Weyerhaeuser Company · NYSE:WY
Weyerhaeuser — 2020 RBC Capital Markets Global Industrials Conference
57 slides from Weyerhaeuser's conference presentation, Sep 11, 2020
Slide 1: Weyerhaeuser 2020 RBC Capital Markets Global Industrials Conference
Weyerhaeuser 2020 RBC Capital Markets Global Industrials Conference DEVIN STOCKFISH | President & CEO September 14, 2020 EXHIBIT 99.1
Slide 2: Forward-looking statements
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 goals and prospects; business strategies; factors affecting m
Slide 3: Weyerhaeuser Investment Thesis
WEYERHAEUSER INVESTMENT THESIS UNMATCHED PORTFOLIO INDUSTRY-LEADING PERFORMANCE DISCIPLINED CAPITAL ALLOCATION SUPERIOR SHAREHOLDER VALUE + + ESG Strong ESG Foundation | Our Forests and Wood Products are Natural Climate Solutions
Slide 4: Recent Actions
RECENT ACTIONS Focused on Driving Long-Term Value for Shareholders Sustainability Ambitions Leadership Changes Balance Sheet Timber Portfolio Operating Results WY LAUNCHED NEW 3 BY 30 SUSTAINABILITY INITIATIVES ENHANCING OREGON TIMBERLAND HOLDINGS REDEEMING $325 MILLION IN 2023 MATURITIES ENSURING S
Slide 5: Unmatched Portfolio
UNMATCHED PORTFOLIO Our Quality, Diversity and Scale Cannot Be Replicated
Slide 6: Who We Are
WHO WE ARE A Tax-Efficient Timber REIT with Three Industry-Leading Businesses UNMATCHED PORTFOLIO 11 MILLION ACRES OWNED IN THE U.S. 35 MANUFACTURING FACILITIES ACROSS NORTH AMERICA 14 MILLION ACRES LICENSED IN CANADA 19 Lumber Mills 6 Oriented Strand Board Mills 6 Engineered Lumber Mills 3 Plywood
Slide 7: What We Do
WHAT WE DO Create and Capture Superior Value at Every Step UNMATCHED PORTFOLIO Diverse customer mix that fully values our quality, scale, reliability, and sustainable practices Proprietary seedlings yield superior growth, wood quality and survival characteristics Customized planting deploys the best
Slide 8: How We Do It: Strong ESG Foundation
HOW WE DO IT Strong ESG Foundation CORPORATE GOVERNANCE ENVIRONMENTAL STEWARDSHIP Safety & Human Capital Workplace Culture Community Investment & Engagement SOCIAL RESPONSIBILITY Best Practices in Governance Board Composition Ethics & Integrity Sustainable Forest Management Environmental Impact Carb
Slide 9: Environmental Stewardship
15% 100% OF OUR TIMBERLANDS ARE REFORESTED AFTER HARVEST WE PLANT ABOUT 150 MILLION TREES EVERY YEAR ENVIRONMENTAL STEWARDSHIP Sustainable Forestry • Carbon Sequestration • Reduced Environmental Footprint WE PARTICIPATE IN 18 HABITAT CONSERVATION PLANS IN NORTH AMERICA 100+ years of expertise in sus
Slide 10: Social Responsibility & Governance
SOCIAL Responsibility & GOVERNANCE Human Capital Management • Ethics • Board Composition GOVERNANCE HUMAN CAPITAL MANAGEMENT RECORDABLE INCIDENT RATE WE REDUCED INJURY SEVERITY BY 35% IN 2019 95% OF ALL SALARIED EMPLOYEES HAVE AN INDIVIDUAL DEVELOPMENT PLAN WE DRIVE SIGNIFICANT SAFETY IMPROVEMENT 30
Slide 11: Timberlands: Superior Holdings Create Value Today and Tomorrow
TIMBERLANDS SUPERIOR HOLDINGS CREATE VALUE TODAY AND TOMORROW Unrivaled portfolio that cannot be replicated Diversified holdings at scale Superior supply chain Enduring value across market cycles Enhancing portfolio over time Unmatched timber-growing expertise UNMATCHED PORTFOLIO
Slide 12: Our Timberlands Portfolio
Adjusted EBITDA(1) by Region (2019) See appendix for reconciliation to GAAP amounts and definition of Adjusted EBITDA. North includes Other. Approximate total acres as of March 31, 2020. High value Douglas-fir Premium land west of the Cascade mountains Sawlogs are approximately 90% of harvest Unique
