West Fraser Swings to Third Quarter Profit
Oct. 25, 2010 - West Fraser Timber Co. Ltd. yesterday reported earnings after discontinued operations of $45 million or $1.04 per share on sales of $707 million in the third quarter of 2010 and earnings after discontinued operations of $128 million or $2.95 per share, on sales of $2.2 billion for the first nine months of 2010.
"Although we are experiencing a slow recovery in some of our key markets, we are generally very pleased with our results. Our improved cash flows allow us the opportunity to reinvest in our operations which will better position us to take advantage of the eventual economic recovery," said Hank Ketcham, West Fraser's chairman, president and CEO.
In the quarter the lumber segment generated operating earnings of $22 million and EBITDA of $49 million. After a period of higher lumber prices in the second quarter of 2010, prices weakened in the third quarter reflecting a continuing weak U.S. housing market. SYP lumber prices were particularly hard hit. Shipments to China continued to increase in the quarter, supporting lumber prices.
The panel segment, which includes plywood, LVL and MDF, generated operating earnings in the quarter of $14 million and EBITDA of $20 million. Plywood prices came under pressure in the quarter with the average benchmark price declining 13% from the previous quarter as U.S.-produced plywood was sold into the Canadian market. The impact of this decline on panel segment results was largely offset by stronger MDF prices.
Pulp and paper operations generated operating earnings of $41 million and EBITDA of $55 million. Pulp prices increased in the quarter with the average NBSK benchmark price for the quarter increasing to US$1,000 per tonne compared to US$993 in the previous quarter. Record pulp production of over 300,000 tonnes for the quarter contributed to the strong segment results.
The economic uncertainty in the U.S. continues to delay a recovery in U.S. new home construction, which is a key market for the Company's lumber, MDF and LVL. The Company expects pulp prices to be reasonable over the near term as a result of the improving global economy.
Mr. Ketcham concluded, "Despite the uncertain recovery, we are confident that our well capitalized mills, our strong balance sheet and our low cost culture will allow us to maintain our leadership position in our industry."
West Fraser is an integrated wood products company producing lumber, wood chips, LVL, MDF, plywood, pulp and newsprint. The company has operations in western Canada and the southern United States.
SOURCE: West Fraser Timber Co. Ltd.