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Canadian lumber and paper companies are returning to profitability, says a new PwC report.

It finds many companies achieved generally positive results in the fourth quarter of 2013. In fact, the net earnings of nine top Canadian western-based companies increased from $10.6 million in the fourth quarter of 2012 to $48.3 million in Q4 2013.

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“This quarter was pivotal [for] forest and paper companies,” says Bruce McIntyre, leader of PwC’s Forest, Paper and Packaging industry practice in Canada. “These results [point to] optimism for the industry moving into 2014.”

He adds that Canadian manufacturers have benefitted from a weakening Canadian dollar.

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Global results

Prices for structural building materials remained strong in the last quarter in Canada: softwood pulp prices benefited from low inventories and steady demand, while hardwood pulp was kept in check due to higher inventories. Newsprint prices also remained steady throughout Q4 2013.

And as the forestry sector strengthens, so too does housing. Despite the adverse affects of severe weather conditions across North American, for example, U.S. housing starts steadily recovered and grew by 18% in 2013.

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As well, pricing and productivity gains in the U.S. allowed its top forest and paper companies to post strong results. They offered net earnings of US$2.2 billion for the fourth quarter of 2013, up from US$0.9 billion in the fourth quarter of 2012.

Looking abroad, the report finds European-based companies (which experienced significant net losses of €972.3 million in Q4 2012) had much stronger results in 2013, with net earnings of €243.7 million in Q4.

The six Japanese companies in the survey also had a profitable fourth quarter, with earnings of US$321.5 million, compared to earnings of US$459.7 million for the same period in 2012.

Nonetheless, “industry executives are still concerned about the possibility of tough times ahead due to a variety of economic and business risks,” says McIntyre, who points out that companies need to adopt and adapt to new technology.

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Originally published on Advisor.ca

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