VANCOUVER, May 9, 2013 /CNW/ - After several challenging years, the
world's forest products sector is beginning to show signs of recovery,
according to the forestry feature in PwC's recent 16th Annual CEO Survey .
"We are seeing optimism that demand and prices will continue to
strengthen in the solid wood sector, but recovery in the pulp and paper
sector will likely lag," said Mike Vermette, partner in PwC's Deals
practice. "Assuming that the rise in US housing continues over the
medium term and China's economy continues to grow as predicted; the
stage is being set for a potentially strong market for softwood
Vermette adds: "However, CEOs are still watchful of economic volatility,
energy costs, access to raw materials, and a shortage of skilled
labour, which if not carefully managed, may limit growth once the
sector kicks into high gear."
Forest products CEOs are targeting pockets of opportunity and
non-traditional business models as a way to control costs, manage risks
and develop new markets. PwC found 50% of CEOs surveyed entered into a
new strategic alliance or joint venture last year, some of which were
entries into new business areas or with organizations along the supply
One example of a strategic alliance includes four leading British
Columbia based forest products companies teaming to charter a cargo
ship to move their products to the developing Chinese market. This
collaboration allowed these companies to decrease logistic uncertainty
and risk which has plagued exporting goods to Asia in recent years.
Deal making was on the minds of forest products CEOs last year and they
continue to put a greater emphasis on deals in 2013 - more than CEOs of
other industries. Strategic alliances and joint ventures top the list,
and some exits and M&As are being considered, according to the PwC CEO Survey.
"Companies with strong balance sheets today are likely to be in a
position to maximize profitability once the market uptick is in full
swing," said Vermette. "There's a potential for financially stronger
companies to take advantage of opportunities to pick up assets of less
profitable producers or find partners to make further inroads into
markets where the demand potential is high."
Mike Vermette will be one of the presenters at PwC's 26th Annual Global Forest & Paper Industry Conference to be held in
Vancouver on Thursday May 9. For details visit: www.pwc.com/ca/forestconf
Follow PwC on Twitter at @PwC_Canada_LLP and join the conversation using the hashtag #pwcforestry.
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