Just as the 72nd Annual Truck Logger AGM kicks off this week in Victoria, BC, bringing west coast Canadian forestry stakeholders, operators, and contractors together, major announcements are coming out of BC’s coastal forest products manufacturers. Most notable among these is Western Forest Products, a major employer on Vancouver Island and the mainland coast.
Western Forest Products will reopen its Ladysmith, BC, mill on Monday, the company announced January 16, bringing back all 85 workers affected by the closing. That sawmill shut down in the first week of December due to weakness in the Asian market.
“We want to keep the mill running for as long as we can. We have an order file for two months but more are coming after that,” said company Director of Communications Amy Spencer to the Cowichan Valley Citizen Wednesday.
Western’s Saltair mill, which is also in Ladysmith, was not affected.
Western permanently closed its sawmill in downtown Nanaimo, BC, last year, while it invested $10 million to modernize its Duke Point mill, where it will add another shift.
The 62 employees who had been working at the Nanaimo mill were to be offered jobs at other mills, including Duke Point.
The idea behind the consolidation was to increase production at both the company’s Duke Point and Saltair sawmills while reducing costs.
British Columbia Coastal Forestry
In addition, Western was in the final weeks of negotiation Thursday to close a $25.5 million deal with Woodfibre LNG for the 2013 purchase agreement for the former Woodfibre pulp mill site on the Howe Sound at Squamish, BC, which closed in 2006. That sale should be finalized by mid-February
Also this week, Western announced the appointment of J. Barrie Shineton to its Board of Directors Board. Shineton is the past President and CEO of Norbord, and currently serves as the Vice Chair at Norbord, and as a Director of Stella-Jones.
Western went ex-dividend at the end of last year, for its quarterly dividend of $0.02, payable on December 19, 2014. It is interesting to note that January 15, shares of Western crossed below their 200 day moving average of $2.34, changing hands as low as $2.26 per share.
Despite seeing its shares gain almost 80 per cent in value over the last year, Western trades at only 9 times earnings.
Western Forest Products has a price-to-earning ratio (P/E) of 9.77 and on Thursday an earnings yield of 0.104.
Another company with operations on the BC coast, Vancouver, BC’s Interfor, already this year has capitalized on recent plans and decisions.
In the second week of January Interfor priced a three million-share offering at $20.10 each. The proceeds would be used to help fund the 2014 purchase of four sawmills in two different areas of the US, in acquisitions expected to close in 1Q.
At the time the $20.10 price is about 8 per cent above the $18.65 share closing price that day.
Almost immediately following the share offering, it was also announced that underwriters RBC Capital Markets and Raymond James agreed to a bought deal at the offering rate, which is expected to close on January 27. If demand is sufficient then the two can sell an extra 300,000 shares.
At the time the shares were trading at $20.77.
Under the terms of such offerings, those receipts will be converted to common shares (on a one-for-one basis) if and when the acquisition closes this quarter as expected. If the deal doesn’t close by the end of April, the holders will get their money back plus some interest, according to the Financial Post January 7.
Interfor shares were trading at $20.59 at market close Thursday.
There are three forestry companies among seven Canadian manufacturing stocks that have reported high capital expenditure (greater than $10 million) and strong asset turnover ratio (greater than 1.0) during their latest reported quarter, said Small Cap Power Wednesday. Moreover these stocks are expected to report decent operating profit margins for 4Q 2014. During the past one month, the majority of the these stocks have registered price gains with daily average trading volumes in excess of 100,000.
As a comparison, iShares Global Timber & Forestry ETF shares closed Thursday at US$53.80, close to the 52-week high of US$54.32. The 52 week low was US$46.69, and the dividend yield was 0.97 per cent. The ETF’s P/E was 25.55 and dividend yield was 0.97 per cent.
For it’s part, on Thursday Interfor had a P/E of 23.21 and an earnings yield of 0.043