Interfor Corporation · TSX:IFP
Interfor — Investor Presentation (November 2024)
34 slides from Interfor's investor presentation, November 2024
Slide 1: Investor Presentation November 2024
INVESTOR PRESENTATION NOVEMBER 2024
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’s (“Interfor” or the “Company”) business outlook, objectives, plans, strategic priorities and other information that is not historical fact.
Slide 3: Interfor Investment Highlights
INTERFOR INVESTMENT HIGHLIGHTS Pure-play North American lumber producer of scale • Top three softwood lumber producer in North America, with 28 strategically located facilities • High exposure to US South, Eastern Canada and Atlantic Canada with attractive log costs Compelling lumber market fundamen
Slide 4: Investor Value Proposition
INVESTOR VALUE PROPOSITION Attractive Earnings Through the Cycle Consistently Growing Volumes $500 ADJUSTED EBITDA MARGIN PER UNIT ($C/MBF) 4,500 LUMBER PRODUCTION VOLUMES (MMBF) 4,000 $400 3,500 $300 3,000 2,500 $200 2,000 10-year avg = $123/MBF 1,500 $100 1,000 $- 500 - $(100) Increasing Leverage
Slide 5: Pure-Play North American Lumber Producer
PURE-PLAY NORTH AMERICAN LUMBER PRODUCER
Slide 6: Pure-Play Lumber Producer
PURE-PLAY LUMBER PRODUCER Interfor is a North American focused, pure-play softwood lumber producer INTERFOR 2023 REVENUES BY SOURCE Softwood Lumber (80%) Other Wood Products (4%) Dimensional lumber primarily for Primarily I-joists - engineered wood structural members framing/structural applications,
Slide 7: Lumber Species & Markets
LUMBER SPECIES & MARKETS Diverse lumber species mix; high leverage to key US market INTERFOR INTERFOR LUMBER SALES BY SPECIES (1) LUMBER SALES BY MARKET (1) USA 84% Spruce-Pine-Fir (SPF) 31% Southern Yellow Pine Hem-Fir 46% 4% Doug Fir/ Japan Larch <1% 18% Cedar Other 1% China/Tw/HK Canada <1% 13% 1
Slide 8: Lumber Industry Landscape
LUMBER INDUSTRY LANDSCAPE Interfor is a top three producer in North America and the only publicly traded pure-play lumber producer of scale NORTH AMERICAN LUMBER PRODUCTION BY COMPANY (BBF) (1) 6.0 5.0 4.0 3.0 2.0 1.0 - Source: Forest Economic Advisors’ Top Producer Survey / Company Reports. (1) Ref
Slide 9: Interfor Operations
INTERFOR OPERATIONS EASTERN CANADA 730 MMBF (15%) • 2 stud mills; 3 dimension mills; 1 I-Joist BC INTERIOR facility 750 MMBF (16%) • Spruce – Pine – Fir (SPF) • 3 dimension mills; 1 remanufacturing • Efficient, well-run, well-maintained facility (Sumas, WA) • Douglas-Fir, Hem-Fir, SPF, Cedar • Effic
Slide 10: Compelling Lumber Market Fundamentals
COMPELLING LUMBER MARKET FUNDAMENTALS
Slide 11: Lumber Prices
LUMBER PRICES Recent pricing increasing from multi-year lows, following significant volatility through the pandemic NORTH AMERICAN BENCHMARK LUMBER PRICES (US$/MBF) $2,000 $1,800 Southern Yellow Pine $1,600 US Northwest Hem-Fir Western SPF $1,400 Eastern SPF $1,200 $1,000 $800 $600 $400 $200 Source:
Slide 12: Lumber Demand
