Slide 1: Company Update September 2016
COMPANY UPDATE SEPTEMBER 2016
Slide 2: Forward-Looking Information
FORWARD-LOOKING INFORMATION This presentation contains information and statements that are forward- looking in nature, including, but not limited to, statements containing the words “will”, “is expected”, “forecast”, “annualized”, “target” and similar expressions. Such statements involve known and u
Slide 3: Interfor's Four Regions
INTERFOR’S FOUR REGIONS BC Coast Pesce cess eenaseseeenee : Pree erree rrr ryy : : 320 MMbf (11%) BC Interior i - 2 mills o - Cedar, Hem-Fir, : peo MMpt (25%) Douglas-Fir - Douglas-Fir, Hem-Fir, - Specialty SPF, Cedar vedussenveesaverienesees - Dimension : US Northwest : 625 MMbf (20%) : -4 mills -
Slide 4: 4th Largest Lumber Producer
4th LARGEST LUMBER PRODUCER Bbf North American Lumber Production by Company - 2015 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 - Source - Wood Markets Monthly March 2016 - Capacity 4
Slide 5: Interfor Strategic Plan
INTERFOR STRATEGIC PLAN Growth by Acquisition Building Value Operational Excellence 5
Slide 6: Lumber Markets
RAYMOND JAMES U.S. SOUTH CONFERENCE - PERRY SAWMILL TOUR LUMBER MARKETSSeptember 30, 2015
Slide 7: Interfor's Diverse Lumber Mix
INTERFOR’S DIVERSE LUMBER MIX Cedar Lumber Sales By Species 1 Hem-Fir 10% Spruce-Pine-Fir 9% Western Dimension Doug Fir/ Larch Southern 30% Yellow Pine 35% Southern Yellow Pine Lodge Pole Pine Lodge Pole/ Ponderosa Pine 4% Cedar 12% (1) By value for YTD Q2-2016 7
Slide 8: North American Driven Business
NORTH AMERICAN DRIVEN BUSINESS Lumber Sales By Market 1 Canada 6% China/Tw/HK 4% USA Other 77% 3% Japan 10% (1) By value for YTD Q2-2016 8
Slide 9: Benchmark Lumber Price Trends
BENCHMARK LUMBER PRICE TRENDS US/Mbf $475 2013 2014 2015 $450 Q1’16 Q2’16 Q3’16 (1) $425 $400 $375 $350 $325 $300 $275 SYP Composite WSPF Composite $250 SYP $385 SYP $400 SYP $357 SYP $363 SYP $390 SYP $386 SPF $350 SPF $350 SPF $279 SPF $262 SPF $300 SPF $315 $225 Source: Random Lengths 9 (1) Q3-20
Slide 10: Key Market Drivers
KEY MARKET DRIVERS (1) 2014(1) 2015 2016E(1) 2017E(1) US Housing Starts - Total (mm) 1.0 1.1 1.2 1.3 Change +11% +6% +8% US Housing Starts - Single Family (mm) 0.6 0.7 0.8 0.9 Change +10% +12% +10% NA Lumber Consumption (Bft) 49.0 51.9 53.7 56.3 Change +6% +3% +5% NA Offshore Exports (Bft) 7.6 6.9 6
Slide 11: Operations Overview
A INTERFOR Building Value.. 11
Slide 12: 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 13: BC Interior Dimension Mills
BC INTERIOR DIMENSION MILLS A INTERFOR Building Value...
Slide 14: 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 14
Slide 15: BC Interior Modernization
BC INTERIOR MODERNIZATION 2008-09 2012 2015 Adams Lake, BC Grand Forks, BC Castlegar, BC • 3 MODERN MILLS IN GOOD FIBER BASKETS • RE-INVESTMENTS ARE COMPLETE • SIGNIFICANTLY REPOSITIONED THE ASSETS • STRONG CASH FLOW AND ROI • TOP DECILE/QUARTILE EBITDA MARGINS FOR THE BC INTERIOR 15
Slide 16: US South Dimension Mills
ai +P s _.US soutH DIMENSION MILLS A INTERFOR Building Value..
Slide 17: US South Overview
US SOUTH OVERVIEW • Invested over US$400 million since March 2013 • 5 acquisitions • 9 mills • 1.3 Billion feet of lumber capacity across 3 States • Largest lumber producer in Georgia • 44% of Interfor’s capacity is in the South 17
Slide 18: US South: Started Up in 2013
US SOUTH: STARTED UP IN 2013 ACQUIRED ASSETS...NOW REPOSITIONING THE BUSINESS Phase 1 Phase 2 Phase 3 • Acquire Assets • Build Team/Infrastructure • Mill Improvements • Mill Improvements • Optimization • Targeted Capex • Modest Capex 2013-15 2016-17
Slide 19: Logistics – Right Log to Right Mill
LOGISTICS – RIGHT LOG TO RIGHT MILL Each circle is a 50 mile radius. 19
Slide 20: US South Opportunity
US SOUTH OPPORTUNITY US South Competitive Advantages US South Relative Performance - Log Costs - Lumber recovery - Labor Rates - Cash conversion costs - Product mix/quality/mills nets Non-Controllables Controllables Interfor’s 2016/17 goal is to capture a significant portion of the opportunities in
Slide 21: Financial Review
FINANCIAL REVIEW
Slide 22: Historical Financial Results
HISTORICAL FINANCIAL RESULTS Benchmark Lumber Prices ($/Mbf) Interfor Production Volumes (Mmbf) $430 800 $410 672 700 639 618 618 637 $390 582 567 578 568 600 $370 495 500 447 470 418 $350 390 400 $330 300 $310 WSPF Composite (US$/Mbf) 200 $290 WSPF Composite (C$/Mbf) $270 SYP Composite (US$/Mbf) 10
Slide 23: Capital Spending Profile
CAPITAL SPENDING PROFILE $mm $140 $120 $100 $80 $60 $40 $20 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016E Depreciation, Depletion & Amortization(1) Capital Expenditures(2,3) (1) Includes depreciation of plant & equipment and depletion & amortization of logging roads, timbers and other. (2) Includ
Slide 24: Capital Structure
CAPITAL STRUCTURE • Weighted average interest rate < 4%. • At Jun 30, 2016 - available liquidity of $181 mm. • Substantial tax loss carry-forwards – approx. $125 mm in Canada and US$180 mm in the US. • No significant employee future benefit obligations. Capital Structure Debt Maturity Schedule As of
Slide 25: Net Debt Profile
NET DEBT PROFILE $400 Net Debt – US$ mm US$345 US$344 $350 US$330 US$327 US$(1) •Free cash US$3 US$304 $300 US$281 flow (net of •Free cash •Seasonal US$(26) Castlegar working flow capex) capital •Free cash flow •Monticello $250 acquisition US$mm •Castlegar capex $200 US$175 •Simpson $150 acquisition
Slide 26: Summary
SUMMARY • 3 modern mills in BC Interior Strong Asset Base • Margin improvement initiatives focused on the US With Significant South: $35 mm annualized EBITDA impact by 2017 (1) Upside • “Capital light” approach for 2016 • Debt maturities termed out to 2019-2026 Prudent Capital • Low cost debt Struct