CIBC Investor Tour Quesnel, B.C. June 13, 2012

Transcription

1 CIBC Investor Tour Quesnel, B.C. June 13,

2 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 lumber production, Alberta and U.S. South log supply, U.S. South demographics, pulp & paper outlook and significant potential strength of lumber markets. These statements are subject to the cautionary statement which introduces West Fraser s 2011 Annual Management s Discussion & Analysis which can be accessed on the Company website 2 2

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4 Quesnel Mill

5 Business Philosophy Low Cost 5

6 Business Philosophy Re-invest Profits Quesnel Sawmill 6

7 Business Philosophy Strong Balance Sheet Reduced debt by $460 million during the worst lumber market since the Great Depression 600 $ millions Dec Dec % Net Debt to Capital 14% Net Debt to Capital 7

8 Business Philosophy -People Strong, stable Senior management Internal promotion Continuity of Culture Predominantly non-union 8

9 Since The Downturn investing over $300 million of softwood lumber duty refunds to acquire 13 U.S. South sawmills from International Paper rebuilt our Quesnel sawmill West Fraser 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: sold or closed several higher-cost operations including, in 2010, our Eurocan linerboard and kraft paper mill 9 9

10 Since the Downturn (cont.) West Fraser 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, in 2011, a $230 million capital improvement program focused primarily on our lumber business expanded our participation in bioenergy projects and committed substantial resources to ensuring that bioenergy and bioproducts are a key part of our future operations 10 10

11 Product Diversification. West Fraser Lumber 26 Mills Panels 6 Mills Pulp & Paper 5 Mills SPF 3.5 Bfbm SYP 2.0 Bfbm Total 5.5 Bfbm Plywood: 830 MMsf3/8 MDF: 300 MMsf3/4 LVL: 3.2 MMcf NBSK: 590 Mtonnes BCTMP: 640 Mtonnes Newsprint: 135 Mtonnes North America s largest lumber producer 11 Largest plywood producer in Canada Third largest pulp producer in Canada 11

12 Trend Sales Mix West Fraser Pulp & Paper 24% Panels 13% Lumber 63% 12 Growth, Integration and Diversification Developing a Bio-energy and Bio-products business 12

13 Geographic Diversification West Fraser 13 13

14 West Fraser Geographic Diversification Lumber Capacity Location U.S. 35% B.C. 46% Alberta 19% 14 14

15 West Fraser Lumber Production 6,000 5,000 4,000 4,212 4,911 MMfbm 3,000 2,000 1,713 1,

16 2011 Lumber Production Billion Board Feet West Fraser Canfor Weyerhaeuser Stora Enso Tolko Growth in our core business 16 Source: Company reports. 16

17 West Fraser SPF Lumber Geographic Sales Mix ($) Non U.S., 55% U.S., 45% Non U.S., 38% U.S., 62% 17 17

18 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

19 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

20 110% West Fraser Lumber Opportunity Lumber Operating Rate % 97% % of Capacity 90% 80% 70% 75% 78% 72% 71% 67% 60% 50% WFT Canada WFT U.S. B.C. Interior Canada U.S. South U.S. 20 Low-cost structure allows for higher operating rates in down market 20

21 West Fraser Strong Cash Generation ($ million) Total Cash from Operations Capital Expenditures * Dividends * 2011 and 2010 includes pulp Green Transformation projects 21 21

22 Total Shareholder Return (Cdn$) (June 2006* May 17, 2012) West Fraser 40% 30% 20% 10% 0% 29% 2% 10% -10% -20% -30% -40% -50% -4% -26% -38% West Fraser S&P/TSX Dow Competitor A Competitor B Competitor C 22 * June 2006 marked the beginning of the steep decline in U.S. housing starts Source TD Bank 22

23 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

24 U.S. Housing Starts (Seasonally Adjusted ) Source: U.S. Census Bureau 2,950 2,450 Thousands 1,950 1, 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

25 1,000 U.S. Housing Forecast (2012 & 2013) Single & Multi family NAR RBC NAHB APA Wells Fargo Source: APA/Wood Markets FEA RISI Wood Markets Average 25

26 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

27 Initial Claims for Unemployment Insurance Below Key 400,000 Level 700,000 4-Week Moving Average 600, , , ,000 Jan-09 Jan-10 Jan-11 Jan-12 Source: FEA 27

28 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

29 SPF Shipments from Canada to China 3,000 2,662 2,500 MMfbm 2,000 1,500 1,585 1, Source: COFI China has become a major consumer of Canadian softwood lumber 29

30 India Japan 30

31 Transportation/Distribution 31

32 Supply Constraints Mountain Pine Beetle Approximately 1 Billion m 3 Dead or Dying 32

33 Supply Constraints Quebec Annual Allowable Cut Million M Forecast Source: FEA 33

34 Potential For Constrained Supply Mountain Pine Beetle Eastern Canadian harvest reductions Boreal Accord 34

35 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 recovery YES BUT WHEN? 35 35

36 WFT Toronto Stock Exchange 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 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

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