Western Forest hurt by strong Canadian dollar, United Steel Workers strike

By Aaron Hochman-Zimmerman

New York, Aug. 14 - Western Forest Products, Inc. announced its second quarter showed a C$10.4 million improvement in net income over the first quarter, but said the company continues to suffer from a strong Canadian dollar and a United Steel Workers strike.

Despite a sharp increase in net income during the second quarter, which is historically strong for Western Forest, the company's quarterly EBITDA dropped to C$21.1 from C$23.3 million in the first quarter, president and chief executive officer Reynold Hert said during the company's quarterly conference call.

Since July 21, Western Forest has faced a strike by the United Steel Workers, which represents the majority of the company's hourly-wage earners.

During the conference call Hert claimed that the striking workers are protesting shift flexibility, partial closure severance and Western Forest's use of non-union contractors.

However, a press release from the USW cites safety concerns as well.

"Since January 2005 more than 65 [British Columbia] forest workers have been killed," according to the press release.

The Duncan, B.C.-based timber company has enough inventoried lumber to last through September, according to chief financial officer Paul Ireland.

If the strike persists through the end of the year there will be a "pronounced effect" on fourth quarter numbers, Ireland said.

Western Forest's finances have not yet been affected by the U.S. subprime crisis, according to Ireland. Cedar is typically sold to high-income customers who have not borrowed in the subprime arena.

However, if the crisis lasts through the end of 2008 "that lag will eventually catch up," Ireland said.

Western Forest does hold approximately C$150 million to C$180 million in property it intends to sell in the near-term. The land will be sold in irregular parcels and pieces, and the selling process is projected to be "lumpy," according to Ireland.

"It's not going to be a smooth and steady process," Hert said.

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