It’s a tale of two Canadas for the forestry sector in the third quarter.
While profits dipped among Western Canadian companies from the second to third quarters, a PwC report shows forest and paper businesses in the region still managed to outdo their counterparts out east by $300 million.
The December 1 earnings summary revealed Western Canadian companies brought in $169.8 million in profit during the third quarter, a 5.5% drop from the previous quarter when those companies brought in $180.4 million.
That’s a 50.4% increase from the third quarter of 2013, when Western Canadian companies’ profits totalled $113 million.
Eastern Canadian companies, however, posted losses of $132 million in Q3 of 2014 compared with $41 million in losses during the second quarter.
In Western Canada, companies such as Mercer International ($100 million), West Fraser ($70 million) and Canfor ($58 million) led the way in terms of profit, while Ainsworth and Catalyst Paper Corporation reported losses of $36.4 million and $22.5 million, respectively.
PwC forest, paper and packaging analyst Kevin Bromley said the main difference between the regions is the west is predominantly lumber-based, while the east is paper-based.
“Lumber has been doing relatively well and obviously the paper side of the business, especially newsprint, has been in decline,” he said.
In Eastern Canada, Resolute Forest Products led the decline with $126.3 million in losses followed by Cascades’ $16-million loss. Norbord ($5.4 million) and Tembec ($5 million) both posted profit.
Despite the heavy Q3 losses in 2014, the Eastern Canadian companies still improved over the same period a year ago when those firms posted $558 million in losses.
Bromley said improving U.S. housing starts and the decline in the Canadian dollar have been helping the Western Canadian lumber market.
He added he expects Q4 results to be “very much on par” with the third quarter of 2014.
