West Fraser Timber Co. Ltd. · TSX:WFG
West Fraser Timber — Non-Deal Roadshow (June 2012)
37 slides from West Fraser Timber's roadshow presentation, Jun 13, 2012
Slide 1: CIBC Investor Tour Quesnel, B.C.
CIBC Investor Tour Quesnel, B.C. June 13, 2012 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation and comments associated with it contain forward-looking statements including statements relating to U.S. housing recovery, the potential for constrained lumber supply, pent up U.S. housing demand, projected SPF shipments to China, projected B.C. Interior
Slide 3: West Fraser
cI West Fraser
Slide 4: Quesnel Mill - 1956
Quesnel Mill - 1956 West Fraser
Slide 5: Business Philosophy – Low Cost
Business Philosophy – Low Cost 5
Slide 6: Business Philosophy – Re-invest Profits
Business Philosophy – Re-invest Profits Quesnel Sawmill 6
Slide 7: Business Philosophy – Strong Balance Sheet
Business Philosophy – Strong Balance Sheet 800 Reduced debt by $460 million during the worst lumber market since the Great Depression 700 600 500 $ millions 400 300 200 100 0 Dec - 2007 Dec - 2011 25% Net Debt to Capital 14% Net Debt to Capital 7 7
Slide 8: Business Philosophy – People
Business Philosophy -People Strong, stable Senior management Internal promotion Continuity of Culture Predominantly non-union 8
Slide 9: Since The Downturn
West Fraser Since The Downturn Since the downturn in North American lumber markets began in 2006, in addition to paying down nearly $500 million of debt, we have significantly improved the Company’s asset profile by: investing over $300 million of softwood lumber duty refunds to acquire 13 U.S. Sout
Slide 10: Since the Downturn (cont.)
West Fraser Since the Downturn (cont.) upgraded our NBSK operations by expanding capacity, reducing costs and improving reliability so that they are now highly competitive received $88 million of Green Transformation Credits which has been invested in high payback energy-related projects initiated,
Slide 11: Product Diversification
West Fraser Product . Diversification Lumber Panels Pulp & Paper 26 Mills 6 Mills 5 Mills SPF 3.5 Bfbm Plywood: 830 MMsf3/8” NBSK: 590 Mtonnes SYP 2.0 Bfbm MDF: 300 MMsf3/4” BCTMP: 640 Mtonnes Total 5.5 Bfbm LVL: 3.2 MMcf Newsprint: 135 Mtonnes North America’s largest Largest plywood Third largest p
Slide 12: Trend Sales Mix
West Fraser Trend Sales Mix Pulp & Paper 24% Panels Lumber 13% 63% •Growth, Integration and Diversification 12 •Developing a Bio-energy and Bio-products business 12
Slide 13: Geographic Diversification
West Fraser Geographic Diversification 13 13
Slide 14: Geographic Diversification – Lumber Capacity Location
West Fraser – Geographic Diversification Lumber Capacity Location U.S. 35% B.C. 46% Alberta 19% 14 14
Slide 15: Lumber Production
West Fraser Lumber Production 6,000 4,911 5,000 4,212 4,000 MMfbm 3,000 2,000 1,713 1,000 0 2000 2005 2011 15
Slide 16: 2011 Lumber Production
2011 Lumber Production 6.0 4.9 5.0 Billion Board Feet 4.0 3.6 3.6 3.0 2.3 1.9 2.0 1.0 0.0 West Fraser Canfor Weyerhaeuser Stora Enso Tolko Growth in our core business Source: Company reports. 16 16
Slide 17: SPF Lumber Geographic Sales Mix
West Fraser SPF Lumber Geographic Sales Mix ($) 2011 2005 Non U.S., Non U.S., 38% U.S., 45% 55% U.S., 62% 17 17
Slide 18: Lumber Opportunity – Alberta Key Advantages
West Fraser – Lumber Opportunity Alberta – Key Advantages competitive cost structure expanding log supply less impact from mountain pine beetle than B.C. West Fraser currently operates 30% of Alberta’s lumber capacity 18 18
Slide 19: Lumber Opportunity – U.S. South Key Advantages
West Fraser – Lumber Opportunity U.S. South – Key Advantages proximity to market demographics support long-term housing growth expanding log supply currency and trade (softwood lumber duties) hedge 19 19
Slide 20: Lumber Operating Rate - 2011
West Fraser – Lumber Opportunity Lumber Operating Rate - 2011 110% 100% 97% % of Capacity 90% 80% 78% 75% 72% 71% 70% 67% 60% 50% WFT WFT B.C. U.S. U.S. Canada Canada U.S. Interior South Low-cost structure allows for higher operating rates in down market 20 20
Slide 21: Strong Cash Generation
West Fraser Strong Cash Generation ($ million) Total 2011 2010 2009 2008 Cash from Operations 788 85 421 96 186 Capital Expenditures * 367 213 89 18 47 Dividends 66 24 8 10 24 * 2011 and 2010 includes pulp Green Transformation projects 21 21
Slide 22: Total Shareholder Return
West Fraser Total Shareholder Return (Cdn$) (June 2006* – May 17, 2012) 40% 29% 30% 20% 10% 10% 2% 0% -10% -4% -20% -30% -26% -40% -38% -50% West Fraser S&P/TSX Dow Competitor A Competitor B Competitor C * June 2006 marked the beginning of the steep decline in U.S. housing starts 22 Source TD Bank 2
Slide 23: Why Invest in West Fraser?
