Second-quarter profits among Western Canadian lumber producers surveyed by PricewaterhouseCoopers (PwC) have dropped by more than half compared to last year, according to a new report from the accounting firm.
The 10 companies surveyed, which include West Fraser, Canfor and Fortress Paper, reported total net earnings of $180 million.
That’s a 53% drop compared to Q2 2013 when profits for those 10 companies were $383.8.
PwC cited the sluggish U.S. housing market — one of the biggest customers for Canadian lumber — for declines at B.C. companies.
“(U.S.) housing starts statistics for June were about 6% below the average year-to-date trend,” the report said.
“Due to the continued slow recovery in the US, 2014 is expected to become the seventh consecutive year in which US housing starts remain below the (1 million) unit level.”
North Vancouver’s Fortress Paper was hit with losses of $20.8 million — a 115% plummet from its 2013 Q2 profits of $134 million.
The company has been dealing with the fallout from the Chinese Ministry of Commerce’s (MOFCOM) decision to impose a 13% duty on cellulose pulp coming from Canada, the U.S. and Brazil.
The MOFCOM also determined the final duty for any unnamed current or future pulp producers would be 23.7%.
Fortress Paper CEO Chadwick Wasilenkoff told Business In Vancouver in April that a 23.7% duty on the company’s Global Cellulose Mill in Lebel-sur-Quevillon, Quebec, makes that operation economically unviable.
In August, Fortress sold its shares in bank note security subsidiary , Fortress Optical Features, to Nanotech Security Corp. for $17.5 million.
It wasn’t all bad news for local lumber producers, though.
Vancouver-based West Fraser saw profits rise from $72 million in Q1 to $74 million in Q2. But that was still a significant drop from the same period last year, when its net earnings were at $109 million.