Another quarterly report-Western Forest
On May7,2015 Western Forest released it's first quarter report.It was an average report;both revenues and EBITDA were higher than the last quarter of 2014 but lower than the same quarter in 2014.Revenues of $249 million were 7% higher than Q4 2014 but 1% lower than Q1 2014.EBITDA at $30 million compared to $15 million in Q4 2014 and a decrease from $33 million in Q1 2014.They faced challenging lumber markets in both China and Japan.North American markets recovered from their lows but were far from the highs in 2014.They also completed the sale of a pulp mill on February6,2015for gross proceeds of $22 million.And lastly made strategic capital investments of $30 million.
Equipment Changes
WEF was faced with a situation where the spot price of lumber fell from a price of $380 per thousand board feet in 2014 to a low of $240 per thousand feet in May 2015.It only has recovered to it's present $290 per thousand feet.In times like this(with low prices) it pays to be efficient and Western Forest is becoming quite efficient.It also has installed new equipment that allows it to change the platform that changes the cut and style of their product.This allows them to reduce cuts that are not in demand and increase volume of products that have increased demand.This changeable platform increase revenue over a fixed platform.
Summary
Western Forest is now in the middle of the lumber price cycle.It will not get the prices seen in early 2014 but they have recovered from the spring.The economy has slumped somewhat in China and Japan which are two of their main markets.The Canadian market has been fairly constant and the American market has picked up slightly.WEF cannot count on a pickup in the Chinese market;they might get a small recovery in the Japanese market and the Canadian market.But if prices are going to return close to early 2014 levels WEF needs to see the American housing market pick up significantly.Look for revenues in Q2 to be slightly higher than Q1.Howver WEF is working on modernizing equipment and reducing costs and will continue to do so.This equipment also allows them to increase revenues for products in demand and reduce for slow growing products.This is how an effective producer adjusts in a slow growing marketplace.This blog sees adjusted EBITDA and earnings per share to be up in Q2 and Q3.But only from 7 to 15%.
Equipment Changes
WEF was faced with a situation where the spot price of lumber fell from a price of $380 per thousand board feet in 2014 to a low of $240 per thousand feet in May 2015.It only has recovered to it's present $290 per thousand feet.In times like this(with low prices) it pays to be efficient and Western Forest is becoming quite efficient.It also has installed new equipment that allows it to change the platform that changes the cut and style of their product.This allows them to reduce cuts that are not in demand and increase volume of products that have increased demand.This changeable platform increase revenue over a fixed platform.
Summary
Western Forest is now in the middle of the lumber price cycle.It will not get the prices seen in early 2014 but they have recovered from the spring.The economy has slumped somewhat in China and Japan which are two of their main markets.The Canadian market has been fairly constant and the American market has picked up slightly.WEF cannot count on a pickup in the Chinese market;they might get a small recovery in the Japanese market and the Canadian market.But if prices are going to return close to early 2014 levels WEF needs to see the American housing market pick up significantly.Look for revenues in Q2 to be slightly higher than Q1.Howver WEF is working on modernizing equipment and reducing costs and will continue to do so.This equipment also allows them to increase revenues for products in demand and reduce for slow growing products.This is how an effective producer adjusts in a slow growing marketplace.This blog sees adjusted EBITDA and earnings per share to be up in Q2 and Q3.But only from 7 to 15%.
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