West Fraser Timber Co. Ltd. posted a profit of $166 million in 2010, significantly improved over the previous year despite the continuing poor housing market in the U.S.
The company, which has extensive operations in north and central B.C. employing more than 3,000 people, was helped by an emerging lumber market in China and robust pulp prices.
"Overall, we had a pretty good year compared to the previous few years," West Fraser president and CEO Hank Ketcham told analysts on a conference call Friday.
He noted the company shipped 32 per cent of its lumber overseas in the last three months of the year. Of that 270 million board feet, 190 million board feet was shipped to China. "As we look forward, we see the export lumber market, particularly in China, growing. And we will fully participate in that growth," said Ketcham.
While the outlook in China is positive, the U.S. market continues to be soft. Recent figures peg housing starts in the U.S. under 600,000 on an annualized basis. That's well below a peak of two million in 2005, and normalized annual starts of 1.2 million to 1.4 million.
West Fraser had sales of $2.9 billion in 2010, an increase in sales of $2.4 billion in 2009. West Fraser's $166 million profit in 2010, was well above losses of $347 million in 2009 and $134 million in 2008.
As a result of the U.S. housing collapse, a global recession and cost pressures, it closed a small sawmill in Quesnel and its Eurocan linerboard mill in Kitimat. Ketcham noted that equipment is being sold from the shuttered Eurocan plant.
However, the improved financial results are allowing the company to re-invest.
Earlier, West Fraser announced it was doubling a planned capital spending plan in 2011 to $230 million.
Ketcham said Friday well over 50 per cent of the funds will be spent on its Canadian operations, almost entirely on lumber mills.
West Fraser has an extensive network of sawmills in northern and central B.C., including in Smithers, Houston, Fraser Lake, Chetwynd, Quesnel, Williams Lake, 100 Mile House and Chasm. The company also has sawmills in Alberta and the U.S. South.
"A key element of our long-term strategy has always been to invest in our business to ensure we have the lowest cost and efficient operations as possible," said Ketcham.
West Fraser is also spending $88 million on its pulp and paper mills, money it is eligible for under a federal government subsidy program. The company will use the money on electrical-generation projects so it can sell power, lower its energy consumption and reduce costs. West Fraser has two pulp mills in Quesnel, and others in Alberta.
Two of West Fraser bioenergy projects also made the short list of a B.C. Hydro proposal call. The projects would produce electricity at sawmills in Chetwynd and Fraser Lake.
West Fraser is not the only company with operations in north and central B.C. to announce a major capital spending program. Canfor Corp. has said it will spend $300 million in the next three years on its sawmills in Canada and the U.S., many of which are in north-central B.C.
Canfor revealed recently it was spending $38 million at its sawmills in Vanderhoof and Polar, just north of Prince George.
