September 19, 2022
Paper, Packaging & Forest Products
The Continuous Digester – What we learned this week
Lumber prices and OSB prices decreased – According to Random Lengths (“RL”), the Framing Lumber Composite decreased by $3 w/w to $538, and the OSB Composite decreased by $5 w/w to $403. For next week, RBC ElementsTM forecasts that the RL Framing Lumber Composite will decrease $12 w/w to $526, and the RL OSB Composite will decrease $2 w/w to $401.
RBC Global Industrials Conference in Las Vegas: Companies from our coverage that were in attendance at our conference on September 13-14 : CLW, IP, LPX, PCH, RYN, and WFG.
Interfor has successfully completed its $100MM substantial issuer bid. The offer was carried out by way of a modified Dutch auction with a tender price range of $29 to $34 per share. The company announced this week that it has taken up and paid for the cancellation of 3,355,704 common shares (~6.1% of total outstanding shares) at a price of $29.80 per share.
Weyerhaeuser reports work stoppages in Oregon and Washington following strikes. Members of the International Association of Machinists and Aerospace Workers (IAM) union walked out at multiple sites this week after negotiations related to wages and benefits hit a standstill. Weyerhaeuser senior vice president and chief administration officer, Denise Merle, stated that the company has been “formally engaged in collective bargaining with IAM since May” and continues to be committed to negotiation in good faith with union representatives. Weyerhaeuser stated that it continues to work closely with customers and partners in the region to ensure minimal supply disruptions.
PotlatchDeltic and CatchMark complete merger. PotlatchDeltic announced that the company has successfully completed its merger with CatchMark Timber Trust. Announced on May 31, the merger was an all-stock transaction in which CatchMark shareholders received 0.23 common shares of PotlatchDeltic for each share of CatchMark owned (please click here for more information).
Mercer has a new sustainability-linked credit facility. The company announced it had entered into a new five-year, €300MM revolving credit facility for its German subsidiaries that is sustainability linked. If certain sustainability targets are achieved, there is a reduction in the interest rate on the facility.
International Paper to settle tax dispute for ~$310MM. International Paper settled its tax dispute with the Internal Revenue Service regarding its previously disclosed 2015 timber monetization restructuring tax matter (which related to entities set up to preserve the tax deferral after the company's 2006 sale of its forestlands). The company will roughly pay $260MM in federal income taxes under the agreement, and $50MM in interest expense.
Ence to produce fluff pulp at the Navia mill; and Pontevedra mill is still down. According to RISI, Ence, a Spanish pulp producer, plans to undertake a project at its mill in Navia, Spain to convert a portion of its bleached eucalyptus kraft (BEK) pulp production into 100k tons/year of fluff capacity. The project is expected to cost €30MM, with fluff production targeted to begin in 2024. Ence aims to target the absorbent hygiene products market in Europe and displace imported fluff. Separately, downtime at the company’s 515k tons/year Pontevedra mill in Spain continues due to low water flow in the river that supplies the Pontevedra biofactory. RISI reports a restart is unlikely before September end.
Hancock Lumber plans to acquire Madison Lumber Mill. With the acquisition of the Madison, NH mill, Hancock Lumber will expand its portfolio to four mills and become the largest eastern white pine producer in the US. Hancock has indicated that it plans to continue to operate the mill under the Madison Lumber name. The sale is expected to close on September 30.