The recent decline in the stock market, owing to the covid-19 pandemic, has affected many industries; the forestry industry is no exception. However, the growth potential shown by this industry has stunned stock analysts. The forest industry is a crucial part of Canada’s economy. Forests cover roughly 39% of the landmass in Canada. These forests are a rich source of food, fuel, wood, and daily supplies such as paper and ingredients to manufacture drugs. These commodities are highly sought after, allowing Canadian forestry companies to earn millions in profit. These profits have also urged Canadian investors to get their hands on these lucrative stocks.
Main Aspects of The Forest Industry in Canada
Before you start looking for potential forestry companies to invest in, you must know what exactly you are investing in. First, many forestry companies lease forest land from the government to harvest wooden products such as timber, paper, and firewood. Second, some companies harvest forest trees using sustainable forest management methods. The third aspect of forestry involves sawmills or lumber mills. Several Canadian forestry companies have invested in these mills that produce lumber from fallen logs.
What are the Top Forestry Companies in Canada?
It is undoubtedly tempting to invest in the forestry companies of Canada, given their ever-increasing revenue and profitability. If you are keen to invest in some of the largest forestry companies in Canada, here are a few options.
West Fraser Timber Co. Ltd (TSX: WFG)
The largest producer of lumbar in Canada, West Fraser Timber Co. Ltd, is the first name you should know if you are planning to invest in the forestry industry of Canada. West Fraser was initially a small wood-planing mill established in British Columbia in 1955. However, the company has come very far since then. The company now owns 13 lumber mills, five pulp and paper mills, and seven engineered wood and panel facilities. The valuation of this company has tripled over the last three years and is expected to increase even further. The company’s recent acquisition of Norbord has also enticed investors. Norbord is an established name in the wooden panel industry and will be an excellent addition to West Fraser’s diversified base of mills.
West Fraser is the premier Canadian exporter of lumbar and wooden products to Europe and North America. From paper & pulp to bioproducts, the company excels in various commodities obtained from forests.
Another promising prospect about West Fraser Timber is its market value. The market cap of West Fraser has surpassed the $10 billion mark. In addition, it has a healthy price-to-earnings ratio of 2.5, and its share volume of 210,000 makes it a must-have stock in your investment portfolio. Trading at $97.54 on August 28, 12:21 pm PDT, West Fraser Timber Co. has a consensus rating of Buy.
Canfor Corp TSX: CFP
This Vancouver-based company is another exciting prospect for investors looking to put their savings in forestry stocks. Canfor Corporation is a multinational company that offers a range of wood-related products to its diverse clientele. The company operates in North America, Europe, and Asia – and is a trusted name in the world of wood. In May, the stock price of Canfor was up by a whopping 350%.
Canfor’s recent ventures into the green energy realm have made it even more interesting. The future is very receptive to greener technologies, and people are keen to buy stocks that can provide high returns in the future. This makes Canfor ideal for long-term investment. Canfor is also planning to invest in New Sawmill in Louisiana, and this state-of-the-art facility will have an annual production capacity of 250 million wooden board feet.
The stock of Canfor Corporation has a strong P/E ratio of about 1.90, and with the market expected to recover from the economic recession, there is no telling how high this stock will go. Currently trading at $26.89 at 1:33 pm PDT, you won’t regret investing in this stock.
Resolute Forest Products (TSX: RFP)
After the depreciation in its stock price during June, Resolute Forest Products is back in the forest industry and has recovered from the decline in lumber prices. The company has amassed revenue of $873 million during Q1, about 26% more than its earnings during the same quarter last year. Stock analysts are also expecting promising figures for the second and third quarters. As a result, the company can grow even further during the next fiscal year and has a consensus rating of Buy.
Resolute Forest Product has a diverse range of products, including tissue, wood, market pulp, and paper. The flagship product of this company, the market pulp, comes in various grades. From packaging material to tissue paper, the market pulp is used to produce several consumer products. When it comes to paper pulp, the company has an annual production capacity of 1.3 million tons.
Other products include tissue, paper, packaging materials, and wood products. The sawmills of Resolute Forest Products produce construction-grade lumber used in bed frame components and furring strips.
Trading at $16.43 on August 28, 1:56 pm, stock analysts predict that this stock will take flight once the lumber prices increase again.
