Tembec announced today its forest products group returned to the black in the fiscal third quarter ended June 26, posting operating earnings of C$2 million (US$1.95 million) compared with an operating loss of C$24 million (US$23.4 million) in the year-earlier period.
Forest product sales at the Quebec-based company shot up 75% to C$126 million in part because shipments climbed 72% to 224 million board feet of SPF lumber and benchmark prices for Tembec products rose between 37% and 50% from the year earlier, depending on the product involved.
EBITDA--earnings before interest, taxes, depreciation, and amortization--also rebounded, climbing from a negative C$18 million in 2009's fiscal third quarter to a positive C$6 million in the latest quarter. The changing U.S.-Canadian exchange rate also figures into the equation: A U.S. dollar was worth 85.8 Canadian cents in 2009's fiscal third quarter but 97.3 cents in the latest three-month period.
Despite the increases, Tembec mills remain underutilized. Demand for SPF lumber equaled 56% of capacity vs. 44% in 2010's fiscal second quarter and 31% in 3Q09.
Company-wide, the building products, pulp, and paper company reported net earnings of C$59 million this quarter compared with a year-earlier loss of C$38 million. EBITDA made a similar shift to a positive C$60 million from a negative C$42 million. All this came on a 33.9% rise in sales to C$545 million.
"In lumber, the company continued with selective production curtailments to manage and control inventory levels," Tembec said in a statement. "Demand and pricing improved in April and May, but fell back in June. Continued pricing volatility is anticipated as relatively weak lumber demand is balanced against low supply chain inventories. An improvement in U.S. housing starts will be required to support more sustained lumber demand and prices in the medium and longer term."