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New report on sawmill earnings We just received a news release form PricewaterhouseCoopers reporting sawmill earnings around the world for 2006 and up to Q2 2007. There are some sobering numbers from 2006 and the first half of 2007. News Release North American sawmill profits lowest in the world in 2006 and Q2 of 2007: global benchmarking report Sawmills in South Africa, Chile and North-West Russia report the highest profits. VANCOUVER, BC, September 12, 2007 — Sawmills throughout the U.S. and Canada achieved dismal operating results in 2006 where the profits at average1 mills were barely positive and slipped into negative territory in the second quarter of 2007, when lumber prices collapsed to below the cost of production. The cost of logs delivered to the mills has generally been rising in North America and, in conjunction with low lumber prices, has caused sawmills to incur deep operating losses not seen since 1991. These and other findings were released today in the latest issue of a report published by International WOOD Markets, PricewaterhouseCoopers, and The Beck Group. The report is the most comprehensive compilation available on global timber, lumber and sawnwood cost benchmarking, covering over 170 sawmills in 29 major forest products producing regions of the world. Sawmills in South Africa, Chile and North-west Russia were the most profitable in the world - the 2006 and 2007 Q2 earnings2 at average mills were between two and five times greater than the overall global average earnings, a dismal USD 13/Mbf, or just 4% of lumber sales revenue. In North America, the U.S. South posted the best mill earnings–this was one of the few areas not punished by rising log costs. The worst sawmill earnings for all the regions in the report occurred in Brazil, the U.S. Inland West region, Quebec and the B.C. Coast. They all recorded negative earnings in 2006 as well as the second quarter of 2007. The U.S. West Coast region reported some of the lowest earnings in 2006 (near zero) and 2007 Q2 (negative) due to rising delivered log costs and poor lumber prices. This region had the highest average sawmill earnings in the world in 2004. The B.C. Interior challenged US West mills for lowest operating cost honours at top-quartile mills but fell short in 2006, as in 2004. “The largest sawmills in B.C., Washington and Oregon, especially those operating on three shifts, are recording the largest annual lumber output in the world, but European mills still boast both the highest capacity ‘two-shift mills’ and the lowest operating costs of all sawmills surveyed” said Russ Taylor, President of WOOD Markets Group. “Compared to North American mills, the European sawmilling process is more flexible and can produce commodity and/or specialty orders in almost any size or length at lower costs.” “The U.S. West and B.C. Interior sawmills had been bright spots in the industry’s financial picture between 2002 and 2005,” said Dave Thompson, a partner in PwC’s Global Forest, Paper and Packaging Industry practice. “However, these regions posted weak operating results in 2006 and 2007 Q2, in spite of favourable operating costs. North American regions are also seeing increasing competition from emerging suppliers in lower cost regions, such as Russia, South America and China.” Bill Mitchell, Vice President of the Beck Group said: “This year’s report shows how the competitive position of sawnwood lumber producers in several regions shifted between 2004 and 2006, particularly U.S. and Canadian mills. Lumber prices slumped while log costs in most regions increased, hitting the bottom line hard. The weakening US dollar was also responsible for higher costs in Canada and most other forest products regions of the world. Key Report findings include: Notes: 2.’Earnings’ is earnings before interest, taxes and depreciation allowance (EBITDA). For more information on the Global Lumber/Sawnwood Cost Benchmarking Report—2006 and 2007 Q2, contact Russell Taylor. To arrange an interview with one of the co-authors to discuss the findings, please contact: Jim Nelson, PwC, at +1 (604) 806 7047, or email: jim.nelson@ca.pwc.com; Russell Taylor, International WOOD Market Group Inc, at: +1 (604) 801 5996; or Bill Mitchell, The Beck Group, +1 (503) 684 3406. About International WOOD Markets Inc. About PricewaterhouseCoopers About The Beck Group Beck is an industry leader in Competitive Assessment (benchmarking) studies for the forest products industry. The company has completed numerous studies for various segments of the industry, including hardwood lumber, oriented-strand board (OSB), softwood lumber, plywood, particleboard, and medium density fiberboard (MDF). Contacts: Jim Nelson Russell Taylor Bill Mitchell |
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