Slide 13: Timberlands Customers
THIRD-PARTY DOMESTIC CUSTOMERS WEYERHAEUSER MILLS EXPORT CUSTOMERS TIMBERLANDS REVENUE BY END MARKET (2019) We flex supply to meet dynamic customer demands and capture market opportunities TIMBERLANDS CUSTOMERS Capture Full Value Through a Diverse Customer Mix UNMATCHED PORTFOLIO
Slide 14: Timberlands Export Markets
71% 23% 6% EXPORT REVENUE Percentages based on 2019 full year Timberlands export sales. TIMBERLANDS EXPORT MARKETS Unrivaled Market Position and Supply Chain Expertise UNIQUE JAPAN BUSINESS Multi-decade relationships supplying steady post & beam housing market Western timberlands ownership provides
Slide 15: Enduring Value Across Market Cycles
NCREIF Timberland INDEX INDEXED MARKET VALUE Per Acre, by Region Source: National Council of Real Estate Investment Fiduciaries (NCREIF) Timberland Index. Changes in index composition may affect average market values (e.g. NCREIF Northwest expanded to include Idaho in 2013). TIMBERLANDS Enduring Val
Slide 16: Timberlands Portfolio Management
Timberland Acres By Region TIMBERLANDS PORTFOLIO MANAGEMENT Disciplined and Opportunistic OVER 45% INCREASE SINCE 2012 NEARLY 70% INCREASE SINCE 2012 $1.6 BILLION OF PROCEEDS Strategic Divestitures Announced transactions to enhance Oregon timberland holdings Net cost approximately $40 million Expect
Slide 17: Real Estate, Energy & Natural Resources
REAL ESTATE, ENERGY & NATURAL RESOURCES MAXIMIZE THE VALUE OF EVERY ACRE WE OWN Continually evaluate every acre Deliver a significant premium to timber value Generate consistent and reliable cash flow Capture the full value of surface and subsurface assets UNMATCHED PORTFOLIO
Slide 18: Real Estate: Unlock Higher and Better Use Value
REAL ESTATE Unlock Higher and Better Use (HBU) Value Nimble Business Model Low Operating Costs Minimal Capital Investment �� �� �� 1.3 MILLION ACRES with HBU attributes CONTINUALLY EVALUATE every acre ≤1% of timberland acres SOLD ANNUALLY 55–65% Premium to Timber Value SINCE INCEPTION consistently e
Slide 19: Energy & Natural Resources
ENERGY & NATURAL RESOURCES Maximize the Value of Surface and Sub-Surface Rights BALANCED EBITDA MIX (1) Infrastructure Rights of Way Wind and Solar Power Wetland Mitigation Banks Aggregates & Industrial Materials Oil & Natural Gas Oil & Natural Gas Wind, Solar & Other Aggregates & Industrial Materia
Slide 20: Consistent, Reliable Cash Generation
UNMATCHED PORTFOLIO REAL ESTATE, ENERGY & NATURAL RESOURCES Consistent, Reliable Cash Generation (1) See appendix for reconciliation to GAAP amounts. Adjusted EBITDA(1) $ in millions $189 $241 $264 Real Estate Energy & Natural Resources $274 Demand for Real Estate properties remains solid Increased
Slide 21: Wood Products
WOOD PRODUCTS MAXIMIZING MARGIN THROUGH THE BUSINESS CYCLE Unmatched scale, brand and reputation Diversified mix of high-quality products Relentless focus on industry-leading cost structure Diverse customer mix and demand drivers Superior returns through the cycle: “Black at the bottom” UNMATCHED PO
Slide 22: Wood Products Portfolio
LUMBER ORIENTED STRAND BOARD ENGINEERED WOOD PRODUCTS DISTRIBUTION WOOD PRODUCTS PORTFOLIO Industry-Leading Scale, Diversification and Quality 2nd largest producer in North America 19 lumber mills 5.2 BBF capacity 4th largest producer in North America 6 oriented strand board mills 3.0 BSF capacity L
Slide 23: Diverse Demand Drivers and Customer Mix
WOOD PRODUCTS Diverse Demand Drivers and Customer Mix NEW RESIDENTIAL: SINGLE & MULTI-FAMILY REPAIR & REMODEL: PROFESSIONAL AND DIY PERCENT OF SALES BY END MARKET (2019) NON-RESIDENTIAL CONSTRUCTION AND INDUSTRIAL USES Percentages are approximate based on 2019 full year Wood Products net sales. UNMA
