July 22, 2010 / 9:01 PM / 8 years ago

UPDATE 1-West Fraser posts profit, sees prices weakening

* Housing still not strong enough to help lumber price

* Softer China demand expected to weigh on pulp prices

VANCOUVER, July 22 (Reuters) - West Fraser Timber Co. Ltd. (WFT.TO) swung back to a quarterly profit on Thursday, but cautioned the higher lumber and pulp prices it had enjoyed would be weaker for the rest of the year.

North America’s largest softwood producer said its net earnings were C$63 million, or C$1.46 per share, in the second quarter compared with a loss of C$39 million, or 91 Canadian cents a share, a year ago.

Sales totaled C$772 million, up from C$612 million, the company said.

Analysts credited higher lumber prices earlier in the year on production cutbacks, but the rebound prompted companies to restart sawmills that had been idled because of weak markets, raising supply levels.

West Fraser said it expects lumber prices to be lower in the second half of the year because weak U.S. housing construction will dampen demand, although Canadian housing starts could stimulate plywood demand.

The forestry industry also benefited in the second quarter from higher pulp prices, but West Fraser said that market has weakened because of reduced demand in China and that will weigh on prices in the third quarter. (Reporting Allan Dowd; editing by Rob Wilson)

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