TORONTO, Dec 8 (Reuters) - The Canadian forest industry racked up losses totaling C$552 million in the third quarter, a report by PricewaterhouseCoopers showed on Monday, as the U.S. housing market deteriorated and companies cut production in response to weak demand for building products.
For the period ended Sept. 30, forestry companies in Western Canada lost C$230 million, compared with losses of C$132 million a year earlier, when a 13-week strike hit coastal producers in British Columbia, the report said.
Eastern Canadian producers lost C$322 million in the quarter compared with losses of C$47 million a year earlier.
Of the six largest publicly traded companies in Eastern Canada, Domtar Corp (UFS.TO) was the only one that reported positive and improved earnings, PwC said, noting that other producers said manufacturing cost and pricing improvements were offset by higher raw material, energy and chemical costs.
Overall, it’s “not good news for the forest industry” as there is a big migration of production to countries where costs of production are lower, pressuring North American producers, said Craig Campbell, leader of PwC’s forest and paper practice unit.
“We don’t see the earnings getting back into positive territory until late 2009 at the earliest,” he said.
“It’s not a good outlook and we’re going through a lot of transformation, a lot of change and difficult times for the forest and paper industry.”
Of the aggregate C$552 million loss in the quarter, C$302 million was for restructuring costs and asset impairment charges, as the industry was battered by the U.S. housing crisis. As well, pre-tax foreign exchange losses totaled C$111 million, the report said.
$1=$1.25 Canadian Reporting by Jennifer Kwan; editing by Rob Wilson