Slide 24: Positioned for Superior Performance Through the Cycle
WOOD PRODUCTS Positioned for Superior Performance Through the Cycle EWP Distribution $ in millions Achieved Industry-Leading Cost Structure Improved EWP & Distribution EBITDA Through Market Headwinds ADJUSTED EBITDA(1) Achieved “Black at the Bottom” Cost Net of Logs/MBF Indexed to 2013 Controllable
Slide 25: Industry-Leading Performance
INDUSTRY-LEADING PERFORMANCE Significant, Sustainable Margin Improvement Through the Cycle
Slide 26: Operational Excellence 1.0
MERCHANDISING Right product from the right log HARVEST & HAUL Increase efficiency and reduce cost SILVICULTURE Optimize site prep, thinning and fertilization MARKETING Right product to the right customer RELIABILITY Maximum uptime, highest quality product CONTROLLABLE COSTS Efficient labor, maintena
Slide 27: Our OpX Scorecard
DRIVING SUPERIOR RELATIVE PERFORMANCE Our OpX Scorecard We are “Black at the Bottom” TIMBERLANDS ADJUSTED EBITDA(1,2) PER ACRE WEST LUMBER(4) ORIENTED STRAND BOARD SOUTH ENGINEERED WOOD PRODUCTS DISTRIBUTION Source for competitor data: public SEC filings, National Council of Real Estate Investment F
Slide 28: OpX 2.0
MARGIN IMPROVEMENT BOTTOM LINE Deliver and Maintain Industry-Leading Cost Structure FUTURE VALUE 1 Superior Execution on: Silviculture Prescriptions Reliability Programs COST AVOIDANCE Simplify/Standardize Tools Automate Manual Work Leverage Technology/Data Procurement Optimization Shared/Repurposed
Slide 29: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION Long-Term Commitment to Balancing Three Key Priorities
Slide 30: Capital Allocation
CAPITAL ALLOCATION OPPORTUNISTIC ALLOCATION Disciplined capital allocation Appropriate and Temporary Adjustments to Navigate Uncertain Environment CORE ALLOCATION Investment Grade Credit Rating INVEST IN OUR BUSINESSES RETURN CASH TO SHAREHOLDERS MAINTAIN AN APPROPRIATE CAPITAL STRUCTURE Disciplined
Slide 31: Returning Cash to Shareholders
Committed to a sustainable dividend policy that will drive long-term shareholder value and return meaningful and appropriate levels of cash across market cycles Regularly reviewing opportunities to reinitiate an appropriate quarterly cash dividend RETURNED NEARLY $8 BILLION TO SHAREHOLDERS SINCE 201
Slide 32: Capital Expenditures
CAPITAL EXPENDITURES Wood Products - $160 million Maintenance capex Projects to improve costs and reliability Timberlands - $110 million Reforestation and silviculture Roads and infrastructure Corporate – Very minimal IT system upgrades Real Estate & ENR – Very minimal Primarily entitlement activiti
Slide 33: Solid Balance Sheet and Financial Flexibility
INVESTMENT GRADE CREDIT PROFILE SOLID LIQUIDITY STRONG ASSET COVERAGE OPPORTUNISTIC LIABILITY MGMT Repaid precautionary draw on $1.5 billion revolver Earmarked $150 million of cash for repayment of final 2021 maturity Repaid $569 million notes due March 2021 Maintain AN appropriate capital structure
Slide 34: Superior Shareholder Value
SUPERIOR SHAREHOLDER VALUE Capitalizing on Strong Portfolio and Operational Performance
Slide 35: Improving Fundamentals Across Our Markets
SHAREHOLDER VALUE IMPROVING FUNDAMENTALS ACROSS OUR MARKETS Driven By Continued Demand for U.S. Housing REPAIR & REMODEL HOUSING STARTS LUMBER ORIENTED STRAND BOARD WESTERN LOGS SOUTHERN LOGS Renewed preference for single-family Low interest rates Favorable demographics, pent-up demand High unemploy
