OREANDA-NEWS. November 18, 2008. In the past 12 months energy costs have had the most signifcant impact on profits in the forest, paper and packaging (FPP) industry, according to PricewaterhouseCoopers recent online poll of eighty FPP executives, reported the press-centre of PricewaterhouseCoopers.

A third of respondents report that energy costs have hit their bottom line, whereas nearly 30% say that exchange rates have had the most impact on profits. Around 15% cited both fibre supply and transport costs.

Survey participants were also asked the million dollar question: when will major consolidation happen in the Western European industry? Forty per cent of executives think that the industry will finally consolidate within 1–3 years. Thirty per cent said that 3–5 years was more likely. An optimistic handful thinks it will happen within 6 months.

An overwhelming percentage of respondents said that the South American market has the best chance of sustaining profitability over the next 1–3 years. Sixty per cent said South America, 20% said China has the best chance. Russia, Western Europe, the US and Central and Eastern Europe were highlighted by a small proportion of the respondents. Executives said that Canada has the least chance of sustaining profitability.

In terms of the effects of the global credit crunch, over half of respondents said it had had a moderate impact on the forest, paper and packaging industry. Nearly a quarter said it had a major impact. A small proportion said it had had no impact on their business at all.

Alexei Ivanov, Partner, PricewaterhouseCoopers Forest, Paper & Packaging Industry Leader in Russia said:

“The main impact of the crisis on the FPP industry is that there has been a drop in demand for its products from traditional consumers resulting in the global market glut. Coupled with the rise in export duties on lumber, the current situation on the global market poses big challenges before Russian businesses from the industry – they have to take appropriate measures, such as production suspension, curtailment of expenditures, including staff reduction, etc. Today, it is difficult to predict how the crisis will develop and what effects it could have on the FPP industry. However, the leading Russian companies share the opinion that the industry’s long-term prospects remain positive. So, they will address strategic issues based on this outlook”.