financial performance and opportunities for the forest and paper … · 2015. 6. 3. · financial...

Financial Performance andOpportunities for theForest and Paper Industry

Craig CampbellLeader, Performance Improvement

Global Forest, Paper and Packaging Practice

PricewaterhouseCoopers

Financial Performance and Opportunities for the Forest and Paper Industry

PricewaterhouseCoopers 20th Annual Global Forest and Paper Industry Conference

4.34.2 5.3 4.5 4.6ROCE * (%)

(Return on Capital Employed)

(USD billions)

(USD billions)

295 304 328 340360Sales

3.5 7.8 13.7 9.1 15Net Earnings

20022003200420052006(E)

Source: PricewaterhouseCoopers

PricewaterhouseCoopers Global Top 100

1

* Excluding unusual items



Return on Capital Employed by Region*

2.3 3.8Europe

4.5% 4.6%GLOBAL TOP 100

3.1 4.7Japan

5.5 0.5Canada

9.512.6Emerging Markets

6.3 4.2USA

2005 2006(E)

2

British Columbia -1.8% 4.1%

* Excluding unusual items

Source: PricewaterhouseCoopers



Source: Random Lengths (SPF, Western 2x4, KD, Std & Btr, Random, Mill Prices)

Lumber Prices (USD per mfbm)

2002 2003 2004 2005 2006

500

450

400

350

300

250

200

2007



Lumber Prices (USD per mfbm - inflation adjusted)

1980 1985 1990 1995 2000 2005

500

400

300

200

100

Source: Random Lengths (SPF, Western 2x4, KD, Std & Btr, Random, Mill Prices)

Adjusted for inflation using BC CPJ, 1992=100



Source: Pulp & Paper Week; NBSK List

2004 2005 2006

800

750

700

650

600

550

Pulp Prices (USD per tonne)

2007



BC Operations Net Earnings (Loss) (CAD millions)

(1,000)

(500)

0

500

1,000

1,500

2,000

2,500

2002 2003 2004 2005 2006E

Source: PricewaterhouseCoopers; 2006 excludes softwood duty refunds



An industry undergoing comprehensive and

far-reaching change:

• demand growth moving East to Asia

• supply advantage moving South

Interviews indicate:

• Optimism about future demand for products; highest

amongst Emerging Market CEOs

• Executives facing up to the major challenges of

balancing short and long term strategies

• More innovative thinking and actions are required

2006 CEO Survey Findings

Industry fragmentation: Further consolidation and

rationalization is necessary



Global Forest and Paper Deal Trends

16

Source: Dealogic, PwC analysis

12

8

4

2003 2004 2005 2006

Private Equity

Corporate Deals

(USD billions)

20

24

28

0



Global Forest and Paper Deal Trends Private Equity Percent of Total Deal Value

Source: Dealogic, PwC analysis

50%

2003 2004 2005 2006

40%

30%



Source: Natural Resources Canada

• >550m m3 infected

• Annual cut in BC = 80m m3

• Projected loss = 900m m3

Mountain Pine Beetle Epidemic



Mountain Pine Beetle Epidemic

5mm


PricewaterhouseCoopers 20th Annual Global Forest and Paper Industry Conference11

Alternatives for the BC Forest Industry

• Invest in the pulp sector leveraging beetle kill wood

• Status quo

• Old pulp industry continues to be subsidized

by world class lumber industry, then dies;

• Interior lumber industry shrinks significantly

• Research alternative long term uses of beetle wood

such as energy, engineered lumber, etc.

• Combination of above



The BC Energy Landscape

• BC Hydro currently has capacity to

generate 11,000 MW

• BC Hydro imports 12% of energy requirements

• BC energy demand to increase by 25-45%

over the next 20 years

• BC Pulp sector generates 850 MW for internal use

Source: BC Government; The BC Energy Plan



BC’s Competitive Advantage

0 5 10 15 20 25


Canadian cents per kilowatt hour

Winnipeg

Vancouver

Montreal

Portland

Chicago

Ottawa

Edmonton

Toronto

Halifax

Miami

New York

San Francisco



Costs to provide electricity in BC (CAD per MW hour)

Large Hydroelectric 43-62

Coal 67-82

Imported power 80

Wood biomass >100 (mill residuals and roadside beetle kill)

Europe 100-200




Roadside Beetle Wood



Wood Pellets

• BC pellet production capacity

approximately 600,000 tonnes

(1 dozen plants)

• More than 80% sold into Europe

• European demand for wood pellets

to increase 150% by 2010

• Canada viewed as a secure supplier

of quality wood pellets.

• Payback on capital approximately

3-4 years.

Source: BC Wood Pellet Association

Craig CampbellLeader, Performance Improvement

Global Forest, Paper and Packaging Practice

PricewaterhouseCoopers

Summary

financial performance and opportunities for the forest and paper … · 2015. 6. 3. · financial...

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