Western Forests Products Inc. (TSX: WEF)
Western Forests Product is a global company that excels in the provision of high-quality construction-grade building products. Western Forests’ stocks are rising with several countries gravitating towards wood for construction purposes.
The company excels in several types of wooden infrastructure, such as outdoor construction, wooden panelling, and fencing. The company produces natural, high-quality wood that is biodegradable for all of its construction purposes. It mainly obtains wood from sustainably managed forests.
Western Forests provides an impressive range of wood-related products in Europe and North America, especially to the construction industry. With the recent hike in housing prices across the US, analysts expect Western Forests to profit from their lumber business.
Although lumber prices have stopped their upwards trajectory, they are still much higher than last year. This has proved very profitable for forestry companies specializing in construction-grade lumber, such as Western Forests. As a result, their cash flow has substantially increased, and their long-term prospects look much more promising now.
This stock is currently trading at $2.12 at 2:43 pm PDT. The strong P/E ratio in multiples of 4 (4.40 to be exact) has urged several investors to invest their money in this company.
Cascades Inc (TSX: CAS)
Cascades Inc is a Canadian company that manufactures, converts, and sells tissue products and packaging materials. The company employs recycled fibres to manufacture high-quality paper and hygiene products. Although the demand for such products remains steady over time, Cascade’s e-commerce ventures have massively helped their sales. The company mainly operates in Canada but has a diverse client base in the USA and Italy.
Recently, the company increased its dividends by 50%. Cascades Inc. also recorded a sale of $956 million in the second quarter of 2021. In addition, it has recently announced its Fluff and Tuff product line, which consists of 100% recyclable packaging.
The company has a P/E ratio of 10.60 and has a share volume just short of the 100k mark. The company stock is currently trading at $15.57 at 3:30 pm PDT. Stock analysts believe that Cascades Inc. is an opportunistic stock that has a minimal chance of losing money in the near future.
Forest-related Industries in Canada
The forest products industry is one of the most lucrative sectors in Canada, but contrary to popular belief, it is not all about harvesting forests and producing lumber. The forestry sector is the precursor of several other industries in Canada, such as the paper and construction industries that depend entirely on wood-based raw materials for their products. That is why any industry dependent on wood to manufacture its products is categorized as a forest-based industry. Let us dig deeper into a few of these industries.
Paper and Pulp Industries
Pulp is a fibrous, semi-liquid material that is derived from wood. It is later fed into a paper machine, where it forms a paper web, and after some final touches, it becomes dry paper. Canada’s paper and pulpindustries are one of the country’s oldest and most profitable. It is concentrated in the provinces of Quebec, Ontario, and British Columbia. Several companies in these provinces deal in paper products. In addition, Canada is the largest producer of newsprint and northern bleached softwood pulp worldwide.
The Canadian furniture industry is growing thanks to the steady supply of timber and softwood from several forestry companies. In 2020, Canada’s furniture stock market had a valuation of $11 billion. There were more than 4000 furniture businesses in this industry. This number has only grown with time and is poised to play a vital role in the Canadian economy in the coming years.
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Canadian Forestry Companies
Canada’s traditional forestry sector includes forestry, logging, pulp and paper production, and the manufacture of wood products. Coulson Forest Products’ activities include fully managing forests in Arrowsmith Timber Supply Area in British Columbia under A19234 and A59658 in a management agreement with Toquaht First Nation, which has managed timber lot licenses since 1903. The company maintains a core group of management and forestry professionals with up-to-date knowledge in harvesting timber and managing private and public forests.
Canada’s traditional forestry sector is a global leader in producing many forest products, including softwood, pulp and wood pellets. Wood, solid wood products, pulp, and paper account for the largest share of the sector’s production and exports.
Sierra Pacific manufactures its wood products at its ten sawmills in Washington and California. In addition to the production facilities, the company generates income from leasing its land and leisure activities.
The privately-owned company produces forest products such as plywood, boards and veneers. In 2018, the company partnered with Hunt Forest Products to construct a $115 million timber mill in Louisiana, marking its first expansion into the United States.
The company is a Canadian-based company active in the wholesale distribution of hardwood lumber, related panel products, and specialty products. The company supplies its products to the cabinet moulding, milling, furniture and specialty wood industries. In addition, the company generates revenue from the sale of land and land resources located on its forested land.
