COMPANY UPDATE SEPTEMBER 2017

Transcription

1 COMPANY UPDATE SEPTEMBER 2017

2 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 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

3 INTERFOR S FOUR REGIONS 3

4 4 th LARGEST LUMBER PRODUCER Bbf 6.0 North American Lumber Production by Company Capacity Source: Wood Markets Monthly March

5 INTERFOR STRATEGIC PLAN Growth by Acquisition Building Value Operational Excellence 5

6 SUMMARY Q results were the best in Interfor s history Sales >$500 mm EBITDA of $77 mm Strong free cash flow Delivered on commitments made in late 2015/early 2016 Castlegar rebuild project >$35 mm in margin improvements from the South Leverage reduced to 21% ND/IC Interfor is positioned for its next phase Capital and non-capital initiatives across the South portfolio External growth that meets risk adjusted return criteria 6

7 LUMBER MARKETS

8 INTERFOR S DIVERSE LUMBER MIX Lumber Sales By Species 1 Cedar Hem-Fir 8% Spruce-Pine-Fir 10% Western Dimension Doug Fir/ Larch 28% Southern Yellow Pine 38% Southern Yellow Pine Lodge Pole Pine Lodge Pole/ Ponderosa Pine 4% Cedar 12% (1) By value for YTD Q

9 NORTH AMERICAN DRIVEN BUSINESS Lumber Sales By Market 1 Canada 7% USA 74% China/Tw/HK 5% Other 5% Japan 9% (1) By value for YTD Q

10 BENCHMARK LUMBER PRICE & FX TRENDS US$/Mbf $ $C/US$ 1.00 $475 $450 CAD/USD FX Rate (Right Axis) SYP Composite Price (Left Axis) WSPF Composite Price (Left Axis) Q1 Q Q3 (1) $ $ $375 $ $ $300 $ $ $225 $400 $ $357 $ $382 $ $416 $ $417 $ $382 $ $ Source: Random Lengths & Bank of Canada (1) Includes prices & FX rates up to September 15,

11 KEY MARKET DRIVERS 2016 (1) 2017E (1) 2018E (1) US Housing Starts - Total (mm) Change +4% +10% US Housing Starts - Single Family (mm) Change +8% +9% NA Lumber Consumption (Bft) Change +3% +4% NA Offshore Exports (Bft) Change -1% -1% NA Offshore Imports (Bft) Change +38% -3% (1) Source: Forest Economic Advisors (FEA) forecast published August 28,

12 OPERATIONS OVERVIEW 12

13 BUSINESS COMPARISONS BC Interior Dimension Mills 3 dimension mills in BC southern interior Modern/low cost operations Good fiber supply/limited exposure to pine beetle US South Dimension Mills 9 dimension mills in Georgia, S. Carolina and Arkansas Low cost wood baskets Strong geographic fit/significant operational upside US NW Stud Mills 3 stud mills in Washington State and Oregon Efficient/modern operations Specialty Mills 3 specialty mills in BC Coast and Oregon High value products (eg. cedar, Japanese squares and pine boards) 13

14 BC INTERIOR DIMENSION MILLS

15 BC INTERIOR: OVERVIEW Mountain Pine Beetle Cumulative Percentage of Merchantable Forest Volume Killed Since 1999 Very High (>45%) Adams Lake High (31-45%) Moderate (16-30%) Low (<16%) None (0%) Castlegar Grand Forks Source: BC Ministry of Forests 15

16 BC INTERIOR: CASE STUDY Adams Lake, BC Grand Forks, BC Castlegar, BC 3 MILLS IN GOOD FIBER BASKETS SIGNIFICANTLY REPOSITIONED THE ASSETS RE-INVESTMENTS ARE COMPLETE STRONG CASH FLOW AND ROI TOP DECILE/QUARTILE EBITDA MARGINS FOR THE BC INTERIOR 16

17 US SOUTH DIMENSION MILLS

18 US SOUTH: OVERVIEW 1.3 Billion feet of lumber capacity across 3 States Largest lumber producer in Georgia 44% of Interfor s capacity is in the South 18

19 US SOUTH: MULTIPLE PHASES Phase 1 Phase 2 Phase 3 Phase 4 5 Acquisitions Build Team/ Infrastructure Mill Improvements/ Optimization Targeted Investments >$35 million Annual EBITDA Impact

20 US SOUTH: RIGHT LOG TO RIGHT MILL Each circle is a 50 mile radius. 20

21 FINANCIAL REVIEW

22 HISTORICAL FINANCIAL RESULTS Benchmark Lumber Prices ($/Mbf) Production Volumes (Mmbf) $525 $500 $475 $450 $425 $400 $375 $350 $325 $300 $275 $250 WSPF Composite (US$/Mbf) WSPF Composite (C$/Mbf) SYP Composite (US$/Mbf) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Adjusted EBITDA (C$mm) Cash From Operations After W/C Changes (C$mm) $80 $77 $110 $106 $70 $60 $50 $40 $30 $47 $45 $37 $36 $36 $39 $37 $32 $25 $57 $58 $60 $51 $36 $33 $90 $70 $50 $39 $34 $69 $42 $35 $46 $36 $63 $68 $49 $20 $10 $0 $13 $12 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q $30 $10 -$10 $20 $20 $15 $16 $9 $5 $(1) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q

23 CAPITAL SPENDING PROFILE $mm $140 $120 $100 $80 $60 $40 $20 $0 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

24 FREE CASH FLOW CONSIDERATIONS C$mm LTM Adjusted EBITDA (as of 6/30/17) $247 Significant additional margin uplift opportunities in the US South. Less: Annualized Cash Interest Expense $(14) Average interest rate ~ 4%. 2017E Maintenance Capex (Maint. $55m; Disc. $30 mm) $(55) 2017E total capex outlook of C$85mm; maintenance capex includes logging roads. Cash Taxes $(1) Substantial tax loss carry-forwards. $107 mm in Canada and US$155 mm in the US. Other $TBD No significant employee future benefit obligations. LTIP dependent on stock price. Free Cash Flow $177 Free Cash Flow/Share $

25 CAPITAL STRUCTURE Capital Structure As of June 30, 2017 Cash (C$mm) $(41) Debt (C$mm) $259 Net Debt (C$mm) $218 Book Equity (C$mm) $816 Invested Capital (C$mm) $1,034 Net Debt / Invested Capital 21% Net Debt/LTM EBITDA 0.9x EBITDA/Interest Expense (LTM) 15.4x $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 Debt Maturity Schedule (C$mm) As of June 30, 2017 Prudential Notes (4.17%) Net Debt/Invested Capital 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 38% 39% 38% 38% 34% 35% 33% 34% 31% 32% 28% 27% 28% 23% 24% 24% 22% 21% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q