DRAFT

WFP Fibre Needs and Distribution of Logs West Island Woodlands Advisory Group - February 19, 2015

Presentation Objective

Help the Advisory Group better understand Western’s business needs &

community benefits.

Identify WFP’s requirements for success/sustainability in the Alberni

Valley (volume, competitiveness, business certainty).

Re-enforce WFP’s long standing relationship with this Advisory Group;

continue to understand mutual interests.

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WFP’s success is a community success

Our Mission

To create a globally competitive,

sustainable business that

operates profitably through

business cycles, for the benefit of

employees, customers,

shareholders and the

communities in which we

operate.

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Timberlands: 8 operations

o Primarily Tree Farm Licenses (TFL)

Manufacturing: 9 operations

o 7 Sawmills

o 2 Remanufacturing facilities

Our Company

Margin-Focused Timber & Lumber Company

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5th Largest Canadian Lumber Company

Operating only on the coast of British Columbia, serving global markets:

o Largest Crown timber tenure holder in Coastal B.C.

o Largest Cedar lumber manufacturer in North America

o Timber resource unaffected by Mountain Pine Beetle

LTM1 revenues of $1 billion and EBIDTA of $118 million

Revenue by Product1 Revenue by Market Area1

(1) Last twelve months total extended revenue ended September 30, 2014..

Largest investor in coastal B.C. manufacturing

>1.1 billion board foot capacity

>50 domestic log customers

Customers in 28 countries

$125 million investment plan

2000 employees

1400 contract employees

$190 million payroll

$6.0 million property tax

>5000 BC based suppliers

7 Sawmills

2 Remanufacturing facilities

2 million hectares of land tenure (4.8 million acres)

6.4 million m3/yr AAC1

9.5 million trees/yr. planted

Resources Business

Competitive Advantages

1AAC: Annual Allowable Cut as of September 2013

Statistics based on 2013 estimates 5

People

Saanich Forestry Center

Celebrating 50 years of sustainable forest management and forest regeneration

Goal: All employees (company and contract) return home safely every day!

Lead by example

Always take the time to do the job safely

Never ignore an unsafe act or condition

Ensure employees are properly trained and qualified, with the right tools

Continually look for ways to improve safety performance

People: Working Safely a Top Priority

Managing safe and productive operations

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360 staff and hourly employees

250 contract employees

$76 million salaries and benefits staff/hourly and contract

$1.3 million property tax

Largest supplier of fiber to Catalyst Pulp Mill

$14.4 million accounts payable

8

Local Impact

Port Alberni Operations

Stable communities require sustainable businesses

Port Alberni Forest Operation

782, 481 m3 Average Annual Cut (AAC)

139,446 ha land base

79,055 ha (57%) productive area

997 ha Annual Harvest Area

CSA and ISO Certified

Harvest Methods

o 60% Old Growth Conventional

o 10% Old Growth Heli

o 30% Second Growth Conventional

$5.0 million new capital investment

15 Kiln Chambers

700 ,000 m3 current fiber consumption – Whitewood (Hemlock, Balsam)

International Customers –Japan, North America, China, Korea

Alberni Pacific Division Sawmill

Producing lumber in the Alberni Valley for over a century

Somass Sawmill

Producing lumber in the Alberni Valley since 1935

170,000m3 current fiber consumption – Western Red Cedar

7 Kiln Chambers

International Customers –Japan, North America

Education

Giving & Sponsorship

Tours & Community Events

Jobs Training, Apprenticeships, Summer Students

Employment Opportunities

Supporting the Port Alberni Community

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Invested in our community

Benefits to the City of Port Alberni

Stable, well paying jobs at Mills and Timberlands:

o Long-term resident retention

o Money spent in local economy

Revenue to municipal, provincial and federal governments

Sustainable management of the public forest resource -- ensures benefits from

the forest in perpetuity

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Western’s Success is community Success

