INVESTOR PRESENTATION February 2019 TSX:WEF Forward Looking - PowerPoint PPT Presentation

INVESTOR PRESENTATION February 2019 TSX:WEF

Forward Looking Statements and Non-GAAP Financial Measures All financial references are expressed in C$ unless otherwise noted. This presentation contains statements and estimates that may constitute forward-looking statements under the applicable securities laws. Readers are cautioned against placing undue reliance on forward-looking statements. All statements herein, other than statements of historical fact, may be forward-looking statements and can be identified by the use of words such as “will”, “estimate”, “project”, “expect”, “anticipate”, “plan”, “intend”, “believe”, “seek”, “should”, “likely”, “pursue” and similar references to future periods. Forward-looking statements in this presentation include, but are not limited to, statements relating to our current intent, belief or expectation with respect to: domestic and international market and economic conditions; our growth, marketing, wholesale and capital allocation plans and strategies; our competitive position and expectations regarding future competition; regulatory developments, including, but not limited to, allowable annual cut levels; and product pricing and logistics. Although such statements reflect management’s current reasonable beliefs, expectations and assumptions as to, amongst other things, the future supply and demand of forest products, global and regional economic activity and the consistency of the regulatory framework within which the Company current operates, there can be no assurance that forward-looking statements are accurate, and actual results and performance may materially vary. Many factors could cause our actual results or performance to be materially different including: general economic conditions, international demand for lumber and logs, competition and selling prices, international trade disputes, changes in foreign currency exchange rates, labour disruptions, natural disasters, relations with First Nations groups, changes in laws, the availability of fibre and allowable annual cut, changes in regulations or public policy affecting the forestry industry, changes in opportunities and the factors discussed in the Company’s annual MD&A, which is available on our website at www.westernforest.com. The foregoing list is not exhaustive, as other factors could adversely affect our actual results and performance. Forward-looking statements are based only on information currently available to us and refer only as of the date hereof. Except as required by law, we undertake no obligation to update forward-looking statements. During the course of this presentation, certain non-GAAP financial information will be presented. Definitions and reconciliation of terms can be found in the Company’s annual and quarterly MD&A for Western Forest Products Inc. (the “Company”). 1

Section 1: Company Snapshot

Investment Highlights Margin-focused strategy with exposure to growing lumber demand High-value, diverse products serving global markets Business of scale and leader in our key markets Strong financial position and attractive dividend Stability of earnings due to specialty product focus Superior timber asset base and secure fibre supply Committed to enhancing and growing shareholder value Western is well-positioned to capitalize on improving market fundamentals 3

Operations Snapshot  Margin-focused, specialty lumber company Sawmill Remanufacturing – Leading cedar lumber, timbers and Japan square manufacturer in British Columbia North America  Serve global markets from Coastal Vancouver (Head Office) B.C. and Washington Arlington (acquired 2018)  Recently expanded operations into the U.S. Pacific Northwest Washington  Lumber capacity in excess of one billion board feet at eight sawmills Canada Columbia Vista (acquired 2019) U.S.  Four remanufacturing facilities See Appendix for detailed listing of sawmills and remanufacturing facilities Strategically located manufacturing locations with secure fibre supply 4

Financial Snapshot  2018 Sales by Product 2018 revenue of $1.2 billion  2018 EBITDA of $144 million 7% Specialty Lumber 13% Commodity Lumber  Market cap. of ~$720 million 1 $1.2 Logs billion 59% 21%  Quarterly dividend of By-products 59% $0.0225 per share Specialty Lumber $0.09 per share annually – 2018 Sales by Geography Current yield of 4.8% 1 – Canada 16% 24% United States 13% $1.2 China  Well capitalized balance billion Japan sheet 8% 1% Other Final destination 38% 38% of a portion of Europe International Canadian sales are to international markets (1) Based on closing share price of $1.88 on February 25, 2019 Strong financial performance, well capitalized balance sheet and attractive dividend 5

