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West Fraser 2008 results: worst financial loss in its history

West Fraser Timber Co. Ltd. reported a loss of $70 million or $1.63 per share on sales of $746 million in the fourt…

West Fraser Timber Co. Ltd. reported a loss of $70 million or $1.63 per share on sales of $746 million in the fourth quarter of 2008 and a loss of $137 million or $3.20 per share, on sales of $3,189 million for 2008. The quarterly loss includes an exchange loss of $46 million ($0.91 per share) on translation of long-term debt.
Hank Ketcham, West Fraser’s chairman, president and CEO states: “In 2008 our company suffered its worst financial loss in its history as the lengthy and severe downturn of the U.S. housing market continued and, late in the year, global pulp markets collapsed.”
The company’s lumber operations recorded an earnings (EBITDA) loss for the quarter of $48 million, compared to EBITDA of $29 million for the third quarter of 2008, reflecting a sharp decline in the price of lumber late in the fourth quarter. The company curtailed additional production late in the fourth quarter and has announced further curtailments beginning in February 2009.

After taking these curtailments into account, approximately 30% of the company’s annual production capacity of 6 billion board feet has been curtailed. Many lumber producers have announced curtailments in an attempt to balance production against extremely weak demand.

Ketcham adds: “We deeply regret the disruption to the lives of so many of our valued employees, their families, and the communities in which we operate as a result of the production curtailments we have been forced to undertake.”
Panel operations generated EBITDA for the quarter of $11 million compared to $5 million in the previous quarter.
Pulp and paper operations generated EBITDA of $42 million compared to $45 million in the previous quarter although demand fell off sharply late in the quarter.
According to West Fraser, 2009 is expected to be another very challenging year for the company’s lumber operations as a near-term recovery of the U.S. housing market appears unlikely. Demand for the company’s pulp and paper products is expected to be weak as the global economic recession continues.