Canfor Corporation Don Kayne, President and Chief Executive Officer - - PowerPoint PPT Presentation

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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

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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

• ther 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

• riented 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

• pportunities available to or pursued by the Company.

F f h d il h f d i d li bl ► For further details on these factors and our assumptions and applicable 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.

C A N F O R C O R P O R A T I O N

www.sedar.com.

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Canfor Operations

Locations

p

Core Holdings

1 Chetywnd 2

• Ft. St. John

3 Grand Prairie, AB 4 Houston 5 Isle Pierre

g

14 sawmills in Canada (4.3 Bfbm) 4 sawmills in US (0.6 Bfbm) 50 2% interest in Canfor

6 Mackenzie 7 Plateau 8 Polar 9 Prince George 10 Quesnel

9 21 22 24 25 26

50.2% interest in Canfor Pulp (3 BC interior pulp mills -1 million admt)

11 Radium 12 Rustad 13 Vavenby 14 Daaquam, QC 15 Darlington, SC

1 2 3 6 12 27 23

Non Core Holdings

50% interest -Peace Valley OSB plant 2 panel plants in BC – OSB & plywood

16 Graham, NC 17 Conway, SC 18 Camden, SC 19 Marion, SC 20 Bellingham , WA

4 5 7 8 10 14

OSB & plywood 1 BCTMP pulp mill in BC

21 Tackama 22 PolarBoard 23 Peace Valley 24 Intercontinental 25 Prince George

11 13 15 16 17 18 19 20

Head Office

Sawmills Remanufacture Plywood & OSB Pulp & Paper

C A N F O R C O R P O R A T I O N

26 Northwood 27 Taylor

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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 C ti t iti t

• Creating new opportunities to

diversify our markets

C A N F O R C O R P O R A T I O N

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Canfor Overview Canfor Overview

2010 Revenues ($2.4 billion) Assets ($2.8 billion)

Lumber Pulp Lumber Pulp

Market Capitalization (billions$)

Panels and Other Panels and Other

Market Capitalization (billions$)

1.5 2.0 2.5 0.5 1.0 C A N F O R C O R P O R A T I O N 0.0 CFP/CFX WFT NBD TMB IFP

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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 80 100 120 140 20 40 60 80 C A N F O R C O R P O R A T I O N 2006 2007 2008 2009 2010 2011E

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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

t 300 illi b d f t to 300 million board feet

• 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

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Our Markets - Lumber Our Markets - Lumber

SYP

SYP 12% US 100% SPF 88%

Market Focus

► Grow Asian markets

• Expand SPF uses in China

Offshore 36%

SPF

China 27%

p ► Grow high value customers

• Increase integration with U.S.

retail customers K A i t

Canada 18% US 46%

C A N F O R C O R P O R A T I O N

• Key Asian customers

Represents 2011 Q1 volumes

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Customer Centric Organization Customer Centric Organization

Product Offerings Product Offerings

Offshore Home Centre Construction Reman

Product Offerings Product Offerings

Premium Grade Grade Grade

C A N F O R C O R P O R A T I O N

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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 M lti t / lti f il d

• Multi-story/multi-family and non-

residential

C A N F O R C O R P O R A T I O N

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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

21% 3%

Market Breakdown

2x4 House Construction 21% 76% 2x4 House Construction Post and Beam Pre-Fabrication C A N F O R C O R P O R A T I O N

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China China

Mmfbm

700 800 900 400 500 600

► Long term commitment to China ► Building codes are now more d i t d f

200 300 400

conducive to wood frame construction (“WFC”) ► Establishing 2 x 4 for the emerging WFC housing sector

100 2005 2006 2007 2008 2009 2010 2011F

C A N F O R C O R P O R A T I O N

emerging WFC housing sector

Low Grade #2 & Better

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China – Moving up the Value Chain China Moving up the Value Chain

2011E 2013E Wood Frame Construction

• Single family rural
• Multi-family 6-storey

2% 8%

Hybrid Construction – Infill Walls & Interior Partitions Wood Truss Replacement Increase In Wood Products Remanufacturing

