With the advances in technology concerning email, data storage, and networks (among other things), we are becoming an increasingly paperless society. This trend is evidenced by the declining demand for nearly all grades of paper in the US. This lack of demand causes pulpwood prices to decrease, which also hurts PCL. This trend will continue as technology improves even more, which will continue to dampen PCL's revenues.
Rising interest rates could slow the residential real estate market, hurting Plum Creek's real estate business; they could also slow housing development and renovation, the largest market for wood, greatly reducing Plum Creek's timber revenues.
Because PCL is tied so closely to housing, the current housing market hurts PCL. In the past few months, the tax rebate has essentially sealed off home buyers looking to buy in the next few years as they rushed to take advantage of the tax break. Now that it is over, the housing industry has again slumped, which will hurt PCL.
Plum Creek's net debt/capital ratio is 58%, and is expected to increase to 61% by FY2010. This is extremely high and Plum Creek runs at risk in paying off its excessive amount of debt. If Plum Creek does not choose to de-lever in the next few years, it may face debt repayment issues, especially if the housing market does not pick up.
Plum Creek's net debt/capital ratio is 58%, and is expected to increase to 61% by FY2010. This is extremely high and Plum Creek runs at risk in paying off its excessive amount of debt. If Plum Creek does not choose to de-lever in the next few years, it may face debt repayment issues, especially if the housing market does not pick up.
The influx of Canadian timber into the global timber market could create a supply glut, putting downward pressure on timber prices and lowering Plum Creek's profit margins.
If timber lands are destroyed, the timber supply will be impacted (which could be offset by higher pricing). However, in the interim, weaker demand coupled with increased harvesting of timber assets prior to destruction of beetles could be negative for prices.
