Selective Cuttings

Selective Cuttings

Financial results of forest companies still solid in the second quarter

October 7, 2013

The quarterly results of the largest publicly traded Canadian forest sector firms indicate that the financial performance of the sector continues to be strong. In Q2 2013, the ten largest publicly traded Canadian forest companies (including Domtar, Resolute, Cascades, West Fraser Timber, Canfor, Tembec, Norbord, Mercer, Catalyst, and Western Forest Products) reported a net income of $177 million. Though it was down 18% from last quarter, it actually more than doubled the $77 million net income reported in Q2 2012. For the first 6 months of 2013, the total net income of these companies reached $392 million, up 530% compared to the same period of 2012. However, fewer companies reported positive net income. Only 5 of these 10 firms reported positive net earnings in Q2 2013, compared to 6 firms in last quarter and 7 in Q2, 2012.

Financial results of the largest Canadian publicly traded forest companies

This chart shows the quarterly financial results of ten largest Canada-based publicly traded forest products companies, including the comparison of Q2 2012, Q1 2013and Q2 2013. Five of these companies posted positive net earnings in Q2 2013. Together the ten largest publicly traded Canadian forest companies reported a net income of $177 million.

The financial results also highlighted the diverging segment trends. Companies with major exposure to wood products significantly improved their financial performance; together they recorded $526 million net income over the first 6 months of 2013, thanks to the strong wood products markets and rising prices. However, companies with more exposure to pulp and paper products all posted negative net income over the same period, mainly due to the continued weak global pulp and paper markets. The total net loss of those companies with more exposure to pulp and paper products reached $135 million.

Going forward, U.S. housing market is widely expected to continue to slowly recover and lumber prices will remain fairly volatile but with a gradual upward trend. Global pulp and paper market signals vary across different products and grades. While most pulp and paper markets, including graphic papers, hardwood pulp and dissolving pulp are soft, the medium outlook for NBSK pulp is positive. Overall the financial performance of the Canadian forest sector will likely continue to improve in the second half of the year.