Surging wood products markets improve forest industry profitability

June 12, 2013

The quarterly results of the largest publicly traded Canadian forest sector firms indicate that the financial performance of the sector continues to improve. In Q1 2013, the ten largest publicly traded Canadian forest companies, measured by revenue, were Domtar, Resolute, Cascades, West Fraser Timber, Canfor, Tembec, Norbord, Mercer, Catalyst, and Western Forest Products. Overall, they reported a net income of $219 million, a ten-fold improvement over the $22 million net income reported in Q4 2012, and a dramatic turn around from a net loss of $20 million in Q1 2012. Six of these 10 firms reported positive net earnings in Q1 2013, compared to only five firms reporting positive net income in Q1 2012, and Q4 2012.

Financial results of the largest Canadian publicly traded forest companies

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With global pulp and paper markets still remaining relatively weak, the source of improvements is primarily associated with firms weighted towards wood products. For example, Western Forest Products reported the highest earnings in its company’s history and has zero net debt in Q1 2013. Norbord also reported its highest earnings in 7 years. However, companies with more exposure to pulp and paper products generally posted either declining or negative net income in Q1 2013. In fact those companies reporting negative net income all have more exposure to pulp and paper products.

Going forward, weaker near-term wood product commodity prices may put some downward pressure on the financial results of Canadian forest companies in the short term.