And of what tree-like nature are profits in the forest industry these days? Soaring. As recently as 1975, MacMillan Bloedel Ltd. was losing money while Abitibi-Price Inc. kept less than two cents of every sales dollar. Now, led by MacBlo’s likely earnings of $7 a share compared with last year's record $4.50, the industry's profits could jump an incredible 75 per cent. As if on signal, a spate of companies hauled out trumpets announcing modernization programs so far totalling at least $2.5 billion. Although the future of Canada’s most manic-depressive industry seems assured, the transition to stability won’t be easy. "It’s an illusion that these companies are doing well,” says Jack Puusepp, a forest products analyst at Dominion Securities Ltd. At least half the total profits in 1978, and possibly more this year, can be attributed to foreign-exchange gains resulting from Canada’s devalued dollar with 75 per cent of Canada’s pulp and paper products exported and priced in U.S. dollars. Analyst
Greg Liddy at Merrill Lynch Royal Securities Ltd. predicts it can’t last with 1980 newsprint profits likely to be 30 per cent below this year's. The reason is an increasingly robust Canadian dollar (which strengthened last week to close at $.856 U.S. ) or a possible U.S. recession. Every time the dollar moves up one cent, MacBlo loses $3 million in net earnings.
Optimism continues, however, with news of the capital spending programs, not only to expand capacity but also to improve existing plants. Along with MacBlo, other big investors include Abitibi-Price, which plans to spend about $1 billion on plant improvement and pollution control, and E. B. Eddy Forest Products Ltd., which will spend $210 million to update its mill at Española, Ontario.
With the demise of Reed Paper Ltd.,the industry is shedding its clubby reputation, but one problem lingers: will there soon be any trees left to cut down? Great Lakes Forest Products Ltd. acquired Reed’s Dryden, Ont., mill for $80 million in November. By spending more than $200 million and promising to manufacture pulp, the
company may be able to get the rights to Reed's timberland, thus doubling its present cutting lands. Otherwise, predicts Professor Kenneth Hearnden of Lakehead University’s forestry department: "They'll start 1 running out of wood in 10 years.” Even in B.C., with more than 50 per cent of Canada’s standing timber, Calvert Knudsen, a rising MacBlo executive, says: "The major portion of the existing economically accessible forest resource has basically been allocated.” Ian Brown
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