Indicator: Forest sector financial performance
The forest sector’s financial performance worsened in 2019, marking the end of seven consecutive years of growth both in operating profits and in return on capital employed. In 2019, operating profits fell by 64.4% over 2018 levels, and return on capital employed fell to 4.4%, down from 11.5% in 2018.
- After declining in late 2018, commodity prices remained relatively low throughout 2019, lowering the financial performance of the forest sector
- Financial conditions improved slightly near the end of 2019 with higher lumber prices and renewed demand from the United States housing market
Together, operating profits and the return on capital employed can be used as measures of the forest sector’s economic competitiveness.
Operating profit measures the difference between operating revenues and operating expenses.
Return on capital employed measures the efficiency of capital use in the sector.
Financial performance by Canada’s forest sector, 2009 to 2019
In 2009, Canada’s forest sector lost about $300 million in operating profit. In 2010, 2011 and 2012 the sector turned a profit of $1 to $2 billion. Operating profits then climbed steadily from about $2.5 billion in 2013, to just over $7.5 billion in 2018. Operating profits dropped to $2.7 billion in 2019.
The forest sector’s return on capital employed was 1% in 2009, 5.6% in 2010, and 1.9% in 2011. The percent return on capital employed then increased each year, from 4.8% in 2012 to 11.5% in 2018. In 2019, it dropped to 4.4%.
|Year||Operating profits||Return on capital employed|
Why is this indicator important?
- Strong financial performance is essential for the continued economic competitiveness of Canada’s forest sector.
- Both operating profits and return on capital employed indicate whether Canada’s forest sector can attract investment and continue to generate economic benefits to Canadians.
What is the outlook?
- The COVID-19 pandemic will likely have a negative impact on world economies and Canada’s forest sector, but the breadth of the impact remains uncertain.
- The federal government introduced a number of emergency response measures to assist workers and help businesses deal with COVID-19 and continues to work with provinces, territories, Indigenous communities, and industry to advance the transformation of the sector in the long-term.
Sources and information
- Statistics Canada. Quarterly balance sheet and income statement, by North American Industry Classification System (NAICS) (special extraction, February 26, 2020).
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