LUMBER DEMAND Diversified end-use demand drivers across R&R, industrial and housing NORTH AMERICAN LUMBER DEMAND KEY DEMAND DRIVERS BY END-USE Repair & Remodel (R&R) Repair & • Housing stock > 40 years old on 38% Remodel average • Household balance sheets in good shape New Home • Strong fundamentals
Slide 13: Lumber Demand: Key Drivers
LUMBER DEMAND: KEY DRIVERS Underlying housing fundamentals remain favourable, despite near-term volatility US HOUSING STARTS AGE OF US HOUSING STOCK (MILLIONS SEASONALLY ADJUSTED) (MEDIAN AGE IN YEARS) 1.9 43 Single-Family Multi-Family 1.8 1.7 50-year 41 1.6 avg = 1.45 MM 1.5 39 1.4 1.3 37 1.2 1.1 3
Slide 14: Lumber Supply
LUMBER SUPPLY Measured supply growth in the US South, offset by ongoing declines in BC US SOUTH Measured growth (five-year CAGR of only 3%), NORTH AMERICAN LUMBER PRODUCTION (BBF) limited by labour availability and long equipment (1) lead times. 2020 2021 2022 2023 2024 US WEST & CANADA (NON-BC) US
Slide 15: Lumber Supply: BC Interior
LUMBER SUPPLY: BC INTERIOR Declining BC industry log supply, but Interfor well-positioned in southern BC. Over 40% of industry capacity in BC curtailed since 2018. Mountain Pine Beetle BC INTERIOR ALLOWABLE Cumulative Percentage 70.0 ANNUAL CUT (MM M3) of Merchantable Forest Volume Killed Since 23%
Slide 16: Lumber Supply: European Imports
LUMBER SUPPLY: EUROPEAN IMPORTS European imports surged in late 2022/early 2023, but have since declined US LUMBER IMPORTS FROM DAMAGED TIMBER IN CENTRAL 140 EUROPE – TRAILING THREE EUROPE (MM M3) 120 600 MONTH AVERAGE (‘000 M3) 100 Amount of damaged timber peaked in 2020 80 500 60 40 400 20 0 2017
Slide 17: Softwood Lumber Dispute
SOFTWOOD LUMBER DISPUTE Limited exposure to duties with ~60% of lumber capacity based in the US U.S. COUNTERVAILING & INTERFOR SOFTWOOD LUMBER ANTI-DUMPING CASH DEPOSIT RATES DUTIES HIGHLIGHTS APPLICABLE TO INTERFOR (1) 21% 20.23% US$580 MM Duties on Deposit 17.91% 18% Duties paid by Interfor to the
Slide 18: Top-Tier Margins & Returns on Capital
TOP-TIER MARGINS & RETURNS ON CAPITAL
Slide 19: Top Quartile Operating Margins
TOP QUARTILE OPERATING MARGINS Focus on operational excellence reflected in superior margin performance LUMBER SEGMENT ADJ. EBITDA MARGINS – 2019 TO 2023 (C$/MBF) (1)(2) $250 $200 $150 $100 $50 $- Peer #1 Interfor Peer #2 Peer #3 (1) Average of 2019-2023 (2) Peers include Canfor North America, Weyer
Slide 20: Interfor Regional Operating Margins
INTERFOR REGIONAL OPERATING MARGINS Consistent margins across regions over time, but achieved via different routes INTERFOR CASH MARGIN (C$/MBF) (1) Mill Net Selling Price Net Log Costs Conversion Costs MARGIN (2) (3) BC Interior US Northwest US South Eastern Canada (1) Average of 2016-2023 (2) East
Slide 21: Focus on Return on Capital
FOCUS ON RETURN ON CAPITAL Improvement in relative performance vs. peers in recent years; driven by disciplined and balanced capital deployment EBIT RETURN ON CAPITAL EMPLOYED (%) (1) 30% 25% 20% 15% 10% 5% 0% 2010-2019 2020-2023 2010-2019 2020-2023 2010-2019 2020-2023 Peer #1 Interfor Peer #2 (1) B
Slide 22: Growth and Diversification Strategy
GROWTH AND DIVERSIFICATION STRATEGY
Slide 23: Growth & Diversification
