News – 01-JUN-07
June 1, 2007 By Pulp & Paper Canada
DOMTAR TURNS PROFIT
MONTREAL, QC — Domtar has swung to black. The company recently announced a preliminary first quarter net income result of $49 million, compared to a net loss of $747 million in the first quarter of 2006.
FOREST PRODUCTS SECTOR CAPTIVE TO SHIPPERS: FPAC
OTTAWA, ON — “The forest products industry pays over $280 million annually in excess freight costs due to the monopoly power of the railways,” Avrim Lazar, president and CEO of the Forest Products Association of Canada charged. “It is time for the government to take action.”
In an address to the Senate Committee on Transport and Communications as part of its study of Bill C-11, an Act to amend the Canada Transportation Act and the Railway Safety Act, FPAC called for an increase in competition within the railway freight system and new measures to provide shippers with the means to challenge ‘unreasonable’ costs.
“The lack of competition over significant parts of the rail system results in significantly higher transportation costs for Canadian shippers, particularly in those remote areas that are ‘captive’ to the railways. This affects both rates and service at the majority of our mills across the country,”
According to FPAC, the forest products industry is the largest user of rail transport in Canada, contributing $2 billion annually to rail revenues. A recent report by Travacon Research Limited notes that where there is effective competition for rail traffic, payments to railways should not exceed 20% of railway variable costs based on volumes shipped. FPAC says its members paid out an additional $280 million above these costs.
“A competitive rail network will greatly benefit not only the forest products sector but also Canada’s export sector more broadly,” Lazar said.
U.S FOREST GROWTH STRONG
WASHINGTON — America’s forests are in good shape, a new report issued by the Society of American Foresters says. The U.S. is covered by 750 million acres of forestland; an amount that has remained largely unchanged over the past 100 years.
“The State of America’s Forests reports there is good reason to believe that the positive trends will continue,” the report said. “Most encouraging of all, perhaps, is not what has already been accomplished, but what is likely to be achieved by forestry and natural resources professionals in the future.”
The study concluded that forestland in the U.S. has increased by more than 10 million acres over the past 20 years, and that replanting and reforestation efforts, combined with forest regrowth on abandoned agricultural lands has been able to offset any loss of forest land during the 20th century due to urban/suburban growth.
INTERFOR TO BUILD BC SAWMILL
LOS ANGELES — International Forest Products is investing $100 million to build a 280 million board feet sawmill in the southern B.C. Interior equipped to deal with the challenges of mountain pine beetle-killed timber, Forestweb reported.
The Vancouver-based company said in a press statement related to its first quarter financial results that its Board of Directors has approved the construction of a state-of-the-art sawmill to replace its existing mill at Adams Lake. The construction is the final stage of the Adams Lake Master Plan approved in 2003.
In 2006, Interfor invested $30 million at Adams Lake in site improvements and a wood-fired energy system. Total spending on the ‘master plan’ is more than $40 million since 2003.
Construction of the new mill will begin this summer, with completion projected for late 2008. Interfor said it would incorporate proven technology that would ‘materially improve’ operating efficiency and cost structure at Adams Lake.
CATALYST TO PLANT SEEDS FOR CHANGE
DUNCAN, BC — Catalyst Paper’s Crofton mill and North Cowichan council are joining forces to fight climate change. The duo is preparing to plant 6,000 trees on municipal forestland next February.
Tom Murphy, a spokesman for Catalyst, said the $3,000 project will mark the company’s 50th anniversary in the pulp mill business.
“We will plant about 1,100 trees per hectare so it involves about six hectares,” he said.
Catalyst is covering costs associated with supplying the trees, while North Cowichan is paying for planting costs.
WWF AND DOMTAR RAISE THE GREEN BAR
TORONTO, ON — Domtar and WWF have taken a step to further solidify their relationship. The World Wildlife Federation and Domtar are committed to ensuring the long-term conservation of the Canadian boreal forest. Through their new agreement, WWF Canada will work with Domtar to pursue FSC certification, to identify important areas for protection on Domtar-managed lands, and to promote FSC-certified environmentally responsible papers, such as Domtar’s EarthChoice Line.
“Domtar’s commitment to sustainable forest management has long been one of the cornerstones of our business strategy,” said Raymond Royer, president and CEO of Domtar. “This new agreement will enable us to bring our commitment a step further by working in partnership with WWF-Canada to continue implementing FSC certification to protect the long-term health of these forestlands, and to encourage public adoption of FSC-certified products like the Domtar EarthChoice line of papers.”
BIODIVERSITY STUDY A MATTER OF TIME AND UPM
WESTMONT, ILL — Time Inc. and UPM are launching a biodiversity study in Canadian forests.
