Weyerhaeuser Company · NYSE:WY
Weyerhaeuser — Non-Deal Roadshow (March 2017)
34 slides from Weyerhaeuser's roadshow presentation, Mar 6, 2017
Slide 1: Investor Meetings March 2017
INVESTOR MEETINGS MARCH 2017
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES This presentation contains statements and depictions that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including, without limitation, with respect to future pro
Slide 3: Weyerhaeuser's Investment Thesis Focused on Driving Value for Shareholders
WEYERHAEUSER’S INVESTMENT THESIS FOCUSED ON DRIVING VALUE FOR SHAREHOLDERS Operational excellence Most value from every acre Return cash to shareholders Invest in our businesses Maintain appropriate capital structure Premier timber, land, and wood products assets SUPERIOR RELATIVE TOTAL
Slide 4: Delivering on Commitments: 2016 Progress and 2017 Goals
DELIVERING ON COMMITMENTS: 2016 Progress and 2017 Goals Merged with Plum Creek Divested Cellulose Fibers businesses for $2.5 billion pre-tax Captured merger cost synergies ahead of schedule and raised target Achieved over $105 million of OpX and operational synergies Completed AVO process
Slide 5: Weyerhaeuser's Investment Thesis Focused on Driving Value for Shareholders
WEYERHAEUSER’S INVESTMENT THESIS FOCUSED ON DRIVING VALUE FOR SHAREHOLDERS Operational excellence Most value from every acre Return cash to shareholders Invest in our businesses Maintain appropriate capital structure Premier timber, land, and wood products assets SUPERIOR RELATIVE TOTAL
Slide 6: Focused Portfolio of Scale Assets
FOCUSED PORTFOLIO OF SCALE ASSETS 6 7 13 2012 2013 2016 MILLION ACRES MILLION ACRES MILLION ACRES Timberlands Wood Products INCREASING FOCUS UNMATCHED SCALE AND QUALITY WE ARE ONE OF THE LARGEST REITS IN THE U.S. OUR TIMBERLANDS ASSETS ARE WORLD CLASS OUR WOOD PRODUCTS MANUFACTURING FACILITIES ARE
Slide 7: Three Business Segments
THREE BUSINESS SEGMENTS TIMBERLANDS REAL ESTATE, ENERGY & NATURAL RESOURCES WOOD PRODUCTS LARGEST PRIVATE TIMBERLAND OWNER IN THE U.S. Unmatched scale and diversity Superior quality and productivity Sustainably certified MAXIMIZING VALUE FROM EVERY ACRE Premium recreation and conservation la
Slide 8: One of the Largest Private Timberland Owners in the World
ONE OF THE LARGEST PRIVATE TIMBERLAND OWNERS IN THE WORLD QUALITY, DIVERSITY & SCALE ARE UNMATCHED NORTH 2.5 MILLION ACRESWEST 3.0 MILLION ACRES SOUTH 7.4 MILLION ACRES 100% CERTIFIED TO SUSTAINABLE STANDARDS 8
Slide 9: Real Estate & ENR: Maximizing the Value of Every Acre
REAL ESTATE & ENR: Maximizing the value of every acre ENERGY & NATURAL RESOURCES ▪ Capture value of all surface and subsurface assets • Oil and natural gas • Construction materials and minerals • Wind resources HIGHER AND BETTER USE (HBU) • Capture premium values above timberland value – Recreation
Slide 10: Industry Leading North American Wood Products Producer
INDUSTRY LEADING NORTH AMERICAN WOOD PRODUCTS PRODUCER LUMBER PRODUCTION 3rd OSB PRODUCTION 4th ENGINEERED WOOD REVENUE 1st DISTRIBUTION FACILITIES (not shown) 17 $4.3 Revenue and statistics for full year 2016. Engineered Wood revenue includes solid section and I-Joist products. *Production capacity
Slide 11: Weyerhaeuser's Investment Thesis Focused on Driving Value for Shareholders
WEYERHAEUSER’S INVESTMENT THESIS FOCUSED ON DRIVING VALUE FOR SHAREHOLDERS Operational excellence Most value from every acre Return cash to shareholders Invest in our businesses Maintain appropriate capital structure Premier timber, land, and wood products assets SUPERIOR RELATIVE TOTAL
Slide 12: Timberlands: OpX Performance
