TimberWest Forest Corp. announced today that it will permanently close the Elk Falls sawmill in Campbell River, B.C. The last full operating shift will be May 9, 2008. The sawmill closure will include the associated shipping operations at Stuart Channel Wharves located in Crofton, B.C.
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Feb 7, 2008 — Forestweb
LOS ANGELES, February 7, 2008 (Forestweb) — Vancouver billionaire Jimmy Pattison is among a number of well-known investors who have baffled analysts in recent months by buying up forest company shares, despite the industry’s bleak outlook.
Bank of Montreal analyst Stephen Atkinson said the industry was losing huge amounts of money while being “taxed to death” by the government. He added: “my personal view is you have to be brain-dead to go into this industry,” the Alberni Valley Times reported.
According to Natural Resources Canada, there have been 12,116 forestry layoffs in the last 12 months and 112 production curtailments. Yet, on Nov. 6, Pattison began buying up 4.5 million shares in Canfor Corp. for C$38 million.
Pattison is not alone. New York investor Peter Kellogg, ranked by Forbes as the 108th richest man in the U.S., has been buying shares Mercer International Inc. - a U.S.-based pulp producer with assets in Canada. Montreal investors Daniel Brosseau and Peter Letko bought 15.3% of shares in the Canfor Pulp Income Fund last September and October. Their firm Letko, Brosseau & Associates Inc. manages C$25 billion in assets.
Toronto investment house Howson Tattersall Investment Counsel, which manages assets worth C$13 billion, announced that it owned 12.75% of International Forest Products Ltd. (Interfor) in October. Four months earlier, it boosted its ownership of Fraser Papers Inc. to 12.6%, and has interests in West Fraser, Cascades, and Catalyst Paper Corp.
Ken Shields, chairman of investing house Raymond James, last year founded a new company to acquire the lumber assets of Quebec producer Domtar Corp. The Quebec government blocked the deal, but Shields has indicated that he intends to try again. Other buyers into the sector include Philip Falcone, ranked the second top-paid hedge fund manager in the world last year. His firm increased its ownership of Western Forest Products Inc. to 32.5% in early 2007.
In addition to the high level of investment in the sector, forestry funds are surprisingly overweight. Paper and forest products make up 17% of the holdings in Brandes' Canadian Equity Fund, while the Mackenzie Cundill Canadian Security Fund has a 12.8% exposure to lumber.
Investors see the merit of buying at an industry low and waiting for a recovery, and believe that a number of companies will not survive - allowing their investments to take a greater share of the market. Wade Burton, Cundill's VP for investments, said Canfor and West Fraser had 12-15% of the North American lumber market. If they did nothing and just survived the cycle, they would have significantly more of the market share of structural lumber in 2010, and they would get that at no cost.
The exchange rate between the U.S. and Canadian dollars is another cause for concern. Kevin Mason, an analyst with Equity Research Associates, said that if the Canadian dollar climbed to $1.10 or $1.20 US, “pretty much everyone’s bankrupt”. But Howson Tattersall’s Scott Carscallen said he did not believe the Bank of Canada would allow the Canadian dollar to appreciate to levels where it would seriously impact not only forest product companies, but probably all Canadian manufacturers.
The primary source of this article is the Alberni Valley Times, Port Alberni, B.C., February 6, 2008.
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