BY SPECIES (1) LUMBER SALES BY MARKET (1) USA Hem-Fir Spruce-Pine-Fir 79% 9% 8% Doug Fir/ Larch 30% Southern Yellow Pine 41% Lodge Pole/ Canada Ponderosa Pine Cedar Japan 9% 4% 8% 6% Other China/Tw/HK 3% 3% (1) By Value for Q1-2020 8
Slide 9: Lumber Markets
INTERFOR INTERFOI NX) S ts ; INTERFOR INTERFOF oN INTERFOR INTERFOR R INTERFOR INTERFOR INTERFOR ————— —$———_—__ —{—— Sez et _LUMBER MARKETS
Slide 10: Lumber Prices
LUMBER PRICES 2016-2020 NORTH AMERICAN BENCHMARK LUMBER PRICES (US$/MBF) $625 $600 $575 $550 $525 $500 $475 $450 $425 $400 $375 $350 $325 SYP Composite $300 Hem-Fir Stud #2 2x4 $275 WSPF Composite $250 $225 Source: Random Lengths (includes prices up to May 1, 2020) 10
Slide 11: 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 2007 2009 2011 2013 2015 2017 2019 Source: Forest Economic Advisors (FEA) 11
Slide 12: 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 41 1.6 Single-Family Multi-Family 1.5 39 1.4 1.3 37 1.2 1.1 35 1.0 0.9 33 0.8 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 Ap
Slide 13: Lumber Supply
LUMBER SUPPLY NORTH AMERICAN LUMBER PRODUCTION BY REGION (BBF) Y/Y Variance Region 2017 2018 2019 '18 vs. '17 '19 vs. '18 South 18.3 18.8 19.3 3% 3% West 13.9 14.4 14.3 4% -1% Other 1.6 1.6 1.7 3% 1% USA 33.8 34.9 35.3 3% 1% BC 13.0 12.4 9.8 -4% -20% Rest of Canada 15.4 14.9 14.6 -3% -2% Canada 28.3
Slide 14: Softwood Lumber Dispute
SOFTWOOD LUMBER DISPUTE • Interfor’s Canadian operations’ shipments to the U.S. represent approx. 14% 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 15: Operations Overview
OPERATIONS OVERVIEW
Slide 16: Business Comparisons
BUSINESS COMPARISONS BC INTERIOR US SOUTH DIMENSION MILLS DIMENSION MILLS • 3 dimension mills in BC southern • 9 dimension mills in Georgia, interior South Carolina and Arkansas • Modern/low cost operations • Low cost wood baskets • Good fiber supply/limited exposure • Strong geographic fit/signific
Slide 17: 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 $48 US SOUTH (US$/TON) $46 $44 $42 $40 $38 $36 $34 $32 $30 2013 2014 2015 201
Slide 18: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS
Slide 19: 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 19
Slide 20: 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 20
Slide 21: US South Dimension Mills
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Slide 22: US South: Overview
US SOUTH: OVERVIEW Little Rock Atlanta Georgetown Monticello Eatonton Thomaston Swainsboro Perry Meldrim Preston Baxley 1.5 BILLION FEET OF LUMBER CAPACITY ACROSS 3 STATES • Largest lumber producer in Georgia • 50% of Interfor’s capacity is in the South 22
Slide 23: 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$70 MM: • Meldrim, GA and Monticello, AR • Completed in 2019. PHASE II: Three pro
Slide 24: Financial Review
FINANCIAL REVIEW
Slide 25: Historical Results Snapshot
HISTORICAL RESULTS SNAPSHOT BENCHMARK LUMBER PRICES (US$/MBF) PRODUCTION VOLUMES (MMBF) $550 750 WSPF Composite (US$/Mbf) 700 SYP Composite (US$/Mbf) $500 650 $450 600 550 $400 500 $350 450 400 $300 350 $250 300 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q
Slide 26: Capital Spending Profile
CAPITAL SPENDING PROFILE ANNUAL CAPITAL EXPENDITURES (C$MM) $220 US SOUTH PHASE I & II & OTHER STRATEGIC $200 Capital Expenditures - Discretionary PROJECTS MILL UPGRADES Capital Expenditures - Maintenance (Includes Woodlands Roads) $180 Depreciation, Depletion & Amortization $160 $140 CASTLEGAR, BC
Slide 27: Contact Information
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Slide 28: Investor Contacts
INVESTOR CONTACTS IAN FILLINGER MIKE MACKAY President & CEO Director, Corp. Development & Planning 604-689-6807 604-689-6846 ian.fillinger@interfor.com mike.mackay@interfor.com 28
Slide 29: 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