Global Forest and Paper Industry Financials Improve in 2004
In Spite of Weak US Dollar and Rising Costs:
PricewaterhouseCoopers Survey
-Key ROCE Measure Averages 5.5%
The global forest and paper industry showed signs of a slight improvement in 2004, but still fell short of industry financial performance targets, according to PricewaterhouseCoopers’ (PwC) eighth annual
Global Forest and Paper Industry Survey, released on July 13, 2005. All forest and paper products producing regions of the world were faced with rising energy and material costs and felt mixed effects from the weaker U.S. dollar.
PwC’s
2005 Global Forest and Paper Industry Survey summarizes the 2004 year-over-year financial information of the PwC Top 100—the 100 largest forest and paper companies in the world with publicly available data. Companies are ranked by annual revenues.
The PwC survey found that, while total global industry sales in U.S. dollar terms (US$) were up by 11.8% in 2004 to US$340 billion from US$304 billion in 2003, the more telling yardstick of return on capital employed (ROCE) indicated only modest growth. ROCE for the global industry averaged 5.5% in 2004, up slightly over 4.2% in 2003, still far from the target of 10 -12%. Three Canadian producers of lumber and wood products were the top performing companies in the industry during 2004, as measured by ROCE: Ainsworth Lumber (28.2%); Norbord (23.2%); and Canfor (16.2%).
The most influential factor in regional financial performance continued to be the depreciation of the U.S. dollar. During 2004 the U.S. dollar dropped 12% against the Pound Sterling, 10% against the Euro, 8% against the Canadian dollar and 7% against the Japanese yen. The net effect of this depreciation was a foreign exchange advantage for U.S. producers, and reduced revenues for producers in other regions.
Other significant factors influencing the performance of the global forest and paper industry were continuing low interest rates, strong housing demand in North America, increased product demand from China, transportation difficulties, notably ocean port congestion.
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