Canada's paper products industry to return to profitability, but not until 2011
Thursday, May 27, 2010 at 06:09PM OTTAWA, May 27 /CNW Telbec/ - After losing a total of more than $5 billion over the past seven years, Canada's paper industry is expected to finally return to profitability in 2011, according to The Conference Board of Canada's Canadian Industrial Outlook: Canada's Paper Products Industry - Spring 2010.
"The paper industry's outlook is gradually improving thanks to price increases and a modest recovery in demand," said Michael Burt, Associate Director, Industrial Economic Trends. "However, a robust recovery is not expected and industry revenues will be smaller in the future than they were at their peak in 2000."
Industry production is expected to increase by three per cent this year, its first increase since 2005. Production will continue to grow modestly over the next four years, but it is not expected to return to its previous peak. The relative strength of the Canadian dollar, competition from Asian and South American producers, and stagnating demand in North America will limit the industry's prospects.
The paper industry, which includes the production of pulp, newsprint, paperboard and sanitary tissues, recorded a second consecutive annual pre-tax loss of more than $1 billion in 2009. This year, losses will shrink to $139 million due to improved demand and drastic cost-cutting measures. Paper companies cut costs by just over 15 per cent in 2009. Between 2008 and the end of 2010, the industry is expected to have cut more than 20,000 jobs.
The industry is expected return to profitability in 2011, posting a profit of $366 million. However, profit margins will remain very weak, averaging about 1.6 per cent over the next four years.
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