Global Forest and Paper Industry: Net Earnings Summary

Three months ended June 30, 2018

This Net Earnings Summary has been prepared by PwC based on financial statements and other sources issued by the selected companies. Earnings are reported in regional currencies, as noted.

Canada

The largest Western and Eastern Canadian based forest products companies reported overall higher net earnings in the second quarter of 2018 compared to the second quarter of 2017. 

The recent currency average in Q2 was $0.77, down from Q1 of $0.79 and up from the Q2 2017 average of $0.74. 

The average price of Western SPF 2x4s in Q2 was US $602 per thousand board feet (mfbm), up from US $513 per mfbm in Q1 2018 and US $386 per mfbm in Q2 2017. The average price of Southern Pine 2x4s in Q2 was US $578 per mfbm, up from the Q1 price of US $540 mfbm and from the Q2 2017 average price of US $452. The Q2 average price of OSB (7/16”, N.C.) was US $425 per thousand square feet (msf), up from US $367 msf in Q1 2018 and $330 msf in Q2 2017. The Q2 average price of Plywood (Southern 3/8”) was US $390 per msf, up from US $368 msf in Q1 2018 and from the Q2 2017 average of US $291 per mfbm. Average softwood pulp (NBSK, Europe) prices were US $1200/tonne, up from US $1097/tonne in Q1 2018 and up from US $872/tonne in Q2 2017. Hardwood pulp (BEK, Europe) average prices were US $1050/tonne, up from US $1020/tonne in Q1 2018 and up from US $820/tonne in Q2 2017.

The reported seasonally adjusted US housing starts for June 2018 were 1.273 million units, down from the 1.320 million annualized starts reported in March 2018 and up from the 1.217 million units reported in June 2017.

Western Canadian based companies posted net earnings of $658.2 million in the second quarter of 2018, compared to net earnings of $419.3 million in the first quarter of 2018 and net earnings of $286.3 million in the second quarter of 2017.  West Fraser reported quarterly earnings of $346.0 million, compared to $197.0 million in the first quarter of 2017 and $146.0 million in the second quarter of 2017. West Fraser indicated that record quarterly sales and operating earnings were factors in the quarterly result. West Fraser also reported the repurchase $2.878 million shares at an average price of $88.94.

Canfor reported quarterly earnings of $198.6 million, up from $141.5 million in the previous quarter, and $90.9 million in Q2 2017.

Eastern Canadian based companies posted net earnings of $354.6 million in the second quarter of 2018, compared to net earnings of $204.8 million in the first quarter of 2018 and net earnings of $291.9 million in the second quarter of 2017. Resolute Forest Products reported quarterly earnings of $93.0 million, compared to $12.6 million in the previous quarter, and a loss of $99.5 million in Q2 2017. Resolute attributed positive price momentum and improved operational performance as factors for the quarterly result. Cascades reported Q1 2018 earnings of $37.0 million, down from $72.0 million in the previous quarter and from $261.0 million in Q2 2017. Cascades reported increasing transportation costs as a factor impacting the quarterly result.


Net Earnings (Loss): Western Canada
$ millions
Company Q2 2018 Q1 2018 Q2 2017
West Fraser $346.0  $197.0 $146.0
Canfor 198.6  141.5 90.9
Interfor  63.8 33.0 24.5
Western Forest Prod. 27.1 21.7 25.6
Mercer International 21.6
32.4 (2.8)
Conifex 9.2 2.5 4.2
Fortress Paper Ltd (8.2) (8.8) (2.1)
Total CAD $658.2 $419.3 $286.3

Net Earnings (Loss): Eastern Canada
$ millions
Company Q2 2018 Q1 2018 Q2 2017
Norbord $224.7 $120.2 $130.5
Resolute Forest Products 93.0 12.6 (99.5)
Cascades 37.0 72.0 261.0
Total CAD $354.6  $204.8 $291.9

United States

Nine of the largest US-based forest and paper companies reported net earnings of US $1.89 billion in the second quarter of 2018, compared to earnings of US $1.67 billion in the first quarter of 2018 and earnings of US $1.26 billion in the second quarter of 2017.

International Paper reported net earnings of US $407.0 million compared to US $730.0 million in the previous quarter and US $80.0 million in the second quarter of 2017. International Paper’s Q1 2018 Net Earnings included income from discontinued operations of $368 million, which was attributed to the transfer of the North American consumer packaging business.

Kimberly-Clark reported earnings of US $465.0 million, compared to earnings of US $97.0 million in the previous quarter and US $540.0 million in Q2 2017.  Kimberly-Clark stated that changes in foreign currency exchange rates had a positive impact on sales for the quarter.


