Forest Resources LLC – Q3 Review 2011
Larry Richard, President and Chief Executive
Forest Resources LLC – Q2 Review 2011
Larry Richard, President and Chief Executive
Forest Resources LLC (“Forest”), which includes our majority interest in CanAmPac, had one lost-time incident and four total recordable incidents during Q2 2011. Forest’s TRR (Total Recordable Rate) for the 12 months ended Q2 2011 was 2.8 compared to the 3.2 industry average rate. Boehmer Box achieved 46 consecutive months without a lost-time injury as of the end of Q2 2011.
Forest experienced weather-related power interruptions, resultant equipment failures and the continuing market challenges driven by higher fiber costs in Q2. Fiber costs remain well above 2010 levels and increased again in July 2011 due to low domestic generation of wastepaper and strong overseas demand for fiber.
Sales at CanAmPac (Strathcona Paper and Boehmer Box) remained strong. However, CanAmPac is under the same fiber cost pressures as the Mill Division. The coated recycled board market in Canada is sensitive to the strong Canadian dollar, which increases the competitiveness of U.S. manufacturers.
Margins remained below “cycle average” levels during the first half of 2011, and this trend is expected to continue forward into Q3. Consolidations and permanent mill closures are continuing as the market adjusts to the slowly recovering overall economy. Waste reduction initiatives and improved production efficiency initiatives remain the top priorities.
Forest Resources LLC – Q1 Review 2011
Larry Richard, President and Chief Executive
Forest Resources LLC (“Forest”), which includes our majority interest in CanAmPac, had no lost-time incidents and one recordable incident during Q1 2011. Boehmer Box achieved 43 consecutive months of no lost- time injuries as of the end of Q1.
Hartford City Paper, our recycled medium mill, maintained a high production level during Q1. Volume at Peoria, our specialty grade mill, remained on target, serving a niche market for crepe paper and ticket stock products. Forest announced the permanent closure of its Joliet facility, which will be completed in Q2. The scale and age of the Joliet facility rendered it non-competitive during our tenure, as cycle average fiber margins compressed and it became extremely difficult to achieve sustainable profitability. Shillington Box’s cost-reduction program was instrumental in maintaining margin in a very price-competitive box market. Kraft paper manufacturers have announced price increases for Q2; however, containerboard markets have remained stable.
Sales at CanAmPac’s wholly owned subsidiaries, Strathcona Paper and Boehmer Box, remained strong. The coated recycled board market in Canada is sensitive to the strong Canadian dollar, which increases competitiveness of U.S. manufacturers. Coated recycled board producers announced price increases for Q2.
Consolidations and permanent mill closures are continuing to occur as the market adjusts to the slowly recovering economy. Industry-wide inventories remain at historic low volumes; demand is slowly increasing, but only over the low levels of 2010. Continued discipline will be required by major producers to maintain market balance and support the anticipated price increases.
Forest Resources LLC – Q3 Review 2010
Larry Richard, President and Chief Executive
Forest Resources LLC (“Forest”), which includes our majority interest in CanAmPac, is a holding company engaged in manufacturing industrial and food packaging products, including recycled corrugated medium, clay-coated boxboard, kraft, crepe and specialty packaging papers, as well as corrugated boxes and folding cartons, at six facilities in the U.S. and Canada.
Forest had 1 lost time incident and 8 total recordable incidents during Q3 2010. Forest‘s TRR (Total Recordable Rate) for Q3 2010 and nine months ended September 30, 2010, were 4.70 and 3.79, respectively, compared to the 3.2 industry average rate. Boehmer Box achieved 38 consecutive months of no lost time injuries as of the end of Q3 2010.
Forest recorded higher EBITDA for Q3 2010 compared to the same period last year while operating in a very challenging market driven by higher fiber costs and the volatile Canadian dollar. Fiber costs remain well above 2009 levels and are forecast to increase during Q4 2010 due to low generation of wastepaper and a strong fiber export market.
Forest’s Mill Division has met these market challenges with aggressive cost and spending control initiatives and adjusted production to more closely match increasing customer demand driven by low customer inventories and tight mill capacity.
Sales at CanAmPac (Strathcona Paper and Boehmer Box) remained strong with EBITDA under the same fiber cost pressures as the Mill Division. The coated recycled board (“CRB”) market in Canada is sensitive to the strong Canadian dollar, which increases competitiveness of U.S. manufacturers and fiber costs. The strengthening Canadian dollar, which depressed earnings at Strathcona Paper in Q2, has begun to decline from recent highs.
Industry-wide inventories remain at historic low volumes; demand is increasing, but only over the extremely low levels of 2009. Continued discipline will be required by major producers to maintain production/demand balance in order to support the price increases already implemented this year.
Forest Resources LLC – Q2 Review 2010
Larry Richard, President and Chief Executive Officer
Forest Resources LLC is a holding company engaged in manufacturing industrial and food packaging products, including recycled corrugated medium, clay-coated boxboard, kraft, crepe and specialty packaging papers, as well as corrugated boxes and folding cartons, at six facilities in the U.S. and Canada.
