Sawmills around the world endured a gory 2008

Sawmills around the world were hit with some of the worst losses in recent history during 2008 and early 2009, with Canada seeing the biggest losses, especially in Eastern Canada, according to a new lumber benchmarking report.

The report - a collaboration of the International WOOD Markets Group, PricewaterhouseCoopers and The Beck Group - that global average losses on an EBITDA basis were $12 US per cubic metre of lumber in 2008 and dropped even lower to $14 per cubic metre in the first quarter of 2009.

EBITDA, which are earnings before interest, depreciation and amortization, is considered a key cash-flow measure that allows a better comparison across jurisdictions which may have, for example, different tax regimes.

By comparison, in 2006, the global industry showed a profit of $8 per cubic metre.

The report showed that the region with the lowest EBITDA in 2008 for average sawmills was Canada. The poor performance was the result of the collapse of the U.S. housing market, the strength of the Canadian dollar against the U.S. currency which erodes income and export taxes on on lumber shipments to the U.S.

The report said that average sawmills in Eastern Canada had "horrific" annual losses of $37 US in 2008, dropping even further in the first quarter of 2009.

The B.C. Interior was the region to fare the best in Canada, but still did not do as well as its U.S. competitors, with the U.S. South leading the way across the border, WOOD Market Group head Russell Taylor said in an interview.

There are numerous factors that can impact financial performance, but despite having modern, larger mills, the B.C. Interior was still hit by the rising Canadian dollar, the U.S. tariffs and poor prices, said Taylor.

The report showed that the regions with the highest EBITDA earnings for average mills in 2008 were in niche markets such as South Africa, China and northwest Russia. While these regions were the most profitable, they were only marginally so at $3 US per cubic metres of lumber.

Informational resource: Gordon Hoekstra
Prince George Citizen