FOREST PRODUCTS - International Forest Products on aggressive acquisition, repositioning drive

By: | at 08:00 PM | Channel(s): International Trade  

The high costs of logging in British Columbia’s rugged coastal region, together with growing competition from engineered wood products is pushing one of British Columbia’s oldest forestry companies, International Forest Products Limited (Interfor), to reposition itself in the marketplace.
The company got its start in the 1930s with a single mill near Vancouver, relying on logs from the surrounding area. For many years the company logged the coastal areas of the province supplying Western red cedar, Western hemlock, balsam and fir to markets worldwide. In 1971, Interfor made the jump from Coastal logging to the interior of the province by purchasing a mill at Adams Lake near Kamloops, BC.
This purchase was followed by the purchase of the Pacific Pine Division of Triangle Forest Products in 1976 and, during the next two years, the purchase of McDonald Cedar Products and Bay Forest Products Ltd.
Interfor’s acquisition drive continued steadily until 1991 when the company acquired Crown Forest Industries Ltd. from Fletcher Challenge Canada Ltd., together with major cutting rights, sawmills and planer mills in Coquitlam, BC, and Maple Ridge, BC. This was followed four years later by the acquisition of 976,000 cubic meters of annual cutting rights, together with two sawmills and planer mills located at Port Moody and Squamish, BC.
With the downswing in Japanese lumber markets, the company decided in 1998 to launch a major rightsizing strategy, introducing cost cutting measures and jettisoning unprofitable operations.
This strategic repositioning process is continuing today.
Gerald Friesen, Interfor’s corporate secretary, told AJOT that at the present time there is an overabundance of sawmills in British Columbia and the Pacific Northwest. The company intends to continue shifting its source of logs from Coastal areas in favor of the Spruce, Pine and Fir produced in the interior.
Last year the company set its sights on acquiring Riverside Forest Products, one of BC’s top forest products companies with lumber and plywood production facilities in the interior of the province. At the time, Interfor announced publicly that the purchase would make Interfor the 7th largest lumber company in the world, with annual sales of C$1.5 billion and would enhance its product and geographic diversification and create synergies of more than C$20 million a year.
“This acquisition is a key element of our strategy to transform Interfor into a world-class, globally competitive wood products company,” president and CEO of the company, Duncan Davies said after making the offer. “The transformation began in mid-1998 when Interfor launched an aggressive restructuring program focused on debt and cost reduction and market repositioning.”
Unfortunately, the Riverside deal did not go through and competing Tolko Industries Ltd. picked up the assets for C$40 per share.
Citing less than favorable market conditions and a rising Canadian dollar Davies said Intefor management felt that increasing its offer was not in the best interests of the company and said Interfor would continue to search for opportunities that would fit the company’s growth strategy.
In May of this year, the firm’s newly created division, Interfor Pacific, announced that it had purchased Floragon Forest Products Mollalla Inc. with a plant at Mollalla, Oregon, about 30 miles southeast of Portland.
Following the announcement, Davies said in a prepared statement, “We have been looking for opportunities to expand our presence in the Pacific Northwest since acquiring the Crown Pacific sawmills and forming Interfor Pacific in September last year. From a product and market standpoint, the Floragon operation is an excellent fit with our operations in Washington and Oregon.”
During 2004 Interfor generated about C$31.8 million through the sale of surplus assets such as the Sawyers Landing property in Pitt Meadows, BC, the McDonald Cedar mill in Fort Langley, BC and a portion of its Fraser Mills property in Coquitlam. In turn, the company pumped $2

American Journal of Transportation