analysts’ tour – may 24 , 2011 u.s. south · analysts’ tour – may 24th, 2011 ... source:...
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Analysts’ Tour – May 24th, 2011
U.S. South
22
Forward-Looking Statements
This presentation includes forward-looking statements, which are statements that are not historicalfacts, 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. Forward-looking 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.
Welcome to the South
44
US South Growth
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
BB
F
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
� Purchase Joyce & Huttig from Plum Creek (2000)
� Acquisition of thirteen IP sawmills (2007)
� Curtailments (2008/09)
� 3 mills indefinitely curtailed
� Current capacity of 2 BBF
� Q1 2011 – 76% of capacity
55
Mill Locations
Huttig
Commercial SYP species rangePine > 80% Pine = 50%
Pine = 30% Pine < 10%
Leola
MEMPHIS
ATLANTA
RICHMOND
JACKSONVILLE
NEW ORLEANS
New Boston
Henderson
Joyce
Citronelle McDavid
Maplesville Opelika
Folkston
Whitehouse
Augusta
Newberry
Armour
Seaboard
(indefinite shut) (indefinite shut)
(indefinite shut)
66
SYP Producer Capacity
Independents53%
Weyerhaeuser 12%
West Fraser 11%
Georgia Pacific10%
Temple-Inland6%
Gilman3%
Canfor3%
Anthony Group2%
Source: FEA
SYP Markets
88
Lumber – End Use (Average 2007-2010)
SYP
R&R 43%
Industrial 21%
New Residential
29%
Non Residential
7%
SPF
Industrial 21%
R&R37%
New Residential
39%
Non Residential
3%
Source: FEA
99
End Use
1010
SYP Segments
� Treated� Traditional
� Big Box
�Retail
�Pro Yard
�Co-Op
� Traditional
� Industrial
� Truss
�Export
1111
U.S. Housing Starts by Region
Northeast
0
200
400
600
800
1,000
1,200
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9
North Central
0
200
400
600
800
1,000
1,200
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9
South
0
200
400
600
800
1,000
1,200
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9
West
0
200
400
600
800
1,000
1,200
59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9
Source: FEA
1212
0%
5%
10%
15%
20%
25%
30%
35%
40%
19
70
19
80
19
90
20
00
20
10
Northeast North Central South West
Share of US Population by Census Region
1313
� Near term� Tough pricing environment
� SYP supply / demand balance
� Wide dimension
� Texas
� Export
� Longer term � Positive as housing recovers
Market Outlook
Timber Supply
1515
U.S. South Timberland Ownership
2007 Public, 12%
Private Corp., 28%Private
Non-Corp., 60%
Timber is moving into Private/Corp. category through REITS
2002 Public, 10%
Private Corp., 18%
Private Non-Corp.,
72%
Source: FEA
1616
Corporate Ownership of Forest land by Ownership Class
Source: USDA; Butler and Wear 2010
1717
Timber Supply
� Sourcing Strategy � Long Term Agreements 20 – 25%
� Negotiated Gate Wood 10 – 20%
� Tract Specific Agreements 25 – 35%
� Timber Deeds <5%
� Open Gate Wood 15 – 35%
� Varies by Mill and Location depending on regional Land Ownership & Supplier Force
Note: Percent based on “Normal” operating schedule.
1818
Supply Availability
US South Total SYP Log Supply 2001 - 2015
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Bill
ions
Cub
ic F
eet
Removals Growth Accumulated Surplus
FEA: US South Privately-Owned Available Softwood Growing Stock Inventory
1919
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
2020
� Near term� Impact of downturn on Supplier / logging force
� Stumpage expectations
� Operating cost increase
� Continue flattening of price curve
� Longer term� Decreased competition in many drains
� Change in land ownership patterns
� Positive growth/drain ratio
Timber Outlook
2121
Projected Price / Supply Dynamics
Volume
Pric
e
historical projected
Summary
2323
Competitiveness
Net Mill Return
150
200
250
300
350
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
$/M
fbm
US South US$ BC Interior US$
Source: FEA
2424
Competitiveness
Delivered Wood
100120140
160180200220240
260280
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
$/M
fbm
US South US$ BC Interior US$ BC Interior Par exchange
Source: FEA
2525
Competitiveness
Ebitda
-60
-40
-20
0
20
40
60
80
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
$/M
fbm
US South US$ BC Interior US$
Source: FEA
2626
US South Lumber Production
0
5,000
10,000
15,000
20,000
25,000
30,000
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
MMfbm
0.0
0.5
1.0
1.5
2.0
2.5
Million
Capacity US Housing Starts ®Source: FEA/RISI
2727
Share of North American Production
10%
15%
20%
25%
30%
35%
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
US South US West Coast US Other British Columbia East of the Rockies
Source: FEA
2828
Update - 2007 to Current
� WF manufacturing culture
� Good progress in operating metrics
� Synergies exceeded expectations
� Capital
� on hold due to downturn
� backlog of projects
2929
Priorities
� WF culture
� Cost
� Manufacturing focus
� Capital to improve competitiveness
� Prioritization
� Project management
� Re-grow capacity
� People development and succession
3030
Summary
� Proximity to market
� Demographics support demand
� Growing log supply
� Investment opportunities
� Diversification
� Pine Beetle
� FX
� Trade
Questions?
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