Canadian Forestry Firms Report Robust First Quarter

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Financial results at Canada's major forestry firms were more robust than expected in the first quarter of 2010, but the picture may darken as the year goes on, according to a Reuters news report this week. Higher than expected lumber, pulp, and panel prices reduced the combined loss of nine Western Canadian producers surveyed by PricewaterhouseCoopers to C$3 million ($2.9 million), down from a loss of C$326 million a year earlier.

Reuters noted that the five Eastern Canadian firms surveyed by the company reported C$466 million in losses, compared with C$417 million the year before, but that included a C$521 million loss with one-time charges at AbitibiBowater Corp., which is in the final stages of bankruptcy reorganization.

Industry analysts say lumber prices climbed in the quarter mainly because of tight supplies rather than increased demand, and prices have already begun to fall as companies have increased production to cash in. The weaker lumber prices will be reflected in financial results for the second and third quarters, said Michael Armstrong, a director at PricewaterhouseCoopers's Global Forest, Paper and Packaging Practice.

Higher pulp prices have also prompted some Canadian producers to increase production, but prices will likely drop as production in Chile recovers from damage suffered in the earthquake earlier this year, Armstrong added. PricewaterhouseCoopers' survey of the top 10 U.S. lumber and paper producers found they had combined net income of $22 million, up from a loss of $63 million in the same quarter a year earlier.