TIMBERLANDS: OpX performance OPERATIONAL EXCELLENCE 20 14 -1 5 20 16 PROGRESS GOAL $64 MM $42 MM $200 MM TOTAL GOAL KEY INITIATIVES Capture operational synergies ̶ Optimize wood flows: minimize costs and increase realizations ̶ Optimize silviculture: cost and value creation ̶ Best practices: harve
Slide 13: Timberlands: Relative Performance
TIMBERLANDS: Relative performance ADJUSTED EBITDA* / ACRE OWNED U.S. WEST ADJUSTED EBITDA* / ACRE OWNED U.S. SOUTH Source for competitor data: public SEC filings, National Council of Real Estate Investment Fiduciaries (NCREIF). *Adjusted EBITDA. See appendix for reconciliation to GAAP amounts. **WY
Slide 14: Real Estate: Delivering the Most Value from Every Acre
REAL ESTATE: Delivering the most value from every acre Identify opportunities to capture premium value (Asset Value Optimization — AVO) Determine timber net present value for each acre Deliver a premium to timber net present value 2 3 1 14
Slide 15: Real Estate & ENR Segment Ramping Up
REAL ESTATE & ENR SEGMENT RAMPING UP KEY INITIATIVES Completed AVO analysis for WY Southern timberlands ̶ Identified approximately 500,000 of 4.0 million acres ̶ Primarily HBU Western analysis on track for completion by mid-2017 Identified acres will be brought to market over the next decade ̶
Slide 16: Wood Products: OpX Performance
WOOD PRODUCTS: OpX performance Controllable cost Improved recovery Focused capital investments Reliability Controllable cost Enhanced product mix Controllable cost Improved recovery Improved product margins Reduced operating costs Lower selling expenses KEY INITIATIVES $46 $34
Slide 17: Wood Products: Relative Performance
WOOD PRODUCTS: Relative performance LUMBER ADJUSTED EBITDA MARGIN* RELATIVE PERFORMANCE -5% 0% 5% 10% 15% 20% 2011 2012 2013 2014 2015 2016 Canfor Lumber Interfor Lumber West Fraser Lumber WY Lumber EWP ADJUSTED EBITDA MARGIN* RELATIVE PERFORMANCE -3% 0% 3% 6% 9% 12% 15% 18% 2011 2012 2013 2014 2015
Slide 18: Cost Reductions: Exceeding $100 Million Synergy Target
COST REDUCTIONS: Exceeding $100 million synergy target Achieved original $100 million run rate target Raised target by 25% Labor reductions and facility consolidation – 80% SG&A and 20% cost of sales $125 MILLION HARD DOLLAR COST SYNERGIES BY 2017 Q1 $35 MILLION CELLULOSE FIBERS ALLOCATED OVER
Slide 19: Weyerhaeuser's Investment Thesis Focused on Driving Value for Shareholders
WEYERHAEUSER’S INVESTMENT THESIS FOCUSED ON DRIVING VALUE FOR SHAREHOLDERS Operational excellence Most value from every acre Return cash to shareholders Invest in our businesses Maintain appropriate capital structure Premier timber, land, and wood products assets SUPERIOR RELATIVE TOTAL
Slide 20: Returning Cash to Shareholders
RETURNING CASH TO SHAREHOLDERS Quarterly dividend per share SUSTAINABLE AND GROWING DIVIDEND $0.15 $0.31 2011 Q1 2017 Q1 $500 MILLION $2.0 BILLION ACCELERATED SHARE REPURCHASE MORE THAN DOUBLED SINCE 2011 COMPLETED REMAINING AUTHORIZATION 20
Slide 21: Investing in Our Businesses: Disciplined Capital Expenditures for 2017
INVESTING IN OUR BUSINESSES: Disciplined capital expenditures for 2017 TIMBERLANDS Reduce costs and improve productivity Maintenance capex Silviculture Roads and infrastructure 2017 C A P E X FOCUS WOOD PRODUCTS REAL ESTATE, ENERGY & NATURAL RESOURCES Primarily entitlement activities $135
Slide 22: Investing in Our Businesses: Optimize Timberland Portfolio
▪ Completing comprehensive review of all acres ̶ Strategic review of Uruguay on track ▪ Continue to strategically upgrade timberland portfolio ̶ Divest less productive or non-strategic timberlands ̶ Reinvest in more productive lands in strategic markets ▪ Goal is the most valuable timberland portfol
Slide 23: Maintain Appropriate Capital Structure
▪ Solid investment grade credit ratings • Moody’s: Baa2 stable • S&P: BBB- stable ▪ Target Net Debt / Adjusted EBITDA < 3.5x ▪ Net Debt to Enterprise Value 21%* MAINTAIN APPROPRIATE CAPITAL STRUCTURE *As of December 31, 2016. **Approximately 92% fixed rate. Weighted average cost of debt approx. 6.0%
