VANCOUVER — The top 100 global forest, paper and packaging companies reported record losses of US$8 billion in 2008, a significant reversal from profits of US$13.8 billion in 2007, a new report shows.
The PricewaterhouseCoopers study released Wednesday says it’s the first negative finish for the collection of worldwide companies since 1996.
Total global sales, reported in U.S. dollars, were $357 billion in 2008, up from $333 billion in 2007.
The total net loss for the 11 Canadian companies included in the survey rose 355 per cent to $4.04 billion, compared to losses of $889 million in 2007.
All 11 Canadian companies included in the study reported a net loss in 2008, compared to eight with losses in 2007.
The increase in red ink in Canada was blamed on the stronger loonie versus the U.S. dollar, as well as goodwill and other asset impairments charges.
Troubled firm AbitibiBowater (TSX:ABH) reported the most significant decline in profitability, with a net loss of $2.2 billion in 2008, compared with a 2007 net loss of $490 million. The company sought creditor protection in April.
The 11 Canadian companies accounted for 8.4 per cent of the 2008 global sales, or $29.9 billion, up almost nine per cent from $27.5 billion the year before.
However, the report made note of a $2.4-billion increase in sales from full year results for Abitibi, which merged with Bowater in October 2007.
Excluding AbitibiBowater results, Canadian sales in the list were flat year-over-year.
“Many companies recorded writedowns and asset impairments, as companies looked to restructure and clean up their balance sheets,” said Craig Campbell, author of the survey.
“Not only did the much anticipated recovery in the U.S. markets served by Canadian producers not materialize in 2008, a number of Canadian producers actually described the year as the most difficult and worst downturn in recent history.”
A number of Canadian producers described 2008 as the worst downturn and most difficult in recent history, the report notes.
“While Canada’s forest and paper industry realized improvements in product prices during the first half of the year, the onset of the global financial crisis and reduction in demand resulted in inventory increases and reductions in sales volumes for the last half of the year,” it states.
Other Canadian firms on the 2008 list alongside AbitibiBowater include; Domtar Inc. (TSX:DTC), Cascades Inc. (TSX:CAS), West Fraser Timber Co. Ltd.(TSX:WFT), Canfor Corp. (TSX:CFP), Tembec Inc. (TSX:TBC), Catalyst Paper Corp. (TSX:CTL), Mercer International Inc. (TSX:MRI.U), Norbord Inc. (TSX:NBD), Western Forest Products Inc. (TSX:WEF) and Fraser Papers Inc. (TSX:FPS).
In 2007, 13 Canadian companies made the top 100 list.
International Forest Products Ltd. (TSX:IFP.A) and Ainsworth Lumber Co. (TSX:ANS) were dropped from the survey for 2008 after their sales plummeted to $413 million and $339 million respectively.
The entire forest industry is being hit hard by a global drop in demand for paper, a steep decline in the lumber market, mill closures and thousands of layoffs that have battered mill towns across Canada.
The same day the survey was released, privately owned newsprint company Kruger Inc. said it was indefinitely shutting one of its paper machines at a mill in Newfoundland, laying off 130 workers, because of poor market conditions.
Last week, Fraser Papers began a court-supervised bankruptcy restructuring in Canada and the U.S.
The PricewaterhouseCoopers study says the industry is facing similar woes worldwide.
“Nearly every segment of the industry suffered from significant drops in demand during the second half of the year, accelerating in the last quarter due to the grim economic situation,” the report states.
That, in turn, led to significant build up in inventory and shrinking prices for the products. Add to that tight credit markets, and it’s no wonder companies are focus on tighter cash management and cutting costs.