Forest began 2010 facing a very challenging market, driven by higher fiber costs and a strong Canadian dollar. However, in Q2 containerboard producers implemented two price increases sufficient to cover unprecedented fiber cost increases, and as fiber cost relief began to emerge late in Q2, more normal margins have been restored.
Forest addressed the market challenges in its U.S. Mill Division with aggressive cost control initiatives and adjusted production to match increasing customer demand. Mill Division sales experienced stronger demand driven by low customer inventories and tight mill capacity. Costs for the domestic mills’ fiber increased during the period as the economic slowdown negatively impacted generation of waste paper and foreign exports drove up costs. CanAmPac’s (Strathcona Paper and Boehmer Box) revenues remained strong but profitability was impacted by the same fiber cost pressures as the Mill Division. The strong Canadian dollar increases competitiveness of U.S. coated recycled board manufacturers and pressured earnings at Strathcona Paper in Q2. Cost-reduction programs across all business units and operating efficiency improvements contributed positively to EBITDA, and remain a companywide focus.
Major producers have announced Q3 price increases for both coated recycled board and containerboard. Industry-wide, inventories remain at historic low volumes and demand is increasing, but only modestly. With fiber costs moderating, a proposed third price increase in less than one year will be difficult for box buyers to accept. Continued discipline will be required by major producers to maintain production/demand balance for this to succeed. Margins returned to “cycle average” levels at the end of Q2, so even without a successful third price increase, we anticipate a stronger performance during the second half of 2010.
Forest Resources LLC – Q1 Review 2010
Larry Richard, President and Chief Executive Officer
Forest Resources LLC is a holding company engaged in manufacturing industrial and food packaging products, including recycled corrugated medium, clay-coated boxboard, kraft, crepe and specialty packaging papers, as well as corrugated boxes and folding cartons, at six facilities in the U.S. and Canada.
Rapidly increasing wastepaper costs and substantial appreciation of the Canadian dollar resulted in a challenging quarter for the company. But despite the environment, Boehmer Box and Strathcona Paper, Forest Resources’ two Canadian companies, posted respectable performances in Q1.
Boehmer continued to exceed budgeted production efficiency rates, which helped to offset lower- than-budgeted sales volume. Boehmer’s successful start-up of its new, state-of the art KBA press was a major milestone during the first quarter. The new press increases Boehmer’s production capacity, improves efficiencies, reduces waste and is expected to be a real “game changer” for the business.
Strathcona, like the other Forest Resources mills, was impacted by higher-than-budgeted fiber costs. Prices for all grades of wastepaper increased, driven by high Chinese demand and low wastepaper inventories. Price increases tend to lag input cost increases. Consequently, Strathcona expects to regain much of the fiber margin that was lost during the first quarter with price increases that are being implemented.
Forest Resources’ U.S. industrial packaging businesses – Hartford City Paper, Shillington Box, Ivex Packaging Paper and Ivex Specialty Paper – had its margins squeezed during the first quarter as weak market demand for their industrial products combined with increased wastepaper fiber costs. Forest is taking aggressive action on sales and cost-reduction efforts in order to combat the margin compression.
We expect the balance of 2010 to be challenging for Forest Resources because of high raw material costs and a stronger Canadian dollar. While our management teams remain optimistic that price increases will help offset cost increases in materials and supplies, we will continue to focus on cost reduction and productivity improvements to drive results.
Forest Resources LLC – Q4 Review 2009
Larry Richard, President and Chief Executive Officer
Forest Resources, which manufactures corrugated packaging papers and boxes, folding cartons, specialty papers and clay-coated recycled boxboard at six facilities in the U.S. and Canada, was challenged in 2009 by general volume reductions by its U.S. customers.
Despite the challenging environment, the Canadian packaging operations achieved record production and profitability in 2009. Boehmer Box net sales climbed throughout the year, as Canadian food packaging markets were strong compared to the general economy. Boehmer Box’s key achievements include solidifying a strategic partnership with Loblaws, Canada’s largest food distributor; realizing increased value from its Continuous Improvement Program; and installing a new press which will come online in 2010, further strengthening its market position. Management expects that increased sales volumes should offset the impact of forecast price reductions. Boehmer Box also recorded a remarkable safety milestone of 30 months without a lost time accident, a streak that has continued into 2010.
Strathcona Paper achieved excellent financial performance in 2009 by improving operating efficiency, increasing production volume and continuing to provide superior service to its long-standing base of customers. Strathcona Paper experienced strong demand in the first half of 2009 and also benefited from a weak Canadian dollar and low raw materials costs. However, these positive trends are unlikely to persist in 2010, creating a more challenging market environment.
The markets for Forest Resources’ U.S. industrial packaging products fell dramatically late in 2008, with the residual effects impacting performance in 2009. Operating rates for Shillington Box, Hartford City Paper, Ivex Packaging and Ivex Specialty climbed above 90 percent briefly in the summer, but were below 80 percent for most of the year. Volume increases are expected in 2010, particularly in the second half of the year, but the marketplace remains challenging.