Why Invest in West Fraser? proven ability to generate strong cash flow even in worst markets consistent, straightforward business plan loyal, long-term employee and management base conservative financial management coupled with proven ability to grow strategically 23 23
Slide 24: U.S. Housing Starts
U.S. Housing Starts (Seasonally Adjusted 1947 - 2012) Source: U.S. Census Bureau 2,950 2,450 1,950 Thousands 1,450 950 450 Jan-47 Jan-52 Jan-57 Jan-62 Jan-67 Jan-72 Jan-77 Jan-82 Jan-87 Jan-92 Jan-97 Jan-02 Jan-07 Jan-12 Longest housing trough in history 24
Slide 25: U.S. Housing Forecast (2012 & 2013)
U.S. Housing Forecast (2012 & 2013) Single & Multi family 1,000 900 800 700 600 000 500 400 300 200 100 0 NAR RBC NAHB APA Wells FEA RISI Wood Average Fargo Markets Source: APA/Wood Markets 25
Slide 26: Historically High Home Vacancies Indicates Large Shadow Inventory
Historically High Home Vacancies Indicates A Large Shadow Inventory Exists In The U.S. Thousands This gap is one estimate of overhang of existing homes *Assumes 12.5% Vacancy Rate Source: FEA 26
Slide 27: Initial Claims for Unemployment Insurance Below Key 400,000 Level
Initial Claims for Unemployment Insurance Below Key 400,000 Level 4-Week Moving Average 700,000 600,000 500,000 400,000 300,000 Jan-09 Jan-10 Jan-11 Jan-12 Source: FEA 27
Slide 28: Underlying Demand for Housing
Underlying Demand for Housing 300,000 units removed annually Positive demographics Severely under built the last 5 years Reduction in housing size may be exaggerated 28
Slide 29: SPF Shipments from Canada to China
SPF Shipments from Canada to China 3,000 2,662 2,500 2,000 1,585 MMfbm 1,500 1,000 836 500 358 152 0 2007 2008 2009 2010 2011 Source: COFI China has become a major consumer of Canadian softwood lumber 29
Slide 30: India Japan
India Japan 30
Slide 31: Transportation/Distribution
Transportation/Distribution 31
Slide 32: Supply Constraints – Mountain Pine Beetle
Supply Constraints – Mountain Pine Beetle Approximately 1 Billion m3 Dead or Dying 32
Slide 33: Supply Constraints – Quebec Annual Allowable Cut Forecast
Supply Constraints Quebec Annual Allowable Cut 35 33 Forecast 31 29 M illion M 3 27 25 23 21 19 17 15 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Source: FEA 33
Slide 34: Potential For Constrained Supply
Potential For Constrained Supply Mountain Pine Beetle Eastern Canadian harvest reductions Boreal Accord 34
Slide 35: Is A Recovery On The Horizon?
Is A Recovery On The Horizon? • Canada will have limited ability to supply North American lumber demand • U.S. consumption will increase substantially from current levels • Export demand will remain high • Recovery slow and bumpy but moving in proper direction • Supply constraints will lead to price
Slide 36: WFT – Toronto Stock Exchange
“WFT” – Toronto Stock Exchange www.westfraser.com These materials have been prepared by Management of the Company. No regulatory authority has approved or disapproved of the contents of these materials. These materials do not constitute an offer to sell or the solicitation of an offer to buy any sec
Slide 37: West Fraser
td West fraser,