Pulp Income Trust a Veiled For Sale Sign?

Monday, February 20, 2006 03:45 AM

-by Ben Meisner

Canfor's announcement last week that it was creating the Pulp Income Trust seems, from the first page, to just be a bit of house keeping. Even the Canfor brass are saying, don’t worry be happy we are not selling the store.

Let’s take yet another look at the move.

It does, after all, pave the way for an outside company like the pulp giants of Scandinavia, to help themselves to enough of the trust over time to gain control of the company.

Canfor has said it wants out of the Pulp business. It would prefer to be in the wood business plain and simple. The pulp mills (all five that they own) are not Canfor's favorite investments, so is a Pulp Income Trust a means of moving out of that section of the industry?

A good many insiders say it is only a matter of time before the trust comes under the control of a major player in the pulp world.

When that takes place, that will not only free up Canfor with some new found money to invest in off shore timber development (such as China and Russia) but also in the USA. That is where acquisitions (at least at this point) would allow Canfor to import off shore timber with a view to selling it on the US markets at very competitive prices, given the tariffs.

Given that scenario, Prince George doesn't seem to be a good fit in Canfor's future plans.

I'm Meisner, and that is one man's opinion.

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Posted on Monday, February 20, 2006 03:45 AM in Views by Ben Meisner

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Comments

Posted by: trueblue2 on February 20 2006 10:20 AM

Consider this: Canfor has also announced it has cut its capital project spending, meaning there will be no improvements made, no equipment replaced, no expansions of the operation. How long can a business survive if its owner do not re-invest in the equipment?

This is the sad state of affairs for the pulp industry with more companies taking out mills around the world. More often, third world countries employing cheap labour and plentiful fibre make pulp and paper for far less than North American mills.

Consider this: What happens when the beetle wood is all milled? How long will Canfor remain with their roots in our community once there is not enough timber to feed the sawmills? We had better be ready because our world is going to be very different in the next 8 to 10.