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Forestry products chiefs expect more consolidation

File photo of large stock piles of wood in B.C.

Jeff Bassett/The Canadian Press

Chief executive officers in the global forestry products industry are increasingly looking to joint ventures or mergers as they seek new avenues of growth, says a new survey.

Half of forestry, paper and packaging CEOs in PricewaterhouseCooper's annual poll said they struck a new strategic alliance or joint venture in the past year. And 34 per cent said they completed a cross-border merger-and-acquisition (M&A), with 32 per cent saying they closed a domestic M&A, the report indicates.

In the coming 12 months even more CEOs plan to do deals, with 58 per cent eyeing a strategic alliance or joint venture, 47 per cent a cross-border M&A and 34 per cent a domestic M&A, according to the poll.

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"The high degree of transactions and partnerships reflects the broadening uses being found for fibre such as bioproducts, biofuels, and textiles," Bruce McIntyre, leader of PwC's forest, paper and packaging practice in Canada, said in a news release Monday.

The report also found that forestry CEOs are less optimistic about their company's revenue prospects in the next 12 months than their peers in other sectors, but that they are more confident than their colleagues about revenue prospects over the next three years.

"The CEOs of forest, paper and packaging companies are a resilient bunch. Recently, they've faced challenges such as shifting demand and markets, a bumpy economy, overcapacity, environmental issues and rising costs," said Mr. McIntyre. "CEOs have identified their top three priorities: enhancing operational effectiveness, investing in innovation and R&D; and developing new business models."

Job cuts in the sector won't be as severe in Canada as elsewhere, Mr. McIntyre added.

"In fact, we're hearing concern from some Canadian forest products companies about the looming shortfall of qualified labour. If the U.S. housing market rebounds and demand from China continues to grow we could have a labour shortage in Canada."

PwC's 16th annual Global CEO Survey is based on 1,330 interviews in 68 countries conducted during the last quarter of 2012, including 38 forestry CEOs in 15 countries.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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