Slide 1: Company Overview
COMPANY OVERVIEW November 2014
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: The Interfor Way
THE INTERFOR WAY We conduct ourselves with honesty and integrity. We respect, value and engage our employees. We embrace world-leading safety and environmental standards. We are strategic, fact-based and proactive. We strive for excellence in everything we do. We are responsible for our own success.
Slide 4: Pure Play Lumber - Four Regions
PURE PLAY LUMBER - FOUR REGIONS BC Coast - 320 MMbf (13%) • 2 mills • Cedar, Hem-Fir, Douglas-Fir • Specialty BC Interior – 720 MMbf (30%) • 3 mills • Douglas Fir, Hem-Fir, SPF, Cedar • Dimension US Southeast – 880 MMbf (37%) • 6 mills • Southern Yellow Pine • Dimension US Pacific Northwest – 470 MM
Slide 5: Interfor's Balanced Profile
INTERFOR’S BALANCED PROFILE BC Coast 9% US Southeast BC 35% BC Southern US Pacific BC Interior Northwest Southern Southern 33% US Southeast 39% Interior Interior 23% 42% 34% BC Coast BC Coast 19% US Pacific 15% US Pacific Northwest Northwest 29% 22% Production Volume 3Q 2014 – 567 MMbf Operating Rat
Slide 6: Interfor Transformation
INTERFOR TRANSFORMATION 2012 2014 • Top 10 N.A. lumber producer • Top 5 N.A. lumber producer • 9 sawmills in 3 regions • 14 sawmills in 4 regions US Southeast BC 23% Southern • No presence US Pacific BC in US South • Largest lumber producer in Georgia Interior Northwest Southern 33% 39% Interior 42%
Slide 7: Production Has More Than Doubled
PRODUCTION HAS MORE THAN DOUBLED Quarterly Lumber Production 2010 - 2014 MMbf 600 550 500 450 400 350 300 250 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 2012 2013 2014 7
Slide 8: 4th Largest Lumber Producer in N.A.
4th LARGEST LUMBER PRODUCER IN N.A. NA Lumber Production by Company 5.0 4.0 2013 3.0 Production Bbf 2.0 1.0 0.0 Source: Wood Markets monthly – March 2014 Notes: (1) Interfor’s 3Q 2014 production annualized (2) GP includes Temple Inland. 8
Slide 9: Interfor Strategic Plan
INTERFOR STRATEGIC PLAN Growth by Building Value Operational Acquisition Excellence 9
Slide 10: History of Successful Acquisitions
HISTORY OF SUCCESSFUL ACQUISITIONS Year Business Acquired Assets Region 2001 Primex 2 sawmills Coast 2 reman facilities 2004 Crown Pacific 3 sawmills PNW 2005 Floragon 1 sawmill PNW 2008 Pope and Talbot 2 sawmills BC Interior 2008 Portac 1 sawmill PNW 2010 Weyerhaeuser BC interior 275,000 m3 of tenu
Slide 11: State of the Art Operations
STATE OF THE ART OPERATIONS • Interfor has invested over $300 million in various strategic capital projects over the past several years, with additional projects now underway. Adams Lake, BC Grand Forks, BC Port Angeles, Washington Gilchrist, Oregon Swainsboro, Georgia Thomaston, Georgia 11
Slide 12: Significant Presence in US South
SIGNIFICANT PRESENCE IN US SOUTH • Interfor is the largest lumber producer in Georgia – market share >30%. Lumber Industry Capacity by Southern State 3.0 2.5 2013 2.0 Capacity Bbf 1.5 1.0 0.5 0.0 GA AL AR MS NC TX SC LA FL VA OK Source: FEA– December 2013 12
Slide 13: Georgia Operations
GEORGIA OPERATIONS Sawmill Regional Office 13
Slide 14: Favourable Log Supply in US South
FAVOURABLE LOG SUPPLY IN US SOUTH Growth & Drain, Bbf Int’1 ¼” Inventory, Bbf Int’l ¼” 50 300 45 290 Sawtimber Inventory 40 280 35 270 30 260 Growth Drain 25 250 20 240 15 230 Growth 10 Drain 220 Inventory 5 210 0 200 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: FEA– October 2014 14
Slide 15: Diverse Lumber Mix
DIVERSE LUMBER MIX Lodgepole/ By Species1 Ponderosa Pine By Dimension1 By Grade1 #3/Utility, Studs #4/Economy Cedar 4% Doug Fir / Other(2) 13% Grade 12% Larch 24% 13% 27% Specialty Grade(3) 37% Southern Boards / Yellow Industrials Pine 7% Dimension 27% Hem Fir Narrows 15% 38% #2/Standard Dimension G
Slide 16: Product Diversification Rationale
PRODUCT DIVERSIFICATION RATIONALE Specialty Benchmark Prices Commodity Benchmark Prices Monthly – Jan 2010 – Sep 2014 Monthly – Jan 2010 – Sep 2014 US$/Mbf US$/Mbf $500 $1,400 $450 $1,200 $400 $1,000 $350 $300 $800 $250 $600 $200 $400 $150 C$/Mbf SPF $100 Sep/141 $390 $200 Last Peak2 $593 $50 $0 $0
Slide 17: Diverse Market Profile
DIVERSE MARKET PROFILE 9 months ending September 2014 Average Shipments (By Volume) By End Market Euro & ME China/Tw/ Canada 1% HK 10% 15% Japan 6% USA 68% 17
Slide 18: Recent Initiatives/Current Focus
