2012 financial results of U.S. forest sector

April 24, 2013

In 2012, the 10 largest publicly traded U.S. based forest companies, measured by revenue, were: Kimberly-Clark, International Paper, Weyerhaeuser, Rock-Tenn, Sonoco, MeadWestvaco, Packaging Corporation of America, Graphic Packaging, Boise, Louisiana-Pacific. Cumulatively, they reported a net income of US$3.9 billion (see figure), much larger than the C$807 million net income recorded by the 10 largest publicly traded companies in Canada. Compared to their counterparts in Canada, these companies are generally much larger in size. Their total sales combined were US$87 billion in 2012, almost 250% larger than the total sales of the 10 largest publicly traded forest companies in Canada.

2012 financial results of U.S. forest sector

All 10 firms reported positive net income in 2012, an improvement from 9 in 2011. However, while total sales jumped 10% compared to 2011, their total net income slipped 6.5%.

The declining profitability is partly due to their business composition, as the majority of these companies are more focused in pulp and paper products business rather than in solid wood products. Therefore they benefited less from the ongoing price surge of solid wood products spurred by strong Asian demand and the nascent recovery in the U.S. housing sector. On the other hand, their financial performance had been, to some extent, squeezed by falling demand for certain grade of pulp and paper products, in particular newsprint and other graphic papers.

As discussed in 2012 financial results of Canadian forest sector, the diverging trend for wood products and pulp and paper products is expected to continue. So the financial performance of these largest public U.S. companies will likely continue to be impacted by this trend over the next few years. Nonetheless these companies have some resilience to withstand these market pressures, given their large sizes and market shares.