Executing on Strategic Priorities  Pursue margin-focused business opportunities and acquisitions Explore Opportunities  Grow wholesale lumber business  Growth opportunities in the U.S. Pacific Northwest  Optimize operations to improve margins Grow the  Targeted, high-margin products of scale to Base selected customers  Non-capital margin improvement programs  Strategic capital investments Strengthen  Invest in people and systems Foundation  Mutually beneficial relationships with First Nations Focus on growing long-term shareholder value 6

Section 2: Company Updates

Strengthen the Foundation: Newly Formed Limited Partnership with Huu-ay-aht First Nations (“HFN”)  Agreement for HFN to purchase a 7% TFL 44 Port interest from WFP in a newly formed Alberni Somass Sawmill Limited Partnership (“LP”) Alberni Pacific Sawmill TFL 44 – LP consists of certain assets and liabilities of WFP’s Port Alberni Forest Operation, TFL 44 including TFL 44 (AAC of 782,482 m 3 ) Ucluelet Purchase price of $7.2 million ($132 per m 3 ), – Bamfield subject to customary closing adjustments  WFP will continue to source fibre from the LP to support our B.C. manufacturing operations  Scheduled closing: Late Q1-2019 BC Subject to customary closing conditions and – B.C. government approval Continue to explore mutually beneficial relationships with First Nations 8

Strengthen the Foundation: Recent Executive Management Appointments Name & Position Background  Over 30 years of sales, manufacturing and management experience in the forest products sector and manufacturing industry, including on the coast of B.C.  Most recently SVP, Sales, Marketing and Logistics at Norbord  13 years as President of Raute North America, an engineering and Bruce Alexander manufacturing company, and over 12 years in various corporate, operations and sales roles at Interfor SVP, Sales, Marketing and Manufacturing  Previously COO of Highland Helicopters  30 years of lumber marketing experience  Over 20 years as President of Vanport Canada, a leading lumber wholesale company  Proven track record of building highly successful supply and sales Don McGregor agreements in North America and Asia VP, Wholesale Lumber Strengthens WFP’s management team to execute on our strategic priorities 9

Growing the Business: New Wholesale Lumber Business Unit  Form strategic agreements with global suppliers, enabling WFP to broaden the scope of our specialty products offerings  Combination of WFP’s existing product portfolio and complementary supply from new strategic relationships, will enable WFP to offer an expanded product line that will deliver greater value to our customers Will make our existing business and product offerings stronger –  New products will originate in the U.S., Asia, Europe and Canada – Comprised of finished products, as well as lumber products that could be further processed at Arlington or with other strategic remanufacturing partners Growing global supply of targeted specialty products for our selected customers 10

Growing the Business: Acquisition of Columbia Vista  Acquired February 2019 for US$30.5 million 1  Located in Vancouver, Washington  Focuses production on Douglas fir specialty products for Japanese and U.S. markets – Complements our B.C. hemlock business into Japan Sawmill and log yard  Annual lumber production: ~60 million board feet  Columbia Vista’s owner will remain with Western in a consulting capacity Remanufacturing: Kilns and planer (1) Subject to post closing working capital adjustments Growing our operations in the U.S. Pacific Northwest 11

Growing the Business: Arlington, Washington Lumber Distribution and Processing Facility  Acquired January 2018 for $11.6 million Planer Installation Planer Installation  18 acre distribution and processing facility Overview  170,000 square feet covered storage  Rail spur on site serviced by BNSF  Increase production of targeted specialty products and expanded finishing capacity  Fits With Our Increase margins by growing the sale of Lumber Sales finished products, closer to the end Strategy customer  Centralized warehousing and distribution near the high value U.S. west coast corridor  Site and infrastructure improvements completed in Q2-2018, enabling distribution Capital activity to commence from the site Improvements  Equipment installation is nearing Update completion; expect to commission Trimmer secondary processing late in Q1-2019 Arlington creates centralized distribution and growth in finished products 12

Section 3: Company Overview