West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Corporate Update (October 2013)
44 slides from West Fraser Timber's corporate update, October 2013
Slide 1: Investor Tour – October, 2013
Investor Tour – October, 2013 Armour, North Carolina
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes forward-looking statements, which are statements that are not historical facts, and as a result are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in or suggested by the forw
Slide 3: Plum Creek Sawmill Acquisition 2000
Plum Creek Sawmill Acquisition 2000 NORTH TENNESSEE CAROLINA MEMPHIS SOUTH ARKANSAS CAROLINA ALABAMA GEORGIA MISSISSIPPI FLORIDA TEXAS LOUISIANA 3
Slide 4: West Fraser - IP Acquisition 2007
West Fraser - IP Acquisition 2007 NORTH TENNESSEE CAROLINA MEMPHIS SOUTH ARKANSAS CAROLINA ALABAMA GEORGIA MISSISSIPPI FLORIDA TEXAS LOUISIANA Lumber Joyce & Huttig 4 4
Slide 5: Production - BBF
Production - BBF 2013 Production back to 2008 levels 5 5
Slide 6: US South
US South Fourteen lumber mills Nine Southern States 2,000 employees 20% of West Fraser’s sales 6
Slide 7: Things that are different
Things that are different Half of the industry is made up of independently owned sawmills 7
Slide 8: Things that are different
Things that are different Half of the industry is made up of independently owned sawmills Timber is bought on the open market 8
Slide 9: Things that are different
Things that are different Half of the industry is made up of independently owned sawmills Timber is bought on the open market The mills are smaller 9
Slide 10: Things that are different
Things that are different Half of the industry is made up of independently owned sawmills Timber is bought on the open market The mills are smaller Operating Conditions Lower inventories - logs (avg 2-4 days), rough green (3 days) 10
Slide 11: SYP Markets
(®) West fraser SYP Markets
Slide 12: SYP Markets
SYP Markets Largest and fastest growing lumber market in North America Mills that provide products across the US South Complimentary product offering 12
Slide 13: Lots of People
Lots of People Millions 2000 to 2013 California 38 12% Texas 26 25% New York 20 3% Florida 19 21% Illinois 13 4% Pennsylvania 13 4% Ohio 12 2% Georgia 10 21% Michigan 10 - North Carolina 10 21% 30% of population lives in the South and its growing at more than double the National rate 13
Slide 14: 50%+ Housing Starts in South
50%+ Housing Starts in South 80% 60% 52% 40% 26% 22% 20% 0% South West Northeast 14 14
Slide 15: Framing Products
Framing Products 15 15
Slide 16: Homes are Older
Homes are Older 60 Mn Units >90 70-90 50 50-70 30-50 <30 40 30 20 10 0 h st t t s es ut ea we So W th id or M N 16
Slide 17: Outdoor Living
Outdoor Living West fraser
Slide 18: Market Outlook
Market Outlook Near term Improving pricing environment SYP supply / demand balance Residential improvements Narrow dimension Longer term Positive as housing recovers 18 18
Slide 19: Timber Supply
(®) West fraser Timber Supply
Slide 20: Why we like the US South
Why we like the US South Market Trees Fast Growing Lots of Them Large 20
Slide 21: US Inventory of Sawtimber
US Inventory of Sawtimber BBF, Int’l 300 250 200 150 100 50 0 South Inland Coast Source: FEA Data 21 21
Slide 22: Trees Grow Fast
Trees Grow Fast Average harvest age is 25 years 22 22
Slide 23: Our Fundamental Objective…
Our Fundamental Objective… New Boston, TX Joyce, LA 23 23
Slide 24: Slowdown has Deferred Southern Harvest
Slowdown has Deferred Southern Harvest BBF, Int’l Drain Growth At 1.7 million housing starts Growth = Drain Source: FEA 24 24
Slide 25: US South Wood Supply
US South Wood Supply “Assuming that the housing market slowly recovers over the next few years and tops out at 1.2 million housing starts by 2014, the US South will have built approximately 80 million tons of softwood sawtimber inventory over and above the 80 million tons currently being harvested.”
