PAGE 1 Canfor Corporation Don Kayne, President and Chief Executive Officer C A N F O R C O R P O R A T I O N
PAGE 2 Forward Looking Statements g ► The presentation and answers to questions today contain forward looking ► The presentation and answers to questions today contain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Factors that could have a material impact on any future oriented statements made herein include, but are not limited to: general economic, market and business conditions, product selling prices, raw material and operating costs foreign exchange rates interest rates material and operating costs, foreign exchange rates, interest rates, changes in law and public policy, the outcome of trade disputes, and opportunities available to or pursued by the Company. ► For further details on these factors and our assumptions and applicable F f h d il h f d i d li bl risks and uncertainties, please refer to Canfor Corporation’s Annual Report for the year ended December 31, 2010 available at www.canfor.com or www.sedar.com. www.sedar.com. C A N F O R C O R P O R A T I O N
PAGE 3 Canfor Operations p Locations 1 Chetywnd 2 Ft. St. John 3 Grand Prairie, AB 4 Houston Core Holdings g 5 Isle Pierre 9 6 Mackenzie � 14 sawmills in Canada 26 7 Plateau (4.3 Bfbm) 8 Polar � 4 sawmills in US (0.6 9 Prince George Bfbm) 22 25 24 10 Quesnel � 50 2% interest in Canfor � 50.2% interest in Canfor 21 11 Radium Pulp (3 BC interior pulp 12 Rustad mills -1 million admt) 12 23 2 13 Vavenby 14 Daaquam, QC 27 1 15 Darlington, SC 6 3 4 Non Core Holdings 7 16 Graham, NC 5 8 17 Conway, SC � 50% interest -Peace 10 18 Camden, SC Valley OSB plant 14 19 Marion, SC � 2 panel plants in BC – 20 Bellingham , WA OSB & plywood OSB & plywood Sawmills 21 Tackama � 1 BCTMP pulp mill in BC 13 Remanufacture 22 PolarBoard 19 Plywood & OSB 23 Peace Valley 16 15 Head Office 11 24 Intercontinental Pulp & Paper 17 18 20 25 Prince George 26 Northwood 27 Taylor C A N F O R C O R P O R A T I O N
PAGE 4 Canfor Southern Operations – Southern Yellow Pine Canfor Southern Operations Southern Yellow Pine • 600 million board feet of capacity • Strong management team • Excellent fibre supply Excellent fibre supply • Modern facilities • Traditional thinking has led to highly regional markets • Creating new opportunities to C ti t iti t diversify our markets C A N F O R C O R P O R A T I O N
PAGE 5 Canfor Overview Canfor Overview 2010 Revenues ($2.4 billion) Assets ($2.8 billion) Lumber Lumber Pulp Pulp Panels and Panels and Other Other Market Capitalization (billions$) Market Capitalization (billions$) 2.5 2.0 1.5 1.0 0.5 0.0 CFP/CFX WFT NBD TMB IFP C A N F O R C O R P O R A T I O N
PAGE 6 Capital Expenditures Capital Expenditures ► 2010 capital spend of $90 million: � Maintenance capital - $25 million ► 2011 projected capital spend - $140 million (part of 3 year/ $300 million program) � Mill modernization and cost reduction � Improvement projects have a high ROI (+ 20%) � Announced $62 million in specific projects 160 140 120 100 80 80 60 40 20 0 0 2006 2007 2008 2009 2010 2011E C A N F O R C O R P O R A T I O N
PAGE 7 Fort St. John Upgrade pg • $45 million project, completed in 2011 • Rebuild of portions of sawmill and planer to increase grade and planer to increase grade recovery, productivity and to reduce costs • Increase in capacity from 220 to 300 million board feet t 300 illi b d f t • Top quartile mill with assured green fibre supply C A N F O R C O R P O R A T I O N
PAGE 8 Our Markets - Lumber Our Markets - Lumber SYP SYP 12% US 100% SPF 88% SPF Offshore 36% Market Focus China ► Grow Asian markets 27% • Expand SPF uses in China p ► Grow high value customers Canada 18% • Increase integration with U.S. retail customers US 46% • Key Asian customers K A i t Represents 2011 Q1 volumes C A N F O R C O R P O R A T I O N
PAGE 9 Customer Centric Organization Customer Centric Organization Product Offerings Product Offerings Product Offerings Product Offerings Offshore Home Centre Construction Reman Premium Grade Grade Grade C A N F O R C O R P O R A T I O N