• Specialty products
• Engineered wood products
• Doors, flooring and furniture

49% 51%

n Value

g

Concrete Forming

• Residential high-rises
• Infrastructure projects

48% 39%

C A N F O R C O R P O R A T I O N

Company Estimates

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China’s Rapid Urbanization

Shift to Urbanization

p

70% 1000

• From 2000 to 2010, ~ 218 million people

moved from rural to urban area

• By 2025, urban population will represent 62

% of China’s population

40% 49% 57% 60% 62%63% 40% 50% 60% 70% 700 800 900 1000 n 0)

% of Urbanization Urban Rural

By 2025, China will have…

221 221

Cities Cities

11%13%15%17%18%18%20% 23% 28% 31% 35% 20% 30% 40% 300 400 500 600 % of Urbanizatio Population (,000

23 23

Cities Cities

22 22

Cities Cities

15 15

• 10%

0% 10% 100 200

1950 1960 1970 1980 1990 2000 2010 2020 2030

> 5 > 5 million million people people > 10 > 10 million million people people

Cities Cities

> 25 > 25 million million people people > 1 > 1 million million people people

C A N F O R C O R P O R A T I O N 950 960 9 0 980 990 000 0 0 0 0 030 Source: Chinadaily.com Source: United Nations

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Market Pricing - “The China Effect” Market Pricing The China Effect

2,500 450 2,000 350 400

SPF 2x4 #2&B in USD (left axis)

1,500 200 250 300 500 1,000 100 150 200

US Housing Starts 000's (right axis)

500 50 C A N F O R C O R P O R A T I O N Jan‐05 Jan‐06 Jan‐07 Jan‐08 Jan‐09 Jan‐10 Jan‐11

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Freight Advantage - Asia

Ed t

Freight Advantage Asia

O Edmonton

4,881 11,000 12,500 12,500 3 100 3,750 3,750

# of Containers # of Containers

Prince George Prince Source: Costco

863 84 1,802 3,100 3,750 3,750 2009 2010 2011 Forcast 2012 Forecast 2013 Forecast

Rupert

2011 Growth Forecast

• PG/Prince Rupert

126%

• Edmonton

520%

• Strategic location as closest Canadian port to Asia
• New breakbulk program to assist in diversification from containers
• Container stuffing capacity growth at Port of Vancouver

C A N F O R C O R P O R A T I O N

• Vancouver

1.6%

• Prince Rupert offers several opportunities for throughput increase
• Edmonton Reload – container stuffing for China utilizing back haul rate

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Green Building Focus Green Building Focus Planted 30 million trees in 2010 t ice the n mber

• Planted 30 million trees in 2010, twice the number

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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BC Fibre Outlook – Production Capacity p y

Capacity = 1,300Mfbm

60 70

p y ,

10 20 30 40 50 60 70 10 20 30 40 50 2010 2020

Pine Spruce/Other Species

Fort St. John Capacity = 1,000Mfbm

10 2010 2020

Pine Spruce/Other Species p p

60 80 100

Prince George Houston Capacity = 1,500Mfbm

20 40 2010 2020

Pine Spruce/Other Species

Vavenby Capacity = 400Mfbm

10 20 30 40 50 60 70 80

C A N F O R C O R P O R A T I O N

2010 2020

Pine Spruce/Other Species

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Long Term Outlook – Lumber Markets Long Term Outlook Lumber Markets

New Home R&R Non-Residential Industrial Canada Asia North American Capacity Bbf 70 80 90 Operating Rate: 95%, Average Price: C$517 Operating Rate: 93%, Average Price: ? O ti R t 60% A P i C$205 50 60 70 US Housing Starts (000’s) 2010 – 590 2011 – 600 2012 725 Operating Rate: 60%, Average Price: C$205 20 30 40 2012 – 725 2013 – 1,000 2014 – 1,350

20.5BBF 20.4BBF

10

27.6BBF 15.5BBF

C A N F O R C O R P O R A T I O N Source: Woodbridge Associates Inc., Company Estimates, USDA Capacity growth rate estimated at 2.2% based on historic figures

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Canfor Pulp Canfor Pulp

► Controlling interest in Canfor Pulp Limited Partnership (50.2%) g p p ( ) ► 2010 declared cash distributions of $92 million ► NBSK pulp markets remain tight (high prices)

North America Europe Asia

950 1000 1050

35 40

Canfor’s distributions from Canfor Pulp

CAD millions$ US$/ADMT

45% 37%

North America Europe Asia

600 650 700 750 800 850 900 950

5 10 15 20 25 30 18% Tissue P&W Specialty Commodity

600

Q1.08 Q2.08 Q3.08 Q4.08 Q1.09 Q2.09 Q3.09 Q4.09 Q1.10 Q2.10 QQ3.10 Q4.10 Q1.11

Cash Distributions NBSK Pulp List Price del. US (right axis)

