CANADA'S PAPER INDUSTRY TO POST PROFITS FOR FIRST TIME SINCE 2002

OTTAWA, May 17 /CNW/ - Following eight consecutive years of losses, Canada's paper manufacturing industry will record a small pre-tax profit in 2011, according to The Conference Board of Canada's Canadian Industrial Outlook: Canada's Paper Products Industry - Spring 2011.

"A rebound in pulp prices and higher demand for paper products provided the industry with a much-needed boost beginning in 2010 and continuing into this year. But the industry is far from healthy - it still has excess production capacity that will limit price growth, and the trend toward digital communication means that new markets for paper products have to be found elsewhere," said Michael Burt, Associate Director, Industrial Economic Trends.

Pulp prices soared to multi-year highs in 2010, boosting industry revenues and production. However, prices are expected to lose strength later this year as global production picks up and pulp supply increases.

Industry production rose by 1.5 per cent last year— marking its first gain since 2004— and is expected to grow an additional 0.8 per cent this year. Although output is expected to increase over the next four years, shrinking North American demand for printing and writing paper means that production will not return to its previous peaks. Moreover, in response to declining market demand and increasing international competition, the trend of mergers and acquisitions is expected to continue throughout the industry.

The federal government's $1 billion Green Transformation Program has injected much-needed funding to help manufacturers invest in new machinery and upgrade existing mills. By-products, such as biofuels and electricity generation, are emerging as an opportunity for the industry.

After losing an average of more than a billion dollars annually from 2007 to 2009, the industry lost another $147 million last year, but is forecast to earn profits of $251 million in 2011. Over the next four years, the industry will post modest profits, averaging $512 million annually. The continued strength in the Canadian dollar and increased competition from Asia and South America will restrain profit growth.

SOURCE CONFERENCE BOARD OF CANADA

For further information:

Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448
E-mail: corpcomm@conferenceboard.ca

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