RBC Capital Markets Forest Products Investor Day INVESTOR - - PowerPoint PPT Presentation

▶
rbc capital markets forest products investor day
SMART_READER_LITE
LIVE PREVIEW

RBC Capital Markets Forest Products Investor Day INVESTOR - - PowerPoint PPT Presentation

Jan 16, 2023 786 likes •1.16k views

RBC Capital Markets Forest Products Investor Day INVESTOR PRESENTATION April 16, 2015 Toronto, Ontario Forward-Looking Statements This presentation and comments associated with it contain forward-looking statements including statements

slide-1
SLIDE 1

RBC Capital Markets Forest Products Investor Day

INVESTOR PRESENTATION

April 16, 2015 Toronto, Ontario

slide-2
SLIDE 2

2

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, energy-related opportunities, earnings sensitivity and estimated annual capital expenditures. These statements are subject to the cautionary statement which introduces West Fraser’s 2014 Annual Management’s Discussion & Analysis which can be accessed on the Company website www.westfraser.com.

Forward-Looking Statements

slide-3
SLIDE 3

3

  • To be a leading forest products manufacturer,

focused on solid wood products

  • Strong financial results through the business cycle
  • Long-term growth and shareholder value

enhancement

  • Stable, conservative financial structure

Our Goals

slide-4
SLIDE 4

4

  • Operational excellence
  • Diversification
  • Product differentiation
  • Integration

Our Strategy

slide-5
SLIDE 5

5

  • Managing to ensure a committed workforce
  • Cost control and efficiency
  • Continuous reinvestment
  • Internal and external benchmarking and

competition

  • Straightforward, consistent business model

Operational Excellence

slide-6
SLIDE 6

6

LUMBER

27 mills

PANELS

7 mills

PULP & PAPER

5 mills SPF 3.9 Bfbm SYP 2.3 Bfbm Total 6.2 Bfbm Plywood: 830 MMsf3/8” MDF: 300 MMsf3/4” LVL: 3.2 MMcf NBSK: 570 Mtonnes BCTMP: 650 Mtonnes Newsprint: 135 Mtonnes

Product Diversification

  • North America’s largest lumber producer
  • Largest plywood producer in Canada
  • Third largest pulp producer in Canada
slide-7
SLIDE 7

7

Lumber 66% Panels 11% Pulp & Paper 23%

Trend Sales Mix ($)

slide-8
SLIDE 8

8

Operations diversified by geography

Geographic diversification

B.C. 40% Alberta 23% U.S. 37%

Lumber Capacity

slide-9
SLIDE 9

9

  • Wood as the best environmental choice
  • Renewable resource, sustainable business
  • Expanding applications
  • Bioenergy, full use of the resource

Product Differentiation

slide-10
SLIDE 10

10

  • Lumber, panels, pulp, newsprint and energy
  • Substantial fibre self-sufficiency
  • Fuller utilization of resource
  • Some benefits from counter-cyclicality
  • Better able to respond to new opportunities

such as bioenergy

Integration (in Canada)

slide-11
SLIDE 11

11

Demand - North American housing

  • Chinese construction and

industrial applications

  • Japanese housing

Supply

  • Fibre limitations
  • Residual offtake
  • Mill closures
  • People

Efficiency - Capital investment

  • Business model

Earnings Growth Drivers - Lumber

slide-12
SLIDE 12

12

Returns on Lumber

  • 10%
  • 5%

0% 5% 10% 15% 20% 25% 30% 35% 40% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EBITDA Margin (%) - Lumber

Average: 16%

slide-13
SLIDE 13

13

U.S. Housing

Million Units

Source: FEA, Q4 2014

Significant pent up demand bodes well for long-term recovery

Pent Up Housing Demand (conventional + mobile)

0.50 0.75 1.00 1.25 1.50 1.75 2.00 2.25 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Production Underlying Demand

slide-14
SLIDE 14

14

50% 55% 60% 65% 70% 75% 80% 85% 90% 30 year average share = 76%

US Housing Single Family Share well below 30 year average

Share of single-family housing starts

Source: FEA

slide-15
SLIDE 15

15

Unlike Single-Family, Multi-family has Recovered

Source: U.S. Census Bureau

50 100 150 200 250 300 350 400 450 500 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Thousands

Single-Family (Left Scale) Multi-Family (Right Scale)

slide-16
SLIDE 16

16

U.S. Lumber End Use

U.S. Lumber End-use 2013 U.S. Lumber End-use Normalized

Source: FEA and WF

Single Family Construction, 24% Multifamily Construction, 3% Residential Improvements, 38% Industrial Production, 30% Nonresidential/ Mobile, 5% Single Family Construction, 37% Multifamily Construction, 4% Residential Improvements, 29% Industrial Production, 23% Nonresidential/ Mobile, 7%

slide-17
SLIDE 17

17

Canadian Shipments to China

500 1,000 1,500 2,000 2,500 3,000 3,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 Mmfbm

