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Wood products industry profits to double in 2013 - Outlook less positive for paper products industry

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OTTAWA, June 26, 2013 /CNW/ - Pre-tax profits in Canada's wood products industry are expected to more than double this year and reach an eight-year high, according to The Conference Board of Canada's Spring 2013 outlook.

"Canada's wood products industry is cashing in on the recovery in the U.S. housing market and strong Chinese demand for wood products," said Lin Ai, Economist.

 
HIGHLIGHTS
  • Price improvements and higher production mean that industry revenues will rise to a six-year high, reaching $24 billion in 2013.
  • Production increases will drive costs higher, but revenue gains will be more than sufficient to cover them.
  • The industry continues to reap the benefits of cost-cutting measures undertaken even before the 2008-09 economic recession. The end result is that 2013 will be the fourth consecutive year of profitability.

The positive news is tempered by weakness in the domestic housing market, but the rebound in the U.S. housing market and robust exports to China will more than offset the slackening demand at home.

Industry production will continue to rise each year through 2017. However, the pace of growth will slow down in the outer years of the forecast, as production will be constrained by lower timber supply—a result of the mountain pine beetle infestation in British Columbia.

Some 6,000 new workers are expected to be added to payrolls in 2013. However, producers are facing a skilled-worker shortage, which will pose a major challenge for the industry going forward.

In contrast to the surging outlook for wood products, this year is shaping up to be a disappointing one for Canada's Paper Products Industry. Revenues will drop slightly due to weaker production, which has also resulted in declines in both material inputs and employment. Although costs should be lower this year, it will not be enough to keep the industry in the black. The industry is expected to record a pre-tax loss of $213 million in 2013. The industry is expected to turn a pre-tax profit 2014, but profit margins will remain thin over the next four years

Bright spots in the paper industry outlook include rising demand from emerging markets and growth in certain segments of the industry, such as sanitary paper and other higher value-added paper products, all of which are helping to offset declining demand for newsprint.

 

SOURCE Conference Board of Canada



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