COMPANY UPDATE NOVEMBER 2015
FORWARD-LOOKING INFORMATION This presentation contains information and statements that are forwardlooking in nature, including, but not limited to, statements containing the words will, is expected, forecast, annualized, target and similar expressions. Such statements involve known and unknown risks and uncertainties that may cause Interfor s actual results to be materially different from those expressed or implied by those forward-looking statements. Such risks and uncertainties include, among others: price volatility; competition; availability and cost of log supply; natural or manmade disasters; foreign currency exchange fluctuations; changes in government regulation; export and other trade barriers; environmental and community matters; labour disruptions; and other factors referenced herein and in Interfor s current Annual Report and Management s Discussion & Analysis, both available on www.sedar.com. The forward-looking information and statements contained in this presentation are based on Interfor s current expectations and beliefs. Readers are cautioned not to place undue reliance on forward-looking information or statements. Interfor undertakes no obligation to update such forward-looking information or statements, except where required by law. 2
INTERFOR S FOUR REGIONS 3
4 th LARGEST LUMBER PRODUCER Bbf North American Lumber Production by Company 6.0 5.0 4.0 3.0 2.0 1.0 - Source: Wood Markets Monthly March 2015 (1) Annualized Q3-2015 production. 4
INTERFOR STRATEGIC PLAN Growth by Acquisition Building Value Operational Excellence 5
RAYMOND JAMES U.S. SOUTH CONFERENCE - PERRY SAWMILL TOUR September 30, 2015 LUMBER MARKETS
INTERFOR S DIVERSE LUMBER MIX Lumber Sales By Species 1 Hem-Fir 10% Spruce-Pine-Fir 10% Doug Fir/Larch 30% Southern Yellow Pine 35% Lodge Pole/ Ponderosa Pine 4% Cedar 11% (1) By value for YTD Q3-2015 7
PRODUCTS SOLD AROUND THE WORLD YTD Q3-2015 Lumber Sales China/Tw/HK 5% Canada 7% Other 4% Japan 9% USA 75% 8
$475 BENCHMARK LUMBER PRICE TRENDS WEEKLY LUMBER PRICES US$/Mbf 2013 2014 Q1 Q2 Q3 Q4 (1) SYP $413 SPF $356 SYP $418 SPF $349 SYP $413 SPF $308 2015 SYP $383 SPF $270 SYP $331 SPF $269 SYP $377 SPF $259 $425 $375 $325 $275 SYP (East) #2&Btr 2x4 SPF #2&Btr 2x4 $225 Source: Random Lengths 9 (1) Includes prices up to October 30, 2015
KEY MARKET DRIVERS 2014 (1) 2015E (1) 2016E (1) 2017E (1) US Housing Starts (mm) 1.0 1.1 1.3 1.5 Change +13% +17% +12% NA Lumber Consumption (Bft) 48.8 51.3 55.0 58.4 Change +5% +7% +6% NA Offshore Exports (Bft) 7.6 7.2 6.7 6.3 Change -6% -6% -6% NA Offshore Imports (Bft) 0.6 0.7 0.9 1.3 Change +26% +24% +45% NA Capacity (Bft) 72.6 73.6 74.3 74.9 Change +1% +1% +1% Implied Operating Rate 77% 78% 82% 85% Change +2% +4% +3% (1) Source: Forest Economic Advisors (FEA) Monthly Lumber Advisor; Published October 14, 2015 10
OPERATIONS OVERVIEW 11
BUSINESS COMPARISONS US South Dimension Mills Current Run Rate Annual Production (mmfbm) 1,100 9 dimension mills in Georgia, S. Carolina and Arkansas Low cost wood baskets Strong geographic fit/significant operational upside BC Interior Dimension Mills 700 3 dimension mills in BC southern interior Modern/low cost operations Good fiber supply/limited exposure to pine beetle US NW Stud Mills 530 3 stud mills in Washington State and Oregon Efficient/modern operations Margins are more variable than other regions Specialty Mills 230 3 specialty mills in BC Coast and Oregon High value products (eg. cedar, Japanese squares and pine boards) More stable prices/margins 12
US SOUTH DIMENSION MILLS 13
US SOUTH OVERVIEW Invested over US$400 million since March 2013 5 acquisitions 1,100 employees 9 mills 1.3 Billion feet of lumber capacity across 3 States Largest lumber producer in Georgia 43% of Interfor s capacity is in the South 14
US SOUTH: STARTED UP IN 2013 ACQUIRED ASSETS...NOW REPOSITIONING A BUSINESS Phase 1 Phase 2 Phase 3 Acquire Assets Build Team/Infrastructure Mill Improvements Targeted Capex Mill Improvements Optimization Modest Capex 2013-15 2015-17
LOGISTICS RIGHT LOG TO RIGHT MILL Mill Log Size Super Large Pulpwood Chip-n-Saw Sawtimber Sawtimber Preston 35% 35% 30% Note: Each circle is a 50 mile radius. Thomaston 20% 40% 40% Eatonton 80% 20% Perry 25% 60% 15% Swainsboro 5% 95% Baxley 25% 60% 15% Meldrim 15% 60% 25% Georgetown 60% 40% 16
