October 10, KEY FACTS ABOUT RAYMOND JAMES LTD. -Formerly known as Goepel McDermid Inc., became Raymond James Ltd. in January Parent company, NYSE-listed Raymond James Financial, Inc (RJF) ranks as the ninth largest full-service brokerage firm in the U.S., with over C$2.6 billion in revenues. -Raymond James Financial maintains an established network of 4,800 investment professionals in approximately 2,000 offices worldwide with $120 billion (Cdn) in private client assets under administration. -Raymond James research has been ranked #1 in the Wall Street Journal’s quarterly performance rankings more than any other firm over the last ten years. The research team includes 46 analysts in the U.S. covering 475 companies, and 17 analysts in Canada, covering 130 companies. -The Raymond James forest products corporate finance team is a well recognized financial advisor to the forest industry in Canada, with a track record for innovative transactions.
October 10, Paper & Forest Industry Update: “The Ugly, the Good, the Bad …” Mark Bishop Equity Research Analyst Paper & Forest Products Raymond James Ltd.
October 10, Industry Overview Commodity Review B.C. Industry
October 10, Too much capacity Easy access to capital More global fibre looking for a home “The Ugly”
October 10, Performance during the late 1990’s was not impressive.
October 10, Declining “need” to invest in the sector
October 10, “The Good” Capacity closures Capital spending restraint Market discipline
October 10, Capacity closures …. but how permanent?
October 10, Capital spending restraint
October 10, Capital spending restraint Lowest growth rate ever recorded
October 10, Market discipline…
October 10, … historic low inventories
October 10, Recent weaker U.S. currency has helped NA industry
October 10, Recent relative performance more encouraging
October 10, Consolidation continues …
October 10, … and may lead to more stable pricing.
October 10, Bigger isn’t necessarily better …
October 10, … but customers are also consolidating.
October 10, Consolidation will continue Drivers : Customer consolidation Globalization Buy vs. build Benefits: Inventory management Best practices Product rationalization Pricing stabilization
October 10, “The Bad” tech meltdown, global geopolitical concerns & corporate misconduct has significantly reduced confidence in capital markets print advertising recovery is not materializing resolution of the US/Cdn lumber trade dispute remote supply discipline may be faltering
October 10, Commodity Review Typical economic recovery, inventory and supply conditions aside, drives demand in paper and forest products commodities through the following sequence: 1.Building materials – Lumber & panels interest rate sensitive, consumer led 2.Packaging - Containerboard with initial pickup in industrial economy & manufacturing activity 3.Communication papers - Uncoated freesheet (UFS) increasing demand for business papers first e.g., UFS increasing demand for magazine & advertising follows e.g., coated paper resulting increase in pulp demand 4.Publishing papers - Newsprint largely driven by retail kicks in with increasing consumer confidence as a result of improved industrial activity – i.e., job growth
October 10, Commodity Review
October 10, Lumber
October 10, Lumber
October 10, Lumber 27% cash duties in place since May 22 Canadian industry responds with higher operating rates to reduce unit costs Preliminary WTO “win” for Canada in July Next key ruling in Feb – NAFTA Curtailments now on the increase
October 10, Lumber
October 10, Lumber
October 10, Market pulp
October 10, Market pulp
October 10, Newsprint
October 10, Newsprint
October 10, Newsprint
October 10, Summary - Valuation
October 10, Summary - Valuation
October 10, Canadian P&FP Share Price Performance
October 10, Canadian P&FP Share Price Performance
October 10, B.C. Industry EPS Forecast
October 10,
October 10, B.C. Industry government committed to forest policy change policy change remains tied to trade file expect policy change will occur on B.C. coast at accelerated pace – Fall 2002 labour environment appears to be improving consolidation likely as visibility on U.S. market access improves