Alan Nicholl Senior Vice President, Finance & CFO. Pat Elliott Vice President & Treasurer. May 2014

Alan Nicholl Pat Elliott Senior Vice President, Finance & CFO Vice President & Treasurer May 2014 Forward Looking Statements The presentation an...
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Alan Nicholl

Pat Elliott

Senior Vice President, Finance & CFO

Vice President & Treasurer

May 2014

Forward Looking Statements The presentation and answers to questions today contain forward-looking statements which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Factors that could have a material impact on any future oriented statements made herein include, but are not limited to: general economic, market and business conditions, product selling prices, raw material and operating costs, foreign exchange rates, interest rates, changes in law and public policy, the outcome of trade disputes, and opportunities available to or pursued by the Company. For further details on these factors and our assumptions and applicable risks and uncertainties, please refer to Canfor Corporation’s Annual Report for the year ended December 31, 2013 available at www.canfor.com or www.sedar.com.

C A N F O R

C O R P O R A T I O N

2

Canfor Corporation (CFP)

C A N F O R

C O R P O R A T I O N

3

CFP Overview • US market demand steady, reflecting improved housing prices, pent up demand and falling unemployment; availability of financing and land continue to be challenges • Canadian market weaker after robust performance in recent years • China shipments increased in value for 2013, continuing positive trend in demand for higher-grade lumber

• Japan demand for the highest quality lumber up significantly in 2013, projected to moderate somewhat in 2014 • Supply constraints in Canada will limit production upswing as markets recover; US supply response coming from US South • Global customer base expecting significant future growth in demand, product quality • Benefits of $300 million capital program and Tembec strategic acquisition, upgrades are being realized

• Strategic growth targeted in strong fibre areas supporting key customers C A N F O R

C O R P O R A T I O N

4

CANFOR’S OPERATIONS

Sawmill

Pulp & Paper

Other

Western Canada JD Little Forest Centre

East Coast

Prince George

• 20 sawmills located across North America

Northwood

ALBERTA Canada

Fort St. John

Prince George

Taylor Chetwynd

Intercontinental Prince George

Mackenzie

Grand Prairie

Polar Houston

Plateau

• 4 pulp mills including 1 paper mill • Fibre base supports our customer focused strategy • Well located mills in regions minimally impacted by mountain pine beetle

Isle Pierre

CAROLINAS USA

Graham Marion

BRITISH COLUMBIA Canada

Camden

Vavenby

Conway

ALABAMA USA

Radium

Jackson Fulton

Canal Flats

Mobile Elko

Darlington

SPF Global Market Diversification 2007 Sales Volumes 4.5 Billion fbm North America, 89%

Korea Japan, 6% China, 2%

China

Other, 3%

2013 Sales Volumes 4.2 Billion fbm

Japan

North America, 66%

Other, 3% Japan, 7%

C A N F O R

China, 24%

C O R P O R A T I O N

Emerging markets

6

Global Demand For All Lumber Grades Offshore Markets

North America

J-Grade • Japan • China Square Edge • Korea • Japan • China

Square Edge • US • Canada MSR • US • Canada

J- Grade

Square Edge / MSR

#2 &Better • China

Construction Grade

#3 & Economy • China • India • Middle East • Other Emerging Markets

(#2&Btr)

#3 & Economy • US • Canada

Remanufacturing Grade

(#3 & Economy) % Offshore Shipments

100% C A N F O R

#2 &Better • US • Canada

50%

C O R P O R A T I O N

% North American Shipments

0

50%

100% 7

THE UNITED STATES

C A N F O R

C O R P O R A T I O N

8

US Housing Starts Forecast Multifamily

Single Family

2.000 1.800 1.600 1.400

In 2014, analysts predict a

15%

increase in US housing starts

1.200 1.000 0.800 0.600 0.400 0.200 0.000 2010

2011

* Source: FEA

2012

2013

2014

2015

2016

2017

2018 9

US Housing Starts Averaging 1.33 Million units (over the last 12 years) Total Housing Starts

