West Fraser announces improved results
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West Fraser Timber Company Ltd. recently reported earnings after discontinued operations of $19 million or $0.45 per share for the first quarter of 2010. Earnings from continuing operations were $34 million or $0.79 per share on sales of $688 million.
“West Fraser’s results reflect the efforts of our employees who maintained their focus on our culture of cost control and improved efficiency throughout a very bleak downturn.” said Hank Ketcham, the Company’s Chairman, CEO and President. “These efforts, along with improved pricing for our products, have positioned West Fraser to return to profitability.”
The Company’s lumber operations were significant contributors to the positive results as prices for both SPF and SYP lumber increased substantially in the quarter as a result of the continuing curtailments by many producers in North America and inventory restocking throughout the distribution chain. Lumber prices rose despite continuing depressed housing starts in the United States.
In the quarter the lumber segment recorded operating earnings of $36 million and EBITDA of $66 million.
During the quarter the Company’s Canadian sawmills operated near full capacity. A third shift was added at the Company’s Hinton Wood Products division in the quarter. Production at many of the U.S. mills was reduced in the quarter due to severe weather.
At the end of the quarter log inventories at the Canadian mills were at levels that are expected to allow for full operations through the break-up period.
The panel segment, which includes plywood, LVL and MDF, recorded operating earnings in the quarter of $5 million and EBITDA of $11 million. The MDF and LVL operations continue to operate on a curtailed basis while the three plywood mills ran at near capacity levels.
Pulp and paper operations recorded operating earnings of $26 million and EBITDA of $39 million. The strength in the pulp market is reflected in the rapid increase in prices for all major grades of pulp. In addition to strong underlying demand, production curtailments resulting from the Chilean earthquake in February significantly constrained supply. “We continue to make progress in reducing our production costs in our pulp operations. With over one million tonnes of pulp capacity we are experiencing the benefits of this strong pulp market.” commented Mr. Ketcham.
In late January the Eurocan mill ceased operations. The process of selling the remaining inventory and disposing of the assets associated with this mill is expected to continue through the remainder of the year. To the end of the quarter the majority of the anticipated closure costs have been recorded.
The recent increase in lumber prices is largely driven by market and weather-related downtime across North America and inventory restocking. We expect that lumber prices may decline later in the year as additional production comes onstream. Increased housing starts in Canada are likely to support demand and prices for our panel products. The strong pulp markets should continue as economic growth in the consuming regions continues.
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