October 10, 2002 1 KEY FACTS ABOUT RAYMOND JAMES LTD. -Formerly known as Goepel McDermid Inc., became Raymond James Ltd. in January 2001. -Parent company, NYSE-listed Raymond James Financial, Inc (RJF) ranks as the ninth largest full-service brokerage firm in the U.S., with over C$2.6 billion in revenues. -Raymond James Financial maintains an established network of 4,800 investment professionals in approximately 2,000 offices worldwide with $120 billion (Cdn) in private client assets under administration. -Raymond James research has been ranked #1 in the Wall Street Journal’s quarterly performance rankings more than any other firm over the last ten years. The research team includes 46 analysts in the U.S. covering 475 companies, and 17 analysts in Canada, covering 130 companies. -The Raymond James forest products corporate finance team is a well recognized financial advisor to the forest industry in Canada, with a track record for innovative transactions.
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October 10, 2002 1 KEY FACTS ABOUT RAYMOND JAMES LTD. -Formerly known as Goepel McDermid Inc., became Raymond James Ltd. in January 2001. -Parent company,
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October 10, 20021
KEY FACTS ABOUT RAYMOND JAMES LTD.
- Formerly known as Goepel McDermid Inc., became Raymond James Ltd. in January 2001.
- Parent company, NYSE-listed Raymond James Financial, Inc (RJF) ranks as the ninth largest full-service brokerage firm in the U.S., with over C$2.6 billion in revenues.
- Raymond James Financial maintains an established network of 4,800 investment professionals in approximately 2,000 offices worldwide with $120 billion (Cdn) in private client assets under administration.
- Raymond James research has been ranked #1 in the Wall Street Journal’s quarterly performance rankings more than any other firm over the last ten years. The research team includes 46 analysts in the U.S. covering 475 companies, and 17 analysts in Canada, covering 130 companies.
- The Raymond James forest products corporate finance team is a well recognized financial advisor to the forest industry in Canada, with a track record for innovative transactions.
October 10, 20022
Paper & Forest Industry Update:
“The Ugly, the Good, the Bad …”
Mark BishopEquity Research AnalystPaper & Forest Products
Raymond James Ltd.
October 10, 20023
• Industry Overview
• Commodity Review
• B.C. Industry
October 10, 20024
• Too much capacity
• Easy access to capital
• More global fibre looking for a home
“The Ugly”
October 10, 20025
Performance during the late 1990’s was not impressive.
TSE P&FP vs. TSE 300 & S&P P&FP vs. S&P500 Relative Strength Index
• tech meltdown, global geopolitical concerns & corporate misconduct has significantly reduced confidence in capital markets
• print advertising recovery is not materializing
• resolution of the US/Cdn lumber trade dispute remote
• supply discipline may be faltering
October 10, 200221
Commodity Review
Typical economic recovery, inventory and supply conditions aside, drives demand in paper and forest products commodities through the following sequence:
1. Building materials – Lumber & panels interest rate sensitive, consumer led
2. Packaging - Containerboard with initial pickup in industrial economy & manufacturing activity
3. Communication papers - Uncoated freesheet (UFS) increasing demand for business papers first e.g., UFS increasing demand for magazine & advertising follows e.g., coated paper resulting increase in pulp demand
4. Publishing papers - Newsprint largely driven by retail kicks in with increasing consumer confidence as a result of improved
industrial activity – i.e., job growth
October 10, 200222
Commodity Review
Current and Trough - Peak Commodity Cycle Pricing
0
200
400
600
800
1000
1200
1400N
ew
spri
nt
40
lb C
GW
NB
SK
Pu
lp
WS
PF
Lu
mb
er
CS
P P
lyw
oo
d
NC
OS
B
50
lb U
FS
42
lb L
ine
rbrd
US
$/u
nit
October 10, 200223
Lumber
WSPF 2x4 Lumber Prices and Supply Shocks
0
100
200
300
400
500
600
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
current $ constant $* Linear (constant $*)
Lumber I Lumber II
Lumber III
SLA (Export Quota)
Source: Random Lengths, RJ Research estimates and analysis
US$/mfbm
US PNW Spotted Owl Lumber IV
*US PPI price deflator
October 10, 200224
Lumber
WSPF 2x4 Lumber vs. 30 yr. Mortgage Rate
100
200
300
400
500
600
93 94 95 96 97 98 99 00 01 02 03
US
$/m
fbm
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Western SPF 2x4 KD 30 yr. mortgage rates (%)
forecast
Source: Random Lengths , Freddie Mac
October 10, 200225
Lumber
• 27% cash duties in place since May 22
• Canadian industry responds with higher operating rates to reduce unit costs
• Preliminary WTO “win” for Canada in July
• Next key ruling in Feb. 2003 – NAFTA
• Curtailments now on the increase
October 10, 200226
B.C. Public Lumber Companies - Recent and Potential Duty Liability
Total Accruals Prospective Estimated To 1Q02 (Pre-tax) Duty Rate (%) 2003 Duty