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Forest products companies show home construction strength in financial results

Paper products were hit in 2020 due to COVID-19

MADISON, Wis. -- Forest products companies reported 2020 financial results in February reflecting widely separate business environments, with several that sell home building products showing extremely strong results, and others like paper companies reflecting the severe impacts of the pandemic.

Louisiana Pacific, which produces a range of engineered home construction products announced results that reflected the robust U.S. housing market. Siding sales grew by 17% and the sale of oriented strand board by 57%.

The company has announced plans to convert its Houlton, Maine mill to production of siding and has begun the process of reopening its Peace Valley oriented strand board (OSB) mill in British Columbia. It also said that it is considering next converting its Sagola, Michigan mill to manufacturing its siding products.

The company projected continued strong growth of both siding (35%) and OSB (15%) in 2021.

It projected capital expenditures of about $220 million, including $80-85 million in conversion costs at its Houlton mill.

Also affected in a positive way by the housing boom in 2020 was the forest products giant Weyerhaeuser. Devin Stockfish, the company’s CEO, announced a sales increase of 14%.

Stockfish said the company paid down its debt by $900 million and projected continued growth in engineered wood products in 2021.

Meanwhile, vastly different trends affected paper companies in 2021. The pandemic had a significant negative impact on graphic paper demand and the revenue of paper companies reflected that curtailment of demand in sales and profits.

Verso closed two mills in the Lake States (Wisconsin Rapids and Duluth) in June as COVID-19 cut into demand, and sales reflected that with 4th quarter dropping by the prior year by 46% and for the full year by 44%.

Other paper companies were affected. Packaging Corporation of America (PCA) was impacted by hurricane Laura at its De Ridder, Louisiana mill. It also recorded “impairment” charges because of “exacerbated deterioration in uncoated free sheet market conditions arising from the COVID-19 pandemic.”

International Paper, produces a range of products in global markets including tissue, pulp for diapers, plus corrugated packaging products. It reported a similar revenue decline to PCA for printing papers with 4th quarters sales off by 25% from the 4th quarter of the year before.

The trend for paper pulp was not similar to those for paper mills. Mercer, which has a large presence in the pulp market reported a rebound in their results from 2019. The company reported improved pulp pricing and strong sales of its wood products into the U.S. housing market.

Rayonier, a publicly held real estate investment trust with large timberland ownership in the U.S., showed favorable results due in part to an increase in sales of land. David Nunes, its CEO noted, “growing demand for rural land as well as residential lots and commercial properties within our real estate development projects”. He said the company was seeing “favorable tailwinds in the real estate markets” that are “continuing to gain momentum.”

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