Improving US economy produces strong results but Canadian, European and Asian markets still recovering

Forest, paper, and packaging deals continue as companies look for growth opportunities and global advantage

VANCOUVER, May 6, 2015— The big story in 2014 for the forest and paper industry focused on the US market maintaining its strong position thanks to the continued recovery of the housing market and strong total revenues. The appreciation of the US dollar further benefited most major currencies, including many Canadian based companies with products priced in US dollars. Mergers and acquisitions (M&A) activity in the sector was strong again in 2014 particularly in strategically attractive regions, most notably the US South. The trend of expected slowing growth in China and the need to secure fibre supply in strategically attractive regions continued to drive M&A deals.    

“What we saw in 2014 and what we’re continuing to see in 2015 are the offsetting impacts of softening commodity prices and a strong US dollar that is helping Canadian exporting companies benefit from the uplift in the exchange rate,” said Kevin Bromley, Partner and PwC Canadian Forest, Paper and Packaging Leader. “Seasonally adjusted US housing starts as of December 2014 were up 8.4% from the previous year, which is significant for the industry.”

It wasn’t the year of the big deal, but M&A activity was strong in 2014 with 125 announced deals compared to 119 in 2013; however, overall aggregate volume dropped from US$16.3 billion in 2013 to US$9.4 billion in 2014. This indicates that 2014 didn’t have as many big deals as the previous year, but there were a number of strategic closings including three of the large BC producers – Canfor, Interfor, and West Fraser Timber – acquiring operations in the US South.

“Altogether economic conditions in the industry are driving opportunities for forestry and paper companies to improve shareholder value,” said Jason Boyer, a Vice President in PwC’s Deals practice. “We expect deal making to continue in the sector as companies look to gain strength in core markets and become more globally competitive.”

The PwC Q1 2015 FPP Deals Insights highlights this expectation, with Rock-Tenn and MeadWestvaco combining early this year to create a leading global provider of consumer and corrugated packaging with combined net sales of US$15.7 billion.

Boyer added: “We’re also seeing early indications of inbound Asian players in the North American market thanks to Canada’s still strong wood fibre supply basket and expectations around US housing starts gaining momentum. Many companies are positioning themselves for the future.”

These and other business topics will be discussed by senior forest and paper company executives, customers, suppliers, industry analysts and government policy makers at the 28^th Annual PwC Global Forest and Paper Industry Conference being held in Vancouver, British Columbia on Wednesday, May 6, 2015.

Additional resources: 
18th Annual PwC Global CEO Survey

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