GROWTH & DIVERSIFICATION Long-standing strategy of growth and geographic lumber diversification (1) (2) 2001 2012 2021 2024 16% 19% 17% 4% 15% 39% 42% 50% 57% 83% 20% 19% 7% 12% 0.8 BBF 1.7 BBF 3.9 BBF 4.7 BBF BC Interior US Northwest Eastern Canada BC Coast US Southeast Atlantic Canada (1) Charts r
Slide 24: Internal Growth: Multi-Year Capex Plan
INTERNAL GROWTH: MULTI-YEAR CAPEX PLAN Mill rebuilds, machine center upgrades, debottlenecking & optimization projects Molalla, Oregon Eatonton, Georgia Continuous Kilns Thomaston, Georgia Adams Lake, British Columbia 24
Slide 25: Internal Growth: Capex Spending Profile
INTERNAL GROWTH: CAPEX SPENDING PROFILE Strategic investments resulting in a well-capitalized, high-margin sawmill portfolio HISTORICAL CAPITAL EXPENDITURES ($MM) $320 Capital Expenditures - Discretionary $300 Capital Expenditures - Maintenance (Includes Woodlands Roads) $280 Depreciation of Plant a
Slide 26: Balanced Capital Allocation & Optimized Capital Structure
BALANCED CAPITAL ALLOCATION & OPTIMIZED CAPITAL STRUCTURE
Slide 27: Balanced Capital Allocation
BALANCED CAPITAL ALLOCATION Capital deployed in a disciplined and balanced manner to maximize returns CAPITAL DEPLOYMENT SUMMARY – 2020 TO 2024 ($MM) (1) ~C$2.4 B Reinvested $164 $625 $12 $3,000 $149 $2,500 $306 $2,117 $852 $2,000 $1,500 Cash Inflows $1,000 Cash Outflows ~C$636 MM Returned $500 $1,5
Slide 28: Optimized & Low-Cost Capital Structure
OPTIMIZED & LOW-COST CAPITAL STRUCTURE Efficient, flexible and low-cost capital structure. Combination of long-term, laddered maturity, fixed-rate debt and flexible, variable-rate revolving facility CAPITAL STRUCTURE SENIOR SECURED NOTES AS OF SEPTEMBER 30, 2024 ($MM) MATURITY SCHEDULE AS OF SEPTEMB
Slide 29: Conservative Leverage Maintained
CONSERVATIVE LEVERAGE MAINTAINED Conservative leverage maintained to provide flexibility through all markets. Near-term leverage expected to benefit from non-operating cash flows, including net proceeds from disposition of Coastal BC business HISTORICAL NET DEBT – TO – INVESTED CAPITAL RATIO (%) (1)
Slide 30: Positive ESG & Carbon Story
POSITIVE ESG & CARBON STORY
Slide 31: Building Value Sustainably
BUILDING VALUE SUSTAINABLY Respecting Nature. Building Sustainably. A Sustainability Strategy to Match our Growth Ambition. Long-standing strategy of Commitment to growing in a Dedicated ESG leader and purposeful growth and way that makes the world a renewed sustainability geographic lumber better p
Slide 32: Contact Information & Resources
CONTACT INFORMATION & RESOURCES
Slide 33: Analyst Coverage
ANALYST COVERAGE BMO CAPITAL MARKETS Ketan Mamtora (212) 883-5102 ketan.mamtora@research.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) 659-82
Slide 34: Contacts & Resources
CONTACTS & RESOURCES RICK POZZEBON MIKE MACKAY EVP & Chief Financial Officer VP, Corporate Development & Treasury 604-689-6804 604-689-6846 richard.pozzebon@interfor.com mike.mackay@interfor.com BRYAN FAST ADDITIONAL RESOURCES Director, Corporate Development & Investor Relations 604-451-2823 bryan.f