In cooperation with the University of Moncton, the New Brunswick Department of Natural Resources, Bird Studies Canada and the Nature Conservancy of Canada, using bird species as indicators of how biodiversity is managed in forests, the study is expected to contribute to the further development of best forestry practices for the Acadian forest of New Brunswick and Canadian Boreal forests.
The study will use publicly owned land, as well as some owned by UPM in New Brunswick. The study team is looking to develop a methodology that will become a model for future biodiversity studies in other Canadian forests. The findings will contribute to national and international discussions on biodiversity research, forest certification, policy development and forest legislation.
“UPM is pleased to be partnering with Time Inc. on this significant study,” said Bernard Robichaud, chief forester for UPM Canada. “The University of Moncton is responsible for the research project, and the New Brunswick Department of Natural Resources will represent the forest land owner. Bird Studies Canada and Nature Conservancy Canada, two non-governmental organizations, will act as partners and offer their expertise during the whole process,” Robichaud confirmed.
FPAC CALLS FOR ENVIRONMENTAL RECOGNITION, ACTION
OTTAWA, ON — The Forest Products Association of Canada is calling on the government to commit to action on climate change.
As part of its study of Bill C-288, Avrim Lazar, president and CEO of FPAC, addressed the Senate Committee on Energy, the Environment and Natural Resources, and appealed to the government to use 1990 as its base year for calculation of emissions reductions. FPAC says that anything less ‘sends a message to good corporate citizens that environmental responsibility is not recognized and is indeed penalized by making it more advantageous to wait for regulation.’
“The industry’s environmental improvements come as a result of massive retooling, reinventing its energy model by switching from fossil fuels to clean, renewable biomass energy and transforming itself from one of Canada’s largest industrial users towards its ultimate goal of being a net source of green power,” Laza
“The lesson to be learned from the experience of the forest products industry is fundamental retooling of industry processes is critical to any climate change strategy,” Lazar said. “FPAC members did not wait to be regulated, deciding instead to move early on climate change and clean air because they made sense from both an environmental and a competitiveness perspective. And while we are proud of our record in reducing emissions, and determined to go even further, we hope that the government will recognize those industries like the forest products industry that acted early to reduce their emissions.”
FOREST SECTOR HOTBED OF M&A ACTIVITY: PWC
VANCOUVER, BC — According to a recent report by PricewaterhouseCoopers, there were over 280 mergers and acquisitions in the global forest, paper and fibre-based packaging sector in 2006.
The report, called Branching Out, also confirmed the value of these mergers and acquisitions totaled nearly US$26 billion.
North America remained at the forefront of the forest, paper and packaging merger and acquisition activity, with two-thirds of the share of deal values in 2006. The second largest forest products company deal that year took place in Canada — Domtar’s acquisition of Weyerhaeuser’s fine paper business, for US$3.3 billion. Cascades’ acquisition of 50% of Norampac for US$476 million and West Fraser Timber’s purchase of 13 lumber mills from International Paper for US$325 million, ranked among the ten largest deals in North America.
“The global forest, paper and packaging industry continued to face challenges in 2006 – foreign exchange fluctuations, increased energy and transportation costs, waning demand and the impact of emerging markets on global competition,” said Craig Campbell, partner, PwC Global Forest, Paper and Packaging practice. “In spite of these challenges, M&A activity has risen, with companies selling off underperforming and non-core businesses. The leading players are also seeking to extend their reach globally.”
VANCOUVER, BC — Catalyst Paper is making a series of cuts in an attempt to return to profitability. Included in the overhaul is the indefinite curtailment of one paper machine, effective as of September 1, the elimination of 130 support positions, the relocation of the corporate office from Vancouver to Richmond, and the centralization of some mill and corporate administrative functions in Nanaimo.
The company expects to pull in $8 million from the closure of Port Alberni’s PM4, while changes made to the corporate structure are anticipated to deliver annual savings of $16 million, with one-time costs of $19 million.
PACKING IT IN
A new partnership shared by the Smurfit Kappa Group and Fresh Studio Innovations Asia is changing the way fruit is packaged. The new venture, called ‘Packabanana’ is allowing the two companies to work together on research and development ideas concerning the use of solid board packaging for the potassium-rich fruit.
According to a recent report by Forestweb, the use of corrugated board for packaging bananas offers substantial advantages. The ability to fold the material allows the box to be customized to customer requirements, the moisture-resistant nature of the board ensures the package holds its shape in various, humid weather conditions, and it additionally provides increased protection during transportation. Further, as the Forestweb report notes, solid board naturally speeds up the cooling of bananas, and so, the ripening process is improved.
Forestweb confirmed that the new packaging concept has so far, been well received in Middle Eastern markets.
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