CIBC INSTITUTIONAL INVESTOR CONFERENCE CIBC INSTITUTIONAL INVESTOR CONFERENCE INVESTOR PRESENTATION

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  • CIBC INSTITUTIONAL

    INVESTOR CONFERENCE

    INVESTOR PRESENTATION January 21-23, 2015 | Whistler, British Columbia

  • 2

    This presentation and comments associated with it contain

    forward-looking statements including statements relating to U.S.

    housing recovery, the potential for constrained lumber supply,

    energy-related opportunities, earnings sensitivity and estimated

    annual capital expenditures. These statements are subject to

    the cautionary statement which introduces West Fraser’s 2013

    Annual Management’s Discussion & Analysis which can be

    accessed on the Company website www.westfraser.com.

    Forward-Looking Statements

  • 3

    • To be a leading forest products manufacturer,

    focused on solid wood products

    • Strong financial results through the business cycle

    • Long-term growth and shareholder value

    enhancement

    • Stable, conservative financial structure

    Our Goals

  • 4

    • Operational excellence

    • Diversification

    • Product differentiation

    • Integration

    Our Strategy

  • 5

    • Managing to ensure a committed workforce

    • Cost control and efficiency

    • Continuous reinvestment

    • Internal and external benchmarking and

    competition

    • Straightforward, consistent business model

    Operational Excellence

  • 6

    LUMBER 27 mills

    PANELS 7 mills

    PULP & PAPER 5 mills

    SPF 3.9 Bfbm SYP 2.3 Bfbm Total 6.2 Bfbm

    Plywood: 830 MMsf3/8” MDF: 300 MMsf3/4” LVL: 3.2 MMcf

    NBSK: 590 Mtonnes BCTMP: 650 Mtonnes Newsprint: 135 Mtonnes

    Product Diversification

    • North America’s largest lumber producer

    • Largest plywood producer in Canada

    • Third largest pulp producer in Canada

  • 7

    Lumber 66%

    Panels 11%

    Pulp & Paper 23%

    Trend Sales Mix ($)

  • 8

    Operations diversified by geography

    Geographic diversification

    B.C. 40%

    Alberta 23%

    U.S. 37%

    Lumber Capacity

  • 9

    • Wood as the best environmental choice

    • Renewable resource, sustainable business

    • Expanding applications

    • Bioenergy, full use of the resource

    Product Differentiation

  • 10

    • Lumber, panels, pulp, newsprint and energy

    • Substantial fibre self-sufficiency

    • Fuller utilization of resource

    • Some benefits from counter-cyclicality

    • Better able to respond to new opportunities

    such as bioenergy

    Integration (in Canada)

  • 11

    Demand - North American housing

    - Chinese construction and

    industrial applications

    - Japanese housing

    Supply - Fibre limitations

    - Residual offtake

    - Mill closures

    - People

    Efficiency - Capital investment

    - Business model

    Earnings Growth Drivers - Lumber

  • 12

    Returns on Lumber

    -10%

    -5%

    0%

    5%

    10%

    15%

    20%

    25%

    30%

    35%

    40%

    1 9

    9 1

    1 9

    9 2

    1 9

    9 3

    1 9

    9 4

    1 9

    9 5

    1 9

    9 6

    1 9

    9 7

    1 9

    9 8

    1 9

    9 9

    2 0

    0 0

    2 0

    0 1

    2 0

    0 2

    2 0

    0 3

    2 0

    0 4

    2 0

    0 5

    2 0

    0 6

    2 0

    0 7

    2 0

    0 8

    2 0

    0 9

    2 0

    1 0

    2 0

    1 1

    2 0

    1 2

    2 0

    1 3

    Y td

    Q 3

    -1 4

    EBITDA Margin (%) - Lumber

    Average: 16%

  • 13

    U.S. Housing M

    il li o

    n U

    n it

    s

    Source: FEA, Q3 2014

    Significant pent up demand bodes well for long-term recovery

    Pent Up Housing Demand (conventional + mobile)

    0.50

    0.75

    1.00

    1.25

    1.50

    1.75

    2.00

    2.25

    1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

    Production Underlying Demand

  • 14

    50%

    55%

    60%

    65%

    70%

    75%

    80%

    85%

    90%

    30 year average share = 76%

    US Housing

    Single Family Share well below 30 year average Share of single-family housing starts

