Investor Presentation November/December, 2010 Forward-Looking - PowerPoint PPT Presentation

Investor Presentation November/December, 2010

Forward-Looking Statements and EBITDA 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, pent up U.S. housing demand, projected SPF shipments to China, projected B.C. Interior lumber production, Alberta and U.S. South log supply, U.S. South demographics, pulp & paper outlook and significant potential strength of lumber markets. These statements are subject to the cautionary statement which introduces the Company’s 2009 Management’s Discussion & Analysis contained in its 2009 Annual Report. In this presentation reference is made to EBITDA (operating earnings plus amortization and asset impairments). We believe that EBITDA is a useful performance indicator and measure of cash available prior to debt service, capital expenditures and income taxes. EBITDA is not a generally accepted earnings measure under Canadian generally accepted accounting principles (“GAAP”) and does not have a standardized meaning prescribed by Canadian GAAP. Investors are cautioned that EBITDA should not be considered as an alternative to earnings or cash flow, as determined in accordance with Canadian GAAP. As there is no standardized method of calculating EBITDA, the Company’s method of calculating EBITDA may differ from the methods used by other entities and, accordingly, the Company’s use of that term may not be directly comparable to similarly titled measures used by other entities. 2 2

West Fraser Geographic Diversification 3 3

West Fraser Canadian Integration – Product Diversification . Lumber Panels Pulp & Paper  28 Mills  5 Mills  6 Mills SPF 3.5 billion feet Plywood: 830 million square feet (3/8”) 1.2 million tonnes MDF: 300 million square feet (3/4”) SYP 2.0 billion feet LVL: 3.2 million cubic feet Total 5.5 billion feet Third largest pulp Largest plywood Largest lumber producer in the World producer in Canada producer in Canada 4 4

West Fraser Trend Sales Mix Pulp & Paper 23% Panels Lumber 14% 63% West Fraser is an integrated forest products company primarily focused on solid wood products 5 5

West Fraser - Financial Total Shareholder Return (US$) (June 2006 – November 23, 2010) 50% 43% 40% 30% 17% 16% 20% 10% 0% -2% -10% -20% -30% -30% -30% -40% West Fraser S&P/TSX Dow Competitor A Competitor B Competitor C Source TD Bank 6 6

West Fraser - Financial Financial Performance - $ million Ytd Q3 2010 2009 2008 Total EBITDA 363 30 128 521 Net Earnings 128 (341) * (137) (350) Cash from Operations 410 106 179 695 Capital Expenditures 44 19 47 110 Dividends 5 10 24 39 Debt reduction 585 * Includes $260 million of asset impairment, restructuring, and a tax valuation allowance 7 7

West Fraser - Financial Strong Balance Sheet Reduced debt by $585 million during the 800 worst lumber market since the Great Depression 700 600 500 $ millions 400 300 200 100 0 2007 Q3 2010 25% Debt to Capital 6% Debt to Capital 8 8

West Fraser – Lumber Opportunity Inevitable U.S. housing recovery Potential for longer-term constrained supply West Fraser geographic diversification and low- cost, highly-efficient operations 9 9

West Fraser – Lumber Overview 2009 Production 5.0 4.2 4.5 Billion Board Feet 4.0 3.5 3.1 3.0 3.0 2.3 2.5 2.0 1.6 1.5 1.0 0.5 0.0 o r r r c e e o s i n f s s f i a u n E c r e a a F a C a P h r t a r o s e t r e S r W y e e i W S World’s Largest Lumber Producer 10 10

West Fraser – Lumber Overview Lumber Sales Mix - 2009 Asia 11% Canada 20% USA 69% S ignificant Exposure to U.S. Housing 11 11

West Fraser – Lumber Opportunity Pent Up Housing Demand 2.25 Million Units 2.00 1.75 1.50 1.25 1.00 0.75 Production Underlying Demand 0.50 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Significant pent up demand bodes well for long- term recovery. 12 Source: FEA 12

West Fraser – Lumber Opportunity SPF Shipments from Canada to China 2,500 2,000 2,000 1,500 1,350 MMfbm 1,220 1,000 524 500 238 37 0 2006 2007 2008 2009 Ytd Sept. 2010 Est. 2010 Source: China Wood Imports & Exports Data China is poised to become a major consumer of softwood lumber 13 13

West Fraser – Lumber Opportunity Potential For Constrained Supply  Russian log export tariffs  Eastern Canadian harvest reductions  Boreal Accord  Mountain Pine Beetle 14 14

West Fraser – Lumber Opportunity Mountain Pine Beetle Approximately 1 Billion m 3 Dead or Dying 15 15

