Conference board predicts $500 million drop
May 31, 2005 By Pulp & Paper Canada
A Conference Board of Canada report released last week indicated that Canada’s paper products industry will see pro…
A Conference Board of Canada report released last week indicated that Canada’s paper products industry will see profits drop by $500 million in 2005. The document, Industrial Outlook: Canada’s Paper Products Industry-Spring 2005 said that following an improvement last year in the industry’s financial performance, a weak North American demand for newsprint and a stronger Canadian dollar has left operators "struggling to fully recover from the grip of a cyclical downturn" in 2005.
"Revenue gains will not keep pace with cost growth this year, leading to a significant decline in profit levels and weakened profit margins," said Louis Theriault, associate director of industrial outlook at the board, a private sector forecasting agency. Theriault also said that a drop in exports accounts for rising costs in 2005, "since many Canadian plants will operate below capacity." High energy prices were also cited as a contributing factor.
Paper industry profits were $1.2 billion in 2004, but are forecast to decline slightly more than $700 million this year, the board said. However, as cost increases are expected to moderate in 2006, boosting profits to an estimated $1.3 billion, the report said, due largely to a recovery in the printing and writing papers segment. Plant conversions and additional consolidation will contribute to profit growth averaging 10% per year between 2007 and 2009, the report said.
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