Substantial price hikes for lumber enabled West Fraser Timber Co. to roar back to C$19 million (US$18.2 million) earnings after discontinued operations in the first quarter from a loss of C$90 million (US$86.4 million) in the year-earlier quarter, the company announced today. Sales jumped 23.2% to C$688 million (US$660.5 million).
"The recent increase in lumber prices is largely driven by market and weather-related downtime across North America and inventory restocking," the Vancouver, B.C.-based company said. "We expect that lumber prices may decline later in the year as additional production comes onstream."
Operating earnings in the lumber segment swung to a C$36 million (US$34.6 million) in the first quarter from a C$84 million (US$80.6 million) loss in the January-March 2009 period, thanks in part to a 24% rise in sales to C$386 million (US$370.6 million) from C$311 million (US$298.6 million). West Fraser noted that the benchmark price for SPF (spruce/pine/fir) studs jumped nearly 74% over the past year, while the benchmark for southern yellow pine studs climbed 32.5%.
SPF production increased 23% from 2009's first quarter, while southern yellow pine production was down about 12%. West Fraser's Canadian lumber millsoperated at 95% of revised capacity, while its U.S. sawmills (located in the South) ran at 55% of capacity.
Meanwhile, West Fraser's panels segment swung to operating earnings of C$5 million (US$4.8 million) from a year-earlier loss of C$2 million (US$1.9 million) as sales rose by C$2 million to reach C$98 million (US$94.1 million). Benchmark plywood prices have increased roughly 7% since 2009's first quarter, a result of both improved seasonal demand in Canada and the impact of the earthquake in Chile, the company said. However, MDF prices were lower than a year earlier, while LVL prices remained unchanged.
"Lumber prices have improved dramatically over the past few months, despite the relatively low level of housing starts in the United States," the company said. "A critical factor in the increase in lumber prices appears to be related to the low production levels across the industry, both in Canada and the United States. We anticipate that if prices remain at these levels the supply of lumber will increase and without a further increase in housing starts, lumber prices will decline. We anticipate that, in the long term, housing starts in the United States will increase to more normal levels bringing the demand and supply for lumber into more balanced levels."