December 4, 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 $17 w/w to $436, and the OSB Composite decreased by $30 w/w to $330. For next week, RBC ElementsTM forecasts that the RL Framing Lumber Composite will decrease $20 w/w to $416, and the RL OSB Composite will decrease $32 w/w to $298.
RBC Capital Markets Forest Products Virtual Conference Recap. We held our annual Forest Products Conference on Thursday, December 1, featuring CFP, CAS, CFF, DBM, GFP, IFP, KPT, MERC, WEF, and WY. Please click here to access our key takeaways from the conference, which includes a summary of key themes from the day and company-specific commentary.
Western Forest Products announces temporary downtime. On November 30, the company announced plans to temporarily curtail production by ~20 mmfbm across their BC manufacturing platform through December to “manage inventory levels to current market conditions.” Management stated that remanufacturing and shipping operations will continue uninterrupted, and that it expects impacted sites to resume lumber production in January 2023.
PotlatchDeltic declares special dividend and increases regular distribution. The board of directors of PotlatchDeltic have declared a special dividend of $0.95/share (approximately in-line with our $1.00/ share estimate), which is payable on December 30 to stockholders of record on December 21. The company also declared an increase to its quarterly distribution, to $0.45/share (+2.3% q/q). Chief executive officer, Eric Cremers, noted “significant capital [is] available to continue growing shareholder value”.
WestRock completes acquisition of Grupo Gondi. On December 1, the company announced that it had completed the acquisition of the remaining interest in Grupo Gondi for $970MM plus the assumption of debt. The transaction, which management stated would be immediately accretive to earnings, includes four paper mills, nine corrugated packaging plants, and six high graphic plants throughout Mexico (please click here for more information). The company expects the acquisition to enhance its position in the growing Latin American containerboard, paperboard, and consumer and corrugated packaging markets.
Interfor completes Chaleur Forest Products acquisition; announces additional long-term debt financing. Interfor completed its previously announced acquisition of Chaleur Forest Products on November 30. The company also announced $200MM in additional long-term debt financing with Prudential Private Capital. The senior secured notes will carry an annual interest of 7.06% and mature in 2033. The financing is expected to close in early December and will be used to finance the Chaleur acquisition and for general corporate purposes.
Domtar's Kingsport mill to be fully operational within weeks. The company has announced that its Kingsport, Tennessee mill is expected to resume operations in December following a $350MM conversion to a 100-percent-recycled packaging operation. Announced in August 2020, the project would make the Kingsport mill Domtar's first fully recycled packaging facility, with a capacity of 600k tons/year of high-quality recycled linerboard and corrugated medium.
U.S. 30-year fixed-rate mortgage continues to decrease. According to Freddie Mac, the U.S. 30-year fixed rate retreated by 9 basis points w/w to 6.49% — down 57 basis points in the last four weeks as optimism grows around the possibility of slower paced rate hikes.