Crown Forests sees increased profit

Press, 4 April 1987, Page 26

Crown Forests sees increased profit

PA Wellington Crown Forest Industries, Fletcher Challenge Ltd’s Canadian subsidiary, forecasts a further rise in profitability in 1987. Crown. Forest’s 1986 annual report says earnings gains are expected from healthy pulp and paper markets, uninterrupted wood . products operations, continued emphasis on quality, and appropriate cost-reducing capital investments in core businesses. In the report, Mr lan Donald, Crown Forest’s president and chief executive officer, says the mar-

ket outlook for pulp indicates strong demand with firm prices. He says that the upgrading of newsprint quality and service promises to strengthen the company’s competitive position in that market. Demand for newsprint, Crown Forest’s major product, is predicted to remain firm: “Price increases for pulp and newsprint which took effect or were announced in early 1987 will have a positive effect on results for 1987.

“The pulp price increases, one in January and the other announced for April, follow a market upswing which began in the first quarter of 1986,” Mr Donald says. A SUS3O per ton newsprint price increase was announced last month, to take effect on July 1, reflecting tightening worldwide supply. It follows a SUS3S increase last October.

Mr Donald says the full benefit of these price increases is softened somewhat by the strengthening of the Canadian dollar against the US dollar. About one third of Crown Forest’s sales are in US dollars.

At $C38.8 million (SNZSI.7 million), Crown Forest’s . 1986 earnings were the second-best net returns in the company’s history. The result would have been better but for a 4/ 2 month strike by the International Woodworkers of America which closed much of the British Columbia wood products industry in the second half of the year, the company says in its report.

Assuming no further strike costs, Crown Forest’s wood product operations expect an improved year despite fewer housing starts in the US and a 15 per cent export tax on softwood lumber destined for that country. In addition, offshore currency adjustments have made the company’s products more competitive in other export markets which are not affected by a lumber levy.

The company’s substantial domestic business is also expected to hold up well, particularly in eastern Canada where plywood sales look especially promising. Improved earnings are also forecast for packaging operations, as a result of new equipment, and for Crown Paper after final implementation of its customer service computer system. During the year, Crown Forest committed $C57.3 million ($77.4 million) to capital investment, focusing on quality and technological advances in pulp and paper and higher productivity. Elk Falls completed a SC3S million ($47 million) programme to increase production and upgrade the quality of mini-chip pulp, and commenced a SCSO million ($67 million) programme to improve newsprint quality and meet publishers’ colour printing requirements. The pulp project, which included a new digester, almost doubled Elk Falls’: mini-chip pulp capacity and enabled the mill to introduce a new improved pulp product, Elk Prime, to international markets. The Coast and Interior Wood Products divisions spent more than $C14.7 million ($19.9 million) to improve quality, increase productivity and to expand their ability to produce more products of increased value. These included a new chipping line at the Elk Falls lumber mill, new dry kilns and a. small log canter at Fraser Mills, and a semiautomatic lay-up line at the Kelowna plywood plant.

At the Kelowna lumber mill, a SC6 million ($8 million) modernisation is being carried out which will make it one of the. most efficient and lowcost producers of studs in the British Columbia industry.

The report says that markets for Crown Forest’s packaging products remained strong throughout 1986, with corrugated products and a new line of polyethylene checkstand bags enjoyed particular, success.