Western’s Needs to Be Successful &Sustainable

Volume: Fiber Supply

Competitiveness: Municipal Tax Rates

Business Certainty:

oPreserving Timber Harvesting Land Base

oMaintaining Working Waterfront

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Challenges for our business

Where the Wood Goes

Company-wide

6.4 million m3 annual harvest; 1.3 million m3 open-market purchase:

o 60% consumed by WFP sawmills & remanufacturing facilities

o 40% sold externally to domestic, export and pulp log markets

Locally

WFP’s Somass and APD mills

WFP largest fiber supplier to Catalyst Pulp Mill

Provide wood to Franklin Forest Products, Nagaards and McLean Mill

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Western is a major buyer, seller and manufacturer of fiber

Getting the right log to the right market – Maximizing Value

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Internal Log Consumption

ExternalLog Sales

Domestic LogMarkets

Export LogMarkets

ManufacturingFacilities

Diverse and Unique Species Mix

Hemlock / BalsamYellow CedarHemlock / Balsam

YellowCedar

Douglas Fir

~60%Logs processed at

WFP manufacturingfacilities

~40%Logs sold

Log Purchases

~ 1.3 million m3

7 sawmills

2 remanufacturing plants

Pulp Log Markets

Plywood plants

LVL

Shingle manufacturers

Local sawmills

China

Korea

Japan

U.S.

Pulp/paper

manufacturing

facilities

Diverse and Unique Species Mix

Hemlock / Balsam SpruceYellowCedar

Douglas Fir

Western Red Cedar

Annual Allowable Cut (AAC) for Logs

~ 6.4 million m3

ManufacturingFacilities

Volume: Inadequate Fiber Supply –Getting Right Logs to Right Mills

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Issue: Port Alberni Mills are designed to economically utilize a specific log profile

Result: Must sell or transport local wood that we cannot economically manufacture; must import wood for local mills (600,000m3 shortage).

Volume: Inadequate Fiber Supply

1998 AAC: 1,800,127 2015 AAC: 782,482

Issue #1 – Reduction in harvest level

1998 AAC: 1,800,127 m3 2015 AAC: 782,000 m3

Issue: TFL 44 cut has been reduced by 57% since 1998

Result: inadequate local fiber to supply our mills

Volume: Inadequate Fiber Supply –

Port Alberni Mills are Net Wood Importers

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Expensive = unsustainable

Issue: Additional cost of importing/buying wood

Result: Mills cannot economically operate at capacity

Volume: Inadequate Fiber Supply – Solutions

Support our efforts to:

o Improve access BCTS volume and undercut (maximize sustainable harvest on existing local land base)

o Preserve existing timber harvesting land base

o Access to local fiber - First Nations, BCTS

o Supply local manufacturers with Community Forest fiber

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Our ability to manufacture locally depends on our ability to find fiber

Competitiveness: Property Taxes – Port Alberni

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Municipality Major Industry Tax Rate Rank out of 161 BC

Municipalities

Ladysmith 111.22 2

Port Alberni 61.91 16

North Cowichan 39.40 52

Nanaimo 24.95 79

Surrey 20.38 94

BC Average 30.44 -

16th highest tax rate in BC

Business Certainty

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Issues and Opportunities:

Land from Western’s Tree Farm Licence is under constant pressure to be converted to other land uses or to other land users. In order to continue to invest in our infrastructure we need to preserve our working forest and the volume that it generates.

Western needs reliable water access - supply fiber to facilities, external customers safely.

Reliable water access is critical to get fiber to and from our mills

How You Help Us Be Successful & Sustainable

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Recognize our desire to create fibre supply certainty in support of required Western investments.

Recognize our needs to reduce delivered log costs and improve our competitiveness in world markets.

Continue to ask questions to better understand the complexities of this business.

Continue to advise us through the CSA standard in support of certification and building our social licence.

Help us meet the challenges to our business

Relationships

Our Goal:

Is to continue to receive feedback from local community groups with a

special emphasis on this Public Advisory Group (WIWAG).

Thank you and please continue to share your values with us so that we

may understand, and help you achieve them.

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We look forward to working together

DRAFT

ALBERNI TEAM DECEMBER 17, 2014

Alberni Valley Operations

Objective - Alberni Valley Consolidation

Incorporate PAFO office in with Alberni Pacific Division or Somass Division

Common infrastructure/Overhead

Explore Synergies in Timberlands working together with APD and Somass Operations

Manpower reduction opportunities

Inventory reductions

New way of doing business

IMPROVE COLLECTIVE EBITDA