Slide 1: Company Update November 2019
COMPANY UPDATE NOVEMBER 2019
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: Recent Highlights
RECENT HIGHLIGHTS FINANCIAL FLEXIBILITY: MULTI-YEAR STRATEGIC CAPITAL PLAN: • Strong balance sheet @ 9/30/2019: • Discretionary internal projects: • 19% ND/IC; liquidity of $381 MM PHASE I: Two US South projects totaling • No significant debt maturities until 2024 US$70 MM BC INTERIOR TENURE ACQUISI
Slide 4: Interfor's Four Regions
INTERFOR’S FOUR REGIONS BC COAST 320 MMBF (10%) • 2 mills (permanent closure of Hammond mill in Q4- 2019) • Cedar, Hem-Fir, Douglas-Fir • Speciality BC INTERIOR 750 MMBF (24%) • 3 mills • Douglas-Fir, Hem-Fir, SPF, Cedar • Dimension US NORTHWEST 640 MMBF (21%) • 4 mills • Hem-Fir, Douglas-Fir, Ponde
Slide 5: 4th Largest Lumber Producer
4TH LARGEST LUMBER PRODUCER NORTH AMERICAN LUMBER PRODUCTION BY COMPANY - 2018 7.0 6.0 5.0 4.0 3.0 2.0 1.0 - Source: International Wood Markets/FEA Canada Wood Markets Monthly March 2019 5
Slide 6: Interfor's Products & Markets
INTERFOR’S PRODUCTS & MARKETS LUMBER SALES BY SPECIES (1) LUMBER SALES BY MARKET (1) Spruce-Pine-Fir USA Hem-Fir 79% 9% 9% Doug Fir/ Southern Larch Yellow Pine 26% 41% Lodgepole/ Ponderosa Canada Pine Japan 8% Cedar 6% 4% 11% Other China/Tw/HK 4% 3% (1) By Value for FY2018 6
Slide 7: Lumber Markets
INTERFOR INTERFOI NX) S ts ; INTERFOR INTERFOF oN INTERFOR INTERFOR R INTERFOR INTERFOR INTERFOR ————— —$———_—__ —{—— Sez et _LUMBER MARKETS
Slide 8: Lumber Prices
LUMBER PRICES 2012-2019 NORTH AMERICAN BENCHMARK LUMBER PRICES (US$/MBF) $625 $600 SYP Composite $575 Hem-Fir Stud #2 2x4 $550 WSPF Composite $525 $500 $475 $450 $425 $400 $375 $350 $325 $300 $275 $250 $225 Source: Random Lengths (includes prices up to November 8, 2019) 8
Slide 9: Lumber Demand
LUMBER DEMAND NORTH AMERICAN SOFTWOOD LUMBER DEMAND BY END-USE (BBF) & TOTAL US HOUSING STARTS (MILLIONS) 80 2.5 Residential New Home Construction - Bbf Lumber (Left Axis) 70 Industrial/Commercial - Bbf Lumber (Left Axis) Residential Repair & Remodel - Bbf Lumber (Left Axis) 2.0 60 US Housing Starts
Slide 10: Lumber Supply
LUMBER SUPPLY NORTH AMERICAN LUMBER PRODUCTION BY REGION (BBF) YTD August Y/Y Variance Region 2017 2018 2019 '18 vs. '17 '19 vs. '18 South 12.4 13.0 13.0 5% 0% West 9.3 9.8 9.6 5% -2% Other 1.1 1.1 1.1 4% -1% USA 22.8 23.9 23.7 5% -1% BC 8.8 8.6 6.9 -2% -20% Rest of Canada 10.2 10.1 9.8 -2% -3% Cana
Slide 11: Operations Overview
OPERATIONS OVERVIEW
Slide 12: 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 • Strong geographic fit/significant expos
Slide 13: 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 $700 US NORTHWEST (US$/MMBF) $650 $600 $550 $500 $450 $400 2013 2014 2015 2016 2017 2018 2019 $50 $48 US SOUTH (US$/TON) $46 $44 $42 $40 $38 $36 $34 $32 $30 2013 2014 2015 2016 2017 201
Slide 14: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS
Slide 15: BC Interior: Regional Fibre Outlook
