Slide 1: Investor Update
Investor Update October 2013
Slide 2: Forward-Looking Statements
Forward-Looking Statements Information contained herein constitutes forward-looking statements. Forward-looking statements, which include all statements that are not historical facts, are subject to certain risks and uncertainties that could cause actual results to differ materially from those antic
Slide 3: Four Operating Regions
Four Operating Regions B.C. Interior 735 MMbf Adams Lake 350 MMbf DFir & SPF Dimension (Dim) Castlegar 225 MMbf DFir, Cedar & SPF Dim Grand Forks 160 MMbf SPF & DFir B.C. Coast 325 MMbf Hammond 175 MMbf Cedar Specialty Acorn 150 MMbf Hem & Dfir Japan/Specialty U.S. Pacific Northwest 650 MMbf Port An
Slide 4: The Transformation of Interfor
The Transformation of Interfor 2013 2011 2007 2002 U.S. Southeast Southern B.C. Southern B.C. 23% Interior Southern B.C. Interior 33% Southern U.S. U.S. Interior 42% B.C. Interior 39% 38% 22% 21% U.S. PNW B.C. Coast 29% B.C. Coast B.C. Coast 19% B.C. Coast 40% 79% 15% 772 MMbf 1,345 MMbf 1,650 MMbf
Slide 5: US Southeast Strategic Rationale
US Southeast Strategic Rationale • The US Southeast is considered an attractive region: • Favorable wood supply fundamentals • Proximity to the largest US lumber market • Track record of leading profitability in the NA lumber industry 1. • Timing is right to take advantage of the US housing up-cycle
Slide 6: US Southeast Acquisitions
US Southeast Acquisitions Interfor acquired 3 sawmills in Georgia from Rayonier, Inc. (March ’13) Facilities and Capacity MMbf • Total capacity of 360 MMbf Georgia • The acquisition was accretive from the Eatonton 75 outset Swainsboro 125 • Two kiln projects underway; to be Baxley 160 Thomaston 160
Slide 7: Lumber Production Growth
Lumber Production Growth • Interfor’s lumber production has increased by over 60% since early 2010 Quarterly Lumber Production - 2010 to Q2 2013 450 400 350 Million bf 300 250 200 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 • Additional operating initiatives u
Slide 8: Product Mix Diversification
Product Mix Diversification Cedar siding Specialty Cedar Rough cedar 13% 7% Structural Specialty 20% Cedar decking Japan structural Lumber Studs Commodity Framing 60% Facia & trim Millwork Structural dimension Interfor’s product line offering is the broadest of the major lumber producers 8
Slide 9: End Markets - Geographic Diversification
End Markets - Geographic Diversification 1. US – from Cdn Mills 16% Japan 10% US – from US Mills 41% China 16% Pacific Rim 2% Europe <1% Canada 15% Interfor has a more diversified geographic sales mix than other producers 1. Based on sales volume; includes wholesale activities 9
Slide 10: Market Update
Market Update Benchmark Prices, January ’03 to July ‘13 1400 US$/Mbf 2X6 Knotty S4S Cedar 1200 1000 Hemlock 4 1/8” grn squares 13’ 800 600 HF 9’ 2X4 Stud SYP East 2X4 #2&Btr 400 200 SPF 2X4 #2&Btr Random Dimension Source: Random Lengths 0 Publications Inc. 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/1
Slide 11: Financial Update – Selected Income Statement Items
Financial Update – Selected Income Statement Items C$ millions Q2 2013 Q1 2013 Q4 2012 2012 2011 Unaudited Unaudited Unaudited Sales $274.7 $242.5 $222.4 $849.2 $758.2 Adjusted EBITDA 1. 36.1 37.1 19.3 60.5 47.3 Adjusted EBITDA Margin 13.1% 15.3% 8.7% 7.1% 6.2% 1. Excluding other income and Long Ter
Slide 12: Financial Update – Capital Structure
Financial Update – Capital Structure 1. C$ millions June ’13 Dec ‘12 Unaudited Net debt $2342. $120 Book Equity 417 376 Invested capital 651 496 Net debt / invested capital 36% 24% Interfor’s net debt to invested capital ratio will remain at an appropriate level 1. See also page 24 – Pro Forma Capit
Slide 13: Financial Update – Strong Liquidity
Financial Update – Strong Liquidity • Interfor’s debt was recently extended • Approximately 65% of the debt is swapped into, or locked-in at fixed interest rates • Average interest rate of approx. 3.65% Senior Cdn Bank US Operating $ millions (at June 30 ‘13) Secured Total 1. Lines Line Notes Maturi
Slide 14: Key Takeaways
Key Takeaways • Interfor has been radically transformed over the last 10 years • Interfor is positioning its assets to be top quartile (top decile) • Interfor has a balanced geographic manufacturing base as well as diversified product lines and market exposure • Interfor has a strong balance sheet a
Slide 15: Additional Company Information
Section 2 Additional Company Information
Slide 16: Company Update
Company Update Lumber Production - 2005 to 2012 1. Billion bf 1.5 1.0 0.5 0.0 '05 '06 '07 '08 '09 '10 '11 '12 Interfor’s production volume was 1.35 Bbf in 2012 (up 7% from 2011) 1. Figures exclude the US Southeast acquisition 16
