West Fraser Records Loss of $341 Million

Friday, February 12, 2010 02:08 PM

Prince George, B.C.- West Fraser is reporting a loss of $20 million on sales of $647 million in the fourth quarter of 2009 and a loss of $341 million on sales of $2,612 million for 2009. The annual loss is more than twice the loss recorded in 2008 ($137 million).

In the fourth quarter of 2009 the following significant items were included in earnings:

- Asset impairment and restructuring charges of $49 million (after tax $34 million or $0.80 per share);

- A valuation allowance which resulted in a reduction to the tax recovery of $3 million or $0.07 per share; and

- The translation of U.S. dollar-denominated debt which resulted in a foreign exchange gain of $6 million (after tax $5 million or $0.12 per share).

Had it not been for those items, West Fraser would have earned $12 million in the fourth quarter.

West Fraser’s lumber operations generated EBITDA for the quarter of $11 million, compared to EBITDA of $3 million for the third quarter of 2009, reflecting higher lumber prices and lower log costs, a reduction in the accrual for future reforestation obligations and a positive log and lumber inventory valuation. These factors more than offset the severance costs incurred in the quarter related to certain indefinitely idled sawmills.

Pulp and paper operations recorded negative EBITDA of $9 million compared to positive $19 million in the previous quarter. The current quarter included a $42 million restructuring charge related to the closure of the Eurocan linerboard and kraft paper mill. Excluding the results for this mill, EBITDA would have been positive $31 million in the current quarter compared to positive $18 million in the previous quarter.

In a release issued this afternoon, the company says it expects 2010 to be another challenging year as U.S. housing starts, although expected to improve from the depressed levels of 2009, will likely remain at relatively low levels. Pulp demand and pricing has been reasonably strong with the return of general economic growth in major consuming regions.

Hank Ketcham, the Company's Chairman, CEO and President, said, "Although 2009 was the company's worst year from the perspective of financial results, with many of our employees having to deal with production curtailments, I believe that we met the challenge of achieving new levels of cost-savings and efficiency. As a result, we are extremely well positioned in terms of our current operating rates to benefit from improved demand and stronger product prices in the future. We have a focused employee group and efficient facilities which should give us a significant advantage going forward."

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Posted on Friday, February 12, 2010 02:08 PM in News by 250 News

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Comments

Posted by: Municca on February 12 2010 2:17 PM

OMG! God help the forest industry!

Posted by: jonnypg on February 13 2010 3:21 AM

Then why are they still running!

Posted by: Eagleone on February 13 2010 3:28 PM

We are at bottom right now. In a few months as we get into building season the survivors will start to up the production significantly and we will see life in the forest industry again until at least this fall... the bottom could still fall out of the American economy in that time and it will happen for sure in the next year, but I think we will see a good 6-months in the forest industry locally from my perspective. Not so sure about operations out west now that they have new costs associated with the Eurocan closure.

If you are one that is unemployed you might want to beat the rush and get your name out to some of the mills running on reduced shifts now... its a huge opportunity (unseen in 10-20 years) to get a leg up when it comes to seniority and working longer term.

Posted by: skeptikl on February 14 2010 7:15 AM

if you read the article, they actually made money on lumber.... it's all the internal bookkeeping adjustments and other factors that created the loss....

and "achieving new levels of cost-savings" has been done on the backs of the logging contractors, equipment maintenance, road maintenance....

Posted by: cougs78 on February 14 2010 12:02 PM

You are correct skeptiki. I have so much to say about this but can't as it would be deleted. All I will say is the Forest companies are paying less than 10% for the wood as they did 15 years ago and through there mismanagement and our governments inability to recognise theft the taxpayers are losing 100s of millions if not billions per year in stumpage and royalties. Think about it, under 10%. We used to pay $50-$90 stumpage now it is under $5.00. That equates to more than $150 per thousand board feet??????????? Even $5.00 is at very least $100,000,000.00