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April 29, 2009 Dear Friend, Enclosed are reports in which we cut earnings estimates both for Plum Creek timber and Smurfit-Stone Container, both of which suffer soft volumes and rising costs. We view Plum Creek as a sort of analog to other companies we study. Its enterprise value near $1,200 per acre represents a sort of alternative to Newmont Mining or Barrick Gold as a store of value. Its business is much easier than replacing gold mines. Further, Plum Creek could be compared to UTS Energy or Teck Cominco's Alberta oil sands as the pulp logs are being championed even in the daily rhetoric of presidential candidate Barack H. Obama as cellulistic ethanol does not drive up food prices. Similarities exist between the containerboard and steel industries in the current weak dollar climate. Both have exported up to one-eighth of monthly shipments to offset softer domestic demand and enjoy high operating rates. Despite a 97% containerboard utilization rate, those companies lack the "price discipline" of steelmakers. Faithfully, John C. Tumazos |
Copyright © 2008 John Tumazos Very Independent Research,
LLC
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