Slide 17: Moving Up The Tiers
Moving Up The Tiers • Interfor has moved into the second tier of North American lumber producers, with production approaching 2 billion bf. 2012 Lumber Production (Billion bf) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - Source: Wood Markets monthly – March 2013 1. Interfor Proforma i
Slide 18: Company Update
Company Update • Interfor has spent approximately $300 million in the last 10 years to upgrade its assets. Major projects were completed between 2005 and 2009 at Adams Lake, Molalla and Port Angeles Discretionary Capex (excluding acquisitions) 1. $ millions Includes $100 million sawmill at Adams Lak
Slide 19: State-of-the-Art Facilities
State-of-the-Art Facilities Port Angeles primary breakdown line Wave Log Feeders and Full Line Double Length Infeed (DLI) Canter Line 19
Slide 20: State-of-the-Art Facilities
State-of-the-Art Facilities Adams Lake Double Arbor Edgers Biomass Energy System 20
Slide 21: New Interfor Brand
New Interfor Brand NINTERFOR
Slide 22: Equity Issue Announced Sept 11
Section 3 Equity Issue Announced Sept 11
Slide 23: Equity Issue – Highlights and Use of Proceeds
Equity Issue – Highlights and Use of Proceeds Highlights: • $75 million bought deal priced at $12.00 per share, 6.25 million shares, closing expected October 1, 2013 • 15% over-allotment option granted to underwriters • Estimated net proceeds to Interfor $71.55 million1 ($82.35 million if entire 15%
Slide 24: Equity Issue – Pro Forma Capital Structure
Equity Issue – Pro Forma Capital Structure • The table below shows the consolidated capitalization of Interfor before and after giving effect to (i) the equity offering (excluding the over-allotment option) and (ii) the completion of the sawmill acquisition from Keadle Lumber Enterprises, Inc. on Ju
Slide 25: Analysts’ Estimates
APPENDIX Analysts’ Estimates
Slide 26: Analysts’ Estimates
Analysts’ Estimates Financial Analysts’ Recent EBITDA Estimates and Indicated EV Multiples Firm Date EBITDA $C millions SPF Lumber Price EV / EBITDA 2013E 2014E 2013E 2014E 2013E 2014E Raymond James 2-Aug-13 $143.0 $195.0 $340 $380 6.3 4.6 RBC 6-Aug-13 $121.0 $183.0 $340 $380 7.4 4.9 Salman 6-Aug-13
Slide 27: APPENDIX
APPENDIX • Impact of Mountain Pine Beetle in BC • China: Wood Frame Construction Markets • NA Lumber Market
Slide 28: Impact of Mountain Pine Beetle in BC
APPENDIX Impact of Mountain Pine Beetle in BC
Slide 29: Mountain Pine Beetle (MPB) – Area Affected
Mountain Pine Beetle (MPB) – Area Affected AAC1 MMm3 Central and Northern BC 0.0 50 – 75% Pine Adams Lake in Southern BC 0.5 28 – 30% Pine Castlegar & Grand Forks in Southern BC 1.0 17% Pine Coastal BC Woodlands 2.0 Adams Lake No Pine 3.5 1. Annual Allowable Cut (million m 3) Castlegar Vancouver
Slide 30: China: Wood Frame Construction Markets
APPENDIX China: Wood Frame Construction Markets
Slide 31: China Markets - Wood Frame Construction
China Markets - Wood Frame Construction Wood truss re-roofing Suburban villas (east and north China) (east, north, n-east, s-west) Low cost rural housing (south-west) Resort homes (north) 31
Slide 32: China Markets - Sectors Under Development
China Markets - Sectors Under Development Public buildings Apartment infill walls / partition walls Multi-story residential Mixed-use hybrid 32
Slide 33: China Markets- Use of BC Wood in Construction
China Markets- Use of BC Wood in Construction House framed with SPF lumber SPF used for furniture frames Cedar used as siding and for outdoor structures 33
Slide 34: NA Lumber Market
APPENDIX NA Lumber Market ASINTERFOR Building Value..
Slide 35: North America Lumber Supply / Demand
North America Lumber Supply / Demand Billion Board Feet 1. 2005 2011 2012 Consumption: US 64.1 33.5 37.4 Canada 11.4 7.9 8.4 Net Export 0.2 7.7 7.7 Total Production 75.7 49.1 53.5 Capacity: US 44.4 39.7 40.0 Canada 37.6 30.2 31.0 Total Capacity 82.0 69.9 71.0 Operating Rate 92% 70% 75% Average SPF P
Slide 36: U.S. Lumber Consumption by End Use
U.S. Lumber Consumption by End Use Billion Board Feet 1. 2005 2011 2012 New Home Construction 31.8 7.0 8.9 Residential Improvements 17.2 13.9 15.5 Industrial Production 13.9 11.1 11.5 Nonresidential Construction 1.2 1.5 1.5 Total US Lumber Consumption 64.1 33.5 37.4 1. FEA 2010 and Q2/13 Appendix Ta
Slide 37: US Homebuilder Outlook VS Single Family Starts
US Homebuilder Outlook VS Single Family Starts 90 2,000 Single Family Starts (rt) 80 1,800 Homebuilders Outlook 70 Index (left) 1,600 1,400 60 1,200 50 1,000 40 800 30 600 20 400 10 200 0 0 Sources: NAHB / Wells Fargo Housing Market Index to August ‘13; U.S. Census Bureau to July ’13 37
Slide 38: Investor Update
Investor Update August 2013 vN INTERFOR Building Value...