RECENT INITIATIVES/CURRENT FOCUS Canadian Operations • Castlegar sawmill upgrade project US Southeast Operations • Integrating Georgia operations under Interfor ownership • Phasing-in the Thomaston 2nd shift - - additional 80 MMbf • Identifying other reinvestment opportunities Pacific Northwest Oper
Slide 19: Castlegar Upgrade: Mill History
CASTLEGAR UPGRADE: MILL HISTORY 2008 2008 - 2013 2013 Next Steps Develop a Acquire additional Purchase a strong Invest to realize successful fiber to support and valuable fiber potential from the operating culture two shift supply for a wood basket. with operation. reasonable price. all key stakehol
Slide 20: Castlegar Upgrade: Project Summary
CASTLEGAR UPGRADE: PROJECT SUMMARY • Superior and secure fiber basket. • Aged infrastructure and outdated technology. • $50 million investment • Eliminate $20 mm of maintenance capex over the next 4 years • Modernize and convert from 3 line to 2 line operation • Increase recovery, production and gra
Slide 21: Castlegar Upgrade: Before and After
CASTLEGAR UPGRADE: BEFORE AND AFTER Castlegar Grand Forks and Adams Lake 21
Slide 22: Summary Income Statement
SUMMARY INCOME STATEMENT C$ millions Q3 2014 Q2 2014 Sales $373.1 $390.2 Adjusted EBITDA1 $45.4 $47.3 Adjusted EBITDA Margin2 12.6% 13.0% Adjusted EBITDA/Mbf2 $79 $80 Notes: (1) Excludes Other Income and Long-term Incentive Compensation expense (2) Excludes impacts from discontinued Beaver operation
Slide 23: Strong Capital Structure
STRONG CAPITAL STRUCTURE • Interfor has a strong balance sheet, with significant liquidity • Average interest rate of approximately 3.2% (73% of debt has locked-in rates) C$ millions Sep 30, 2014 Net debt $204 Additional liquidity of Book Equity $190 mm $630 Invested capital $834 Net debt / invested
Slide 24: Capital Spending Profile
CAPITAL SPENDING PROFILE • Interfor has continually reinvested in its assets throughout the cycle • Current focus is on high-return projects $100.0 $90.0 $80.0 $70.0 $60.0 $ mm's $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 2008 2009 2010 2011 2012 2013 9 mths 2014 Depreciation, Depletion & Amortization(1) Ca
Slide 25: Key Takeaways
KEY TAKEAWAYS • Pure play in lumber. • Track record of growth over the last several years. • Acquisitions • Strategic capital investments • Balanced geographic base and diverse product offering. • Conservative balance sheet with additional financial capacity for future growth. • Business upside: • I
Slide 26: Appendix
AS INTERFOR Building Value APPENDIX 26
Slide 27: US Housing Starts
US HOUSING STARTS Millions (SAAR) 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 Housing Starts 0.4 Underlying Demand Pent-Up Demand 0.2 0.0 Source: FEA– October 2014 27
Slide 28: North American Lumber Consumption
NORTH AMERICAN LUMBER CONSUMPTION Bbf 80 87% 86% 70 85% 84% 60 83% 82% 50 81% 80% 40 79% 30 78% US Canada US Share (R) 77% 20 76% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: FEA– October 2014 28
Slide 29: North American Lumber Exports to China
NORTH AMERICAN LUMBER EXPORTS TO CHINA Source: Wood Markets International Monthly Report – March 2014 29
Slide 30: 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) 30
Slide 31: China Markets – Sectors Under Development
CHINA MARKETS – SECTORS UNDER DEVELOPMENT Public buildings Apartment infill walls / partition walls Multi-story residential Mixed-use hybrid 31
Slide 32: China Markets – Use of BC Wood
CHINA MARKETS – USE OF BC WOOD House framed with SPF lumber SPF used for furniture frames Cedar used as siding Cedar used as siding and for outdoor structures and for outdoor structures 32
Slide 33: Impact of Mountain Pine Beetle (MPB)
IMPACT OF MOUNTAIN PINE BEETLE (MPB) Million m3 Source: FEA– October 2014 33
Slide 34: MPB – Area Affected
MPB – AREA AFFECTED • Interfor’s southern BC Interior wood baskets are less exposed to the MPB than BC’s central and northern interior regions; the Coast is not exposed. Interfor AAC1 MMm3 Central and Northern BC 0.0 50 – 75% Pine Adams Lake in Southern BC 0.5 28 – 30% Pine Castlegar & Grand Forks i
Slide 35: US South Sawtimber Prices
US SOUTH SAWTIMBER PRICES US$/Ton (Nominal $’s) $60.0 $50.0 $40.0 $30.0 $20.0 $10.0 $0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: FEA– October 2014 35
Slide 36: Regional Production vs Peak (Bbf)
REGIONAL PRODUCTION VS PEAK (Bbf) BC lumber Production Eastern Canada Lumber Production US West lumber Production 36 Source: FEA–October 2014