INVESTOR PRESENTATION November 2018 TSX:WEF Forward Looking - PowerPoint PPT Presentation

INVESTOR PRESENTATION November 2018 TSX:WEF

Forward Looking Statements and Non-GAAP Financial Measures All financial references are expressed in C$ unless otherwise noted. This presentation contains statements and estimates that may constitute forward-looking statements under the applicable securities laws. Readers are cautioned against placing undue reliance on forward-looking statements. All statements herein, other than statements of historical fact, may be forward-looking statements and can be identified by the use of words such as “will”, “estimate”, “project”, “expect”, “anticipate”, “plan”, “intend”, “believe”, “seek”, “should”, “likely”, “pursue” and similar references to future periods. Forward-looking statements in this presentation include, but are not limited to, statements relating to our current intent, belief or expectation with respect to: domestic and international market and economic conditions; our growth, marketing and capital allocation plans and strategies; our competitive position and expectations regarding future competition; regulatory developments, including, but not limited to, annual allowable cut levels; and product pricing and logistics. Although such statements reflect management’s current reasonable beliefs, expectations and assumptions as to, amongst other things, the future supply and demand of forest products, global and regional economic activity and the consistency of the regulatory framework within which the Company current operates, there can be no assurance that forward-looking statements are accurate, and actual results and performance may materially vary. Many factors could cause our actual results or performance to be materially different including: general economic conditions, international demand for lumber and logs, competition and selling prices, international trade disputes, changes in foreign currency exchange rates, labour disruptions, natural disasters, relations with First Nations groups, changes in laws, the availability of fibre and annual allowable cut, changes in regulations or public policy affecting the forestry industry, changes in opportunities and the factors discussed in the Company’s annual MD&A, which is available on our website at www.westernforest.com. The foregoing list is not exhaustive, as other factors could adversely affect our actual results and performance. Forward-looking statements are based only on information currently available to us and refer only as of the date hereof. Except as required by law, we undertake no obligation to update forward-looking statements. During the course of this presentation, certain non-GAAP financial information will be presented. Definitions and reconciliation of terms can be found in the Company’s annual and quarterly MD&A for Western Forest Products Inc. (the “Company”). 1

Investment Highlights – Why WFP?  Margin-focused strategy with exposure to growing lumber demand  Superior timber asset base and secure fibre supply  High-value, diverse products serving global markets  Strong financial position and attractive dividend  Stability of earnings due to specialty product focus  Business of scale and leader in our key markets  Committed to enhancing shareholder value Western is well-positioned to capitalize on improving market fundamentals 2

Operations Snapshot  Margin-focused, log and specialty lumber company BC  Serving global markets from Coastal Vancouver B.C. and Washington (Head Office) – Largest Crown timber tenure holder in Canada WA Coastal B.C. U.S. – Leading cedar lumber, timbers and Japan square manufacturer in North America Capacity 1 Mill Location (MMfbm) Forest resource unaffected by – Saltair Ladysmith, BC 240 mountain pine beetle Cowichan Bay Duncan, BC 215 Alberni Pacific Port Alberni, BC 175  Lumber capacity in excess of one Ladysmith Ladysmith, BC 130 Chemainus Chemainus, BC 130 billion board feet at 7 sawmills Duke Point Nanaimo, BC 90 Somass 2 Port Alberni, BC 90  Three centralized remanufacturing Total 1,070 facilities (1) Based on two shifts and 250 operating days, except Chemainus at three shifts (2) Indefinitely curtailed July 2017 Strategically located manufacturing locations with secure fibre supply 3

Financial Snapshot LTM 1 revenue of $1.2 billion LTM 1 Sales by Product  LTM 1 EBITDA of $164 million  7% Specialty Lumber 15%  Market cap. of ~$750 million 2 Commodity Lumber $1.2 Logs billion 57%  Quarterly dividend of 21% By-products $0.0225 per share 78% Lumber $0.09 per share annually – LTM 1 Sales by Geography  Well capitalized balance Final destination 2% sheet of a portion of 8% Canada Canadian sales are to 13% United States international 37% – Currently in a net cash markets China $1.2 position billion Japan 16% Other 61% 24% Europe Canada (1) Last twelve months ended September 30, 2018 & U.S. (2) Based on closing share price of $1.90 on November 8, 2018 Strong financial performance, net cash position and attractive dividend 4