21% 50% 22% 7%

C A N F O R C O R P O R A T I O N

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Optimistic about the Future Optimistic about the Future U S l b k t ill

• U.S. lumber market will recover
• Continued growth in Asia
• Significant increased demand for Green

Building Products

• Improving lumber prices
• Improving lumber prices
• Supply/Demand metrics point to lumber

shortage in the future shortage in the future

C A N F O R C O R P O R A T I O N

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Canfor Corporation Canfor Corporation

These materials have been prepared by Management of the Company. No regulatory authority has approved

• r disapproved of the contents of these materials

These materials do not constitute an offer to sell or the

• r 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 securities of the Company and shall not constitute an offer, solicitation or sale

• f the Company’s securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

Securities of the Company may not be offered or sold in the United States absent their prior registration or qualification or an applicable exemption from the applicable registration or qualification requirements.

TSX:CFP

www.canfor.com

Contacts: Alan Nicholl – SVP Finance and CFO Patrick Elliott – VP and Treasurer 604 661 5370 604 661 5441

C A N F O R C O R P O R A T I O N

Alan.Nicholl@canfor.com Patrick.Elliott@canfor.com

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Appendix Appendix

C A N F O R C O R P O R A T I O N

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Leveraged to a Lumber Market Recovery Leveraged to a Lumber Market Recovery

2,000

US Housing Starts EBITDA Sensitivity ($ millions)

500 1,000 1,500 Full Capacity

April 2011

500 2011 2012 2013 2014 RISI FEA RJ 200 300 400 500

SPF 2x4 #2&B Price (USD)

Current Capacity

Q1.11 Average

100 200 2011 2012 2013 2014 10 20 30 40 50 US$10 Lumber Price Change

C A N F O R C O R P O R A T I O N

RISI FEA RJ

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Capitalization and Liquidity (as at April 1 2011) Capitalization and Liquidity (as at April 1, 2011)

All information excludes CPLP Long Term Debt $ Millions

Senior Unsecured Notes 6.33% 2012 50 Senior Unsecured Notes 5.42% 2013 75

Liquidity $ Millions

Syndicated credit facility Oct 2013 350 Other credit facility Jan 2012 12 Total Debt 125 Cash 119 Shareholders’ Equity 1,476 Net Debt to Total Capitalization <1% Outstanding Letters of Credit (18) Cash balance 119 Net Liquidity 463 C A N F O R C O R P O R A T I O N

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CFP Trading Liquidity CFP Trading Liquidity

CFP WFT IFP

Average Daily Trading Volume (in shares)

300,000 400,000 500,000 600,000

Major Shareholders*

100,000 200,000 2006 2007 2008 2009 2010

Average Daily Trading Value (in $)

The Pattison Group 36% Mackenzie Cundill 14% Jarislowsky Fraser 12%

4 000 000 5,000,000 6,000,000 7,000,000

CFP WFT IFP

* As per public filings

1,000,000 2,000,000 3,000,000 4,000,000 2006 2007 2008 2009 2010

C A N F O R C O R P O R A T I O N Source: Bloomberg

2006 2007 2008 2009 2010

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US Employment will drive US Housing Starts p y g

Housing Starts - Thousands (left axis) Total Non Farm Payrolls - millions (right axis) 136 138 140 2,000 2,500 128 130 132 134 1 000 1,500 122 124 126 128 500 1,000 120 122 Dec-00 Apr-01 Aug-01 Dec-01 Apr-02 Aug-02 Dec-02 Apr-03 Aug-03 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 C A N F O R C O R P O R A T I O N Source: US Bureau of Labour, US Census Bureau

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Housing Inventory Overhang - U.S. Vacant Units g y g

Total Vacancies (millions) Percentage of Total Housing Inventory (right axis) 14% 16% 16 18 20 8% 10% 12% 10 12 14 4% 6% 8% 6 8 10 0% 2% 4% 2 4

C A N F O R C O R P O R A T I O N

0%

Q2.00 Q2.01 Q2.02 Q2.03 Q2.04 Q2.05 Q2.06 Q2.07 Q2.08 Q2.09 Q2.10