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January 2015
Scott KetchumGeneral ManagerHancock Forest ManagementNorthern Inland Division
Hancock Natural Resource Group Report to:State of Idaho Joint Economic Outlook and Revenue Assessment Committee
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Hancock Natural Resource GroupOverview
* As of June 30, 2014
Hancock Timber Resource Group
Founded in 1985; subsidiary of Manulife Financial Corporation
Global portfolio: USD 12.1 billion / 6.4 million acres*– US, Canada, Australia, New Zealand, Chile and Brazil – World’s largest timberland investment manager – Managing assets outside the US since 1992
– Hancock Agricultural Investment Group
– $2.1 billion in investments in high quality farm ground
– 235,000 acres in US., 6,000 acres Australia, 1,000 acres Canada
– 14,000 acres in Idaho (alfalfa, potatoes, corn/soy beans, wheat)
– Hancock Renewable Energy Group
– Focused on investments in the Renewable energy sector (wood pellets)
– $320 million dollar investment in North Carolina plant and export facility (2015)
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Approximately 311 investment clients located in United States, Canada, Europe, Australia, New Zealand, and Japan
Timberlands
2013 harvested 22 million m³ logs (8.5 billion board feet), planted 50 million trees
Sustainable forest management certified by SFI or FSC
Region Acres Hectares % of AreaUS South 2,350,000 951,000 37%US Northwest /Canada
1,610,000 652,000 25%
Australia 1,447,000 585,000 23%New Zealand 765,000 310,000 12%Chile 122,000 50,000 2%Brazil 1,700 700 <1%
6,424,000 2,600,000 100%
Global timberland manager
* As of June 2014
Hancock Timber Resource Group
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HTRG has a Diverse Client Base
USD9.9Billion NIV
317Clients Type of Organization
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
NIV Number
Investment Manager
Foundation/Endowment
High Net Worth
Corporate
Pension Plans
Northern Inland Timberlands Approximately 700,000 acres
Mixed conifer forest of Douglas Fir,
Western Larch, Grand Fir, Ponderosa
Pine, and a small component of high
value Red Cedar (also alpine fir, western
hemlock, mountain hemlock, western white
pine, lodge pole pine and spruce)
In Idaho roughly 140,000 acres under
management.
Page 5
Idaho Idaho is a good place to do business and a great place to invest in
and manage timberland.
– High quality timberlands exhibiting moderate growth rates.– Mature market place with state of the art milling infrastructure.
□ Extremely important not only to our lands in Idaho but we also sell significant percentages of our harvests from NEWA and NEOR into the Idaho markets.
– Stable timber supply well mixed between private, state, and federal suppliers.– Idaho has well designed forest practice regulations
□ Excellent balance between strong environmental stewardship and operational flexibility.
– Idaho Department of Lands does an excellent job of protecting private forests from fire as well works in partnership with Industry to navigate the often difficult and confusing nexus of federal EPA regulations.
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Impacts of Forest Products Industry on Idaho
Forest products industry in Idaho created 11,740 direct jobs in 2014 up 2% from 2013.– An additional 10,621 indirect jobs are also created.
Equates to $429 million in wages and salaries up 1.7% form 2013– Average salary is $56,800, 37% higher than the Idaho average
□ Most come with full benefits.□ 1.7% of all state wages.
2014 Industry Revenue $2.6 billion up 4.5% over 2013.– 2015 expectations are expected to exceed 2014.
For every $1 of value exported out of state of primary wood products it generates $0.6 of sales in other industries.
– 90% of primary wood and 56% of primary paper products are exported yearly.
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North American Lumber and Structural Panel Market Outlook
The Outlook is Good!– GDP growth approaching normal levels– Lowering of Unemployment– High Housing Affordability– Access to Financing Improving.
8 © Copyright 2014 RISI, Inc. | Proprietary Information
US Economy Growth Back to Trend LevelReal GDP Growth, Annualized Percent Change
-9%-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Source: BEA, RISI
9 © Copyright 2014 RISI, Inc. | Proprietary Information
14%
15%
16%
17%
18%
19%
20%
-7-6-5-4-3-2-1012345
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
2014
Job Growth Continues to Improve Along with the Quality of Jobs Change in US Total Payroll Employment, Millions and Share of Part Time Employment (Right Hand Scale)
Source: BLS
10
© Copyright 2014 RISI, Inc. | Proprietary Information
Affordability Is Down But Not Out: Housing Is Still Very AffordableHousing Affordability Index, Monthly, Not Seasonally Adjusted
0.0
50.0
100.0
150.0
200.0
250.0
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
11
Source: National Association of Realtors
© Copyright 2014 RISI, Inc. | Proprietary Information
Mortgage Lending Standards Are EasingAverage FICO Scores for Approved Loans and Loan-to-Value (Right Hand Scale)
Source: Fannie Mae12
62%64%66%68%70%72%74%76%78%
680690700710720730740750760770
© Copyright 2014 RISI, Inc. | Proprietary Information
Timber Industry in Idaho Strongly linked to National Housing Starts.
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40%
50%
60%
70%
80%
90%
0.0
0.5
1.0
1.5
2.0
2.5
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Single-Family Multifamily Single-Family Share (R)
Yearly housing starts (million units)
Source: BEA, RISI
Demand for North American Softwood Lumber: Will Return to 1990’s Level by Mid-Decade
-100
1020304050607080
Demand for North American Softwood LumberUS CanadianNet Export Avg (1990s)
14 © Copyright 2014 RISI, Inc. | Proprietary Information
Influence of Standing Inventory on Inland Log Market
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Risks
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Demand– Economy Stalls Due to Outside Shocks– Housing market remains flat or worse– Exports more price sensitive than estimated
Supply– Too much (Eastern Canada, US South)
A Couple Closing Observations
Applaud the efforts of the Idaho Department of lands.– Forged constructive partnerships with industry.– Provide adequate regulator oversight minimizing the hindrance of
operational needs while still vigorously protecting the environment.
Much of the actual logging and hauling that takes place in Idaho is done by relatively small harvest and haul contractors.– The global financial crisis has been hard on this sector of our industry.– Their continual survival is vital for the timber industry to prosper. It is
important that Idaho maintains an encourages an environment where these small businesses can prosper.
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