Canada: Global Forest And Paper Industry: Net Earnings Summary - Three Months Ended September 30, 2012

Last Updated: December 6 2012
Article by Kevin Bromley, Ray Luchkow and Frédéric Bouchard


Canadian forest and paper products companies reported strong net earnings for the third quarter of 2012, with the solid wood, panel and diversified product companies posting generally better results than the pulp and paper producers. Lumber and panel prices were supported through the quarter by the continued improvement in U.S. housing starts. Pulp prices continued to decline through the quarter, but have likely bottomed. The strong Canadian dollar will continue to make market conditions challenging for all Canadian exporters.

Western Canadian based companies posted net earnings of $775.11 million compared with net earnings of $28.4 million in the second quarter of 2012 and net losses of $243.8 million in the third quarter of 2011. Catalyst Paper Corporation reported net earnings of $688.4 million for the quarter compared to net losses of $12.3 million in the second quarter of 2012. Catalyst completed the final steps towards financial reorganization in the third quarter and emerged from creditor protection on September 13, 2012, approximately eight months following filing for restructuring. Catalyst's third quarter results were significantly impacted by non-cash accounting adjustments, including a onetime gain of $688.1 million from the restructuring process and related fresh start accounting valuations and a $25.2 million foreign exchange gain on the translation of U.S. dollar denominated debt.

Diversified companies West Fraser and Canfor continued their strong performance in the third quarter posting earnings of $55.0 million and $20.7 million respectively. Strong demand and increased prices for Oriented Strand Board (OSB) boosted Ainsworth's third quarter earnings to $32.6 million, up from net losses of $11.5 million in the second quarter of 2012.

Fortress Paper experienced a difficult third quarter and reported a net loss of $18.9 million. Softening demand for dissolving pulp resulted in Fortress dropping prices. Production impacts at the Fortress Specialty Cellulose mill resulting from an unexpected shutdown also contributed to the loss for the quarter.

Eastern Canadian based companies posted net earnings of $14.8 million compared to net losses of $36.1 million for the second quarter of 2012 and net losses of $82.8 million in the third quarter of 2011. Resolute Forest Products reported net earnings of $30.9 million for the third quarter. This is an improvement from the second quarter of 2012 where Resolute reported a net loss of $65.7 million, which was partially influenced by closure costs, impairment and other related charges related to indefinite idling of the company's Mersey newsprint mill. Tembec reported net losses of $47.0 million in the third quarter as the company was negatively impacted by lower pulp prices, a weak pulp market, the strong Canadian dollar and a $50 million impairment charge related to the company's Chetwynd pulp mill. However, Tembec's wood products segment was mainly positive and sales increased by $22 million over the second quarter of 2012 due primarily to higher shipments of lumber and sawmill by-products.

United States

Ten of the largest US-based forest and paper companies reported net earnings of US $1.3 billion for the third quarter of 2012, up from US $1.1 billion in the second quarter of 2012 and down from US $1.5 billion in the third quarter of 2011. Kimberly-Clark reported yet another strong quarter with net earnings of US $537.0 million, up from US $518.0 million in the second quarter of 2012.


Ten of the largest European based forest and paper companies reported overall earnings of €275.3 million for the third quarter of 2012, down from earnings of €482.6 million in the second quarter of 2012, but up from losses of €122.5 million in the third quarter of 2011.

Stora Enso reported net earnings of €81.3 million in a generally weak European market, up from net earnings of €69.5 million in the second quarter of 2012. Norske Skog reported net losses of €58.6 million resulting from lower sales volumes related to weak markets and reduced production capacity following the closure of the Follum paper mill in Norway and the divestment of the Bio Bio newsprint mill in Chile.

Rest of the World: Japan and Emerging Markets

Five of the largest forest and paper companies in Japan posted net earnings of US $285.8 million in the third quarter of 2012, up from US $241.3 million in the second quarter of 2012 and net losses of US $258.2 million in the same period of 2011. The Japanese forest and paper industry continues to slowly improve from the disruption to operations from the March 2011 earthquake and tsunami.

Two of the largest forest and paper companies in emerging markets reported net earnings of US $2.5 million in the third quarter of 2012, compared to net losses of US $373.3 million in the second quarter of 2012 and net losses of US $808.5 million in the third quarter of 2011. Fibria Celulose reported net losses of US $104.5 million for the quarter compared with net losses of US $267.3 million in the second quarter of 2012. Fibria accepted a binding offer from CMPC Celulose Riograndense S.A. to purchase forestry assets and lands located in the State of Rio Grande do Sul (Losango) for R$615 million (US $303 million).


1 Western Canadian Q3 2012 earnings were significantly impacted by non-cash accounting adjustments for Catalyst Paper Corporation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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