Update from the sawmilling industry

on timber Supply and Pricing

Adam Gresham – Managing Director

Logs• Average Log Cost December 2015 $83/t to August 2018 $117/t

$34/t increase ÷ 58% Conversion = $59/m³ increase40% increase

$75

$80

$85

$90

$95

$100

$105

$110

$115

$120

$125

Average Log Price ($/tonne)

Export LogsPrices across all supply points & softwood species have been impacted to various degrees over July and early August – primarily driven by RMB softening which accounted for most of the reduction in utility grade Radiatalogs. As is typical, once price softening is underway, sentiment overtakes the maths and any logic behind pricing calculations and consequently the low point in pricing tends to overrun– with the same issue evident at the top of the price cycle.

Prices have since recovered ~$5/jasto the current level of mid US CNF $130’s/jas (short A grade basis), with market conditions slowly improving and likelihood of small incremental resuming into Q4.

Off-port sales, after having spiked to over 110K m3/day in Q1, have remained steady around an 80K m3/day average from early June through to late August. This is allowing for a steady depletion in inventory, with late August at 3.7M m3.

Timber Pricing

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18

Acc

um

ula

tive

Ch

ange

in P

rice

(%

)

Price Trend - 90x45 SG8 H1.2

• 90 x 45 Timber Price December 2015 $585/m³ to August 2018 $695/m³$110/m³ increase18% increase

How has Kiwi Lumber (and the Sawmilling

Industry) focused on giving the

builder what they need?

Kiwi Lumber Video

Accurately Graded Timber

• Log Sonic Grader –Determines Cut Pattern of the Log

Accurately Graded Timber

• Edger Vision Grader

Accurately Graded TimberTHG – Transverse High Grader• Manual Grading

– 80% Accuracy– 45 lugs / min – 2 Graders

• THG – 95% Accuracy– 60 lugs / min (can

do 120 lugs / min ?)– No Graders– Grades the same

parameters as humans – but accurately and at speed

Accurately Graded TimberTimber Sonic Graders – working in tandem with each other• Measure width, thickness, length and weight to calculate mass• Sonic measurement to then calculate SG grade

Dry TimberCDK – Continuous Drying Kilns• 5 MW Boiler

– Gone from drying 55,000 m³ / annum to 100,000 m³ / annum

– Doesn’t vent the excess steam but uses it in the drying process

• More consistently dried timber

Dry TimberAquascan in the Drymill

• Measures the MC of every board across the length of the Board

Dry Timber

• Accurate Control on the Moisture Uptake when treating but not compromising the level of the treatment

• Uptake of 27l / m³ increases MC by 5%

• Dry timber to 13% and then 5% increase in treatment to give 18%

• Very controlled dimensional change

Dry TimberTimber Wrap

• 80% of packets with plastic wrap had at least one small hole / tear

• Trials on woven wrap have reduced this to minimal levels

Accurately Machined Timber

• Running at 250 lm/min

• Less Downtime• Reduction in skip

dress• Smoother finish

Head Speed = 6000 rpm

Will we have it when the Customer needs it?

• Full time Production Planner

• 2 Full time Despatch Co-ordinators

• 3 Year Freight Contracts

• Opimisation Systems in Sawmill – Can change price tables

to directly effect product recoveries dependant on grading

• Historical information on customer purchases

Kiwi Lumber Masterton’s Recent Upgrade

• $6.5 million

• New Infeed to the Sawmill

• Conversion gain of 1.9%

• Longer 50mm lumber

• Larger Logs – From 480mm to 600mm

Thank You