Source: Council of Forest Industries, February 2015

Equivalent to 300,000 housing starts *

* Based on consumption of 11.5 Mfbm per U.S. housing start (average mix of single and multi family)

slide-18
SLIDE 18

18

B.C. Shipments to Japan

20 40 60 80 100 120 140 200 400 600 800 1,000 1,200 1,400 1,600

2006 2007 2008 2009 2010 2011 2012 2013 2014

Shipments 2x4 Starts

Source: Council of Forest Industries, February 2015

Mmfbm Thousand 2x4 Starts

slide-19
SLIDE 19

19

North American Lumber Capacity

slide-20
SLIDE 20

20

Canadian Fibre Supply

Million (M3)

Source: FEA, Q4 2014

10 20 30 40 50 60 70 80

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Annual Allowable Cut

Quebec Ontario BC Interior

Forecast

slide-21
SLIDE 21

21

U.S. South Positive Timber Inventory

Bfbm Int’l ¼”

Source: FEA, Q4 2014

5 10 15 20 25 30 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Growth Drain

Projected Excess Growth

slide-22
SLIDE 22

22

Demand - China’s paper, tissue and packaging demand

  • Developing countries’ demand
  • Price of cotton and similar products

Supply

  • European paper capacity closures
  • Russian and Canadian start ups
  • Product diversification

(e.g. dissolving pulp)

  • South American production

Reliability - Capital

  • Technology

Earnings Growth Drivers - Pulp

slide-23
SLIDE 23

23

Chemical Pulp End-Use Products

Printing and Writing Papers 31% Tissue 31% Specialty Papers 19% Fluff Based Products 10% Boxboard 5% Other 4%

Source: PPPC 2013

slide-24
SLIDE 24

24

BCTMP Pulp End-Use Products

Boxboard 44% Printing & Writing 41% Specialty Papers 8% Newsprint 4% Other 3%

Source: PPPC 2013

slide-25
SLIDE 25

25

Alberta Newsprint is the lowest cost newsprint producer in North America and a positive contributor to the profitability of our pulp and paper business

Paper — Newsprint

Source: PPPC Cost Survey 2012

Cdn$/tonne

North American Newsprint Cost Structure

Par Exchange Rate ANC

slide-26
SLIDE 26

26

  • Woodwaste to produce heat and steam to dry

wood products and for electricity and steam for pulp mills

  • Woodwaste to produce electricity to be used or

sold

  • Pulp mill effluent as a source for biogas-electricity

generation

  • Expanding opportunities to generate and sell

electricity levering off current business

Energy Opportunities

slide-27
SLIDE 27

27

  • Reinvest profits to lower costs, improve efficiency

through technology and improved processes

  • Estimate normalized annual capital spending

between $150 and $225 million

  • Capital spending in 2014 of $410 million and

spending in 2015 to approximate $300 million

  • Growth through opportunistic acquisitions focused
  • n solid wood

Capital Strategy

slide-28
SLIDE 28

28

West Fraser Capital

159 358 410

50 100 150 200 250 300 350 400 450 2012 2013 2014 Capital Spending Maintenance Timber Profit Improvement Energy

$ Million

slide-29
SLIDE 29

29

  • 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

  • Strong historical shareholder returns

Why Invest in West Fraser?

slide-30
SLIDE 30

30

Strong Cash Generation ($millions)

Total 2014 2013 2012 2011 2010

Cash from Operations 1,595 475 419 195 85 421 Capital Expenditures 1,229 410 358 159 213 89 Acquisitions 238 208

  • 30
slide-31
SLIDE 31

31

Annualized Shareholder Return (Cdn$)

16.4%

7.0%

2.6% 11.6% 11.2% 7.6% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

West Fraser Dow S&P/TSX Competitor A Competitor B Competitor C

June 2006* – March 31, 2015

* June 2006 marked the beginning of the steep decline in U.S. housing starts

Source: TD Bank

slide-32
SLIDE 32

32

Share Value Traded

500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

2014 2013 2012

WFT CFP IFP

Cdn$ Million

slide-33
SLIDE 33

33

“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

  • ffer to sell or the solicitation of an offer to buy any securities of the

Company, and shall not constitute an offer, solicitation or sale of 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.

slide-34
SLIDE 34

34

APPENDIX

slide-35
SLIDE 35

35

Earnings Sensitivity to Key Variables (2014)

Estimated Earnings Sensitivity to Key Variables

1

(based on 2014 production

  • $ millions)

Factor Variation Change in pre

  • tax e

arnings Lumber price US$ 1 ( per Mfbm ) 61 Plywood price Cdn $ 1 ( per Msf ) 8 NBSK price US$ 1 ( per tonne ) 5 BCTMP price US$ 1 ( pe r tonne ) 7 U.S. – Canadian $ exchange rate

2

US$0.01 ( per Cdn $ ) 24

1. Each sensitivity has been calculated on the basis that all other variables remain constant and assumes year end foreign exchange rates. 2. Excludes exchange impact of translation of U.

  • S. dollar - denominated debt and other monetary items. Reflects the amount of the initial

US$0.01 change; additional changes are substantially, but not exactly, linear.