CIBC Investor Tour Quesnel, B.C. June 13, 2012 1
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 www.westfraser.com. 2 2
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Quesnel Mill - 1956 4
Business Philosophy Low Cost 5
Business Philosophy Re-invest Profits Quesnel Sawmill 6
Business Philosophy Strong Balance Sheet 800 700 Reduced debt by $460 million during the worst lumber market since the Great Depression 600 $ millions 500 400 300 7 200 100 0 Dec - 2007 Dec - 2011 25% Net Debt to Capital 14% Net Debt to Capital 7
Business Philosophy -People Strong, stable Senior management Internal promotion Continuity of Culture Predominantly non-union 8
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
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 $230 million capital improvement program focused primarily on our lumber business expanded our participation in bioenergy projects and committed substantial resources to ensuring that bioenergy and bioproducts are a key part of our future operations 10 10
Product Diversification. West Fraser Lumber 26 Mills Panels 6 Mills Pulp & Paper 5 Mills SPF 3.5 Bfbm SYP 2.0 Bfbm Total 5.5 Bfbm Plywood: 830 MMsf3/8 MDF: 300 MMsf3/4 LVL: 3.2 MMcf NBSK: 590 Mtonnes BCTMP: 640 Mtonnes Newsprint: 135 Mtonnes North America s largest lumber producer 11 Largest plywood producer in Canada Third largest pulp producer in Canada 11
Trend Sales Mix West Fraser Pulp & Paper 24% Panels 13% Lumber 63% 12 Growth, Integration and Diversification Developing a Bio-energy and Bio-products business 12
Geographic Diversification West Fraser 13 13
West Fraser Geographic Diversification Lumber Capacity Location U.S. 35% B.C. 46% Alberta 19% 14 14
West Fraser Lumber Production 6,000 5,000 4,000 4,212 4,911 MMfbm 3,000 2,000 1,713 1,000 0 2000 2005 2011 15
2011 Lumber Production 6.0 5.0 4.9 Billion Board Feet 4.0 3.0 2.0 3.6 3.6 2.3 1.9 1.0 0.0 West Fraser Canfor Weyerhaeuser Stora Enso Tolko Growth in our core business 16 Source: Company reports. 16
West Fraser SPF Lumber Geographic Sales Mix ($) 2011 2005 Non U.S., 55% U.S., 45% Non U.S., 38% U.S., 62% 17 17
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
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
110% West Fraser Lumber Opportunity Lumber Operating Rate - 2011 100% 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
West Fraser Strong Cash Generation ($ million) Total 2011 2010 2009 2008 Cash from Operations 788 85 421 96 186 Capital Expenditures * 367 213 89 18 47 Dividends 66 24 8 10 24 * 2011 and 2010 includes pulp Green Transformation projects 21 21
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
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
U.S. Housing Starts (Seasonally Adjusted 1947-2012) Source: U.S. Census Bureau 2,950 2,450 Thousands 1,950 1,450 950 450 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
1,000 U.S. Housing Forecast (2012 & 2013) Single & Multi family 900 800 700 600 000 500 400 300 200 100 0 NAR RBC NAHB APA Wells Fargo Source: APA/Wood Markets FEA RISI Wood Markets Average 25
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
Initial Claims for Unemployment Insurance Below Key 400,000 Level 700,000 4-Week Moving Average 600,000 500,000 400,000 300,000 Jan-09 Jan-10 Jan-11 Jan-12 Source: FEA 27
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
SPF Shipments from Canada to China 3,000 2,662 2,500 MMfbm 2,000 1,500 1,585 1,000 836 500 152 358 0 2007 2008 2009 2010 2011 Source: COFI China has become a major consumer of Canadian softwood lumber 29
India Japan 30
Transportation/Distribution 31
Supply Constraints Mountain Pine Beetle Approximately 1 Billion m 3 Dead or Dying 32
Supply Constraints Quebec Annual Allowable Cut Million M3 35 33 31 29 27 25 23 21 19 17 15 Forecast 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Source: FEA 33
Potential For Constrained Supply Mountain Pine Beetle Eastern Canadian harvest reductions Boreal Accord 34
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
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 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. 36 36
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