Global Forest, Paper & Packaging Industry Survey - Financiera Rural

PwC Top 100 — Results by country/regionUnited StatesEconomic and market overviewUS GDP growth slowed from 2.1% in 2007 to1.1% in 2008, with a significant decrease in thelast half of the year. The fourth quarter experiencedcontraction at an annualised rate of 6.3%. In additionto slow domestic growth, the global economicdownturn caused US producers to face a markeddrop in demand from emerging markets, and acorresponding decline in exports.Many companies are faced with reduced leverage,smaller balance sheets and reduced growth potential.As already noted, US companies debt to equity ratioexploded in 2008, nearly doubling to reach a balancesheet gearing level of 210%. The housing marketremains bleak, despite an initial upturn at the beginningof 2008. The year ended with housing starts at thelowest level seen in decades. Forecasts suggest noimmediate improvement.As in Europe, many US companies reduced or shiftedcapacity. The AF&PA reported an overall capacityreduction of 0.8% for the year, and that paper andpaperboard capacity has contracted 7.3% since its2000 peak.The volume of North American FPP deal-making rosein 2008 but, with the notable exception of InternationalPaper’s $6 billion acquisition of Weyerhaeuser’spackaging assets, the vast majority of deal-makingwas focused on smaller transactions than in theimmediately preceding years. Thus, while deal volumewas up 15%, total value declined by 32%, from$17 billion in 2007 to $12 billion in 2008. The declineis even greater given that the International Paper/Weyerhaeuser deal accounted for half the total dollardeal value. In terms of trends, timberland asset valuesremained relatively strong, and further consolidationwas seen in the packaging sector.The tough times faced by the industry were reflectedby Smurfit-Stone’s decision to file for bankruptcyprotection in January 2009.In recent months, the industry has focused quiteintently upon a provision of the US tax laws thatprovide tax refunds and credits for alternative energy.Some paper manufacturers who use a bio-fuel knownas black liquor are eligible for the credits and someestimates suggest the industry could receive as muchas $6 billion in tax credits from the US government bythe end of 2009, and many papermakers have alreadycollected millions of dollars in the first few monthsof 2009. Hawkins Wright estimates the impact of thecredit to be in the range of $125–$150 per tonne,so it could have a major impact on the relativecompetitiveness of producers based or operating in theUS in the short-term before the credit sunsets at theend of the 2009.Financial performanceThe 24 US-based companies in the PwC Top 100reported aggregated sales of $104 billion. Collectivelythey represent 29% of the total sales of the PwCTop 100. This compares with $100 billion or 30% oftotal sales in 2007. Overall sales revenues increased by amodest 3.8% compared to last year.16PricewaterhouseCoopers’ Global Forest, Paper & Packaging Industry Survey: 2009 Edition – Survey of 2008 Results