Forestry Firms Struggling in 2006, Publishers ‘Should Be Concerned’
ThreeTwo prominent paper companies reported losses in 2006, and a fourththird company is considering selling its fine paper business.
Domtar Inc. reported a net loss of $24 million in the first quarter, erasing a $10 million profit in 2005. Tembec Inc. lost $168.2 million in the second quarter, on top of its year-earlier loss of $26.2 million. Both forestry companies’ struggles are being attributed to high costs and a high Canadian dollar.
International Paper, the world’s largest paper company, reported a Q1first quarter loss of $1.2 billion due toas a result of charges itthe company incurred after selling businesses as part of a transformation plan. The loss came despite a revenue of $5.7 billion—up from $5.6 billion a year ago.
Weyerhaeuser eported a $1.2 billion loss for the first quarter. The company also announced it will be exploring alternatives for its fine paper business, including a possible sale. The company said it has been conducting discussions with several parties.
“These are excellent assets operated by dedicated and knowledgeable employees who continue to make these mills among the best in the white paper industry,” says Steve R. Rogel, Weyerhaeuser chairman, president and chief executive officerchief executive officer.
Steve Frye, owner of Frye Publication Consulting and an expert on the paper industry, says, the two paper companies’ losses and Weyerhaeuser’s potential sale come as no surprise. “Unfortunately it doesn’t surprise me that these things are happening … however, I think it’s an indication of the paper market as a whole,” he says. “… Now is the first time publishers should really be concerned about paper prices [rising]. … Paper costs have increased recently to where they are about equal to slightly higher than their 20-year averages. For the last 10 years or so, we have been buying paper well below the 10- and 20-year averages, but now with costs on the higher side and only going up, publishers will really be paying a larger percentage for paper. This, combined with increasing postal costs, means publishers will need to shop for and budget paper carefully.”