|
|
|
Ainsworth Lumber still bleeding cash |
|
|
Written by GORDON HOEKSTRA
Citizen staff
|
|
Thursday, 15 May 2008 |
Ainsworth Lumber, the company that was to build two OSB plants in B.C.'s Northern Interior, is in serious financial trouble.
The company, which lost $216.5 million in 2007, continues to lose money, posting an $88.2-million loss this quarter.
The company cited continuing low oriented strand board panel prices, a result of a collapse in the U.S. housing sector, and a strong Canadian dollar, as sales dropped sharply to $88.5 million from $135 million during the same period a year ago.
"Our ability to continue as an ongoing concern will be dependent upon the continuing support of our creditors and suppliers, obtaining additional financing or refinancing our capital structure, and ultimately, achieving profitable operations," the company said in a prepared statement.
"We are exploring strategic alternatives to strengthen our balance sheet and enhance our liquidity," added the company in releasing its financial results for the first three months of 2008.
The first-quarter $88.2-million loss compared to a $22.8 million loss a year ago.
“OSB business conditions continue to be challenging, as the U.S. housing industry, a key driver of OSB demand, remains in a protracted downturn,” the company said.
“U.S. housing starts continued to drop due to excess housing inventories and the constriction of credit availability in light of the mortgage credit market crisis.”
Earlier this month, Ainsworth said it was exploring strategic alternatives to strengthen its balance sheet and enhance its liquidity.
In March, the company failed in a bid to refinance $823.5 million US worth of corporate debt by exchanging a series of older unsecured bonds with new secured ones.
Forest industry analyst Kevin Mason said, unfortunately, Ainsworth's financial woes come as no surprise. As the housing market worsened in the U.S. a year ago, Mason's company, Equity Research Associates, predicted that Pope & Talbot, Tembec and Ainsworth were headed for trouble.
Pope & Talbot is now in receivership, Tembec managed a refinancing "amazingly," and now Ainsworth is next in line to fall, said Mason.
The U.S. housing sector is not expected to recover now until 2010, and it will be a slow grind upwards, noted Mason. "There's no way they can make it that long," he said.
There is a slight chance Ainsworth could managed a refinancing, but that will be "very unlikely" in the restricted credit market, said Mason.
The credit tightening is a product of the U.S. housing meltdown, the sub-prime mortgage crisis and Wall Street jitters.
Ainsworth's financial problems also eliminate any chance of an OSB plant being built in B.C.'s Northern Interior, agreed Mason.
In 2005, just days before the provincial election, Ainsworth said it would spend $400 million to build two OSB plants in northern B.C. to tap into mountain pine beetle-killed timber.
The plants -- which to be built in the Prince George and Quesnel areas -- were expected to create 750 jobs.
The announcement three years ago ended speculation as to what exactly were Ainsworth's intentions after it was the highest bidder earlier for a pair of massive beetle-killed timber salvage licences tendered by the province.
In the fall of 2006, Ainsworth walked away from the timber salvage licence in the Vanderhoof area, saying it would only build one plant.
The deadline for the start of construction for the remaining plant is Jan. 1, 2009.
 |
|
Last Updated ( Thursday, 15 May 2008 )
|
Subscribe to this comment's feed