B.C. Forestry’s Stock Shock Highlights Industry Troubles

Look at any stock chart of any publicly traded forest company in B.C. over a three-year period, and you may be struck by what you see: mountains.

Whether it is a major player like West Fraser Timber Co. (TSX:WFT) or a medium-sized company like Conifex Timber Inc. (TSX:CFF), the stock charts for these B.C. companies over three years all have a similar shape – a mountain slope that starts rising in early 2017, peaks in the summer of 2018 and then slides down to three-year lows.

Whereas some B.C. forestry companies were posting record profits one year ago, they have lately been posting losses.

Canfor Corp. (TSX:CFP) posted $126 million in operating income from lumber sales in the first quarter of 2018 and a $78 million loss in lumber sales for the first quarter of 2019.

Its stock price has plunged 65 per cent in one year – from $31.20 per share on May 14, 2018, to $10.93 per share on May 14, 2019.

Interfor Corp. (TSX:IFP) reported net income of $32.7 million in Q1 2018 and a net loss of $15.3 million in Q1 2019. Its share price has fallen 47 per cent, from $24.81 per share on May 14, 2018, to $13.16 on May 14, 2019.

In first-quarter financials, B.C. companies cite lower lumber prices in the U.S. and higher log costs in B.C. for the poor first-quarter showings. And in management and discussion analysis, they also note new layers of regulations in B.C. as introducing new risks and uncertainty that could deter any further investments in B.C.

John Rustad, the BC Liberal critic for forestry, said it’s not just about lumber prices, U.S. softwood lumber tariffs and market access. He points to West Fraser Timber’s most recent financials as an example.

“It showed them making solid profits in Alberta; they’re making solid profits in their operations in the States and they’re losing money on their operations in B.C.,” Rustad said.

“Alberta and B.C., you’ve got the same market conditions. You’re struggling getting wood into the United States. The difference is, British Columbia has become the highest-cost producer in North America.”