Slide 36: Our Working Forests Are Part of the Climate Solution
OUR WORKING FORESTS ARE PART OF THE CLIMATE SOLUTION An Endlessly Renewable Resource that Absorbs and Stores Carbon OUR GROWING FORESTS ABSORB CO2 OUR WOOD PRODUCTS STORE CARBON FROM THE ATMOSPHERE FOR THE LIFE OF THE PRODUCT WE PLANT MORE TREES THAT ABSORB EVEN MORE CO2 AS THEY GROW WOOD IS THE ULT
Slide 37: Weyerhaeuser Investment Thesis
WEYERHAEUSER INVESTMENT THESIS UNMATCHED PORTFOLIO INDUSTRY-LEADING PERFORMANCE DISCIPLINED CAPITAL ALLOCATION SUPERIOR SHAREHOLDER VALUE + + ESG Strong ESG Foundation | Our Forests and Wood Products are Natural Climate Solutions
Slide 38: Appendix: Market Overview and Supplemental Information
APPENDIX Market Overview and Supplemental Information
Slide 39: Expect Long-Term Growth in U.S. Housing
EXPECT LONG-TERM GROWTH IN U.S. HOUSING Source: U.S. Census Bureau 2020 YTD as of July U.S. housing activity rebounding despite weak macroeconomic conditions Historically low mortgage rates and growing preference for larger, single-family homes Persistent economic weakness could dampen near-term hou
Slide 40: Level of Construction Remains Below Housing Need
LEVEL OF CONSTRUCTION REMAINS BELOW HOUSING NEED ANNUAL U.S. HOUSING NEED MILLIONS OF UNITS DRIVER BASELINE AVERAGE DEMAND New Household Formations 1.1 Replace Lost or Obsolete Units 0.3 Second Home Demand 0.1 Natural Vacancy Rate 0.1 ANNUAL NEW UNITS REQUIRED 1.6 Source: Freddie Mac, 2018 U.S. POPU
Slide 41: Strong Repair & Remodel Activity
STRONG REPAIR & REMODEL ACTIVITY Stay-at-home behavior and social distancing driving surge in home improvement activity Expect solid repair & remodel sales volumes when environment normalizes Rising home equity Housing stock continues to age, with median age of approximately 40 years old U.S. HOUSIN
Slide 42: Lumber Demand Has Recovered Rapidly
LUMBER DEMAND HAS RECOVERED RAPIDLY LUMBER PRICING FRAMING LUMBER COMPOSITE NORTH AMERICAN LUMBER CONSUMPTION BY END USE, 2019 Source: FEA Source: Random Lengths Q3 QTD as of 8/28/2020 Q3 QTD vs. Q2 AVERAGE +$175/MBF HIGHER CURRENT vs. Q2 AVERAGE +$290/MBF HIGHER Strong home improvement demand and n
Slide 43: B.C. Mill Closures Have Reduced Industry Capacity
LUMBER B.C. Mill Closures Have Reduced Industry Capacity Log supply declining in British Columbia due to fires, pine beetle and lower allowable cut Canadian lumber exports to the U.S. remain subject to duties Canadian share of lumber market has decreased U.S. Southern lumber production gaining share
Slide 44: OSB Demand Has Recovered Rapidly
OSB DEMAND HAS RECOVERED RAPIDLY Strong home improvement demand and new residential construction activity Industry operating rates have rebounded following COVID-related curtailments Expect uneven pricing as market conditions evolve ORIENTED STRAND BOARD PRICING NORTH CENTRAL OSB WY’s SENSITIVITY AT
Slide 45: Western Logs
Domestic log demand increasing as mill operating rates rebound Unprecedented fire season, with impact on WY Oregon timber operations Japanese demand slowing following consumption tax increase and COVID-19 outbreak Chinese demand normalized following post-COVID spike Able to rapidly flex volume in re
Slide 46: Southern Logs
Sawlog demand improving as mill operating rates rebound WY fiber log demand stable supported by hygiene products As lumber production rises across the South, WY’s timberlands are well positioned to benefit Future upside opportunity from Southern log exports SOUTHERN LOGS Improving Sawlog Demand Will
Slide 47: Well-Laddered Debt Profile
