News
Analyst gives positive forecast for 5 Canadian forest, paper companies

Montreal, QC — Analyst Pierre Lacroix of Desjardins Securities believes that five Canadian companies are positione…

Montreal, QC — Analyst Pierre Lacroix of Desjardins Securities believes that five Canadian companies are positioned well for 2008, notes a Canadian Press article by Ross Marowits. Lacroix has placed a buy rating on Canfor Pulp Income Fund, Cascades, Catalyst Paper, Domtar and Stella-Jones.

Desjardins is forecasting that the Canadian dollar will remain near parity with the U.S. dollar in 2008, and the currency “remains the biggest obvious threat (and opportunity) for the paper and forest products sector,” Lacroix wrote in a report. He added that a weaker U.S. dollar would boost the American exports, which should bring some support to commodities in the sector.
The U.S. housing market isn’t expected to recover before late 2009, he added, and American residential construction spending is forecast to fall 12% this year.

Canfor Pulp is expected to benefit from strong pulp prices, and Lacroix expects monthly distributions will remain stable at 12 cents per unit for most of the year. “We expect the units will experience upside price movement when the market realizes the fund can sustain distributions in 2009.”

Despite risks related to its currency exposure, fibre prices and an uncertain economy, Cascades is seen as well positioned to deliver in 2008, in part, because of the expected closing of its new European joint venture. Lacroix said Catalyst Paper, after cost-trimming efforts in 2007, will benefit from the poor financial shape of groundwood industry players, especially AbitibiBowater. And as the new uncoated freesheet industry leader, Domtar has cut capacity, thereby boosting expectations that paper prices will be healthy throughout 2008.

“The time for shareholder rewards has come, and it appears likely that a dividend will be implemented in 2008, and perhaps inclusion in U.S. indices,” Lacroix said. And he said pole producer Stella-Jones is positioned to benefit from growth in the electrical transmission and railroad infrastructure businesses.

Source: Canadian Press, Jan. 2, 2008.