Underlying Demand

(Thousands of Units) 2,200 2,000

2,068 1,956

1,800

1,600

1,848

1,801

2.7 Mil surplus

1,705

1.33 Million Units

1,400 1,355

1,200

3.7 Mil deficit

1,000 800

923

906 780

600 400

554

587

609

2009

2010

2011

200 0 2002

2003

2004

2005

2006

2007

2008

2012

2013

SOURCE: US Census Bureau C A N F O R

C O R P O R A T I O N

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Joint Center for Housing Studies Leading Indicator of Remodeling Activity Four-Quarter Moving Total in Billions

Four-Quarter Moving Rate of Change

$170

20% 14.0% 14.7%

-1.5%

$129

$127

$126

$123

$122

$119

$115

$111

$112

$112

$114

$113

$112

$112

$120

$121

-6.7% -8.0% -7.6%

$127

-4.4%

$100

10% 5% 0% -5% -10% -15%

-20%

Sources: Joint Center for Housing Studies, Leading Indicator of Remodeling Activity and U.S. Census Bureau Value of Private Residential Construction Spending Put in Place (C-30). C A N F O R

C O R P O R A T I O N

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Rate of Change (%)

0.3%

$140

-1.3%

-0.4%

4.5%

$140

0.5%

4.5%

15% 9.9%

$154

6.2% 4.2%

$140

$110

7.4%

11.4%

$148

$150

$130

9.0%

10.4%

$145

8.4% 6.3%

$116

Residential Spending ($Billion)

$160

North American Capacity and Demand Housing Starts - millions (right axis)

Capacity(BBF)

Demand (BBF)

2.5 2 1.5 84% Operating Rate

1 63% Operating Rate

0.5

0

90 80 70 60 50 40 30 20 10 0

Source: FEA, US Census, Company Data C A N F O R

C O R P O R A T I O N

12

CAD Price/Operating Rate (1992-2013) $600 Years with operating rates ≥ 84%, 2x4 price averaged CAD$415

$500

$400

2013 avg. Price– C$356 Operating Rate – 76%

$300

$200

60%

65%

70%

Source: Company Data C A N F O R

C O R P O R A T I O N

75%

80%

85%

90%

95%

Operating Rate 13

2013 - CANADIAN EXPORTS TO THE U.S. IS 10.9 BFBM WITH 5.2 BFBM TO OFFSHORE BC Exports 5.2 B

5.8 B

1.0 B

1.0 B

OFFSHORE

2013

2018

2.7 B Coast 8.0 B

US Exports 1.5 B

2.0 B Northeast Inland 4.5 B

OFFSHORE

South 15.0 B

Source: COFI & WWPA C A N F O R

C O R P O R A T I O N

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2018 - CANADIAN EXPORTS TO THE U.S. IS 11.5 BFBM WITH 4.5 BFBM TO OFFSHORE BC Exports 4.5 B

6.5 B

1.0 B

1.5 B

OFFSHORE

2013

2018

2.5 B Coast 12.0 B

US Exports 1.5 B

2.2 B Northeast Inland 6.5 B

OFFSHORE

South 21.0 B

Source: Canfor

C A N F O R

C O R P O R A T I O N

15

North American Lumber Prices Forecast FEA Western SPF (2x4,2&Btr)

FEA Southern Pine (2X4,2&Btr)

RISI Western SPF (2x4,2&Btr)

RISI Southern Pine (2X4,2&Btr)

550 500

450

Lumber Price (USD)

400 350 300 250 200 2013

2014

2015

2016

2017

2018

Source: FEA, RISI C A N F O R

C O R P O R A T I O N

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JAPAN

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Japan – Significant Market for BC  Canfor has had a strong relationship with Japan for more than 40 years  Mature, high value market and a strong cultural ties to wood construction

 Widespread recognition of environmental, health, seismic benefits of using wood  2x4 market continues to be the backbone of our market  Hybrid market inroads (in post and beam segment), including commercial and public buildings

