resources | BCBusiness

resources | BCBusiness

Despite a difficult first quarter, B.C.’s forestry sector had a banner 2013 and is poised to carry the upward momentum through 2014

B.C. forestry companies weathered a storm in the first quarter of 2014, but can expect to continue the upward momentum of 2013 for the remainder of the year. That’s the message drawn from financial results compiled by PwC’s Vancouver office.
 
The consulting firm compiled financial results reported by five of the province’s biggest forestry companies: West Fraser Timber Co. Ltd., Canfor Corp., Ainsworth, Canfor Pulp Products Inc. and Mercer International Inc.
 
Although aggregate net earnings for the five companies were down 14 per cent in the first quarter of 2014 compared to the same quarter in 2013, “It actually is a tale of mixed-bag results,” said Jason Boyer, vice-president of the deals practice for PwC in B.C.
 
“West Fraser, Canfor and Ainsworth, the more pure lumber plays, although integrated, all showcased decreased revenues for the quarter relative to Q1 2013,” said Boyer. “The pulp guys did OK, mostly on strong pricing, and that’s just a global supply and demand equation as it influences pulp pricing.”
 
The lumber industry throughout North America suffered from a slow-down in U.S. housing starts in Q1 2014, due to harsh weather, while B.C. lumber producers in particular suffered from the 28-day trucking strike in March, which reduced shipment volumes, said Boyer.
 
Year-end results for 2013 tell a different story: “For western Canada specifically, it was a banner year,” said Boyer. Each of the five B.C. companies surveyed posted increased revenues in 2013, with the aggregate revenues totalling $9.2 billion, up from $7.9 billion in 2012. All benefitted from better volume than the previous year, due primarily to stronger U.S. housing starts, and strong prices on international commodity markets.
 
In addition to riding the uplift across the sector, B.C. companies benefitted by diversifying into Asian markets, specifically China, said Boyer. That focus, however, has already started to shift to the U.S., with both Interfor and West Fraser acquiring lumber mills in the U.S. south in the first quarter of 2014.
 
"That’s mitigating supply problems up here due to the mountain pine beetle problem, but also getting closer to the action, particularly in the U.S. south," said Boyer.
 
European and Japanese lumber and pulp suppliers will likely fill Asian demand as B.C. suppliers turn their focus to the U.S., he added.