Canfor CEO Talks about Pulp Income Trust
By 250 News
Thursday, February 16, 2006 07:53 AM
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Canfor CEO Jim Shepherd says from a Community standpoint, "It's business as usual" now that the Pulp Income Trust has been established. The Trust includes P.G. Pulp and Paper, Intercontinental, and Northwood . ( see Canfor Announces Proposed Pulp Income Trust)
Shepherd says the mills are not up for sale, and he hasn't had anyone knocking at his door to try and buy the mills. "This is purely an effort to put a focus on the pulp business for investors" says Shepherd who says the separation of pulp might make Canfor more attractive to those who want to invest in a lumber company only or a pulp company. The split ,says Shepherd, will also allow Canfor to "Further our path in the wood industry and concentrate our efforts in making that sector grow".
Shepherd expects the selection of a Board of Directors to administer the Pulp Income Trust will be complete by the end of the 2nd quarter following a shareholders vote in mid-June.
"If I were heading to work at one of those mills today," says Shepherd "I would say its business as usual, knowing there is a very dedicated team lookiing after their interests."
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Currently most mills cover their operating expense with the sale of wood chips, and the sale of actual lumber goes to the bottom line. Could this change?
With Canfor as a single unit the focus would be on getting the highest price for the wood chips to ensure healthy saw mills, and anti-competition laws would ensure all saw mills recieved the same rate.
With the new PIT it would seem that it would be in CANFOR's interest to pay the lowest possible price for wood chips driving the the wood chip market down. This would make the pulp mills more profitable, which could then be transferred back to the saw mill division with out much for tax consideration. The competition in the wood processing market would not be able to compete since they would not be recieving royalties as a result of the PIT arrangement with CANFOR.
Time Will Tell