BC INTERIOR DIMENSION MILLS
BC INTERIOR OVERVIEW Adams Lake 375 mmfbm Capacity. Castlegar 210 mmfbm Capacity. Grand Forks 160 mmfbm Capacity. 18
BC INTERIOR MODERNIZATION 2008-09 2012 October 2015 Start-up Adams Lake, BC Grand Forks, BC Castlegar, BC 3 MODERN MILLS IN GOOD FIBER BASKETS RE-INVESTMENTS ARE COMPLETE CONTRUCTION: ON-TIME AND ON BUDGET 19
CASTLEGAR PROJECT BEFORE/AFTER Canter Headrig 20
BC INTERIOR MODERNIZATION IMPACT 2007 2015 (1) Change Primary Breakdown Lines 8 5-38% Annual Production, MMbf 549 700 +27% Lumber Recovery,bf/m 3 279 307 +10% Hourly Headcount, FTE 602 406-33% (1) Adams Lake & Grand Forks YTD Q3-2015 annualized; Castlegar Mill Upgrade Proforma. 21
FINANCIAL REVIEW
CAPITAL SPENDING PROFILE $mm s $120 $100 $80 $60 $40 $20 $0 2008 2009 2010 2011 2012 2013 2014 YTD Q3-2015 2015E 2016E Depreciation, Depletion & Amortization(1) Capital Expenditures(2,3) (1) Includes depreciation of plant & equipment and depletion & amortization of logging roads, timbers and other. (2) Includes additions to property, plant and equipment, additions to logging roads and additions to timbers and other intangible assets. (3) Does not include additions arising from acquisitions. 23
CAPITAL STRUCTURE Interfor has a prudent capital structure. At Sept. 30, 2015 - Available liquidity of $103 mm. $500 Debt Maturity Schedule As of Sept. 30, 2015 $mm $450 $400 $350 $300 $250 Available Liquidity $200 $150 $100 $50 Drawings on Bank Lines Prudential Notes (4.17%) $0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
KEY BUSINESS PRIORITIES 1. Tacoma Monetization Inventory and equipment sale completed in Q4 Real estate auction entering final phase Target net proceeds > cost 2. Castlegar Ramp-up Construction on time and on budget Operational ramp-up is ahead of schedule Target EBITDA impact (1) of >$10 mm/year by 2016 3. US South Improvements Reliability, efficiency, productivity and cost initiatives Capital light approach Target EBITDA impact (2) of >$35 mm/year by 2016/17 4. Other Initiatives Organizational best practices Focused mill improvements Target EBITDA impact (2) of >$5 mm/year by 2016/17 (1) Based on variance from pre-construction period. Q3 2015 included a $(3.7) mm EBITDA loss at Castlegar. Excludes the impact from market price changes. (2) Based on variance from Q3 2015 actual. Excludes the impact from market price changes. 25
INDUSTRY INFORMATION 26
US HOUSING STARTS Millions 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Housing Starts Underlying Demand Pent-Up Demand Source: FEA Q3-2015 Forecast; Published October 2015 27
DEMAND ON NORTH AMERICAN MILLS BBF 85 80 75 70 65 60 55 50 45 40 35 30 25 20 US Canada Net Exports 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Source: FEA Q3-2015 Forecast; Published October 2015 28
MPB AREA AFFECTED Interfor s southern BC Interior wood baskets are less exposed to the MPB than BC s central and northern interior regions; the Coast is not exposed. Central and Northern BC 50 75% Pine Adams Lake in Southern BC 28 30% Pine Castlegar & Grand Forks in Southern BC 17% Pine Interfor AAC 1 MMm 3 0.0 0.7 1.2 Adams Lake Coastal BC Woodlands No Pine 2.0 3.9 1. Annual Allowable Cut (million m 3 ) Grand Forks Castlegar Source: Ministry of Forests 29
FAVOURABLE LOG SUPPLY IN US SOUTH Growth & Drain, BBF Int l ¼ Inventory, BBF Int l ¼ 50 45 40 35 Sawtimber Inventory 300 290 280 270 30 25 Growth Drain 260 250 20 240 15 10 5 Growth Drain Inventory 230 220 210 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 200 Source: FEA Q3-2015 Forecast; Published October 2015 30
US SOUTH SAWTIMBER PRICES US$/Ton (Nominal $ s) $60 $50 $40 $30 $20 $10 $- 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: FEA Q3-2015 Forecast; Published October 2015 31
REGIONAL PRODUCTION VS PEAK (Bbf) 16 BC lumber Production 9 Eastern Canada Lumber Production 14 8 12 10 8 6 4 Inland Coast Coast Peak Inland Peak 7 6 5 4 3 2 Quebec Ontario Quebec Peak Ontario Peak 2 1 0 14 00 02 04 06 08 10 12 14 16 18 20 US West lumber Production 0 00 02 04 06 08 10 12 14 16 18 20 25 US South lumber Production 12 10 20 8 15 6 10 4 Coast Inland Coast Peak Inland Peak South South Peak 2 5 0 0 00 02 04 06 08 10 12 14 16 18 20 00 02 04 06 08 10 12 14 16 18 20 32 Source: FEA Q3-2015 Forecast; Published October 2015