PAGE 10 North America North America • Focus on repair and remodel and pro dealer markets • 45% of total SPF sales for 2011 are destined for the U.S. • Key customer relationships Key customer relationships provide broad market diversification • Significant integration with customers • Multi-story/multi-family and non- M lti t / lti f il d residential C A N F O R C O R P O R A T I O N
PAGE 11 Japan p • Traditional market in 2x4 house construction for our highest value construction for our highest value lumber • New opportunities in post and beam market (EWP & J-Grade) ( ) • Tsunami rebuild will increase demand in 12-18 months Market Breakdown 3% 21% 21% 2x4 House Construction 2x4 House Construction Post and Beam 76% Pre-Fabrication C A N F O R C O R P O R A T I O N
PAGE 12 China China Mmfbm 900 800 700 600 500 400 400 ► Long term commitment to China 300 ► Building codes are now more 200 conducive to wood frame d i t d f 100 construction (“WFC”) 0 ► Establishing 2 x 4 for the 2005 2006 2007 2008 2009 2010 2011F emerging WFC housing sector emerging WFC housing sector Low Grade #2 & Better C A N F O R C O R P O R A T I O N
PAGE 13 China China – Moving up the Value Chain Moving up the Value Chain 2011E 2013E 2% 8% Wood Frame Construction • Single family rural • Multi-family 6-storey Increase In Hybrid Construction – Infill Walls & Interior Partitions Wood Truss Replacement n Value 49% 51% Wood Products Remanufacturing • Specialty products • Engineered wood products • Doors, flooring and furniture g Concrete Forming 48% 39% • Residential high-rises • Infrastructure projects Company Estimates C A N F O R C O R P O R A T I O N
PAGE 14 China’s Rapid Urbanization p Shift to Urbanization • From 2000 to 2010, ~ 218 million people moved from rural to urban area • By 2025, urban population will represent 62 % of China’s population 1000 1000 70% 70% By 2025, China will have… 221 221 % of Urbanization 62%63% 60% 900 Urban 57% 60% Cities Cities 800 Rural 49% 50% 700 40% n 0) Population (,000 40% 40% % of Urbanizatio 35% 600 31% 28% 23 23 500 30% 23% 22 22 11%13%15%17%18%18%20% Cities Cities 400 20% 15 15 Cities Cities 300 Cities Cities 10% 200 > 5 > 5 0% > 10 > 10 > 1 > 1 > 25 > 25 100 million million million million million million million million people people people people people people people people 0 -10% 1950 950 1960 960 1970 9 0 1980 980 1990 990 2000 000 2010 0 0 2020 0 0 2030 030 Source: Chinadaily.com Source: United Nations C A N F O R C O R P O R A T I O N
PAGE 15 Market Pricing - “The China Effect” Market Pricing The China Effect 450 2,500 400 2,000 350 SPF 2x4 #2&B in USD (left axis) 300 1,500 250 200 200 1,000 150 US Housing Starts 000's (right axis) 100 500 500 50 0 0 Jan ‐ 05 Jan ‐ 06 Jan ‐ 07 Jan ‐ 08 Jan ‐ 09 Jan ‐ 10 Jan ‐ 11 C A N F O R C O R P O R A T I O N
PAGE 16 Freight Advantage - Asia Freight Advantage Asia O Edmonton Ed t # of Containers # of Containers 12,500 12,500 11,000 Prince George 4,881 Prince 3,750 3,750 3,750 3,750 3,100 3 100 Rupert 1,802 863 84 2009 2010 2011 2012 2013 Forcast Forecast Forecast Source: Costco 2011 Growth Forecast • Strategic location as closest Canadian port to Asia • New breakbulk program to assist in diversification from containers • PG/Prince Rupert 126% • Container stuffing capacity growth at Port of Vancouver • Edmonton 520% • Prince Rupert offers several opportunities for throughput increase • Vancouver 1.6% • Edmonton Reload – container stuffing for China utilizing back haul rate C A N F O R C O R P O R A T I O N
PAGE 17 Green Building Focus Green Building Focus • Planted 30 million trees in 2010, twice the number Planted 30 million trees in 2010 t ice the n mber harvested • Signatory to the Canadian Boreal Forest Agreement • 97% of our annual allowable cut is certified under the Canadian Standards Association for the Canadian Standards Association for Sustainable Forest Management • Committed to being carbon neutral • Utilizing virtually 100% of wood residuals in value Utilizing virtually 100% of wood residuals in value added applications C A N F O R C O R P O R A T I O N
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