2x4 imported from B.C. transformed into panels for Japanese houses C A N F O R

C O R P O R A T I O N

Source: BC Government (www.flickr.com/photos/bcgovphotos/) 18

CHINA

C A N F O R

C O R P O R A T I O N

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 China has grown from obscurity into BC lumber producers’ largest offshore market

 Huge demand for affordable housing  Expanded wood use to include higher grade lumber

First

3,500

British Columbia Shipments to China

North American lumber company in China

Volume (MMfbm)

3,000 2,500 2,000 1,500 1,000 500 0

C A N F O R

C O R P O R A T I O N

2001 02

03

04

05

06

07

08

09

10

11

12 20

1314 Proj.

Lumber

2013 Share by Countries Russia (30%) Canada (32%) Thailand (7%)

USA (11%)

Lumber Volume (Bfbm)

China Imports - Logs & Lumber (HW & SW) Lumber Imports by Country

11 10 9 8 7 6 5 4 3 2 1 0 2006 Canada

2007 Russia

2013 Share by Countries

New Zealand (24%)

Canada (6%) USA (11%)

C O R P O R A T I O N

Thailand

2010

2011

New Zealand

2012

2013

Sweden/Finland

Others

50 40 30 20 10 0 2006

C A N F O R

USA

2009

Log Imports ~ 42 Million m³ Million m³

Log

Russia (24%)

2008

2007

2008

Source: International Wood Markets Group

2009

2010

2011

2012

2013 21

BC Shipments to the U.S. and China

Source: DFAIT, COFI, Random Lengths Publications

C A N F O R

C O R P O R A T I O N

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Canfor Pulp Products Inc. (CFX)

C A N F O R

C O R P O R A T I O N

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Canfor Pulp Overview • Three facilities located in close proximity within Prince George, BC • Well capitalized mill operations with stable, low cost fibre supply • Significant recent capital investment (≈$200M) preserving top quartile performance • Growing energy revenues from current and future high return capital investment • Market pulp capacity of 1.1 million tonnes, kraft paper capacity of 140,000 tonnes • Fourth largest NBSK pulp producer in the world • Focused on operational excellence and achieving targeted operating rates • Market conditions likely face some challenges from new supply • Marketing focus on premium product sales to high quality customers • Fully leveraging Canfor/Canfor Pulp integration opportunities (>$10M per year) C A N F O R

C O R P O R A T I O N

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Operating Capacity Ratio 100% 95%

D/C Ratio (Hardwood) 97% 95%

D/C Ratio (Softwood)

94% 91%

90%

93% 91% 89% 88% 88%

NBSK (right axis)

94% 92% 91% 90%

93%

93%

BEK (right axis)

94%

94%

$USD/tonne 1000 95%

89%

600

87%

86% 84%

85%

800

85%

86% 400

80%

200

75%

0 06

07

08

09

10

11

12

13

14

15

16

• Significant new hardwood capacity forecast to come to market in the nearterm • Historical price premium of $70 for NBSK over eucalyptus; currently near $150/admt • Potential for softwood pricing to be negatively influenced by falling hardwood operating rates

17

Source: RISI and PPPC C A N F O R

C O R P O R A T I O N

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Diversified End-Use & Region • Targeting customers that need reinforcing pulp • • • • •



Specialty Décor, Masking tape base, Abrasive backing, Labels Tissue Branded top quality lightweight tissue Publication grades • Magazines / Catalogues • Reduce commodity P&W

A balanced and diversified regional mix • Rebalance growth in China and the reduction in North American business C A N F O R

C O R P O R A T I O N

End Use 2007

End Use 2013 Commodity 6%

Commodity 6%

Tissue 12%

Specialty 30%

Japan 6%

Tissue 28%

Publishing 19%

Publishing 52%

Specialty 47%

Sales 2007

Sales 2013 Europe 11%

Europe 15%

Japan 10%

America 26%

America 48%

China 15% APAC 16%

China 35%

APAC 18%

26

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.

Investor Contacts TSX Ticker: CFP, CFX Contacts: Alan Nicholl – Senior Vice President, Finance and CFO [email protected] 604-661-5370 Pat Elliott - Vice-President & Treasurer [email protected] 604-661-5441 27

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