Higher prices and demand for lumber in Asia, as well as lower costs, have helped TimberWest Forest Corp. improve its bottom line for 2011's first quarter.
The company reported EBITDA of $16.2 million for the quarter, a $12.8 million increase over 2010’s first quarter.
The company also recorded log sales of $74.4 million in 2011’s first quarter, a 51% increase from 2010's first quarter results of $49.4 million.
TimberWest augmented its private timberland holdings on Vancouver Island with the acquisition of 7,678 hectares of private land from Western Forest Products Inc. for $22.4 million during the quarter.
Given the ongoing improvements in Asian log markets, CEO Paul McElligott said, “This acquisition was particularly well timed. We have made excellent progress integrating these lands into our operation with road building and timber harvesting activities already underway in the second quarter.”
In the near term, profitability is expected to improve, if sales in Asia continue to improve.
In the long term, the eventual rebound in U.S. housing, the supply constraints created as a result of the mountain pine beetle infestation, and reduced Russian timber shipments are expected to increase demand for timber and further improve the company's profitability.
Until then, TimberWest says it will continue to focus on extracting the highest margins possible by being vigilant on costs and capitalizing on the emerging revenue from its land base.
On April 11, TimberWest announced it had entered into a definitive agreement under which two leading Canadian pension funds, British Columbia Investment Management Corporation (bcIMC) and the Public Sector Pension Investment Board (PSPIB) have agreed to acquire TimberWest for $1.03 billion in cash, including assumed debt.
Under the terms of its agreement with bcIMC and PSPIB, TimberWest has a "go-shop" period until June 9, 2011 during which it is permitted to solicit a superior proposal.
Following the public announcement of the transaction, the company initiated this "go-shop" process, with BMO Capital Markets, contacting 31 prospective buyers, eight of whom have expressed interest and five of whom have entered into a confidentiality and standstill agreement with the company.
Jennifer Harrison