West Fraser – Lumber Opportunity B.C. Interior Lumber Production B.C. Interior Lumber Production 17,000 2,300 Forecast 2,100 15,000 Starts (thousands) 1,900 13,000 1,700 MMfbm 1,500 11,000 1,300 9,000 1,100 900 7,000 700 5,000 500 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 Production U.S. Housing Starts (R axis) Forecast based on W ood Markets (BC Fibre model) Post Beetle production back to 1980’s and 90’s levels. 16 16

West Fraser – Lumber Opportunity Lumber Capacity Location USA 36% BC 47% Alberta 17% Geographic diversification in lumber 17 17

West Fraser – Lumber Opportunity Alberta – Key Advantages  Competitive cost structure  Expanding log supply  Less impact from mountain pine beetle than B.C.  West Fraser currently operates 30% of Alberta’s lumber capacity 18 18

West Fraser – Lumber Opportunity U.S. South – Key Advantages  Proximity to market  Demographics support long-term housing growth  Expanding log supply  Currency and trade (softwood lumber duties) hedge 19 19

West Fraser – Lumber Opportunity Lumber Operating Rate 2009 85% 82% 80% 75% % of Capacity 70% 63% 65% 62% 62% 61% 60% 58% 55% 50% U.S. WFT WFT B.C. U.S. Canada South Canada U.S. Interior Low-cost structure allows for higher operating rates in down market 20 20

West Fraser – Lumber Opportunity Lumber Operating Rate Q2 2010 110% 98% 100% % of Capacity 90% 80% 75% 73% 73% 67% 70% 64% 60% 50% WFT WFT B.C. U.S. U.S. Interior Canada Canada U.S. South Low-cost structure allows for higher operating rates in down market 21 21

West Fraser Canadian Integration – Product Diversification . Lumber Panels Pulp & Paper  28 Mills  5 Mills  6 Mills SPF 3.5 billion feet Plywood: 830 million square feet (3/8”) 1.2 million tonnes MDF: 300 million square feet (3/4”) SYP 2.0 billion feet LVL: 3.2 million cubic feet Total 5.5 billion feet Third largest pulp Largest plywood producer Largest lumber producer in the World producer in Canada in Canada 22 22

West Fraser – Pulp & Paper Pulp & Paper Sales Mix - 2009 North Am erica 30% Asia 60% Europe 8% 23 23

West Fraser – Pulp & Paper Competitive Business Pulp & Paper Ebitda/tonne 225 200 175 150 125 $/tonne 100 75 50 25 0 -25 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 West Fraser No Eurocan Canfor West Fraser’s pulp business is competitive with Canfor’s pulp business 24 24

West Fraser – Pulp & Paper Favourable Outlook  China demand to support pricing  West Fraser operations have shown marked improvement  $88 million reimbursement for capital improvements  Bioenergy integration  BCTMP niche business 25 25

West Fraser – Pulp & Paper Newsprint North American Newsprint Cost Structure Exchange at $.88 Source: PPPC Cost Survey 2009 ANC Cdn$/tonne Alberta Newsprint is the lowest cost newsprint producer in North America and a positive contributor to the profitability of our pulp and paper business 26 26

West Fraser Canadian Integration – Product Diversification . Lumber Panels Pulp & Paper  28 Mills  5 Mills  6 Mills SPF 3.5 billion feet Plywood: 830 million square feet (3/8”) 1.2 million tonnes MDF: 300 million square feet (3/4”) SYP 2.0 billion feet LVL: 3.2 million cubic feet Total 5.5 billion feet Largest plywood Third largest pulp Largest lumber producer in the World producer in Canada producer in Canada 27 27

West Fraser - Panels Panel Segment A Consistent Contributor EBITDA 70 59 60 53 51 48 50 $ million 40 29 30 20 10 0 2006 2007 2008 2009 Ytd Sept. 2010 Plywood sold in Canada while MDF and LVL are predominantly used in North American new home construction 28 28

West Fraser – Environmental Wood Products – The Environmental Choice  Sustainable  Renewable  Recyclable  Energy Efficient  Carbon Storage Greater public acceptance of products and industry 29 29

Why Invest in West Fraser?  Significant potential upside for lumber and other wood building products  Sector continues to be plagued by bad news which depresses share values, creating buying opportunities  Solid pulp & paper business  Low-cost, highly efficient operations 30 30

 Proven ability to generate strong cash flow even in worst markets  Consistent, straightforward business plan  Loyal, long-term employee and management base  Conservative financial management coupled with proven ability to grow strategically 31 31