In the aggregate, we expect 2010 to be more challenging for Forest Resources because of a stronger Canadian dollar and increases in raw material costs, particularly recycled fiber. While our management teams remain optimistic that price increases will help offset increases in materials and supplies, they will continue to focus on cost reduction and productivity improvements to drive results.
Forest Resources LLC – Q3 Review 2009
Larry Richard, President and Chief Executive Officer
Forest Resources’ businesses turned in a solid Q3 performance and we are expecting the same or better for Q4, led by strong results from its Canadian subsidiary, CanAmPac.
At CanAmPac’s Strathcona operation, management and employees set a production record in July, and continued to deliver high production levels in August and September, resulting in terrific financial performance. CanAmPac’s other business, Boehmer Box, marked a significant milestone – two years without a lost-time accident at its Kitchener, Ontario, plant. The Company’s strong safety culture was recently recognized by the Paperboard Packaging Council. Boehmer was named the safest paperboard manufacturing facility in Canada, and the third safest in North America.
Safety is the first priority at all of Atlas’ businesses. It’s the right thing to do. It helps to retain great people. It helps improve product quality. And it helps create preferred work places where management and employees can work together effectively to improve operating performance. For example, Boehmer Box also exceeded its production plan as manufacturing efficiency gains were matched with an increase in sales orders.
Forest Resources’ U.S. industrial packaging businesses – Hartford City Paper, Shillington Box, Ivex Packaging Paper and Ivex Specialty Paper – had profit margins squeezed as weak market conditions resulted in sales price declines. Forest Resources expects that continued soft demand will translate into continued price declines for its industrial products in Q4, though aggressive sales efforts have refilled its order book.
Despite these marketplace challenges, Forest Resources continues to improve its competitive position as a result of Continuous Improvement Process initiatives as well as creative efforts in product development. For example, in September, Hartford City Paper achieved a record production month. In Q3, Ivex Specialty continued to make strides with specialty products, such as new grades of ticket stock and colored papers.
Forest Resources LLC – Q2 Review 2009
Larry Richard, President and Chief Executive Officer
Forest Resources’ businesses posted strong results in Q2, benefiting from lower raw materials costs and improved manufacturing efficiencies.
Forest Resources’ Hartford City Paper, Shillington Box, Ivex Packaging Paper and Ivex Specialty Paper units in the U.S., which supply packaging materials primarily to industrial markets, experienced very soft demand in Q2, forcing the company to reduce production and idle manufacturing capacity. Throughout the quarter, margins at most locations (with the exception of Shillington) narrowed as product prices declined. While the U.S. operations were profitable in Q2, we are anticipating a more difficult second half of the year, as rising wastepaper prices are likely to further compress margins.
Notwithstanding a more difficult environment, the U.S. businesses continued to make strides operationally. Ivex Paper in Peoria, IL developed higher-value paper grades to expand its product offerings while improving productivity by more than a third through increased paper machine speeds. Hartford City Paper’s installation of a new headbox in late 2008 led to record-high quality and operating efficiencies in Q2.
Demand for food packaging cartons — a specialty of Forest Resources’ CanAmPac’s businesses —remained strong through the first half of 2009, as more consumers chose to eat pre-packaged foods at home rather than go to restaurants. CanAmPac’s performance in the first six months of 2009 has outpaced any other period since it joined the Atlas family in 2006. We anticipate that business conditions will remain strong for the balance of the year, barring dramatic appreciation in the Canadian dollar, and we are considering several investment opportunities within the business, including purchasing a new printing press at Boehmer Box to meet growing customer demand.
Ontario-based Strathcona Paper set record speeds on its recycled boxboard production machines for lighter basis weights, and has begun engineering work to increase speeds for heavier basis weight papers.
On a sad note for our Forest Resources business, George (Mike) McClure, our partner and the longtime CFO of Hartford City Paper and a senior financial manager for Forest Resources, died in April at the age of 63. Mike helped Atlas found the Forest Resources business in 1999 and was instrumental in its success. The Forest Resources family will miss his wise insight, excellent judgment and impeccable character. We extend our sincere condolences to his wife, children and colleagues.
Forest Resources LLC – Q1 Review 2009
Larry Richard, President and Chief Executive Officer
Forest Resources’ containerboard packaging businesses — Hartford City Paper, Shillington Box, Ivex Packaging Paper and Ivex Specialty Paper — felt the decline in shipments of durable goods in the U.S. during the first quarter. Fortunately, with raw material costs, particularly waste paper and natural gas, dropping more rapidly than product prices, the industrial packaging business generated significant profits in Q1.
Our Canadian subsidiary Canampac, through its Boehmer Box and Strathcona Paper units, generated record profits in Q1. We attribute the business improvement to the concerted efforts of our managers and employees and benevolent market conditions. Across the business, we experienced declining raw material costs and an improvement in demand. Unlike many of our other businesses, Canampac saw demand improve as consumers stayed home for more meals, driving up demand for food packaging.
Boehmer Box’s “Life Smart” popcorn and spaghettini boxes and its “School Smart” product boxes were chosen for national honors by the Packaging Association of Canada. Its Concord Premium Meats Ltd. package, Sleeve for MarcAngelo™, was honored for sustainable packaging.