Slide 26: US South Wood Supply
US South Wood Supply Forisk analysis of timber markets across the South over time indicates that excess sawtimber volumes could dampen or delay the "strengthening" of pine sawtimber and chip-n-saw prices in the U.S. South. Specifically, the effect slows pine grade price growth by ~30% per year on
Slide 27: High Demand Scenario projects 2020 Harvest Level
2009 Harvest Level @ 20 Million Tons High Demand Scenario projects 2020 Harvest Level @ 28 Million Tons 27 27
Slide 28: West Fraser - Sourcing Strategy
West Fraser - Sourcing Strategy Source Type West Fraser Individual Mills Sourcing Strategy min max Supply Agreement 31.0% 0% 90% "Negotiated" Gate wood 11.0% 0% 31% Timber Deeds 2.0% 0% 20% CSW - Tract Specific 30.0% 0% 61% Open Gate Wood 26.0% 1% 66% Variation between Mills dictated by history, reg
Slide 29: Biomass & Energy Projects
Biomass & Energy Projects Opportunity Increase demand for residuals Non traditional market independent of Housing Supplier Work Force Incidental log supply Challenges Increase Competition for wood supply Impact on Supplier & Loggers Little Opportunity for Synergy with WF 29 29
Slide 30: Timber Outlook
Timber Outlook Near term Impact of downturn on Supplier / logging force Stumpage expectations Operating cost increases Continue flattening of price curve Longer term Improved supply balance in many drains Change in land ownership patterns Positive growth/drain ratio Price increas
Slide 31: Modernization
(®) West fraser Modernization
Slide 32: Lumber Operating Rate - 2012
Lumber Operating Rate - 2012 100% 94% 95% 90% 83% 85% % of Capacity 78% 80% 74% 75% 75% 72% 70% 65% 60% 55% 50% WFT WFT B.C. U.S. U.S. Canada Canada U.S. Interior South Low-cost structure allows for higher operating rates in down market 32 32
Slide 33: Capital Spending
Capital Spending 2009 2010 2011 2012 2013 Est 2014 Est U.S. South 33 33
Slide 34: Planers – Productivity and Value
Planers – Productivity and Value 34
Slide 35: Kilns – Value and Volume Increase
Kilns – Value and Volume Increase 35
Slide 36: Sawmills – Productivity and Yield
Sawmills – Productivity and Yield 36
Slide 37: Summary
(®) West fraser Summary
Slide 38: Competitiveness
Competitiveness Net Mill Return US$/Mfbm = Oe 150 T T T T T T T T T T T T T 1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 400 350 Source: FEA ——US South ——BC Interior a 38 West fraser
Slide 39: Competitiveness
Competitiveness Delivered Wood USS/Mfbm 270 250 +S 230 + 210 190 130 T 170 150 Ne 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E —US South ——BCInterior ——BC Interior Par Exchange Source: FEA T T T T T T T T T T T T 1 39 a West fraser
Slide 40: Competitiveness
Competitiveness NMR - VC USS$/Mfbm 100 y *° WA 60 40 20 oe NS ) : (20) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E Source: FEA — US South -——BC Interior 40 rE West fraser
Slide 41: US South Lumber Production
MMfbm US South Lumber Production Million 25,000 2.5 20,000 2.0 15,000 1.5 10,000 1.0 5,000 0.5 0 0.0 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Source: FEA Production US Housing Starts ® 41 41
Slide 42: Share of North American Production
Share of North American Production 35% 30% 25% 20% 15% 10% 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 US South US West Coast US Other British Columbia East of the Rockies Source: FEA 42 42
Slide 43: Priorities
Priorities WF culture People Cost Manufacturing focus Capital to improve competitiveness Design Construction Start-ups Growth 43 43
Slide 44: Summary
Summary Proximity to market Demographics support demand Growing log supply Investment opportunities Diversification Pine Beetle FX Trade 44 44