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Lumber Industry + Ainsworth Lumber


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Hi all,

 

I stumbled on the following article: http://www.theglobeandmail.com/globe-investor/lumber-supercycle-could-spell-opportunity/article12590017/ which I thought was rather interesting, haven't done a lot of research on it yet but already took a quick look at Ainsworth (given it was the only company with an A and I wanted to start arbitrarily) and looks like it might be an interesting case.

 

  • Low cost and leading manufacturer of Oriented Strand Boards (https://en.wikipedia.org/wiki/Oriented_strand_board), most often used in construction (roofing, flooring, etc) ==> So heavily impacted by construction (mostly housing I guess) outlook
  • Geo. Diversified: 72% US (still large) 18% Canada and around 10% for Japan and ROTW ==> Despite Yen weakness no strong impact (mentioned in 2013Q1 CC)
  • Due to higher OSB pricing EBITDA margins went from 11% to 44%, and capex looks to currently be high due to startup of High Level mill, after which I expect capex to substantially decline to the "maintenance" level, (Do note, I still have to look further into this)
  • Although very subjectively (only read 1 CC) the management seems to be capable and prudent

 

Happy to hear your thoughts on the lumber industry in general, or one of the companies mentioned in the globeandmail article?

 

Besides West Fraser, other prominent names in the sector are Canfor Corp., International Forest Products Ltd., and Ainsworth Lumber. For the more speculatively minded, there are also lumber futures in the United States.

 

Some additional links on possible future for wood used in "greener" construction:

 

http://www.economist.com/blogs/babbage/2012/08/building-materials#comments

 

http://www.economist.com/blogs/babbage/2013/07/tall-buildings

 

Thanks in advance and happy investing

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brookfield owns a large chunk as they spun it out.  ANS was recapitalized by brookfield.  Very cheap name, in the correct industry.  This mill they are starting up will greatly increase output and lower their overall cost structure.

 

I have own ANS for 3 months and plan to hold for a while.

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I did a call with these guys right before OSB prices doubled. I was asking all kinds of questions about the company and they started asking me whether I was interested in the company's equity or debt. I said the equity and they sounded floored, I don't think anybody had considered the possibility that the company could continue on much longer without prices increasing or a substantial reorg of the capital structure. Anyway, I couldn't find a way to buy in the volume I needed and I just didn't do it...#regrets

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  • 1 month later...

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