    Source: FEA

  • 15

    Unlike Single-Family, Multi-family has Recovered

    Source: U.S. Census Bureau

    0

    50

    100

    150

    200

    250

    300

    350

    400

    450

    500

    0

    200

    400

    600

    800

    1,000

    1,200

    1,400

    1,600

    1,800

    2,000

    2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

    Thousands

    Single-Family (Left Scale) Multi-Family (Right Scale)

  • 16

    U.S. Lumber End Use

    U.S. Lumber End-use 2013 U.S. Lumber End-use Normalized

    Source: FEA and WF

    Single Family Construction,

    24%

    Multifamily Construction, 3%

    Residential Improvements,

    38%

    Industrial Production, 30%

    Nonresidential/ Mobile, 5%

    Single Family Construction,

    37%

    Multifamily Construction, 4%

    Residential Improvements,

    29%

    Industrial Production, 23%

    Nonresidential/ Mobile, 7%

  • 17

    Canadian Shipments to China

    0

    500

    1,000

    1,500

    2,000

    2,500

    3,000

    3,500

    2006 2007 2008 2009 2010 2011 2012 2013 2014

    Proj.

    M M

    fb m

    Source: Council of Forest Industries, November 2014

    Equivalent to 300,000 housing starts *

    * Based on consumption of 11.5 Mfbm per U.S. housing start (average mix of single and multi family)

  • 18

    B.C. Shipments to Japan

    0

    20

    40

    60

    80

    100

    120

    140

    0

    200

    400

    600

    800

    1,000

    1,200

    1,400

    1,600

    2006 2007 2008 2009 2010 2011 2012 2013 2014

    Proj.Shipments 2x4 Starts

    Source: Council of Forest Industries, November 2014

    Mmfbm Thousand 2x4 Starts

  • 19

    0

    1,000

    2,000

    3,000

    4,000

    5,000

    6,000

    7,000

    W e

    st F

    ra se

    r

    C an

    fo r

    W e

    yc o

    G P

    In te

    rf o

    r

    Si e

    rr a

    P ac

    if ic

    R es

    o lu

    te

    To lk

    o

    H am

    p to

    n

    Si m

    p so

    n

    Mmfbm

    Top 10 Lumber Capacity

    Top 10 make up only 43% of Capacity

    North American Lumber Capacity

  • 20

    Canadian Fibre Supply M

    il li o

    n (

    M 3

    )

    Source: FEA, Q4 2014

    0

    10

    20

    30

    40

    50

    60

    70

    80

    1 9

    9 0

    1 9

    9 1

    1 9

    9 2

    1 9

    9 3

    1 9

    9 4

    1 9

    9 5

    1 9

    9 6

    1 9

    9 7

    1 9

    9 8

    1 9

    9 9

    2 0

    0 0

    2 0

    0 1

    2 0

    0 2

    2 0

    0 3

    2 0

    0 4

    2 0

    0 5

    2 0

    0 6

    2 0

    0 7

    2 0

    0 8

    2 0

    0 9

    2 0

    1 0

    2 0

    1 1

    2 0

    1 2

    2 0

    1 3

    2 0

    1 4

    2 0

    1 5

    2 0

    1 6

    2 0

    1 7

    2 0

    1 8

    2 0

    1 9

    2 0

    2 0

    Annual Allowable Cut

    Quebec Ontario BC Interior

    Forecast

  • 21

    U.S. South Positive Timber Inventory

    Bfbm Int’l ¼”

    Source: FEA, Q4 2014

    0

    5

    10

    15

    20

    25

    30

    2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

    Growth Drain

    Projected Excess Growth

  • 22

    Demand - China’s paper, tissue and packaging

    demand

    - Developing countries’ demand

    - Price of cotton and similar products

    Supply - European paper capacity closures

    - Russian and Canadian start ups

    - Product diversification

    (e.g. dissolving pulp)

    - South American production

    Reliability - Capital

    - Technology

    Earnings Growth Drivers - Pulp

  • 23

    Pulp & Paper Sales Mix – 2013 ($)

    North America,

    38%

    Asia, 56%

    Europe, 6%

  • 24

    Chemical Pulp End-Use Products

    Printing and Writing Papers

    31%

    Tissue 31%