Nobody can yet be unswervingly optimistic about the economic outlook. There are still too many unknowns ahead, from prospects of US double dip downturn, to the effect of government austerity measures and the impact of drought in Russia on food prices.
The latest results statements from the North American and Nordic forest products sectors typify the caginess in which most business forecasts are still couched. The market remains ”fragile”, according to Norbord, and Weyerhaeuser describes prospects as “uncertain”. The Nordics are just as wary, focusing on “weak financial development in some European markets” and short supplies of raw material due to downturn-triggered harvest cutbacks.
Given the depths of the slump, the caution is understandable. But it does tend to overshadow mounting evidence that the global economy and timber sector are in a better state than a year ago. Take those Nordic and American results. Second quarter loss to profit turnarounds included Weyerhaeuser going from -US$106m in 2009 to +US$14m this year and Stora Enso from -€370m to +€193m, while Södra’s first-half profit rose from SKr9m to SKr1bn.
We’ve had better results in the UK too: Lathams’ annual profits up 69% and Travis Perkins’ interims 24%, for instance.
These stronger figures are partly attributed to companies adapting to trading in a tough climate, no bad thing if the market doesn’t pick up as hoped or stalls, but they’re also put down to better fundamentals, including rising building activity in the US and UK.
So, as a trader said to TTJ recently, there may not “be too many reasons to be cheerful yet, but there are fewer to be miserable”.
And this week we also have further evidence of faith in the longer-term prospects of the UK timber business. Its biggest softwood suppliers, the Swedes, have plenty of other growth markets to go after around the world. But they still see the UK remaining a key export destination and an evolving one too, expected to take an increasingly wide range of value-added products as it becomes a steadily more timber-oriented market place.
