Why Arkansas? | Interfor
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This presentation discusses investing in the US South lumber industry. It provides an overview of Interfor's operations in the region, which have grown significantly through acquisitions over the past few years. The presentation notes that lumber demand in North America is expected to increase due to rising US housing starts, particularly in the South. It also states that while log supply is constrained in Canada, log inventory is growing in the US South, making it well positioned for future lumber demand growth.
Why Arkansas? | Interfor
- 1. Investing in Arkansas ……… and the US South Arkansas Forestry Association 71st Annual Meeting October 5, 2016 Todd Mullis Vice President US South Operations
- 2. 2 This presentation contains information and statements that are forward- looking 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 man- made 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. FORWARD-LOOKING INFORMATION 2
- 3. 3 • Interfor’s Platform • North American Lumber Log Supply • US Lumber Demand • The Future of Southern Yellow Pine • The Road Ahead ITEMS FOR DISCUSSION 3
- 5. 5 March 2013 Rayonier Acquisition • Baxley • Eatonton • Swainsboro July 2013 Keadle Acquisition • Thomaston Sept 2013 Swainsboro second shift March 2014 Tolleson Acquisition • Perry • Preston Jan 2014 Baxley second shift Nov 2014 PTC office opening March 2015 Simpson Acquisition • Georgetown • Meldrim June 2015 Price Acquisition • Monticello 2013 2014 2015 • 5 transactions valued at over $400M • $55M additional investment to date • Nine operations in three states • Over 1,100 employees • 1.3 Bbf of production capacity • Over 5M tons of logs consumed From Zero to: INTERFOR US SOUTH — TIMELINE
- 6. 6 INTERFOR BELIEVES IN AND IS COMMITTED TO THE US SOUTH
- 7. 7 LUMBER FOCUS ONLY 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Interfor Lumber Panels Engineered Products Pulp, Paper & Fibers % of Sales Other Major Lumber Producers
- 8. 8 Doug Fir/Larch 30% Hem-Fir 10% Spruce-Pine-Fir 11% Southern Yellow Pine 34% Cedar 11% Lodge Pole/ Ponderosa Pine 4% INTERFOR’S BROAD RANGE OF PRODUCTS (1) By value for 2015 Lumber Sales By Species 1 Western Dimension Cedar Southern Yellow Pine Lodge Pole Pine
- 9. 9 Canada 8% China/Tw/HK 5% Other 4% Japan 10% USA 73% NORTH AMERICAN DRIVEN BUSINESS; BUT DIVERSE SET OF MARKETS SERVED (1) By value for 2015 Lumber Sales By Market 1
- 10. NORTH AMERICAN LUMBER SUPPLY LOG 10
- 11. 11 BC INTERIOR OVERVIEW Cumulative Percentage of Merchantable Forest Volume Killed Since 1999 Very High (>45%) High (31-45%) Moderate (16-30%) Low (<16%) None (0%) Adams Lake Castlegar Grand Forks Source: BC Ministry of Forests
- 12. 12 Source: FLNRO AAC: Allowable Annual Cut - 10 20 30 40 50 60 70 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 AAC m3/yrMillion m3 BC INTERIOR HARVEST WILL DROP
- 13. 13 US South Timberland Ownership THE MERITS OF PRIVATE LAND SUPPLY • Positive “Pro Business” environment. • Timberland is an attractive asset class. • Significant standing timber inventory. • Abundant commercially harvestable pine habitat. NIPF 60% Public 13% Corporate (REIT, TIMO) 27% Source: Forisk – 2015 Q3
- 14. 141414 LOG INVENTORY IS GROWING IN US SOUTH Source: Forisk Quarterly Q3-2015 Forecast - 0.5 1.0 1.5 2.0 2.5 3.0 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30 GradeInventory(Billiontons) Historic Forisk Base Case Forecast
- 15. UNITED STATES LUMBER DEMAND 15
- 16. 16 US HOUSING STARTS WILL GROW 16 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 Housing Starts Underlying Demand Pent-Up Demand Millions Source: FEA Q4-2015 Forecast; Published December 2015
- 17. 17 DEMAND ON NORTH AMERICAN MILLS WILL BE DRIVEN UPWARD 17 BBF Source: FEA Q4-2015 Forecast; Published December 2015 20 25 30 35 40 45 50 55 60 65 70 75 80 85 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 US Canada Net Exports
- 18. THE FUTURE OF SOUTHERN YELLOW PINE 18
- 19. 19 Source: FEA – 2015 Q3 SOUTH LEADS SINGLE FAMILY HOUSING STARTS 0 0.2 0.4 0.6 0.8 1 1.2 1.4 2013 2014 2015 2016 2017 2018 2019 2020 Northeast North Central South West millions
- 20. 202020 PINE GRADE INVENTORY & HOUSING STARTS Source: Forisk Quarterly Q3-2015 Forecast 0.0 0.5 1.0 1.5 2.0 2.5 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 U.S.HousingStarts(millions) U.S.SouthPineGradeInventory(thousands) Base Housing Low Housing Historic Base Low
- 21. 21 SOUTHERN YELLOW PINE: THE ROAD AHEAD • 2016 North American lumber demand dynamics have been positive. • Domestic consumption is forecasted to increase significantly over the next five years….the US South will lead the way. • Log supply constraints will continue in Canada, but log inventory is growing in the US South. • The US South is well-positioned and remains a good investment opportunity.
- 22. 22 THANK YOU
Editor's Notes
- #5: Geographical reference to presence. Regional production. US driven business with largest percentages of production coming from US South. Continue
- #7: Speak to details of MONTICELLO & PLANNED CAPEX PROJECT 2017
- #8: Based on 2015 q2 – left to right -- focusses on products made and sold Interfor: 100% lumber* includes logs and residuals as well as Coastal Woodlands’ log sales WFT: 65% lumber, 13% panels, 22% pulp and paper CFT: 71% lumber, 29% pulp and paper Weyco – excludes timberlands, lumber 35%, engineered 15%, panels 14%, cellulose 36% (included in pulp, paper & fibres) Resolute: 15% lumber, 85% pulp, paper and specialty papers
- #9: Option 1
- #10: Option 1
- #12: 45 million acres impacted – BC harvest will drop and aren’t projected to stabilize at much lower harvest levels than current (55 MMCM) at 40 MMCM until 2030.
- #14: 45 million acres impacted – BC harvest will drop and aren’t projected to stabilize at much lower harvest levels than current (55 MMCM) at 40 MMCM until 2030.
- #17: Housing starts will increase – SINGLE HOUSING, not multi family housing , represents largest percentage of housing starts
- #20: South leads in single family housing starts. Projected to be that way for extended period of time.