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Price surge results in profit for lumber firm.

Price surge results in profit for lumber firm

While most companies in the forestry sector are feeling the effects of the current recession, one company has actually declared a profit.

In fact, John Sereny, president of Toronto-based Green Forest Lumber Corp., called the first fiscal quarter of 1991 "the best quarter in the company's history."

One forestry analyst, who asked not to be identified, noted that Green Forest Lumber's fortune was shared by other lumber producers, but in the case of more diversified companies "the profits were offset by losses in pulp and paper."

For the quarter running from March 30 to June 30, the company recorded a profit of $1.4 million on sales of $57.6 million. It was a turnaround from the $242,000 loss on sales of $51.3 million recorded during the same quarter last year.

Green Forest Lumber owns dimensional lumber producer Chapleau Forest Products. According to Sereny, the Chapleau company also shared in the firm's success.

"For the last three years the mill has been losing money like crazy," Sereny said in a telephone interview. "Our trading company always made money, but this was the first quarter the mill actually made money."

Sereny pointed out that the Chapleau mill had lost approximately $3.3 million since it was purchased by Green Forest Lumber in the late 1980s. However, it recorded a $200,000 profit for the quarter.

The financial success of the operation, which produces about 65 million board feet of dimensional lumber annually, also reaffirms Green Forest Lumber's decision to pump $20 million into a modernization of the mill.

The two-year program included the installation of computerized processing machinery, a European-style process control unit for the saws and North American-styled process controls for the planer mill and lumber sorter.

Approximately 75 per cent of the lumber produced by the mill is exported to the United States, while the balance is shipped to Quebec and throughout Ontario.

Sereny noted that Chapleau Forest Product's fiscal success coincides with the mill's finally reaching full production levels - a move necessary for the parent company to replenish its inventory.

However, Green Forest Lumber's success is not the result of the black ink flowing from the Chapleau facility, but is mainly due to a 30-per-cent increase in the value of lumber at the end of March. The increase led to the $6.3-million jump in year-to-year sales.

"We normally carry an inventory of about $12 million (at its reload yards), but when we saw things were being sold we decided to increase the inventory to $20 million."

The company operates yards in Charlotte, S.C.; Chicago, Ill.; Windsor and Fort Erie, Ont.

The forestry analyst noted that reduced inventories and an anticipated increase in housing starts resulted in "the price running during the quarter."

Because many firms were caught without adequate inventories, the price increased from $190 to $240 per 1,000 board feet, he added. However, as the inventory levels increased the prices reduced. At press time the September commodity price was $189.

"Prices were already starting to come back down at the end of June, but we're still going to show a profit for the year," Sereny commented.

Housing starts must increase for the company to register more "great" quarters, according to Sereny.
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Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Report on Forestry; prices of lumber; Green Forest Lumber Corp.
Publication:Northern Ontario Business
Date:Sep 1, 1991
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