Net Earnings (Loss): United States
US$ millions

Company

Q2 2018

Q1 2018

Q2 2017

Kimberly-Clark

$465.0

$97.0

$540.0

International Paper

407.0

730.0

80.0

Weyerhaeuser

317.0

269.0

24.0

WestRock

271.3

224.5

326.6

Packaging Corp. of America

186.6

140.1

143.2

Sonoco

89.6

74.9

43.7

Graphic Packaging

66.0

42.7

42.0

Domtar

43.0

54.0

38.0

Boise Cascade Co

41.8

37.1

22.2

Total USD

$1,887.4

$1,669.3

$1,259.7

Europe

Seven of the largest European based forest and paper companies reported net earnings of € 913.5 million for the second quarter of 2018, compared to earnings of € 944.2 million in the first quarter of 2018 and € 600.8 million reported in the second quarter of 2017.

Svenska Cellulosa reported net earnings of € 107.2 million compared to € 70.1 million in the previous quarter, and € 29.7 million in Q2 2017. SCA also reported that a new pulp mill in Östrand began operations in June 2018.

Stora Enso reported net earnings of €213.0 million, down from €273.0 million in Q1 2018, but up from €143.0 million in Q2 2017. Stora Enso attributed current quarter results to an increase in sales, and favourable wood prices.


Net Earnings (Loss): Europe
€ millions

Company

Q2 2018

Q1 2018

Q2 2017

UPM-Kymmene

€ 269.0

€ 309.0

€ 205.0

Stora Enso

213.0

273.0

143.0

Metsä Group

142.8

146.3

86.1

Svenska Cellulosa (SCA)

107.2

70.1

29.7

Holmen

73.4

50.9

40.7

The Navigator Company

66.2

53.2

61.3

Mayr-Melnhof Group

41.9

41.7

35.0

Total EUR

€ 913.5

€ 944.2

€ 600.8


Rest of the world

Japan and Emerging Markets

Five of the largest forest and paper companies in Japan posted net earnings of US $331.0 million in the second quarter of 2018, compared to earnings of US $489.0 million in the first quarter of 2018 and US $296.1 million in the second quarter of 2017. Oji Holdings Corporation reported earnings of US $183.9 million in the second quarter of 2018, compared to earnings of US $82.4 million in the first quarter of 2018 and US $55.8 million in the second quarter of 2017.

Nippon Paper Industries reported a loss of US $54.7 million in the second quarter of 2018, down from net income of US $8.0 million in the previous quarter, and US $40.7 million in Q2 2017. Nippon reported expenses for the reorganization of production structure on paper business of USD $135.9 million.

In the Emerging Markets regions, four of the largest forest and paper companies reported a net loss of US $426.3 million in the second quarter of 2018, compared to earnings of US $686.0 million in the first quarter of 2018 and earnings of US $64.8 million in the second quarter of 2017.

Suzano Pulp and Paper reported a second quarter loss of US $513.8 million, compared to earnings of US $250.5 million in the first quarter of 2018 and earnings of US $61.8 million in the second quarter of 2017. Suzano indicated exchange rate variation and losses from derivatives as key drivers of the reported loss for the period. This is reflected in reported financial expenses for the period of R$3.87 million Real.

Fibria Celulose and Suzano Pulp and Paper both reported that a trucker strike in Brazil has negatively impacted operations.

The average exchange rate for Real to USD in the second quarter of 2018 was $0.28, down 11% from 0.31 in Q2 2017, and down from $0.31 in the previous quarter.


Net Earnings (Loss): Japan
US$ millions

Company

Q2 2018

Q1 2018

Q2 2017

Oji Holdings Corp

$183.9

$82.4

$55.8

Unicharm Corporation

154.7

148.5

132.1

Rengo

62.5

68.9

32.6

Sumitomo Forestry

(15.4)

181.2

34.9

Nippon Paper Industries Co.

(54.7)

8.0

40.7

Total USD

$331.0

$489.0

$296.1


Net Earnings (Loss): Emerging Markets
US$ millions

Company

Q2 2018

Q1 2018

Q2 2017

Empresas CMPC  (Chile)

$94.9

$144.0

$25.7

Sappi (South Africa)

51.0

102.0

58.0

Fibria Celulose (Brazil)

(58.4)

189.5

(80.7)

Suzano Pulp & Paper (Brazil)

(513.8)

250.5

61.8

Total USD

($426.3)

$686.0

$64.8

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