This article reports that the Canadian forestry suffers a loss in the second quarter though prices for lumber and oriented strand board spike. The spike level was not seen since 2006, but only come crashing down by the end of the second quarter. One of the main reasons why the forestry suffers a lost is the fact that demands for building materials remains very low in the second quarter; a lot lower than industrial capacity. Another main factor is the strength of our Canadian dollar, which is 12 per cent higher than it was last year. The strengthened Canadian dollar counteracts revenues earned in U.S. currency.
Connection
The connection in this chapter is the practice of the three fundamental business activities: financing, investing and operating activities. These forestry companies have not successfully invested and operate their companies. When the Canadian dollar is high, instead of exporting lumbers to the U.S; they could have keep it to a minimum and encourage sales within the country. Or, they can keep the revenue in US currency and trade back to Canadian dollar when Canadian dollar weakens. While the lumber tax was eliminated due to the spike in price, these corporations could have finance and invest more in the production of lumber and encourage sales!
Reflection
As stated in the article, there was a brief elimination of lumber tax during the second quarter. The Canadian forestry should have used this chance to their advantage. They could have financed for a maximum production and sales of lumbers within and out of the country. Or they can import as much as lumber as they can to the USA or other places. Remember, with the elimination of tax, the price of lumber is lowered by 15%. Also, since the end of the second quarter is the beginning of school, the producers could have raised the price of line paper for higher revenue since there will be a high demand for paper! Why didn’t the forestry sector report positive earnings like the top four Eastern producers did??
