As an investor, if there is ever a time for engaging in even more diligent “due diligence,” that time is now. There’s a lot of hot air blowing around, and it isn’t just because summer’s arrived. The current investment climate is rife with hype, bold (and maybe even some unfounded prognostications), and contradictory views that can confuse investors.
I’m looking at the lumber, forest products, and paper & paper products industries and considering whether all the giddiness lately means they’re worth investing in.
Weyerhaeuser Company (NYSE:WY) is one of the world’s largest private owners of timberlands. The company recently acquired Longview Timber in a $2.65 billion deal. Weyerhaeuser Company (NYSE:WY) will receive approximately 645,000 acres of U.S. Pacific Northwest timberland with this acquisition.
Additionally, the company also reported recently that it will invest CAD$23 million in their its mill in Drayton Valley, Alberta. This sawmill produces a variety of spruce-pine-fir lumber products for North America and Asian customers. Spruce-pine-fir lumber is a suitable choice for house construction and home projects.
Therefore, Weyerhaeuser Company (NYSE:WY) is positioning itself even more to capitalize on some new strength in the American housing market. The company’s CEO, Mr. Dan Fulton, stated, ” We believe our company is uniquely positioned to maximize the value of these timberlands.”
Weyerhaeuser Company (NYSE:WY) owns or controls, mainly in the U.S., more than 6 million acres of timberlands. Furthermore, the company manages an additional 14 million acres under long-term licenses in Canada. Of note to investors is that it is continuing to build that abundance of resources necessary to fulfill any sustained demand that may come from the U.S. and China.
A paper and paper products company, Resolute Forest Products Inc (NYSE:RFP) has 22 pulp and paper mills and 20 wood products facilities. The company had sales of $4.5 billion last year. As of April 1, 2013, it managed approximately 11.5 million acres of North American forestland.
In November 2012, it announced major investments in two of its sawmills. totaling C$11 million. This involves its Comtois sawmill ($9 million) in Lebel-sur-Quévillon, Quebec, and its sawmill in Senneterre, Quebec ($2 million). The company indicates that it will concentrate on wood products because of the positive outlook for lumber.
Potlatch Corporation (NASDAQ:PCH) owns approximately 1.42 million acres of forestland in Arkansas, Idaho, and Minnesota. Through a subsidiary, it also operates several manufacturing facilities which manufacture lumber and panel products. The company produces approximately 650 million board feet of lumber and 160 million square feet of plywood at its facilities.
The company believes that as the housing market recovers, harvest volume and prices should increase in tandem over the next few years. Potlatch Corporation (NASDAQ:PCH) indicates that it has the flexibility to monetize sawlog or pulpwood harvests. It further indicates that it will aggressively pursue sawlog harvesting upon the recovery of sawlog pricing. Better sawlog pricing is dependent on the U.S. housing market.
The general view is that the U.S housing market is more robust and that everyone can still count on China for sales. However, there are some chinks in the timber logs.
Resolute Forest Products Inc (NYSE:RFP) has its Fort Frances, Ontario (pulp and paper operation) kraft mill and paper machine number 5 indefinitely idled. CEO, Mr.Richard Garneau, said in November 2012, “The markets for these products are challenging and are expected to remain so. The kraft mill situation is particularly difficult given Fort Frances’ operating configuration and the recent decision by a key customer to stop consuming the pulp supplied by Resolute Forest Products Inc (NYSE:RFP) to its mill.” The company subsequently announced (March 2013) the idling of a newsprint machine at its Tennessee operations.