Pope and Talbot Records Profit, Thanks to Refund

By 250 News

If it hadn’t been for the return of  the softwood lumber duties, Pope and Talbot would have seen another  loss.  Pope  and Talbot operates  7 sawmills in B.C. including one in Ft. St.  James,  it also operates two  pulp mills in the province,  one of which is the Mackenzie Pulp Mill.

The company has just released its annual financial report.  It says it posted a profit  of $83 million in the  4th quarter,  but  that is largely due to softwood lumber tarrif refunds. 

Pope & Talbot  recorded a  gain of  $127.5 million in soft lumber refunds.  The company used those dollars to pay off $68 million in debt.  Had there been no refund,  Pope and Talbot would have finished the year with  an operating loss of $26.2 million.

The forest industry remains challenged. 

Pope & Talbot noted  revenue from its wood products sector dropped 28% to $75.5 million.  The company blamed low demand, a residential downtown  and  the usual seasonal slowness in the building industry. 

The National Home Builders Association in the United States is indicating the market will remain tight.  There has been  a 2.5% drop in  building permits issued,  at a time when the mortgage rates are inching up.  According to the NHBA  at the end of march in the U.S.  1 year ARM mortgage had  moved upward to 5.43%  from  5.40% at the end of March.

Analysts  suggest the fears of increasing inflation may  encourage Americans to hold off on building a new home, or renovating the one they are already in. 

There are other pressures, as the strength of the Canadian dollar and  changes in oil pricing both impact  the forest industry.

Where does that  leave the  industry?

The demand is slumping at a time when  industry has put a lot of time, efffort and money into increasing its manufacturing capacity and  efficiency.   When Canfor released it’s year end report,  CEO Jim Shepherd  expressed  caution about the year ahead "We expect markets to be difficult through 2007".  Shepherd is also  quoted as having  concerns about the Mountain Pine beetle "The epidemic is well known" said Shepherd, "But the ever changing  fibre quality is not."

In an effort to balance the supply with the demand,  analysts say there is a very good possibility  more  downtime may be  prescribed. 

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