Slide 24: Weyerhaeuser's Investment Thesis Focused on Driving Value for Shareholders
WEYERHAEUSER’S INVESTMENT THESIS FOCUSED ON DRIVING VALUE FOR SHAREHOLDERS Operational excellence Most value from every acre Return cash to shareholders Invest in our businesses Maintain appropriate capital structure Premier timber, land, and wood products assets SUPERIOR RELATIVE TOTAL
Slide 25: Continued Growth in U.S. Housing Market
CONTINUED GROWTH IN U.S. HOUSING MARKET U.S. HOUSING STARTS SEASONALLY ADJUSTED ANNUAL RATE Growth supported by: ̶ Rising employment and wages ̶ Historically low mortgage rates ̶ Demographics ̶ Pent-up housing demand Current supply constraints: ̶ Labor shortages ̶ Mortgage availability ̶ Lot ava
Slide 26: Lumber: Strong Pricing Driven by Demand Growth and Canadian Export Constraints
LUMBER: Strong pricing driven by demand growth and Canadian export constraints Strong new residential demand Rising repair and remodel expenditures Canadian market share to decline: ̶ Softwood lumber dispute ̶ Pine beetle and AAC reductions limit harvest ̶ 2% Canadian share ≈ 1 BBF lumber dema
Slide 27: Softwood Lumber Dispute: Current Status
SOFTWOOD LUMBER DISPUTE: Current status U.S. International Trade Commission determined there is reasonable indication that U.S. producers have been injured by imports of Canadian lumber Expect preliminary U.S. Department of Commerce determinations regarding: Countervailing duties in late April
Slide 28: Southern Sawlogs: Improving Demand and Pricing
SOUTHERN SAWLOGS: Improving demand and pricing KEY DRIVERS SENSITIVITY $5/ton ≈ $75 million EBITDA PRICING OUTLOOK DELIVERED SOUTHERN AVG PINE SAWLOG U.S. SOUTH LUMBER PRODUCTION Lumber production increasing in the U.S. South Constrained Canadian lumber supply and reduced market share Southern
Slide 29: Western Sawlogs: Strong Demand from Export and Domestic Markets
WESTERN SAWLOGS: Strong demand from export and domestic markets KEY DRIVERS Steady demand for premium Japanese logs ̶ Wooden housing starts up over 8% in 2016 Chinese economic growth supports continued demand for U.S. logs ̶ Softwood log imports up 13% in 2016 ̶ Chinese log inventories remain in
Slide 30: OSB: Continued Strong Markets
OSB: Continued strong markets Demand increasing steadily, driven by ̶ Single-family starts ̶ Repair & remodel Anticipate continued strong operating rates Industry capacity additions will meet rising demand PRICING OUTLOOK NORTH CENTRAL OSB SENSITIVITY $10/MSF ≈ $30 million EBITDA NORTH AMERICA
Slide 31: Weyerhaeuser's Investment Thesis Focused on Driving Value for Shareholders
WEYERHAEUSER’S INVESTMENT THESIS FOCUSED ON DRIVING VALUE FOR SHAREHOLDERS Operational excellence Most value from every acre Return cash to shareholders Invest in our businesses Maintain appropriate capital structure Premier timber, land, and wood products assets SUPERIOR RELATIVE TOTAL
Slide 32: Appendix
APPENDIX 32
Slide 33: Adjusted EBITDA Reconciliation: Timberlands
ADJUSTED EBITDA RECONCILIATION: Timberlands $ Millions 2011 2012 2013 2014 2015 2016 West $279 $258 $373 $571 $459 $443 South 226 298 328 410 430 426 North 29 28 32 47 41 26 Other (15) (8) 46 2 7 6 Adjusted EBITDA including Legacy Plum Creek operations1,3 $519 $576 $779 $1,030 $937 $901 Less: EBITDA
Slide 34: Adjusted EBITDA Reconciliation: Wood Products
ADJUSTED EBITDA RECONCILIATION: Wood Products $ Millions 2011 2012 2013 2014 2015 20161 Lumber ($7) $130 $317 $319 $212 $289 OSB (4) 143 247 46 41 183 EWP 6 17 45 79 114 145 Distribution (37) (29) (33) 2 10 25 Other (1) (15) (2) - (5) (1) Adjusted EBITDA2 ($43) $246 $574 $446 $372 $641 Depletion, De