Slide 1: Company Update May 2018
A INTERFOR Building Value...
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION This presentation contains forward-looking information about the Company’s business outlook, objectives, plans, strategic priorities and other information that is not historical fact. A statement contains forward-looking information when the Company uses what it knows and
Slide 3: Interfor's Four Regions
INTERFOR’S FOUR REGIONS BC Coast ye secrensesvevesscscos : eeevccsseercese : : 320 MMbf (10%) BC Interior : : - 2 mills } 750 MMbf (24%) - Cedar, Hem-Fir, - 3 mills Douglas-Fir - Douglas-Fir, Hem-Fir, ; 7 Specialty SPF, Cedar Coco ror roercessasseereneeeeee = _ Dimension : US South : 1,400 MMbf (45%
Slide 4: 4th Largest Lumber Producer
4th LARGEST LUMBER PRODUCER Bbf North American Lumber Production by Company – 2017 7.0 6.0 5.0 4.0 3.0 2.0 1.0 - - Capacity Source: Wood Markets Monthly March 2018 4
Slide 5: Interfor Strategic Plan
INTERFOR STRATEGIC PLAN Growth by Acquisition Building Value Operational Excellence 5
Slide 6: Summary
SUMMARY • Solid Q1-2018 results: • Strong production, including a record quarter for the US South • Shipments negatively impacted by industry-wide logistics issues • EBITDA of $81 million ($309 million LTM) • Leverage reduced to 12% ND/IC • Multi-year strategic capital plan underway: • +/- $150 mm/y
Slide 7: Lumber Markets
LUMBER MARKETS
Slide 8: Interfor's Diverse Lumber Mix
INTERFOR’S DIVERSE LUMBER MIX Cedar Lumber Sales By Species 1 Spruce-Pine-Fir Hem-Fir 11% Western Dimension 9% Doug Fir/ Southern Southern Yellow Pine Larch Yellow Pine 27% 37% Lodge Pole Pine Lodge Pole/ Ponderosa Pine Cedar 4% 12% (1) By value for Q1-2018 8
Slide 9: North American Driven Business
NORTH AMERICAN DRIVEN BUSINESS Lumber Sales By Market 1 Canada 9% China/Tw/HK USA 4% 76% Other 4% Japan 7% (1) By value for Q1-2018 9
Slide 10: Benchmark Lumber Price & FX Trends
BENCHMARK LUMBER PRICE & FX TRENDS US$/Mbf $C/US$ $575 2016 2017 2018 (1) 1.00 2014 2015 $550 CAD/USD FX Rate (Right Axis) $525 SYP Composite Price (Left Axis) 0.95 WSPF Composite Price (Left Axis) $500 0.90 $475 $450 0.85 $425 $400 0.80 $375 $350 0.75 $325 $300 0.70 $275 $250 0.65 $400 $357 $382 $4
Slide 11: Key Market Drivers
KEY MARKET DRIVERS 2016 (1) 2017 (1) 2018E (1) 2019E (1) US Housing Starts - Total (mm) 1.18 1.21 1.33 1.41 Change +3% +10% +6% US Housing Starts - Single Family (mm) 0.78 0.85 0.93 1.01 Change +9% +9% +9% NA Lumber Consumption (Bft) 55.1 58.2 60.5 63.0 Change +6% +4% +4% NA Offshore Exports (Bft) 6
Slide 12: US/Canada Softwood Lumber Dispute
US/CANADA SOFTWOOD LUMBER DISPUTE • Interfor’s Canadian operations’ shipments to the U.S. represented 15% of company-wide lumber shipments in Q1-2018. • 67% of Interfor’s Q1-2018 lumber production was US-based. • Significant differences in accounting treatment for duties between publicly traded comp
Slide 13: Operations Overview
A INTERFOR Building Value...
Slide 14: Business Comparisons
BUSINESS COMPARISONS BC Interior Dimension Mills • 3 dimension mills in BC southern interior • Modern/low cost operations • Good fiber supply/limited exposure to pine beetle US South Dimension Mills • 9 dimension mills in Georgia, S. Carolina and Arkansas • Low cost wood baskets • Strong geographic
Slide 15: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS A INTERFOR Building Value...
