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Gold/Mining/Energy : Repap (RPAPF) -- Ignore unavailable to you. Want to Upgrade?

To: LABMAN who wrote (438)	8/18/1999 6:50:00 PM
From: Stephen O	Read Replies (1) \| Respond to of 485

This story is about Domtar but Repap has the real leverage to paper prices Domtar Shares Surge to 10-Year High as Paper Outlook Improves Montreal, Aug. 18 (Bloomberg) -- Domtar Inc.'s stock rose to a 10-year high on optimism that the Canadian papermaker will profit from rising paper prices, analysts said. Domtar rose C$0.20 to C$16.50 in Toronto, its highest since April 1989. A total of 1.8 million shares changed hands, making it the sixth most active stock on the Toronto Stock Exchange. Prices for paper and some packaging products, such as linerboard, are rising as sustained economic growth in the U.S. and strengthening economies in France and the U.K. bolster demand. In addition, consumption is starting to recover in Asia. ''There are price increases going through or that have been announced for quite a broad array of pulp and paper and paperboard products,'' said Patricia Mohr, a commodities economist at Bank of Nova Scotia in Toronto. ''I think we're going to see a sustained recovery over the next couple of years. I am quite bullish.'' Last month Canadian and U.S. papermakers announced plans to increase prices for lightweight coated paper used for advertising flyers by 10 percent, or US$60 a short ton. Part of the increase took effect already and the rest is expected to be implemented later this year. Prices for linerboard, used to make cardboard boxes rose last month 11 percent to US$410 a short ton in the eastern U.S. ''All the stars are falling in line for Domtar to have a banner year in 2000,'' said Blaise Ganguin, an analyst at Standard & Poor's Corp. The Montreal-based company has reduced its production costs and is benefiting from its acquisition of specialty papermaker E.B. Eddy in July 1998, Ganguin said. The company said it's on track to cut operating costs by C$60 million this year. Eddy was a beneficial acquisition because it makes high- margin products and generates stable returns, Ganguin said. Domtar also is protected from rising pulp prices because it makes its own, Ganguin said. Pulp is the key ingredient used to make paper products. Pulp prices are set to rise another 5 percent next month to about US$570 a metric ton in North America. Pulp sold for US$485 a metric ton as recent as February. The stock advance also reflects optimism that the Quebec government may soon sell its 19.8 percent stake in Domtar, said Reid Carter, an analyst at Research Capital Corp. in Vancouver. That would further increase its attractiveness as an investment because it would be easier to buy and sell the shares, he said. Weyerhaeuser Co.'s pending acquisition of MacMillan Bloedel Ltd., Canada's largest forest company, has led to a search for other investments in the industry. With the lumber market peaking in recent months and the newsprint market still weak, the focus has shifted to pulp and paper producers such as Domtar, Scotiabank's Mohr said. Investors also have a lot ''confidence'' in Domtar's management, Carter said. That reflects its decision to merge its packaging assets with Cascades Inc. in late 1997 and the Eddy acquisition last year. ''There's a feeling that management won't spend money foolishly,'' he said. Carter said with paper and packaging prices rising and costs kept in check, Domtar is expected to generate as much as C$300 million in free cash flow in 2000. That could lead to a higher dividend or a stock buyback, he said.