UVIC- Analysis of financial statement

7/24/2019 UVIC- Analysis of financial statement

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CANFOR CORPORATIONUniversity of Victoria Student ResearchCFA Institute Research Challenge 2012


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Presentation Highlights

Overview

FinancialAnalysis

Valuation

Risks

Increasing Lumber Demand

Rising Lumber Prices

Competitive Advantages

!"#"!

!!#$%


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Co&'any Overview

Headuartered in !ancouver" #ritish Columbia

Lumber mill operations in #ritish Columbia" Alberta" $uebec" %ashington &tate"

&outh Carolina" 'orth Carolina

Largest Annual Production Capacit( in 'orth America )*+2 billion board ,eet-

*0+2. o/nership stae in Can,or Pulp Paper

Overview

FinancialAnalysis

Valuation

Risks

Source Canfor

North A&erican O'erations


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Overview

FinancialAnalysis

Valuation

Risks0

1000

2000

3000

4000

5000

6000

7000

80002010Total Regional SawnwoodLumberImports(!oard"eet#

Co&'any Overview(3a4or 3arets

&ource FAOSTAT


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Industry Overview(5& Housing &tarts and Lumber Prices

United States 67pected recover( in the housing maret /ill drive up lumber prices

0

500

1000

1500

2000

2500

0

100

200

300

400

500

600

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

$nnual%ousingSt

arts(T&ousands#

Lunmber'ries()perT

&ousand!oard"eet#

$nnuali*edont&l+,S%ousingStarts-s.ont&l+Lumber'ries

Source: Random Lengths, ForecastChart

5& Housing &tarts

Lumber Prices

0

100

200

300

400

500

600

0 500 1000 1500 2000 2500

Lumber'ries

,S%ousingStarts

/orrela on

Overview

FinancialAnalysis

Valuation

Risks High gro/th potential in 5& paired /ith Continued ne/ gro/th in China

Potential ,or

&upernormal &ales

8ro/th in medium

term


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Industry Overview(Harvesting Restrictions in China

Overview

FinancialAnalysis

Valuation

Risks

Restricted


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Industry Overview(8ro/ing&uppl( 8ap in China

Overview

FinancialAnalysis

Valuation

Risks

Sawnwood )u&*er +,'orts to China -.. /oard Feet0


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Overview

FinancialAnalysis

Valuation

Risks

Co&'etitive Positionin1( ChinaCo&'etitive Positionin1('orth America


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FINANCIA)ANA)2SIS


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Financial Analysis(Return 9n 6uit(

Overview

FinancialAnalysis

Valuation

Risks

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2010 2011E 2012E 2013E 2014E 2015E

R


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Financial Analysis(Lumber &ales

US 3ousin1Re*ound

Increasin1

ChineseSu''ly4a'

Risin1)u&*erPrice

Overview

FinancialAnalysis

Valuation

Risks

0

500

1000

1500

2000

2500

2010 2011 2012 2013 2014 2015

RegionalLumberSalesrowt&()#

Canada

China

5nited &tates

:apan

9ther

5%!%

United States54%

Canada22%

China17%

Japan6%

Ot er1%

UnitedStates,

47.81%

Canada,

15.41%

China,31.68%

Japan, 3.15% Ot er, 1.95%

5%!6+


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Financial Analysis(Pulp &ales

%eaening

Demand

67cess

&uppl(

Dropping

'#&; price

0

200

400

600

800

1000

1200

2010 2011E 2012E 2013E 2014E 2015E

'ulpSales()illions#

Overview

FinancialAnalysis

Valuation

Risks

Can,or Pulp and Paper is not a

sustainable contributor to Can,or


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Financial Analysis(Pro4ected Ratios

2010 2011E 2012E 2013E 2014E 2015E

0.

*.

10.

1*.

20.

+/IT7A .ar1in

2010 2011E 2012E 2013E 2014E 2015E

0.

2.

=.

>.

?.

10.

12.

7e*t to Ca'ital Ratio

2010 2011E 2012E 2013E 2014E 2015E

0.

10.20.

@0.

=0.

