Canfor Corporation Raymond James

Transcription

1 Raymond James November 2018

2 Raymond James Kevin Pankratz Senior Vice President, Lumber Sales and Marketing Pat Elliott Vice President, Corporate Finance and Strategy 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, 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 risks and uncertainties, please refer to s Annual Report for the year ended December 31, 2017 available at or

3 Canfor Operations

4 VIDA s Facilities 9 sawmills Access to high-quality, sustainable fibre Annual production of 1.1 billion board feet 9 value-added facilities Includes premium packaging, modular housing, industrial products and energy 4

5 Overview of VIDA Sweden s largest privately owned sawmill company 9 sawmills located in Sweden with 1.1 billion board feet of capacity 9 value-added facilities that include premium packaging, modular housing, industrial products and energy Access to significant supply of high quality spruce and pine fibre in close proximity to sawmills Production primarily focused on structural timber, more than 90% of which is exported to markets other than North America Excellent management team across the company Canfor and VIDA are well positioned to capitalize on joint global market opportunities with significantly enhanced market and geographic diversification 5

6 High Quality Log Supply 6

7 Product & Markets VIDA Key Markets Timber Products: Construction lumber DIY appearance grade lumber Industrial packaging High-value products 7

8 Differentiated Finished Products 8

9 CAD$/Mfbm Diversification - markets, products and species limiting exposure to market volatility Global Softwood Lumber Prices Indices (US$/M 3 ) Lumber Revenue - CAD$/Mfbm Q3 YTD Canfor Lumber Segment Vida Lumber Segment 2018 Q4 Fct. Source: Russ Taylor, FEA; Canfor 9

10 Expanded Global Markets SALES OFFICES 10

11 Financial Overview Implied business valuation of $830 million CAD; 70% ownership in year 1 (~$580 million CAD) Option to acquire remaining interest in VIDA over the long term Pre-synergy acquisition multiple of 5.7x on forecast 2018 EBITDA of $145 million CAD (4.5x excl. working capital) Post-synergy acquisition multiple of ~5.0x (3.9x excl. working capital); includes annual market-related synergies of $20 million Subject to regulatory approval, anticipated to close in Q Purchase price to be funded through combination of cash on hand and existing credit facilities (currently expanding and extending credit facilities) Pro forma net debt to capitalization of 25%-30% anticipated at end of Q

12 VIDA Acquisition - Summary This acquisition represents transformational growth and diversification for Canfor Canfor will become an international manufacturer and provider of wood product solutions with operations in Canada, the US and Europe Our strategic customers are growing and they are looking to Canfor to supply their demand for high quality wood products To meet the growing demand we knew we needed to expand our production capacity We looked for a company that would provide access to a sustainable fibre region and operation platform outside of Canada, and for a company that shares our corporate strategy of producing high-value specialty products, providing an exceptional customer service experience and maintaining a low cost structure VIDA is the company who can deliver on all of these criteria 12

13 Elliott Sawmilling Company - Overview Sawmill located in Estill, South Carolina, approximately 50 miles north of Savannah, Georgia Annual capacity: 210 million board feet of Southern Yellow Pine lumber Purchase price: US$110 million paid in 3 equal instalments Pre-synergy acquisition multiple of ~4.3x on LTM EBITDA of US$26 million Ownership transferred in 2 instalments, 49% at the first closing and remaining 51% at the second closing First closing anticipated in the second quarter of

14 Pro Forma Lumber Capacity Current Lumber Capacity Current Lumber Capacity 5.9 billion board feet 5,900 MMfbm Pro Forma Lumber Capacity 7.2 billion 7,200 board MMfbm feet Pro Forma Lumber Capacity 31% 28% 53% 5% 64% 15% BC Alberta US 4% BC Alberta EUR US *Includes 100% of VIDA and Elliott sales 14

15 World s Second Largest Softwood Lumber Producer

16 Global Softwood Lumber Supply & Demand Volume (Billion fbm) Canada Europe Russia Supplying Regions Demand 9 Demand 54 Demand 6 Production 28 Production 67 Production 21 Global Supply and Demand* Bfbm Demand Supply Supply Deficit USA China Japan Demanding Regions Demand 48 Demand 32 Demand 9 Production 34 Production 16 Production 5 * Includes Southern Hemisphere and others totaling 74 Bfbm in demand Sources: WWPA, COFI, China Customs, Japan Customs, US Census Bureau, WoodMarkets, Canfor 16

17 Volume (Bfbm) U.S. Softwood Lumber Demand New Home Repair & Remodeling Non-Residential Industrial Bfbm Bfbm 16 Bfbm 17 Bfbm Source: WWPA, FEA, Canfor 17

18 Housing Starts (,000 Units) US Housing Starts LUMBER MARKETS US Housing Starts 1,600 1,500 Multi-family Single Family Consensus: 1,400 1,300 1,200 1,100 1, , , , , ,340 1,300 1, Analyst (,000 units) Wells Fargo 1,270 1,350 Forest Economic Adv 1,264 1,343 APA 1,297 1,320 Royal Bank of Canada 1,270 1,310 Mortgage Bankers ,305 Fannie Mae 1,265 1,305 NAHB 1,263 1, Average 1,271 1,310 Source: U.S. Census Bureau, Canfor Source: APA 18

19 Remodeling Spending ($Billions) Age (Year) U.S. R&R Activity Burns Residential Repair and Remodel Spending Median Age of Owner-Occupied Housing Small Project discretionary Big project discretionary Disaster repairs $400 $350 $300 $250 $200 $150 $100 Forecast $50 30 $0 Source: Sources: John Burns Real Estate Consulting, LLC; U.S. Census, CTBUH Source: American Community Survey (ACS) 19

20 LUMBER MARKETS US Supply and Demand 2020 US Softwood Lumber Supply Crunch Projecting 2-3 Bfbm supply gap by 2020, however solid demand in 2019 will be met by increased SYP production and additional European imports U.S. Lumber Supply Supply (Bfbm) 2018 Est Fct Fct. U.S. PRODUCTION Imports Canada Imports EU & Other U.S. Exports (minus) Total Supply U.S. Lumber Demand Segments (Bfbm) 2018 Est Fct Fct. New Home Repair & Remodeling Industrial Non-Residential Total Demand Supply Deficit 0.5 ~3 Source: WWPA, Statistics Canada, FEA, Canfor 20

21 Market Opportunities in Taller Residential and Mixed-Use Building Increase Density in Urban Cores Wood is Part of the Hybrid Solution Building Stories Target Market Share Potential Annual Demand % (non-res) 3.4 Building Types Offices, commercial, schools, public service spaces % (mix) 3.6 Apartments, hotels, offices % (res), 35% (non-res) 1.5 Apartments, commercial, offices Total 5 to 8.5 Bfbm by 2022 Source: Softwood Lumber Board 21

22 Moving Up In Value and Increase Diversity Of End Use Applications China Japan Furniture Door Core/ Flooring, etc. Wood Frame Construction Furring Strips Concrete Forming CLT Manufacturers Industrial Applications Non Residential Hybrid Construction Housing Spruce-Pine-Fir Fir/Larch Southern Pine 22

23 Investor Contacts Pat Elliott Vice President, Corporate Finance and Strategy Alan Nicholl CFO and Executive Vice President, Finance and Canfor Pulp