Conifex Timber Inc., whose primary business is in the forestry and timber products sector, comprises timber harvesting and reforestation, forest management, wood processing and distribution. Wood products are sold in the USA, China, Canada and Japan. Tolko Industries Ltd. is a major manufacturer and marketer of forest products with production facilities in Western Canada.
Canadian Forest Products Ltd. (Canfor) is a leading Canadian integrated forest products company based in Vancouver, British Columbia (BC), active in the timber business with production facilities in Canada (British Columbia and Alberta) and the United States (North Carolina, South Carolina, Alabama, Georgia and Mississippi), as well as in forestry operations in British Columbia. Canfor holds a 50.5% stake in Canfor Pulp’s Products Inc. (“Canfor Pulp”), a global leader in pulp, paper and green energy. Canfor owns and operates three pulp mills in Prince George, B.C. And is the lowest-cost NBSK pulp producer in Canada.
Canfor is one of the world’s largest producers of sustainable wood, pulp and paper and is based in Vancouver, B.C. Canfor, an integrated forest products company, covers timber, engineered timber, wood pellets and energy-producing materials. The Canfor Pulp & Paper Segment operates under the banner Canfor Pulp Products.
The company operates in North America and has customers worldwide, and Interfor Corporation is one of the world’s largest timber suppliers. West Fraser Timber Co. Ltd. is an integrated forest product manufacturing company – producing wood, wood chips, fibreboard, plywood, pulp, linerboard, kraft paper and newsprint. The company has become the largest timber producer in the United States.
The company manages more than eight and a half million hectares of forest. The company uses this land to manufacture its timber products and leases parts of the land for research and recreational use. West Fraser Timber employs more than 5,000 people in Canada, including 8,600 at 50 locations.
After harvesting, the next step is transporting the wood to our sawmills, subjected to primary production. These include sawing, felling, sawn timber, wood chips, and processing. The Taylor facility has an annual capacity of 220,000 tonnes of bleached Chemi Thermo Mechanical Pulp.
Skeena bought the downtown mill operations in 2011 from Vancouver-based West Fraser Timber Co. The mill had been idle since 2007, when raw logs made their way from the port of Prince Rupert to Asian sawmills. Japan and China regard hemlock as coveted wood, and 85 percent of groundwood goes to Asian buyers. As a result, most people think it is best to crush pulp and paper for export to China.
In more than 30 years, the SAN Group has developed from furniture manufacturing to a diversified company for lumberjack and finishing products. More than half is concentrated in its Port Alberni business, where it bought the mill in 2017 from a former supplier and invested $100 million. Stella Jones (SJ) $2.9 billion 41.7% Stella Jones produces, markets and sells wood products with pressure treated in Canada and the United States.
Canfor Corp announced last week that it was halting operations at three sawmills due to current market conditions after West Fraser Timber Co. Ltd. announced further cuts on January 14. According to one analyst, this industry-wide move to reduce emissions is a logical step.
Rival producers such as Interfor Corp. and Resolute Forest Products Inc. curtailed production in the fall, citing market conditions. As a result, in 2017, shipments of softwood lumber from Canada’s ten largest producers decreased, with the most significant decrease in Canada as a whole: 14 of the ten producers and 17 in Canada. The decline in Canadian supplies was a function of many factors. Still, the import tariffs in the US in early 2017 prompted Canadian companies to reassess their markets and factories.
Faced with import tariffs in the US, investment by Canadian mills in the southern US has proved strategic, as the region has ample timber supply and high saw margins due to subdued timber prices due to oversupply. However, Canada’s battered forestry companies in its battered sawmill sector may need government support if they fail throughout the year.
Derek Nighbor, President and CEO of the Forest Products Association of Canada (FPAC), testified on April 17 before the House of Commons Standing Committee on Finance to explain what the industry is experiencing. The drop in the timber prices due to the pandemic gridlock in the North American economy, combined with the pain felt by softwood lumber tariffs in the past two years, has left many in the industry facing the brutal next two financial quarters, Nighboro said. FPAC represents pulp, paper, wood and organic producers in a $7.3 billion industry that employs 230,000 people in northern and rural communities.
The chart below shows the number of forestry and timber companies in Canada from December 2020 by region. Starting at $468 a year, Statista can help your business.