Investor Tour October, Armour, North Carolina

Transcription

1 Investor Tour October, 2013 Armour, North Carolina

2 Forward-Looking Statements This presentation includes forward-looking statements, which are statements that are not historical facts, and as a result are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in or suggested by the forward-looking statements. Forwardlooking statements are intended to provide reasonable guidance to you but the accuracy of these statements depends on a number of assumptions and is subject to various risks and uncertainties and actual outcomes and results may differ materially from those anticipated or projected. These include, but are not limited to, uncertainties associated with the effect of general economic conditions, particularly in the United States, demand for the Company s products, foreign exchange rate fluctuations and in particular the relative values of the Canadian and U.S. dollars, potential trade sanctions, the availability and cost of fibre, competition, operational curtailments, transportation limitations, natural disasters, insect infestation, the effects of forestry, land use, environmental and other government laws and regulations, First Nation s claims and the ability of the Company to execute its business plans. All forward-looking statements made during this presentation, including those in the written materials, are qualified by these cautionary statements. Those attending this presentation or subsequently viewing or listening to it should not place undue reliance on the forward-looking statements, which reflect Management s plans, estimates, projections and views only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances except as required by law. 2 2

3 Plum Creek Sawmill Acquisition 2000 ARKANSAS MISSISSIPPI TENNESSEE MEMPHIS ALABAMA GEORGIA NORTH CAROLINA SOUTH CAROLINA TEXAS LOUISIANA FLORIDA 3

4 West Fraser - IP Acquisition 2007 ARKANSAS TENNESSEE MEMPHIS NORTH CAROLINA SOUTH CAROLINA ALABAMA GEORGIA TEXAS LOUISIANA MISSISSIPPI FLORIDA Lumber Joyce & Huttig 4 4

5 Production - BBF 2013 Production back to 2008 levels 5 5

6 US South Fourteen lumber mills Nine Southern States 2,000 employees 20% of West Fraser s sales 6

7 Things that are different Half of the industry is made up of independently owned sawmills 7

8 Things that are different Half of the industry is made up of independently owned sawmills Timber is bought on the open market 8

9 Things that are different Half of the industry is made up of independently owned sawmills Timber is bought on the open market The mills are smaller 9

10 Things that are different Half of the industry is made up of independently owned sawmills Timber is bought on the open market The mills are smaller Operating Conditions Lower inventories - logs (avg 2-4 days), rough green (3 days) 10

11 SYP Markets

12 SYP Markets Largest and fastest growing lumber market in North America Mills that provide products across the US South Complimentary product offering 12

13 Lots of People Millions 2000 to 2013 California 38 12% Texas 26 25% New York 20 3% Florida 19 21% Illinois 13 4% Pennsylvania 13 4% Ohio 12 2% Georgia 10 21% Michigan 10 - North Carolina 10 21% 30% of population lives in the South and its growing at more than double the National rate 13

14 50%+ Housing Starts in South 80% 60% 52% 40% 20% 26% 22% 0% South West Northeast 14 14

15 Framing Products 15 15

16 Mn Units Homes are Older > < South West Midwest Northeast 16

17 Outdoor Living 17

18 Market Outlook Near term Improving pricing environment SYP supply / demand balance Residential improvements Narrow dimension Longer term Positive as housing recovers 18 18

19 Timber Supply

20 Why we like the US South Market Trees Fast Growing Lots of Them Large 20

21 US Inventory of Sawtimber BBF, Int l South Inland Coast Source: FEA Data 21 21

22 Trees Grow Fast Average harvest age is 25 years 22 22

23 Our Fundamental Objective New Boston, TX Joyce, LA 23 23

24 Slowdown has Deferred Southern Harvest BBF, Int l Drain Growth Source: FEA At 1.7 million housing starts Growth = Drain 24 24

25 US South Wood Supply Assuming that the housing market slowly recovers over the next few years and tops out at 1.2 million housing starts by 2014, the US South will have built approximately 80 million tons of softwood sawtimber inventory over and above the 80 million tons currently being harvested. Forest2Market, Feb

26 US South Wood Supply Forisk analysis of timber markets across the South over time indicates that excess sawtimber volumes could dampen or delay the "strengthening" of pine sawtimber and chip-n-saw prices in the U.S. South. Specifically, the effect slows pine grade price growth by ~30% per year on average and reduces Base Case pine grade prices by ~$1 per ton over the next two years. This effect varies by state and local market. In forecasting wood demand through 2022, Forisk estimates the excess continues to impact stumpage prices in 2013 for all states except Texas. Forisk Forecast, Sept

27 Harvest 20 Million Tons High Demand Scenario projects 2020 Harvest 28 Million Tons 27

28 West Fraser - Sourcing Strategy Source Type West Fraser Individual Mills Sourcing Strategy min max Supply Agreement 31.0% 0% 90% "Negotiated" Gate wood 11.0% 0% 31% Timber Deeds 2.0% 0% 20% CSW - Tract Specific 30.0% 0% 61% Open Gate Wood 26.0% 1% 66% Variation between Mills dictated by history, regional land ownership patterns and Supplier / Logging Force Percentage based on Sept 30, 2013 YTD Deliveries 28

29 Biomass & Energy Projects Opportunity Increase demand for residuals Non traditional market independent of Housing Supplier Work Force Incidental log supply Challenges Increase Competition for wood supply Impact on Supplier & Loggers Little Opportunity for Synergy with WF 29 29

30 Timber Outlook Near term Impact of downturn on Supplier / logging force Stumpage expectations Operating cost increases Continue flattening of price curve Longer term Improved supply balance in many drains Change in land ownership patterns Positive growth/drain ratio Price increases will be slower than historical 30 30

31 Modernization

32 % of Capacity Lumber Operating Rate % 95% 94% 90% 85% 80% 75% 70% 74% 83% 75% 78% 72% 65% 60% 55% 50% WFT Canada WFT U.S. B.C. Interior Canada U.S. South U.S. Low-cost structure allows for higher operating rates in down market 32 32

33 Capital Spending Est 2014 Est U.S. South 33 33

34 Planers Productivity and Value 34

35 Kilns Value and Volume Increase 35

36 Sawmills Productivity and Yield 36

37 Summary

38 Competitiveness 38 38

39 Competitiveness 39 39

40 Competitiveness 40 40

41 MMfbm US South Lumber Production 25,000 Million , , , , Source: FEA Production US Housing Starts 41 41

42 Share of North American Production 35% 30% 25% 20% 15% 10% Source: FEA US South US West Coast US Other British Columbia East of the Rockies 42 42

43 Priorities WF culture People Cost Manufacturing focus Capital to improve competitiveness Design Construction Start-ups Growth 43 43

44 Summary Proximity to market Demographics support demand Growing log supply Investment opportunities Diversification Pine Beetle FX Trade 44 44