Buy Canadian

Soon there will be one less American-owned sawmill in Oregon.

International Forest Products Ltd., one of Canada's largest forest product companies, has agreed to buy a sawmill in Molalla, Ore., for more than $50 million.

The deal announced Wednesday with privately held Floragon Forest Products Molalla Inc. follows several Interfor purchases in Washington state and Oregon last year.

The Molalla operation about 30 miles south of Portland, Ore. produced 220 million board feet last year, "has been significantly upgraded in recent years and is well positioned from a log-supply standpoint," according to a statement issued Wednesday by Interfor, based in Vancouver.

Last year Interfor purchased three mills, one each in Gilchrist, Ore., Marysville, Wash., and Port Angeles, Wash., from the bankrupt Crown Pacific Partners. The company's U.S. holdings also include four manufacturing facilities in Sumas, Wash.

Here's who Interfor is, in its own words:

International Forest Products Limited (Interfor) is one of the Pacific Northwest’s largest producers of quality wood products for sale to markets around the world. The company has operations in British Columbia, Washington and Oregon, including five sawmills in the Coastal region of B.C., one in the B.C. Interior, two sawmills in Washington and one in Oregon. Interfor also operates a number of value-added remanufacturing and specialty products facilities in B.C. and Washington.

Interfor also bought the Klamath Northern Railway Company last year.  It ships lumber and woodchips from the Gilchrist OR mill to the Union Pacific line at Gilchrist Junction.  By the by, Gilchrist is roughly 50 miles south of Bend.  Back to the original article.

"From a product and market standpoint, the Floragon operation is an excellent fit with our operations in Washington and Oregon," Interfor president Duncan Davies said.

Interfor will pay $50 million plus inventories and incentives for financial performance.

The deal, which increases Interfor's annual capacity to 1.5 billion board feet, will be financed from existing bank lines and is expected to add to earnings immediately, Davies said.

Here's who Floragon is, in its own words:

Floragon currently operates 3 sawmills that manufacture both domestic and export lumber products on 2 sites in and near Molalla, Oregon. Species manufactured include Douglas Fir, Hemlock, White Fir and Noble Fir. It also operates an engineered wood products division consisting of a cut-stock line, 2 finger jointer lines and a glue laminating facility.

Floragon’s predecessor was a 60-year-old lumber manufacturing and sales company located in the town of Molalla Oregon. The business has had a long history of marketing and exporting both kiln dried and green lumber products destined to Europe, Australia and the Middle East as far back as the mid 1960’s. In addition to producing domestic and dimensional lumber, in 1972 the business began a successful program of exporting kiln dried, metric sized lumber products to Japan.

So now instead of an American company shipping Oregon wood products to other countries, a foreign company will do so.  At least Oregon gets to keep most of the jobs, so long as our lumber products remain competitively priced.

Comments

[degustibus]

"At least Oregon gets to keep most of the jobs . ..."

nonunion, most likey.

[jeff]

Were they ever union? From what I understand, none of the mills in the Santiam Canyon (for example) have ever been union. A job doesn't have to be union to be a good one. Not with smart management.

What interests me is that I've seen a lot of Floragon wrappers on lumber at the Cascade Warehouse reloader in Salem. They get loaded on centerbeams on the Portland & Western and interchanged with the UP and BNSF. I wonder if that will continue.

[Chris Edwards]

One could argue that the jobs at Floragon are now more secure under the management of a larger and more stable company.

In forest products, bigger is often better, as companies can leverage their sales programs and get better prices for their products, and have more sawmills spread geographically to enable the "trading" of logs with other mills.

Independent samills like Floragon often have a difficult time surviving over the long-term against the big boys (Weyerhaueser, Roseburg Forest Products, Hampton, & Sierra Pacific), especially if they don't own substantial timberlands (which is the case with Floragon).

From a profit standpoint, many of the profits of publicly owned forest products companies flow out of the state, to shareholders scattered around the world. Roseburg Forest Products, Hampton and Sierra Pacific are all private, but Weyerhaeuser (which owns more NW timber than any other company), GP, and most of the major timber holdings (many under management of The Campbell Group) are held by public or out of state instituional money (a lot of it coming from pension funds like Cal Pers and Harvard Teachers' Pension Fund and insurance companies such as John Hancock).

So all in all, the profit from the sale of Floragon stays in Oregon, the jobs stay in Oregon, and the jobs are arguably more secure. Only time will tell for certain, but I tend to doubt that the sale is a bad thing for Oregon.

[RoguePundit]

I hope that the jobs are now more secure. Interfor said the purchase was supposed to be accretive immediately, so (sans accounting shenanigans) what that should mean is that they bought a profitable business. Knock on wood they'll value that versus cherry-picking some pieces and closing the rest.