Executing on Strategic Priorities 1 2 3 Strengthen Explore Grow the Base Foundation Opportunities  Strategic capital  Optimize operations  Pursue margin- improvement focused business  Targeted products of projects opportunities that scale to selected complement our  Invest in people and customers position in selected systems to create a  Margin improvement markets platform for growth program  Consolidation of  Mutually beneficial coastal operating relationships with base coastal First Nations Focus on growing long-term shareholder value 5

Growth Opportunity: New Wholesale Lumber Business Unit  Form strategic agreements with global suppliers, enabling WFP to broaden the scope of our specialty products offerings  Combination of WFP’s existing product portfolio and complementary supply from new strategic relationships, will enable WFP to offer an expanded product line that will deliver greater value to our customers – Will make our existing business and product offerings stronger  New products will originate in the U.S., Asia, Europe and Canada – Comprised of finished products, as well as lumber products that could be further processed at Arlington or with other strategic remanufacturing partners  Newly appointed Don McGregor, VP Wholesale Lumber, will lead the group – Approximately 30 years of lumber marketing experience, including over 20 years at a leading wholesale lumber company Growing global supply of targeted specialty products for our selected customers 6

Margin Strategy / Fibre and Processing Flow Chart Standing Timber Log Availability Margin Decision Market Segments Log Markets Domestic Log Markets External Log Export Log Sales Markets Annual Allowable Cut Diverse and Unique Species Mix Hemlock / Pulp Log (AAC) For Logs Markets Balsam ~30% of Logs Sold (~6.0 million m 3 ) (by volume) Lumber Segments Western Red Western Red Cedar Cedar Log Purchases (1) Douglas Fir (~1.2 million m 3 ) Japan Specialty Internal Log Consumption Yellow Niche Cedar ~70% of Logs Spruce Processed at WFP Commodity sawmills and custom cut division Raw Inputs Finished Products / Sales (1) Based on the twelve months ended September 30, 2018 Timber resource is directed to highest margin opportunity 7

Log Markets Determine Margin Decision LTM 1 Logs by Value Primary Target Log End Market Description Geographies 27%  All five species of Western’s sawlogs External consumed by internal manufacturing Log WFP operations Sales 21%  Sawmills Internal log supply supplemented by open market purchases to maximize $662 3% margin 3% million (2) 73%  Includes sawlogs, peelers (for engineered wood applications) and Domestic shingle logs sold through contractual commitments and open market transactions External Log Sales LTM 1 Logs by Volume  Volumes committed under long-term 30% fibre supply agreements External Pulplogs  Commitments met through internal log Log supply, supply contracts and open Sales 20% market pulplog purchases 5.4 7%  Represents log sorts produced in 70% million m 3 3% excess of internal mill requirements  Export Typically command premium prices due to strong demand  Transportation optimization (1) Based on total external log sales and internal log consumption for the twelve months ended September 30, 2018, including purchased logs. Internal transfer values based on Vancouver Log Market prices (2) Net of freight and fee in lieu Directing log volume to highest margin opportunity 8

Manufacturing and Sales Log Marketing Manufacturing Sales Supply Strategy Strategy Strategy Log diameter and margin determines lumber products manufactured Log Cutting Patterns Log Dimension 5 – 11” 11 - 18” 16 - 22” 20 - 30” 24”+ Narrow Wide Grade & Product Squares Timbers Dimension Dimension Appearance Group Lumber Commodity / Niche / Niche / Commodity Japan Product Type Western Red Cedar Western Red Cedar Western Red Cedar Flexible manufacturing platform presents unique opportunity to create margin 9