US pulp, paper industry 3Q results

as reported by RISI

US pulp, paper industry 3Q results up sequentially but down year-over-year;
higher prices push margin to 4.2%
Third quarter 2007 earnings for US paper andforest products companies improved sequentially from second quarter ongenerally higher volumes and prices for most pulp and paper grades. Despite headwinds of higher input costs for energy, chemicals, and transportation, the higher prices in most key benchmark grades (pulp, uncoated freesheet,
containerboard, and coated papers) helped boost profits nearly equal to last year's third quarter, according to a survey by Pulp and Paper Week. However, companies with added heavy exposure to recovered paper, lumber, newsprint, and the Canadian dollar felt the earnings squeeze and depressed the overall earnings composite.
The earnings for a composite index of 27 US companies dropped 5.1% during third quarter 2007 compared with third quarter 2006, yet up sequentially compared with second quarter 2007. The collective profit margin for the group totaled 4.2%, up from a revised 3.0% in the second quarter, and nearly equal to the two-year high of 4.5% in third quarter 2006, according to the P&PW survey.
Sales for the 27 companies totaled were up more than 1% year-over-year. Only one company -- Bowater -- posted a loss during the quarter. Bowater incurred a $60 million loss due to its triple whammy exposure to declining newsprint markets and pricing, lumber, and the surging Canadian dollar. The composite of US companies shows that while nearly all companies made
money during the quarter and many companies reported double-digit gains, real dollar year-over-year earnings gains were modest. Yet by focusing on cost curtailment in light of escalating energy and freight costs, companies were able to maintain and, in most cases, improve their quarterly earnings from last year.
Except for newsprint and some uncoated mechanical grades, prices for all other major pulp and paper grades have risen since October 2006. These higher prices translated into higher earnings. Mid-sized producers Packaging Corp of America (PCA), and Rock-Tenn reported
record earnings for the third quarter. PCA's earnings improved 11.7% to total $48.7 million, while Rock-Tenn, benefiting from strong demand for its recycled paperboard grades, posted earnings of $22.3 million, 13.7% higher than last year's comparable quarter, which pushed a record quarter into a record year.