Solvency Ratio

2010 2011E 2012E 2013E 2014E 2015E

1+002+00

@+00

=+00

Current Ratio

Overview

FinancialAnalysis

Valuation

Risks

&tabilit( Level


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VA)UATION


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Valuation

7iscounted

Cash Flow

.ulti'leAnalysis

+/IT7ARe1ression

Final Value87ece&*er5%!5

Overview

FinancialAnalysis

Valuation

Risks

Corrects ,or potential

inaccurate c(clical ,oresight

o, DCF

Captures the e,,ect o, short

term cash ,lo/s on Can,or


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7iscounted Cash Flow(Asset Proportions

Canfor, 100%

wners&ip Lumber

Other, 49.8%

Canfor, 50.2%

wners&ip'ulpand'aper

Canfor !"p#i$ited

artnership,24%

Canfors #!$&er

Opera onsand

Other, 76%

$ssetsb+!usiness,nit

Overview

FinancialAnalysis

Valuation

Risks


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7iscounted Cash Flow(PostAnal(tical FCF6 Pro4ection )201> 9n/ards-

Overview

FinancialAnalysis

Valuation

Risks

FCF+ 4rowth Cycle Illustration

6 2ear Positive 4rowth.in( %98 .a,( 5#69

: 2ear Ne1ative 4rowth.in( %98 .a,( 5#69


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7iscounted Cash Flow(Anal(tical Phase )2012201*-

Chan1e In Non;Cash


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.ulti'le Analysis(&imilarit( Assessment

'(CC

)ota"(ssets

)i$&er )en!res

C(*+Sa"es

Epos!re

Effi-ien-

Other /a-tors

!asisor'eer/ompan+Similarit+$ssessment

Overview

FinancialAnalysis

Valuation

Risks

/ompan+ $//

$ssets ST

In-estments

()#

/$RSales TimberTenures()# Regional perations

/anor 6.34 254 10.16 563.7 /anada9,S

'est /raser )i$&er 4.51% 2651.9 7.77% 544.1 Canada, US

)e$&e- 7.67% 1004 2.60% Canada, US, /ran-e

'estern /orest rod!-ts 7.08% 582 3.42% 249.9 Canada

'eerha!ser 7.05% 11962 7.29% 124.96 Canada, US, China, Ur!!a

(&iti&i&oater 5.08% 6846 2.19% Canada, US, S.orea

Ran:ing /ompan+

1 'est /raser )i$&er2 'eerhae!ser

3 )e$&e-

4 'estern/orest rod!-ts

5 (&iti&i&oater


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.ulti'le Analysis(%eighted Average 3ultiple

.

RSS$RI= 272.0Se""in*enera" and(d$inistratie Costs 39.80

!IT?!IT


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*

:o!sinStarts

US;Jariables

+/IT7A .ean( !$! .illion


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Final Value

Statistical

A''roach!%9


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RISS


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Invest&ent Risks

Overview

FinancialAnalysis

Valuation

Risks

Invest&ent Risks

3i1hest I&'act Disappointing 5& housing start gro/th

Lo/er than e7pected Chinese lumber demand gro/th

&ustained lull in lumber prices

67change rate ris

Dangers to natural environment

8overnment regulation changes

Failure to success,ull( renegotiate labour union terms

)owest I&'act Bermination o, &o,t/ood Lumber Agreement )&LA-


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/U2BU+STIONSCRisin1

)u&*er7e&and

4rowin1

)u&*erPrices

Stron1

Co&'etitivePositionin1


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Appendi7 A Financials


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Appendi7 # Financials


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Appendi7 C Financials


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Appendi7 D Financials


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Appendi7 6 FCF6 &ensitivit( Anal(sis


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Appendi7 F DCF Inputs

,

, , ,


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SoureTeamC analysis

,

, , ,

ar:et"atorsBposure FSuppl+

"undamentals

Appendi7 8 Comparables


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Appendi7 H Compan( &imilarit(


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Appendi7 I Comparable Fundamentals

/ompan+ $// /ostoPuit+$terTaB/osto


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Appendi7 :Applied Ratios


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Appendi7 ;Regression !ariables


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Appendi7 L 67change Rates

A di 3


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Appendi7 33anagement Change


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Appendi7 ' 3ountain Pine #eetle

+ntire ProvinceTi&*er 3arvestin1 )and /ase

PineVolu

&eAilled-&illionsof

cu*ic&eters

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UVIC- Analysis of financial statement