Canfor Decision Not to Rebuild NCP Shocks Some
By 250 News
Wednesday, July 30, 2008 02:24 PM
Prince George, B.C. - Reaction to the news Canfor will not rebuild the North Central Plywood Plant has been swift.
"I am in shock" says Pulp, Paper and Woodworkers Local 25 President Jymm Kennedy "I really was optimistic they would rebuild, so I was totally shocked, as were the 259 other former employees". Kennedy says there is nothing more that can be done "I guess we will just have to shake hands, and help each other get to where we want to go."
“At least they (the workers) know where they stand” said one person from the Pulp Paper and Woodworkers Union office in Prince George.
Canfor told its NCP workers this afternoon that it had decided not to rebuild the plant which had burned to the ground in a fire May 26th. The decision will leave more than 200 people without work.
Canfor Vice President, Manufacturing, Mark Feldinger, told the workers the decision was not a reflection on their hard work or dedication. He also informed the workers they will be given 10 days severance for every year of service, as per the collective agreement.
Prince George City Councilor Don Zurowski says he is completely flabbergasted, “I am disappointed, this is not what we were looking for. I am really taken aback by this. This is a real disappointment because it is 250 jobs and probably up to 500 good reasons, I realize there is going to be a more diversified use of the fibre basket, and I want to know where it’s going.” Zurowski says he is hard wired, “I think the fibre will be utilized, its just part of change.” The Mayor of the City had indicated City Hall would do it all it could, including the possibility of tax breaks, to encourage the rebuilding of the plant.
Councilor Brian Skakun says he is extremely disappointed in Canfor, “I had hoped they would live up their motto ‘Our Roots are In this Community.’ I feel for the workers. The senior level of government should do all it can through things like unemployment benefits. A lot of people had their hopes up.”
NDP Forestry Critic, Bob Simpson says “I am loathe to comment at this time, I am disappointed we have lost another mill, and I am concerned we are going to have to looking after those people who are displaced in the market. I am concerned about the government’s ability to support workers who are in this industry. I would like to know what the forest tenure was with relation to the fibre supply for that mill. Was there perhaps only 3 or four years remaining in the license?” Simpson says there are now suggestions two pulp mills in the region may be lost because of the falling supply of fibre. “We are suffering from log exports within B.C. we know more peeler logs will go to the Tackama plant ( in Fort Nelson) at the peril of communities such as Mackenzie, Prince George and Fort St. James. There are further reports that bio energy may pose a very serious risk to the pulp industry and I fear that in the future.”
The decision was announced just moments after Canfor released information that it had recorded a profit in the second quarter.
That release says the net profit was $64.2 million , compared to a net loss of $85.4 million for the first quarter of 2008 and a net loss of $38.8 million for the second quarter of 2007. The insurance gains for the loss of the North Central Plywood plant ($36 million )accounted for nearly half of the profit.
Here is the balance of the release:
For the six months ended June 30, 2008, the Company’s net loss was $21.2 million compared to a net loss of $81.5 million reported for the first six months of 2007.
The net income for the second quarter of 2008 included the following significant items, which together had a net positive impact on net income of $85.0 million:
• Reduction of log inventories previously written down from cost to net realizable value in accordance with a new inventory accounting standard implemented in 2008, which positively impacted net income by $35.3 million ($0.25 per share). The majority of the log write-downs took place in the first quarter of 2008, when the Company built normal seasonal inventory ahead of spring break-up.
• Reversal of log inventory write-downs recognized in previous periods, which increased net income by $12.5 million. The reversal resulted from lower costs and higher finished product prices in the second quarter.
• Gain of $36.3 million resulting from a fire that destroyed the Company’s North Central Plywoods mill in Prince George in May. The gain mostly reflects estimated net insurance proceeds in excess of book value.
• Gains of $14.5 million recorded on derivative financial instruments, designed primarily to protect the Company from rising natural gas and diesel prices, and foreign exchange rates.
• Restructuring, severance and mill closure costs of $13.6 million resulting principally from the indefinite closures in June of the Company’s Mackenzie sawmill and PolarBoard oriented strand board (OSB) mill.
Canfor continued to be significantly impacted by the continued downturn in the U.S. housing market, the strong Canadian dollar and a 15% export tax on lumber shipments to the U.S., in the second quarter. Housing starts in the U.S. fell 4% compared to the previous quarter, and were down 30% compared to the second quarter of 2007. Not surprisingly, lumber and panel sales activity was sluggish through most of the quarter, but lower supply resulted in a modest increase in prices. Pulp markets remained relatively balanced, with the result that prices were stable through the quarter. The Canadian dollar hovered around par with the U.S. dollar through the period.
With respect to the second quarter, the Company continued to make progress in its efforts to reduce costs, and conserve cash. In addition to the modest market price increases, and lower log and lumber inventory write-downs, the second quarter’s results reflected a number of operational improvements achieved in the face of the additional curtailments. These positives more than offset the effects of rising energy prices on input and distribution costs and scheduled maintenance outages at two of Canfor Pulp Limited Partnership’s pulp mills in the quarter.
Commenting on the quarter’s results, Canfor’s President and CEO, Jim Shepard said he was pleased with the progress being made on several fronts. “The results are skewed by the quarterly change in inventory valuations but they also reflect a very concerted effort by all of our employees to deliver improvements in every area of our business, and conserve cash through this protracted downturn,” said Shepard.
In response to depressed market demand, the Company further curtailed its production in the second quarter, and in June indefinitely closed down its Mackenzie sawmill and PolarBoard OSB mill. Commenting on the closures, Shepard said that the Company had been faced with little alternative. “These decisions are never taken lightly,” he said, “but the harsh reality is that we have to continue to adjust our production to reflect the significantly lower levels of demand.”
Shepard said that the Company fully expected conditions to remain difficult through the balance of 2008, adding that the Company does not anticipate any meaningful recovery of the U.S. housing market before the middle of 2009 at the earliest, particularly given increasing recession and inflationary concerns. He added that the Company’s priorities would continue to be cash management and sustainable performance improvement. “We will remain focused on doing everything within our control to weather this storm and position the Company to take full advantage of the market recovery, when it comes,” said Shepard.
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Posted by: ICEMAN on July 30 2008 4:29 PM