West Fraser 'Positioning' For The Future

By Michelle Cyr-Whiting

West Fraser’s President and CEO Hank Ketchum was blunt in releasing the company’s 4th quarter results, saying it was a "very bad quarter for lumber prices and lumber markets, and that certainly was reflected in our earnings."

The forest company had earnings of $296-million dollars in the last quarter of 2006, but that result was affected by a duty refund from the resolution of the softwood dispute.  With the refund removed, West Fraser’s earnings would have been $40-million dollars or six-percent of sales, compared to $53-million, or seven-percent of sales, in the third quarter of 2006.

Ketchum says lumber production was down - to 910-million board feet compared to 1.1-billion in the 3rd quarter.  He says the lower production numbers were primarily due to the sale of the Babine and Decker Lake sawmills in the northwest, lower production at the Quesnel mill (which was shifting to a new 600-million board capacity facility), a power outage that affected several mills along the west line, and some marginally lower ’lumber recovery factors’ and grade problems related to the mountain pine beetle.

The West Fraser boss says grappling with the impacts of the mountain pine beetle epidemic will continue to be a challenge.  "Timber supply analysis conducted by outside consultants, using Government of BC inventory data, indicate a decline in timber harvest levels sometime between 2015 and 2020 for the north-central region of the province."  Ketchum says, "Our ability to utilize this beetle kill pine resource will depend on how quickly the wood deteriorates and the provincial policy framework surrounding mountain pine beetle harvesting and pricing." 

"We are seeing an impact of the mountain pine beetle at our sawmills in our lumber recover factor and grade, we continue to upgrade and operate our mills in a manner that reduces the effect of processing such logs."

Other upgrades aimed at better positioning the company are a new turbo-generator installed at Eurocan Pulp and Paper that can produce 25-percent of the mill's power requirements, a re-structuring underway at the Hinton pulp mill which will be complete by June, and the new super-capacity mill in Quesnel reaching full capacity by the end of the year.

"Although we don't expect strong results for 2007, primarily because of the continued lower housing starts in the U.S.," says Ketchum, "We're taking the steps necessary to be well-positioned when the markets and prices improve."

The company's agreement with International Paper to purchase 13 U.S. south sawmills is expected to close in the first quarter of 2007.  Ketchum says the strategic acquisition will increase lumber production capacity, enhance geographic and product diversification, while reducing exposure to foreign currency volatility and any future trade issues with the U.S..

Email | Print | Facebook | Twitter | Digg | Del.icio.us