Canadian forest, paper and packaging companies lost a total of $660 million in the second quarter of 2009 while their American counterparts, buoyed by $1 billion in fuel tax credits, posted an $839-million profit, according to a PricewaterhouseCoopers report. Reports Gordon Hamilton, Cmawest News Service

PWC’s quarterly earning review of the forest sector shows the global downturn, weak commodity prices, and low demand hit Canadian companies hard.

“Industry curtailments created sporadic demand for some products, but not enough to sustain recovery,” the report states.

By contrast, a U.S. subsidy to companies for using black liquor, a byproduct of the pulping process, as an alternative fuel injected $1 billion into the American forest sector over the second quarter. They reported lower net sales than during the same quarter of 2008.

“The subsidy really tilts the playing field to the advantage of the U.S. producers,” said Craig Campbell, the leader of PwC’s forest, paper and packaging practice. “If you’re competing against another mill that has 25 per cent cost advantage then you’re not going to have a good chance of survival.”

As a result, said Avrim Lazar, the chief executive of the Forest Products Association of Canada, “all of my members are under financial pressure. “There’s going to be more pain,” he added. “This puts Canadian companies and workers at risk.”

Campbell said he believes the industry, which has reported uninterrupted losses approaching $5 billion over the past three years, has hit bottom and will begin to recover once housing and employment begin to pick up in the U.S.

The Canadian losses show an improvement for western companies from the same quarter of 2008. Western Canadian companies, where the focus is mostly on lumber, lost $83 million, down from losses of $128 million in 2008.

Eastern companies — mostly pulp, paper and packaging producers — lost $577 million, versus $344 million for the same period of 2008. PricewaterhouseCoopers surveyed 15 major Canadian companies for the report.

The $660-million total loss on top of losses of $480 million in the first quarter of 2009, add up to a $1.4-billion loss for the first half of the year.

However, the second-quarter losses also include over $500 million in asset impairment and restructuring charges.

Source: Times Colonist

http://www.timescolonist.com/business/Canadian+forest+firms+lose+million/1953170/story.html