Q1 2019 Earnings Presentation April 2019 2 Risks and - PowerPoint PPT Presentation

Q1 2019 Earnings Presentation April 2019

2 “Risks and Uncertainties”, in our MD&A and may differ materially General: This presentation and comments associated with it contains historical information, descriptions of current from those anticipated or projected. Reference should be made circumstances and statements about potential future developments to the other factors discussed in public filings with securities and anticipated financial results. Readers are cautioned that this regulatory authorities. Accordingly, readers should exercise presentation is qualified in its entirety by reference to, and must be caution in relying upon forward-looking- statements and WFT read in conjunction with, the information contained in West Fraser undertakes no obligation to publicly update or revise any Timber Co. Ltd. ’s (WFT’s) management’s discussion and analysis forward-looking statements, whether written or oral, to reflect for the year ended December 31, 2018 (MD&A), available on subsequent events or circumstances except as required by SEDAR (www.sedar.com). A person is not entitled to rely on parts applicable securities laws. of the information contained in this presentation to the exclusion of others. Non-IFRS Measures: This presentation makes reference to certain non-IFRS measures, such as EBITDA. Non-IFRS Forward-looking Statements: This presentation contains measures do not have a standardized meaning prescribed by “forward -looking statements” within the meaning of applicable IFRS and are therefore unlikely to be comparable to similar securities laws. Forward-looking statements, are presented to measures presented by others. For further information regarding the use of non-IFRS measures please refer to the “Non -IFRS provide reasonable guidance to the reader but their accuracy Measures” section in the MD&A. depends on a number of assumptions and is subject to various risks and uncertainties. In some cases, forward-looking statements can be identified by the use of forward-looking External Information: Where this presentation quotes any terminology such as “plans”, “targets”, “expects” or “does not information or statistics from any external source, it should not expect”, “an opportunity exists”, “outlook”, “prospects”, “strategy”, be interpreted that WFT has adopted or endorsed such “intends”, “believes”, or variations of such words and phrases or information or statistics as being accurate. Some of the state that certain actions, events or results “may”, “could”, information presented herein is based on or derived from “would”, “might”, “will”, “will be taken”, “occur” or “be achieved” . statements by third parties and has not been independently In addition, any statements that refer to expectations, intentions, verified by or on behalf by WFT, and no representation or projections or other characterizations of future events or warranty, express or implied, is made as to, and no reliance circumstances contain forward-looking information. Statements should be placed on, the fairness, accuracy, completeness or containing forward-looking information are not historical facts but correctness of this information or any other information or instead represent management’s expectations, estimates and opinions contained herein. projections regarding future events or circumstances . By their Currency: In this presentation, all amounts are in Canadian nature, forward-looking statements involve numerous dollars, unless otherwise indicated. Terminology : References in this presentation to “ MMfbm ” or assumptions, inherent risks and uncertainties, both general and “ mmfbm ” mean million board feet, “SPF” means spruce-pine-fir specific, which contribute to the possibility that the predictions, and “SYP” means southern yellow pine. For any other technical forecasts and other forward-looking statements will not occur. Actual outcomes and results of these statements will depend on terms used in this presentation, please see the Glossary of a number of factors including those matters described under Industry Terms found in our most recent Annual Report.

Demand conditions U.S. 3 U.S. Housing Starts ( not seasonally adjusted) Leading indicator of Remodeling Activity Monthly $B 4 Qtr Moving Improvements and Repairs $350 8.0% 140 $340 7.0% 4 Qtr Moving rate of Change 120 $330 6.0% 100 Repair and renovation growth $320 5.0% continues 80 $310 4.0% Seasonally adjusted: 60 2017: 1,203 $300 3.0% 2018: 1,250 40 $290 2.0% 2019: 1,193 ytd March 20 $280 1.0% $270 0.0% 0 Q117 Q217 Q317 Q417 Q118 Q218 Q318 Q418 Q119 J F M A M J J A S O N D Expenditures % change 2017 2018 2019 Source: US Census Bureau Source: Harvard Joint Centre for Housing Studies U.S. Housing Forecast (000) 2019 2020 50k annual RBC 1,313 1,335 ~600Mfbm increase in increase in RISI 1,280 1,310 housing starts lumber demand FEA 1,277 1,386 Wells Fargo 1,270 1,290 Mortgage Bankers 1,268 1,320 3% growth in ~1,000Mfbm repair and NAHB 1,250 1,286 increase in renovation lumber demand Fannie Mae 1,243 1,288 APA 1,230 1,220 Average 1,266 1,304 Limited growth needed for increased demand of 1 – 2 billion board feet