Slide 16: BC Interior: Overview
BC INTERIOR: OVERVIEW Mountain Pine Beetle Cumulative Percentage of Merchantable Forest Volume Killed Since 1999 Adams Lake Very High (>45%) High (31-45%) Moderate (16-30%) Castlegar Low (<16%) None (0%) Grand Forks Source: BC Ministry of Forests 16
Slide 17: BC Interior: Case Study
BC INTERIOR: CASE STUDY 2008‐09 2012 2015 Adams Lake, BC Grand Forks, BC Castlegar, BC • 3 MILLS IN GOOD FIBER BASKETS • SIGNIFICANTLY REPOSITIONED THE ASSETS • RE‐INVESTMENTS ARE COMPLETE • STRONG CASH FLOW AND ROI • TOP DECILE/QUARTILE EBITDA MARGINS FOR THE BC INTERIOR 17
Slide 18: US South: Dimension Mills
— aS alu, } é US SOUTH: DIMENSION MILLS A INTERFOR Building Value..
Slide 19: US South: Overview
US SOUTH: OVERVIEW • 1.4 Billion feet of lumber capacity across 3 States • Largest lumber producer in Georgia • 45% of Interfor’s capacity is in the South 19
Slide 20: US South: Multiple Phases
US SOUTH: MULTIPLE PHASES Phase 1 Phase 2 Phase 3 Phase 4 5 Acquisitions Build Team/ Mill Improvements/ Investment Infrastructure Optimization Program 2013-2015 2016-2017 2018-2022 No/Low Capex Discretionary Initiatives; Internal Capex >$35 MM Investment Annual EBITDA + Impact Greenfields and/or Acq
Slide 21: US South: Investment Program
US SOUTH: INVESTMENT PROGRAM • ~$500 MM discretionary capex investment program over 5 years: • Mill rebuilds, machine center upgrades, debottlenecking and optimization projects for existing assets • Phase I: Two projects formally announced totaling US$65 MM (Meldrim, GA and Monticello, AR); completi
Slide 22: Financial Review
FINANCIAL REVIEW
Slide 23: Historical Financial Results
HISTORICAL FINANCIAL RESULTS Benchmark Lumber Prices ($/Mbf) Production Volumes (Mmbf) $625 800 $600 WSPF Composite (US$/Mbf) 672 666 $575 700 639 640 655 645 655 618 618 637 628 607 $550 WSPF Composite (C$/Mbf) 582 567 578 568 $525 600 $500 SYP Composite (US$/Mbf) 495 470 $475 500 418 447 $450 390
Slide 24: Capital Spending Profile
CAPITAL SPENDING PROFILE Phase I US South Investment Program $mm Machine center upgrades, debottlenecking and optimization projects $160 Capital Expenditures - Discretionary Capital Expenditures - Maintenance Castlegar, BC $140 Depreciation, Depletion & Amortization Mill Rebuild $120 Adams Lake, BC
Slide 25: Free Cash Flow Considerations
FREE CASH FLOW CONSIDERATIONS C$mm LTM Adjusted EBITDA (as of 3/31/18) $309 • Significant additional margin uplift opportunities in the US South. Less: Annualized Cash Interest Expense $(12) • Average interest rate ~ 4%. 2018E Maintenance Capex $(70) • 2018E total capex outlook of C$150mm; (Maint. $
Slide 26: Capital Structure
CAPITAL STRUCTURE Capital Structure Debt Maturity Schedule (C$mm) As of March 31, 2018 As of March 31, 2018 Cash (C$mm) $(131) $100 $90 Debt (C$mm) $258 $80 Prudential Notes (4.17%) Net Debt (C$mm) $127 $70 Book Equity (C$mm) $901 $60 $50 Invested Capital (C$mm) $1,028 $40 Net Debt / Invested Capita