July 30, 2008 / 11:19 PM / 10 years ago

UPDATE 1-West Fraser, Canfor post profits, but still gloomy

(Adds Canfor mill announcement, paragraphs 2-3)

VANCOUVER, British Columbia, July 30 (Reuters) - North American lumber producers West Fraser Timber Co (WFT.TO) and Canfor Corp (CFP.TO) posted second-quarter profits on Wednesday, but both said their earnings did not reflect improved market conditions.

Canfor also announced that the weak economic conditions do not justify rebuilding its Prince George, British Columbia, plywood mill, which was destroyed by fire in May.

But Canfor said it will use some of the insurance money to construct a wood-fueled energy facility at its sawmill in Fort St. John, British Columbia.

The companies, which are the top two softwood lumber producers in Canada, said their bottom lines were boosted by accounting gains and items such as the reduction of log inventories whose value had been already been written down.

West Fraser reported a net profit of C$3 million, or 8 Canadian cents a share, on sales of C$823 million. That compared with a loss of C$14 million, or 33 Canadian cents a share, on sales of C$948 million a year ago.

Chief Executive Hank Ketcham cautioned that the profit did not mean lumber markets had rebounded, and said the company does not expect the U.S. housing construction market to recover until 2009, at the earliest.

“Our first-half loss of C$65 million is a better indicator of the severity of the current downturn and the effect a strong Canadian dollar has on our business,” Ketcham said in a statement.

Canfor said it earned C$64.2 million ($62.9 million), or 45 Canadian cents a share, in the quarter. That compared with a net loss of C$38.8 million, or 27 Canadian cents a share, in the same period a year earlier.

The results included accounting items that boosted net results by C$85 million, or 60 Canadian cents a share, the company said.

Among the gains Canfor recorded was C$36.3 million in net insurance proceeds it is expecting because of a fire at the North Central Plywoods mill in Prince George.

Canfor said it does not expect any recovery in the U.S. housing market until the middle of 2009, at the earliest.

$1=$1.02 Canadian Reporting by Allan Dowd, editing by Rob Wilson, Gary Hill

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