Global Forest and Paper Companies Post Mixed Results in 3Q '09
Dec. 8, 2009 - Financial results from forest and paper industry companies for the third quarter 2009 were mixed across geographic regions of the world, according to a report by PricewaterhouseCoopers.
Canadian forest and paper companies faced challenging business conditions in the third quarter of 2009 with sluggish weakness in demand and pricing for commodity products. Pulp prices gained momentum during the quarter but closed below prior year levels. In aggregate, losses of $632 million reported by Canadian companies in the third quarter of 2009 exceeded losses of $552 million reported in the same quarter of 2008.
The nine largest public forest and paper companies in Western Canada posted losses of $210 million for the third quarter of 2009, comparable to $230 million losses reported for the prior year period. Four of the nine companies posted positive earnings and seven companies reported improved results, however the improvement was mainly due to fluctuations in non-operating results. Western Canadian companies benefited from pre-tax foreign exchange gains of $164 million on the translation of US dollar denominated debt in the third quarter of 2009 compared to a loss of $87 million in the third quarter of 2008. Included in the results for West Fraser are asset impairment charges of $155 million.
In Eastern Canada, the six largest public forest and paper companies reported losses of $422 million for the third quarter of 2009, a further decline from the $322 million losses for the comparable period of 2008. Domtar and AbitibiBowater benefited from $266 million of alternative fuel tax credits from their US kraft pulp mills. Also reflected in the 2009 third quarter results are $282 million of expenses recorded by AbitibiBowater related to asset impairments and reorganization items and $49 million recorded by Fraser Papers for impairment charges and reorganization costs.
Ten of the largest public US-based forest and paper companies posted earnings of US $1.2 billion in the third quarter of 2009, up almost US $500 million from earnings of US $733 million in the same period of 2008. All but two companies posted positive or improved earnings, reflecting an estimated US $1.1 billion of tax credits for the use of black liquor as a biofuel to generate energy. The alternative fuel tax credit is set to expire at the end of the year.
Ten of the largest European-based forest and paper companies incurred overall losses of EUR 469 million in the third quarter of 2009, comparable to losses of EUR 486 million reported in the third quarter of 2008. Third quarter 2009 results for Stora Enso included EUR 655 million of asset impairment and restructuring charges. Eight of the ten companies experienced improvement in financial performance compared to the same period in 2008 through supply and spending discipline.
Rest of World
Ten of the largest forest and paper companies in Japan and emerging markets reported earnings of US $453 million in the third quarter of 2009, up from losses of US $280 million in the third quarter of 2008.
The two-page report (PDF), which includes comparative financial tables, is available on PwC's website: Global Forest and Paper Industry: Net Earnings Summary 3Q 2009