The world’s 100 largest forest, paper and fibre-based packaging products companies posted mixed financial results in 2007, reflecting the significantly different business and economic situations across regions.

According to the PricewaterhouseCoopers’ (PwC) 11th annual Global Forest, Paper and Packaging Industry Survey the three top regions in terms of return on capital employed (ROCE), a key measure of performance, were: Latin America, 7.8%; Emerging Asia, 7.3%; and the United States, 5.5%.

Canada’s producers earned the lowest average ROCE — a negative 0.1%, reflecting the financial crisis experienced in the Canadian forest products sector.

The overall average ROCE of the companies surveyed was relatively flat compared to the previous year at 4.8%, and a long way from the industry’s 10% – 12% target range.

“The global forest, paper and packaging products sector continues to be shaped by shifting business and environmental factors, creating opportunities for some regions and challenges for others,” says Craig Campbell, leader of PwC’s performance improvement practice for the global forest and paper industry, and author of the PwC survey. “Mills with the lowest production cost structures are the ones that are best able to manage currency fluctuations and rising costs, allowing them to take advantage of new opportunities and markets.”

High performers in 2007 included Setra Group in Sweden, holding the top spot in terms of ROCE at 25.2%, Kimberly-Clark Mexico was second with 20.3%, and Kimberly-Clark in the U.S. held third spot with a ROCE of 15.2%.

According to the survey, the capital reinvestment ratio for the PwC Top 100 companies was 1.2, up from less than 1.0 in previous years. The positive trend is largely due to the increasing weighting of Chinese and Latin American producers, where ratios were 3.08 and 2.84 respectively. At the other extreme, Canada had a 2007 reinvestment ratio of 0.4. The reinvestment ratio is capital investment as a percentage of depreciation, measuring the extent that capital investment is replacing aging assets. According to Campbell, “We would expect to see more consolidations and closures in regions like North America, where there are some smaller, older mills that cannot compete with high tech, low cost producers in Latin America.”


2007 was a challenging year for Canadian forest, paper and packaging companies. The total sales of the 13 Canadian companies in the Top 100 grew, but only from US$25.6 billion in 2006 to US$28.5 billion in 2007, an increase of 12%, reflecting acquisitions, notably the Domtar Weyerhaeuser transaction. Net losses climbed to $1.1 billion from $166 million in 2006.

Ten of the 13 companies reported losses; the largest were at AbitibiBowater and Canfor, totalling $827 million. AbitibiBowater’s losses were heavily impacted by facility closures whereas Canfor’s loss was the result of asset write downs related to lumber and panel operations.

A bright spot was NBSK pulp, where producers enjoyed good profits due to the tightening of supply through mill closures and increasing Asian demand.