Wood Resources LLC – Q3 Review 2010
Richard Yarbrough, President and Chief Executive,
Eric Larsen, Vice President, Finance
Q3 2010 experienced a decline in the markets served by Wood Resources LLC (the “Company”) from the market peak of Q2. Although industry-wide production remained on a decline, consumption declined even faster, as buyers returned to their practice of buying only on back-to- back business. Inventories remain nearly non-existent in the channel.
Even though pricing retreated to Q1 levels by the end of Q3, improved operating performance enabled the Company to generate positive EBITDA. The Company’s commodity business, Chester Wood Products, led the Company’s performance for the quarter. Safety performance was excellent, with no incidents during Q3. Moncure Plywood continued improving its cash cost of production, achieving its best quarter to date. In addition, Moncure’s exemplary safety performance continued, with no incidents for the quarter and only one incident in the last six quarters. Olympic continued its trend of stable performance with its sixth consecutive quarter of positive EBITDA.
With current lackluster demand across most of the Company’s markets, we are anticipating prices to drop below Q3 levels and continue to languish at these levels during Q4. We remain hopeful that a moderate pickup in demand in early 2011 will have a disproportionate impact on pricing, given the extreme tightness in the channel — similar to the experience of the first half of this year. Until then, our objective will be to maintain our highly competitive cost structure.