West Fraser 'Cautiously Optimistic' In 2010

Tuesday, February 16, 2010 08:57 AM

Prince George, B.C. - West Fraser President and CEO, Hank Ketchum, says the company is glad to be putting 2009 "in the rearview mirror."

Ketchum says housing starts reached post-depression lows, lumber prices fell and the dollar's value rose, making for a very challenging year.

However, he says he's quite pleased with how West Fraser performed in the 4th Quarter. The company recorded a loss of 20-million dollars for the period, but Ketchum says that was primarily due to the re-structuring costs associated with closing the Eurocan pulp and paper mill in Kitimat. (click here, for full details) Had it not been for the closure, West Fraser would have recorded 20-million in earnings.

Ketchum says he is cautiously optimistic about 2010, with pulp prices picking up at the end of last year and holding strong, and lumber supply starting to reach a balance. The CEO still expects U.S. housing starts to be low and there will be approximately another 20-million dollars in costs associated with the continued permanent shutdown of Eurocan (which stopped production at the end of January).

Ketchum says the company is running its mills at 95-percent capacity and lumber inventories in Canada are at optimum levels, although the U.S. remains challenged. He says offshore markets, particularly in China are being actively pursued -- right now 90-percent of the company's sales are to the domestic market and 10-percent goes overseas, Ketchum says, mainly to Japan, but China is a growing market.

As for capital, West Fraser has received a 75-million dollar refund from its 2006 taxes and company CFO, Gerry Miller, says the company has about 90-million dollars in working capital at the now-shuttered Eurocan facility, which he says is expected to be re-couped, in full. Miller says West Fraser will reduce its debt and look at capital options over the year, but the dollars haven't been ear-marked for any specific projects. He estimates spending 90-million dollars in 2010.

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Posted on Tuesday, February 16, 2010 08:57 AM in News by Michelle Cyr-Whiting

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Comments

Posted by: He spoke on February 16 2010 9:40 AM

preserve capital. keep the current employment Thank You

Posted by: Green on February 16 2010 8:37 PM

Didn't they get a bunch of money for the green transformation black liquor subsidy that the mills here got... it was supposed to be used for the mill in Kitimat. Where did all that money go to?

Posted by: Palopu on February 16 2010 9:08 PM

90% of sales to domestic market
10% to overseas markets, mainly Japan, China is a growing market.

China will not be a big player in the North American markets for years, if ever. Its pretty obvious that the US is our number one customer, so maybe we should quit bitching at them, and realize that without the USA we would be in a deep dark hole.

Posted by: kaylaP on February 16 2010 10:15 PM

It's glad to know that some companies are recovering from the crisis we had. It will only imply that unemployment rate shall decrease little by little. We are moving on from the recession that has wiped out a lot of industries, and it has led to a new breed of [url=http://personalmoneystore.com/moneyblog/2010/02/16/112-breed-entrepreneur/]entrepreneur[/url] for the new economy. Rather than scrounging for the littlest work that was available, there has been a 2.5% increase in the self employed. That's fewer people lining up for interviews, fewer payday loans sought for a suit for interviews, and more people taking their income stream into their own hands. Every person has a skill they can market, and a specialized market they can fill.

Posted by: Eagleone on February 17 2010 5:04 AM

Some real stats that matter for our local economy...

---------

RealtyTrac reported that in January the number of U.S. families facing foreclosure surged 15% higher compared to the same month last year.

http://www.foreclosurepulse.com/blogs/mainblog/Default.aspx

* In January, one in every 409 U.S. homes was sent a default notice, scheduled for a foreclosure auction or repossessed by a bank.

* Banks repossessed more than 87,000 homes last month alone - that's a whopping 31% increase over January 2009.

* While an all-time record 2.8 million households were threatened with foreclosure last year, RealtyTrac expects that number to surge to 3.5 million this year... a 40% increase.

This is not exactly reassuring news... especially coming on top of December's record 17% plunge in home values...

Fannie Mae's reported in January that the delinquency rate among homeowners with conventional loans more than doubled in a single year - from 2.1% in November of 2008, to 5.3% in November of 2009.

-----------------

Translation is we are far from seeing the worst times behind us for our largest market. Clearly not out of the woods by any stretch of the imagination.

IMO those still operating are the 'last man standing' at this point, and as a result of the rising Canadian dollar we are seeing a rising price for lumber and pulp as the market becomes balanced from huge cut backs in supply from those that have fallen. This could be seen as good, but it is temporary... the American economy clearly has not improved by doubling down on government debt to bail out the bankers and so the worst is yet to come. This summer will be a good chance to sell as much wood as possible, because beyond that all bets are off IMO.

Posted by: leoleo on February 17 2010 7:11 AM

"China will not be a big player in the North American markets for years, if ever. Its pretty obvious that the US is our number one customer"

This depends on the commodity as pulp is huge into China.
Lumber is small compared to the US but has grown ten fold in the last year.

Posted by: Palopu on February 17 2010 12:45 PM

Your right on the pulp leoleo, however China tends to buy pulp when the market is down and stockpiles, while the US and other markets buy on a year round basis.

So even though China buys a lot of pulp, they do not generate the same revenue. Same applies to Chinese lumber purchases. China buys as much or more lumber than Japan, however because it is low grade Japan generates much more revenue for Canadian Mills.

Have a nice day.