PricewaterhouseCoopers' 2004 survey once again analyzes their “Top 100” largest forest and paper companies in the world. It's short and painful, but essential reading.

PricewaterhouseCoopers' Global Forest and Paper Industry Survey - 2004 is a 13-page analysis of recent financial results, packed with forensic detail about the health of our industry. I hope it is a “must read” for every executive and analyst out there. It looks at sales, income and ROCE-in other words, what's left after all the bills have been paid.

Only 17 of the PWC Top 100 companies reached the industry target of 10% or greater ROCE. It looks at all the major players in North America, Europe, Asia and Latin America. The bits that interest me are the U.S. and the emerging markets of Russia and China.

U.S. companies still dominated the sector in 2003 and early 2004 with a net income of nearly $3.7 billion—a massive improvement on the nightmare of $0.8 billion in 2002. At that time the highest earner was Kimberly-Clark with $1.75 billion. The biggest loser was Asia Pulp & Paper (APP) whose losses were $1.75 billion below the line. APP has failed to release audited figures since 1999.

Global Top 10 (US$ millions)

Rank	Company		Country	Net Sales (2003)

1	International Paper	US	24,976
2	Georgia-Pacific	US	23,271
3	Weyerhaeuser	US	16,771
4	Kimberly-Clark	US	13,566
5	Stora Enso		Finland	12,090
6	UPM		Finland	11,234
7	SCA		Sweden	10,562
8	Oji Paper		Japan	10,465
9	Nippon Unipac	Japan	10,053
10	Procter & Gamble	US	9,933

Source: PWC

United States. All regions continued to generate results well short of the industry target 10% minimum ROCE. But results in the US were up sharply from 2002. The report points out that “…while demand fuelled pricing increases, U.S. companies remained relatively high-cost producers with limited bottom line results as reflected by ROCE.” This is a point repeatedly made by the editors of this magazine. I hope someone's listening.

But despite their cost disadvantages, the 27 U.S. companies in the PWC Top 100 turned in aggregate sales of $138.9 billion. Collectively they represent 43.5% of total sales of the PWC Top 100. I think this is very impressive, especially when you consider the constraints under which U.S. companies operate.

Yet U.S. companies continued to dominate the global league table-of the top global five, four are U.S. companies.

US Top 10 (US$ millions)

Company		Sales (2003)	Net income		ROCE %

International Paper	25,179		302		3.8
Georgia-Pacific	20,255		254		4.4
Weyerhaeuser	17,844		13		2.4
Kimberly-Clark	14,348		1,694		14.0
Procter & Gamble	9,933		1,015		7.8
Boise Cascade	8,245		8		2.1
Smurfit-Stone	7.722		197		1.1
MeadWestvaco	7,553		6		1.9
Temple-Inland	3,501		96		6.3
Sonoco		2,758		139		5.1

Source: PWC

“The overall performance of the U.S. companies in the Survey improved in all key measures,” the report comments. “This was driven in part by low interest rates leading to near record high housing starts. High demands resulted in price recovery for construction grade materials. GDP growth also contributed to price recoveries driven by higher demand in newsprint and magazine paper segments,” PWC concludes.

Emerging Markets. The report refers specifically to Russia and China. “The forest industry continues to change in Russia with cautious investments being made by West European companies such as UPM and Stora Enso. The Russian industry remains highly fragmented with Ilim Pulp Enterprise being the sole Russian company represented in the PWC Top 100. With net sales of $1.1 billion, Ilim rose five places to 62 on this year's list.”

“Low production costs and vast timber supplies suggest products from Russia will have a significant impact on world markets in the coming years.”

As for China, PWC states that, “China continued to grow at a rapid rate throughout 2003 and early 2004, reporting 9.1% GDP growth. Chinese demand for forest and paper products is out-pacing domestic supply. Should this trend continue, the demand from China for forest products will become a noticeable influence in world markets.”

And we all know that when China surges into the market for pulp, it empties all the shelves and it distorts statistics for a whole year.

PaperAge. Copyright © O'Brien Publications, Inc. All rights reserved.