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Rising lumber prices helps Q1 earnings: PwC

Improved prices and demand for lumber and Canadian/US dollar exchange rate positively affected the overall performance of Canadian-based forest products companies in the first quarter, according to the PwC Forestry Paper and Packaging (FPP) Net Earnings Summary for the first quarter of 2016.

Kevin Bromley, the national Canadian leader of PwC’s FPP practice, identified the highligts of the latest summary:

• Aggregate results for Canadian based companies were up for the quarter.
• Commodity prices remained mixed for the first quarter, with lumber prices, specifically Western SPF 2×4 improving while panel and pulp prices declined.
• A three per cent decrease in the Canadian/US dollar exchange rate also provided earnings tailwinds for Canadian-based companies in the first quarter.
• South American based pulp and paper companies continue to post strong results. Depreciation of the Brazilian Real, Argentine peso, and Chilean peso relative to the US dollar has once again resulted in strong sales revenues from US-dollar denominated pulp for the South American companies.

PwC reports that the largest Western Canadian- and Eastern Canadian-based forest products companies reported overall higher net earnings in the first quarter of 2016 compared to both the first and fourth quarters of 2015. Western Canadian-based companies posted net earnings of $143.7 million in the first quarter of 2016, compared to net earnings of $4.4 million in the fourth quarter of 2015 and net earnings of $122.2 million in the first quarter of 2015.

Companies based in Eastern Canada posted net earnings of $122.6 million in the first quarter of 2016, compared to net losses of $372.4 million in the fourth quarter of 2015 and losses of $161.9 million in the first quarter of 2015, according to PwC.

PwC calculates that the average softwood pulp (NBSK, Europe) prices decreased to US$792/tone from US$810/tonne in Q4 2015 and US$888/tonne in Q1 of 2015.

In the United States, nine of the largest US-based forest and paper companies reported net earnings of US $1.27 billion in the first quarter of 2016, compared to earnings of US $417.4 million in the fourth quarter of 2015 and earnings of $1.28 billion in the first quarter of 2015.

Ten of the largest European based forest and paper companies reported net earnings of € 819.6 million for the first quarter of 2016, compared to earnings of € 1.06 billion in the fourth quarter of 2015 and €833.1 million reported in the first quarter of 2015, PwC reports.