BC INTERIOR: REGIONAL FIBRE OUTLOOK • Regional Annual Allowable Cut (AAC) reductions of approximately 25% between 2019 and 2025 BC INTERIOR ANNUAL ALLOWABLE CUT (AAC) (MM3) 70 64 61 61 62 60 59 60 56 56 56 55 53 50 50 49 49 50 43 41 41 41 41 40 40 30 20 10 ‐ Source: BC Ministry of Forests 15
Slide 16: 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 16
Slide 17: BC Interior: Interfor Case Study
BC INTERIOR: INTERFOR CASE STUDY ADAMS LAKE GRAND FORKS CASTLEGAR 2008-09 2012 2015 Adams Lake Significantly repositioned the assets STRONG RETURN ON INVESTMENT TOP DECILE/QUARTILE EBITDA MARGINS FOR THE BC INTERIOR 17
Slide 18: US South Dimension Mills
De = en ~ “ > ~ ne : SS Se eee a oe
Slide 19: US South: Overview
US SOUTH: OVERVIEW Little Rock Atlanta Georgetown Monticello Eatonton Thomaston Swainsboro Perry Meldrim Preston Baxley 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: 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$70 MM (Meldrim, GA and Monticello, AR); completed in Q2-2019; currently ramping-
Slide 21: Financial Review
FINANCIAL REVIEW
Slide 22: Historical Results Snapshot
HISTORICAL RESULTS SNAPSHOT BENCHMARK LUMBER PRICES ($/MBF) PRODUCTION VOLUMES (MMBF) $750 750 $700 WSPF Composite (US$/Mbf) 700 $650 WSPF Composite (C$/Mbf) 650 $600 SYP Composite (US$/Mbf) 600 $550 550 $500 500 $450 450 $400 400 $350 350 $300 $250 300 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 23: Capital Spending Profile
CAPITAL SPENDING PROFILE ANNUAL CAPITAL EXPENDITURES (C$MM) US SOUTH PHASE I & II $220 & OTHER STRATEGIC PROJECTS MILL UPGRADES $200 Capital Expenditures - Discretionary Capital Expenditures - Maintenance $180 Depreciation, Depletion & Amortization $160 CASTLEGAR, BC $140 MILL REBUILD $120 ADAMS LAK
Slide 24: Return on Invested Capital
RETURN ON INVESTED CAPITAL ADJ. EBITDA RETURN ON INVESTED CAPITAL (%/YEAR) 30% 28% 28% 25% 23% 23% 20% Average 18% 19% 15% 10% 9% 6% 5% 0% 2013 2014 2015 2016 2017 2018 2019‐YTD Annual EBITDA/Average Net Debt + Equity 24
Slide 25: Capital Structure
CAPITAL STRUCTURE CAPITAL STRUCTURE DEBT MATURITY SCHEDULE AS OF SEP 30’19 AS OF SEP 30’19 (C$MM) Cash & Marketable Securities ($MM) $(52) $100 Debt ($MM) $265 $80 Prudential Notes (4.47%) Net Debt ($MM) $213 Book Equity ($MM) $881 $60 Invested Capital ($MM) $1,094 $40 NET DEBT/INVESTED CAPITAL ($MM
Slide 26: Supplementary Information
. 4 {| be 1 | i SUPPLEMENTARY INFORMATION
Slide 27: Softwood Lumber Dispute
SOFTWOOD LUMBER DISPUTE • Interfor’s Canadian operations’ shipments to the U.S. represented 15% of company-wide lumber shipments in 2018. • 68% of Interfor’s 2018 lumber production was US-based. • Significant differences in accounting treatment for duties between publicly traded companies; limits re
Slide 28: 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
Slide 29: Investor Contacts
INVESTOR CONTACTS MARTIN JURAVSKY MIKE MACKAY Senior Vice President & CFO Director, Corp. Development & Planning 604-689-6873 604-689-6846 martin.juravsky@interfor.com mike.mackay@interfor.com 29