Canfor Corp. CEO Don Kayne said Thursday the lumber and pulp and paper producer remains committed to British Columbia despite the company signing a deal to buy a majority stake in a Swedish sawmill company.
In a teleconference with media following the announcement, Kayne said the majority of Canfor's production continues to be in British Columbia and the company will remain headquartered in Vancouver.
Canfor has reach an agreement to buy 70 per cent of Vida Group for about $580 million. The privately-held company has nine sawmills in southern Sweden with an annual production capacity of 1.1 billion board feet.
The announcement comes about a week after Canfor said it will be buying Elliott Sawmilling Co., Inc., based in South Carolina, for US$110 million, subject to due diligence.
In late October, Canfor reported third-quarter earnings of $125.3 million, doubled from the year before despite lower lumber prices.
However, the figure was down from the second quarter when Canfor took in $169.8 million and said Nov. 1 it be reducing production at its B.C. sawmills by about 10 per cent this quarter.
Unionized sawmill workers in northern B.C. are in a strike position and the United Steelworkers Local 2017 has accused Canfor of implementing rotating layoffs "in what looks more like a bargaining tactic than a reflection of markets."
Despite the moves, Kayne said the company still remains committed to B.C., where he said the majority of Canfor's production is still based.
"We still believe long term, B.C. is well positioned geographically to grow in the Asian markets for sure, let alone the U.S. market," he said. "However, with some of the AAC (annual allowable cut) reductions that you're all familiar with due to the mountain pine beetle, and some of the recent forest fires that we've all had to deal with the last couple of years, the expansion opportunities are certainly limited in B.C.
"But our customers are growing and we need to keep pace with them and frankly, that's the simple fact. And we're dealing with, and we're very proud of it, a very very strong customer base worldwide.
"Companies like Home Depot and companies like Lowe's and there are several examples really around the world like that, they're looking for suppliers who are going to be there for the long term, not for six months or 12 months or three years.
"They're looking five, 10, even farther out than that and so clearly we needed to secure additional SPF (spruce, fire, pine) and an operational platform outside of western Canada for that type of growth that's going to be required today but also more importantly in the future as we move forward."
The deal to purchase Vida Group is expected to close in the first quarter of next year.
Under the agreement, the current owners of Vida will retain a 30 per cent interest and continue to manage the day-to-day business. Vida also has nine value-added facilities that include premium packaging, modular housing, industrial products and energy.
Canfor says it expects to be able to finance the acquisition with cash and liquidity on hand, but will complete an extension and expansion of its existing operating and term loan facilities.
Between its operations in B.C., Alberta, the U.S. Deep South and its impending purchase, Kayne said Canfor has "truly become an international manufacturer."
- with files from Canadian Press