WELL-LADDERED DEBT PROFILE After 2021 Repayments, No Additional Debt Maturities Until 2023 $860 million WestRock note maturing 2023 includes extension option. Revolver was undrawn as of June 30, 2020. Revolver capacity is $1.5 billion. $6.3 billion of long-term debt currently outstanding 96% fixed r
Slide 48: ESG External Recognition
LISTINGS ON ESG INDICES ESG RATINGS AND RANKINGS We have a “WINNING” rating from 2020 Women on Boards WE ARE THE ONLY North American forestry or wood products company Corporate Responsibility Magazine NAMED US ONE OF THE 100 BEST CORPORATE CITIZENS ETHISPHERE named us one of the World’s Most Ethical
Slide 49: Timber-Growing Experts
TARGETED SILVICULTURE CUSTOMIZED PLANTING We are TIMBER-GROWING Experts Deeply Committed to Environmental Stewardship PROPRIETARY SEEDLINGS We cultivate seedlings with superior survival, growth, and wood-quality characteristics We deploy the best genetic material for each acre on our land base Our p
Slide 50: Our Timber Supply-Chain Expertise Is Unrivaled
Our TIMBER Supply-chain EXPERTISE is unrivaled We Capture Maximum Value At Each Step Unmatched supply chain capabilities MATURE FORESTS We grow diverse product offerings in scale quantities with superior, reliable quality DATA-DRIVEN MARKETING SUSTAINABLE HARVESTING Our expert harvest planning captu
Slide 51: Our Wood Products Supply Chain Is Efficient
9 MILLION PRODUCT DISTRIBUTION LOW-COST MANUFACTURING OUR WOOD PRODUCTS SUPPLY CHAIN IS EFFICIENT We Drive Out Cost and Maximize Value From Raw Materials to End Use FIBER PROCUREMENT We source the optimal mix of raw materials internally and externally to maximize margins Our operational excellence a
Slide 52: Our Vision
@) U R Vi S | e) N Working together to be the world’s premier timber, land, and forest products company eo No > S2 HOW WE WIN WHAT IT LOOKS LIKE » 4 WwW WEYERHAEUSER KEY BEHAVIORS A TRULY GREAT COMPANY Safety Develop our people Act with urgency Integrity Drive operational Be accountable excellence C
Slide 53: Adjusted EBITDA Reconciliation: Total Company
$ Millions 2016 2015 2017 2016 2018 2017 2019 2018 Adjusted EBITDA1 $ 1,583 $ 2,080 $ 2,032 $ 1,276 Depletion, depreciation & amortization (512 ) (521 ) (486 ) (510 ) Basis of real estate sold (109 ) (81 ) (124 ) (116 ) Unallocated pension service costs (5 ) (4 ) — — Special items included in operat
Slide 54: Net Debt to Adjusted EBITDA Reconciliation
Net debt to ADJUSTED EBITDA RECONCILATION Total Company LTM – last twelve months. Net debt to Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Net debt to Adjusted EBITDA, as we define it, is long-term debt and borrowings on line of credit, net o
Slide 55: Adjusted EBITDA Reconciliation: Timberlands
Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold, unallocated pension service costs and special items. Adjusted EB
Slide 56: Adjusted EBITDA Reconciliation: Wood Products
$ Millions 2011 2012 2013 2014 2015 20161 2017 2018 2019 Q2 2020 YTD Lumber ($7) $130 $317 $319 $212 $289 $459 $459 $183 $182 OSB (4) 143 247 46 41 183 359 329 59 86 EWP 6 17 45 79 114 145 173 177 207 93 Distribution (37) (29) (33) 2 10 25 38 32 33 25 Other (1) (15) (2) — (5) (1) (12) (10) (6) (4) A
Slide 57: Adjusted EBITDA Reconciliation: Real Estate, Energy & Natural Resources
Adjusted EBITDA is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDA, as we define it, is operating income adjusted for depreciation, depletion, amortization, basis of real estate sold, unallocated pension service costs and special items. Adjusted EB
Weyerhaeuser — 2020 RBC Capital Markets Global Industrials Conference on 6ix