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
10
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
11
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
14
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
16
JAPAN
17
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
19
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
22
Canfor Pulp Products Inc. (CFX)
C A N F O R
C O R P O R A T I O N
23
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
24
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
25
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