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Lower prices for lumber and panels impact forest sector earnings

October 15, 2015 - Second quarter 2015 net earnings reported by the major Canadian forest products companies are overall lower than the first quarter 2015 and second quarter of 2014, according to PwC’s Global Forest and Paper Industry Net Earnings Summary. The report notes that a decrease in the price of lumber and panels impacted the major Canadian building products manufacturers, including Canfor, West Fraser and Norbord.

However, the foreign exchange rate in Q2 2015 was beneficial to Canadian companies exporting to U.S., and the average softwood pulp (NBSK) prices increased to US$975/tonne from US$888/tonne in Q1, reports PwC. Hardwood pulp (BEK) prices increased to US$892/tonne from US$759/tonne in Q1.

PwC says the Canadian dollar averaged $0.81 USD in the second quarter of 2015, down significantly from the 2014 first quarter average of $0.91 USD.

Western Canadian-based companies posted net earnings of $3.6 million in the second quarter of 2015, compared to net earnings of $121.9 million in the first quarter of 2015 and net earnings of $167.6 million in the second quarter of 2014. Second quarter results of softwood lumber producers Canfor and West Fraser were impacted by the decrease in lumber and panel prices. Canfor reported quarterly earnings of $23.9 million, compared to $47.0 million in the first quarter and $64.5 million in the second quarter of 2014. West Fraser reported quarterly earnings of $14.0 million, compared to $49.0 million in the first quarter and $74.0 million in the second quarter of 2014.

Eastern Canadian-based companies posted net losses of $25.2 million in the quarter, compared to net losses of $121.3 million in the first quarter of 2015 and losses of $30.1 million in the second quarter of 2014. Cascades posted net earnings of $24.0 million in the quarter, compared to net losses of $35.0 million in the first quarter of 2015 and losses of $83.0 million in the second quarter of 2014. The company’s second quarter results were driven by higher sales volumes in the containerboard and tissue papers business segments, slight increases in average selling prices and a favourable foreign exchange environment.

South of the border, nine of the largest U.S.-based forest and paper companies reported net earnings of US$519.5 million in the second quarter of 2015, down from earnings of US$1.29 billion in the first quarter of 2015 and US$1.30 billion in the second quarter of 2014.

The merger of packaging companies Rock-Tenn Company and MeadWestvaco Corporation was finalized in the second quarter after receiving approval from the shareholders of both companies. The newly formed entity, WestRock Company, will be the second largest U.S.-based packaging company, with a market capitalization of US$16 billion. International Paper is currently the largest packaging company in the U.S. with a market capitalization of US$20 billion.

Ten of the largest European based forest and paper companies reported net earnings of € 751.0 million for the second quarter of 2015, down from € 825.1 million in the first quarter of 2015 and €615.9 million reported in the second quarter of 2014.

Six of the largest forest and paper companies in Japan posted net earnings of US$367.4 million in the second quarter of 2015, compared to earnings of US$215.2 million in the first quarter of 2015 and earnings of US$ 150.5 million in the second quarter of 2014.

In the Emerging Markets regions, five of the largest forest and paper companies reported net earnings of US$458.8 million, compared to net losses of US$409.2 million in the first quarter of 2015 and net earnings of US$562.9 million in the second quarter of 2014. The depreciation of the Brazilian Real against the US dollar and price increases for pulp bolstered both Fibria and Suzano’s second quarter results. Fibria reported quarterly earnings of US$199.9 million, compared to losses of US$202.0 million in the first quarter. Suzano reported quarterly earnings of US$148.4 million, compared to losses of US$271.9 million in the first quarter.


October 15, 2015
By Pulp & Paper Canada

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