US South Poor Weather Fallout 4 2018 2019 5 Difficult weather conditions late 2018 and early 2019 Source: National Center for Environmental Information

Supply conditions 5 Lumber Supply North America Curtailments Billion fbm MMfbm 70 400 Up 0.5% 350 60 300 50 250 40 Mix of Up 3.5% temporary 200 Down 3.2% and 30 permanent 150 20 Down 5.5% 100 10 50 0 0 BC Canada US Total NA 2018Q4 2019 Q1 2017 2018 Source: Industry analysts, public filings, management estimates, FEA Source: Western Wood Products Association, management estimates Supply growth challenges • Equipment cost inflation affecting paybacks leads to cancelations • Contractor availability and lead times • Residual markets (new and existing) • Slower than expected start up schedule • Temporary curtailments become permanent Curtailments a headwind to supply growth

Consolidated Financial Results 6 $ Millions Adjusted EBITDA Q1-19 Q4-18 Q1-19 Q4-18 Sales $ 1,241 $ 1,274 Lumber $ 84 $ 68 Cost and Expenses 1,231 1,259 Panels 15 9 Operating earnings 10 15 Pulp & Paper 11 47 Finance Expense (11) (9) Corporate/Other - (4) Other (5) 22 Total $ 110 $ 120 Earnings before Tax $ (6) $ 28 EBITDA margin 8.9% 9.4% Tax recovery 1 1 Net earnings $ (5) $ 29 Diluted EPS $ (0.12) $ 0.29 Stronger wood products results offset by weaker pulp results Adjusted EBITDAis defined as operating earnings plus amortization, equity based compensation and export duties.

Q1 Lumber Adjusted EBITDA Reconciliation 7 Lower shipments and cost headwinds offset by higher prices

Q1 Pulp and Paper Adjusted EBITDA Reconciliation 8 Focused on recovering from downtime in NBSK

Q1 Consolidated Adjusted EBITDA Reconciliation 9 Offsetting results in lumber and pulp

Q1-19 versus Q4-18 10 10 $ millions unless Q1 Q4 Change otherwise indicated 2019 2018 SPF shipments lower on market conditions, SYP Lumber Shipments (MMfbm) 1,444 1,569 (125) shipments rebound slightly from Q4 (8%) Pulp Shipments (Mtonnes) 318 287 31 BCTMP shipments higher from vessel delay in Q4-18 11% Adjusted EBITDA better in lumber on better pricing and Adjusted Ebitda $110 $120 $(10) lower write downs, offset by increased costs in pulp from Hinton pulp production interruptions and shutdown (8%) Log inventory working capital build in Western Canada for Cash flow from operations $(228) $12 $(240) spring breakup follows the typical seasonal trend. Carryover tax payments from 2018 Inventory $968 $791 $177 Lumber inventories in-line with Q4 and well below prior year Continuing to execute on capital plans and US Capital Expenditure $108 $86 $22 South modernization program Net Debt $1,001 $606 $395 Net debt increase influenced by seasonal log inventory build, carryover tax payments from 2018 Net Debt to Capital 27% 17% 1,000 bps Cumulative duties on deposit $359 $323 $36 Significant duties on deposit Share buybacks $50 $118 $(68) Maintaining balanced capital allocation Despite difficult start to 2019, maintaining focus on priorities

Liquidity 11 11 Available liquidity Scheduled maturities $600 $900 $800 $500 $700 $400 $600 $500 $300 $400 $300 $200 $200 $100 $100 $0 2017 2018 Q1-17 Q1-18 Q1-19 $0 2019 2020 2021 2022 2023 2024 Bank lines Cash Demand facility Term loan Notes Revolver Ample financial flexibility Cash consists of cash and short-term investments less cheques issued in excess of funds on deposit.

Summary 12 12 ✕ Extreme cold weather in Western ✓ Transportation improved from Canada and high rainfall in US prior year South tempered demand and impacted operations ✓ Maintained financial flexibility, executed balanced capital ✕ Delayed start to 2019 building allocation strategy season weighs on lumber demand ✓ Increased liquidity by $100M after ✕ Log price inflation in BC a quarter end continuing headwind ✓ Continuing to invest in our ✕ Continued challenges at Hinton platform pulp ✕ BC government policy initiatives