Price Pressure In Specialty-Pulp Segment Hurting Rayonier Inc. (NYSE:RYN)

Pushpa Naresh - October 28, 2013

Boston, MA 10/28/2013 (wallstreetpr) – Sentiments from a Hurting Rayonier Inc. (NYSE:RYN) executive that prices of specialty wood pulp may decline due to global over supply of the commodity saw the company drop to its lowest in five years trading. On Friday, the $5.91 billion market cap company fell 14.52% to $46.98. The company is facing weakening prices for its prime commodities and this has impacted negatively on investors. Although Europe is not currently a large market for RYN, there is a concern over potential excess supply and further weakening of prices which validates the fact that competition in the specialty-pulp is seeing many players increase their supply in the higher value specialty market. The specialty pulp is used in construction and automotive industry.

Another threat to RYN’s business is the encroachment of the specialty market by generic producers. This is depressing the prices for high end producers like RYN. The attempt by producers of generic pulp to sell in the specialty market is attributed to the continued decline in the commodity prices, thus forcing them to aim the lucrative specialty pulp segment. With the downward rally of prices now eminent, the company which also invests in real estate development and timberland has now embarked on price negotiations with its customers in efforts to boost its performance, especially against the competition.

In the Q3.13 reporting, the specialty pulp producer recorded a decline in net income, posting $57.4 million or $0.44 a share against $80.6 million or $0.62 a share a year ago. These profit figures fell out of favor with analysts’ prediction of $0.46 per share for the Q3.13. While the company has multiple strengths to rebound, the external forces like increased supply in the market and switch to specialty market supply by generic producers are great concerns. After a huge slump in Friday’s trading, investors should keep an eye on the stock to see how it fairs this week.

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Pushpa Naresh

Pushpa Naresh has done MBA (Finance) and an avid market tracker. She is a technical analyst who closely tracks US markets along with other global markets like India. She has been expressing her views about markets and also advises various clients.

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