Rise in profits hints at Canadian forestry sector turnaround

Pulp & Paper Canada
March 25, 2014
By Pulp & Paper Canada

Canadian forest and paper companies are turning the corner and returning to profitability, according to PwC's Global Forest and Paper Industry Net Earnings Summary for the quarter ending December 31, 2013.

This survey of public companies shows that most Canadian companies achieved generally positive results in the fourth quarter, particularly when compared to 2012 performance. For example, the net earnings of nine selected Canadian western-based companies increased from $10.6 million in the fourth quarter of 2012, to $48.3 million in Q4 2013. The net earnings of four eastern-based companies went from red to black, improving from a loss of $57.6 million in the fourth quarter of 2012 to earnings of $7.9 million in the fourth quarter of 2013.

“This quarter was a pivotal time for Canadian forest and paper companies. After a long period of recovery, these results provide optimism for the industry moving into 2014," says Bruce McIntyre, leader of PwC's Forest, Paper and Packaging industry practice in Canada. “In addition to improving market conditions, Canadian manufacturers have also benefitted from a weakening Canadian dollar."

Furthermore, US housing starts continued their steady recovery with about 18% growth in 2013. Although severe winter weather conditions throughout eastern North America slowed housing construction in December, prices for structural building materials remained strong in the last quarter. Softwood pulp prices also remained strong due to low inventories and steady demand, while hardwood pulp was kept in check due to higher inventories. Newsprint prices remained steady through the quarter.

In the US, improved pricing and productivity gains allowed the nine US-based forest and paper companies in the survey to post strong results. Net earnings of US $2.2 billion for the fourth quarter of 2013 are up from US $0.9 billion in the fourth quarter of 2012.

Internationally, European based companies, which experienced significant net losses (€ 972.3 million) in Q4 2012, had much stronger results with net earnings of € 243.7 million for the fourth quarter of 2013, based on the eight companies surveyed.

“Forest and paper companies should leverage these positive results from the last quarter to help position the industry for future growth. However, industry executives are still concerned about the possibility of tough times ahead due to a variety of economic and business risks as reported in PwC's 17th Annual Global CEO Survey. A key area of focus is adapting more quickly to changing technology," adds McIntyre.

Bruce McIntyre will be chairing PwC's 27th Annual Global Forest Industry Conference on May 6, 2014, in Vancouver, where the industry's financial performance and opportunities for sustainable growth will be discussed.

PwC Canada delivers assurance, tax, consulting and deals services.

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