Industry News Markets
Forest industry posts promising start

June 21, 2016 - A recent Net Earnings Summary prepared by PricewaterhouseCoopers (PwC) suggests that Canadian forest product companies are off to a strong start in 2016.

Specifically, the report found that both Eastern and Western forest product companies reported higher overall net earnings in the first quarter of 2016 than either the first or last quarter of 2015.

Western Canadian-based companies posted net earnings of USD $143.7 million in the first quarter of 2016, a significant increase over net earnings of $4.4 million in the fourth quarter of 2015 and $122.2 million in the first quarter of that same year. Eastern Canadian-based companies, meanwhile, posted net earnings of USD $122.6 million for the first quarter of 2016, a positive sign after a year that saw them post net losses of $161.9 million and $372.4 million in the first and fourth quarters of 2015, respectively.

These overall gains came despite a declining Canadian-U.S. average exchange rate—down to $0.72 in the first quarter of 2016, from $0.75 in the fourth quarter of 2015, and $0.81 in the first quarter of that same year.

Canadian earnings potential was also influenced by ongoing mixed commodity prices, with lumber prices—specifically Western SPF 2x4—improving while panel and pulp prices declined.

The outlook is slightly less promising south of the border, where the nine largest U.S.-based forest and paper companies posted net earnings of USD $1.27 billion for the first quarter of 2016 after posting earnings of $1.28 billion in the first quarter of 2015. Europe likewise saw its first quarter earnings drop from USD $833.1 million in 2015 to $819.1 million in 2016.

Japan’s forest-based companies saw the largest drop over that same span, posting net losses of USD 16.5$ million in the first quarter of 2016 after neat earnings of $215.2 million in the first quarter of 2015. The biggest gains came to those in emerging markets, with five of the largest paper and forest companies posting net earnings of USD $752.5 million for the first quarter of 2016, way up from losses of $400.2 million in the first quarter of the previous year. 

June 22, 2016  By Taylor Fredericks