Nov 25, 2005. /Lesprom Network/. Dropping commodity prices and a rising Canadian dollar dealt Canada's forest industry a double whammy in the third quarter, sending overall net earnings plummeting 92% to $71 million from $883 million during the same time last year. Western Canadian forestry companies weathered the storm better than their Eastern Canadian counterparts, however, with the latter region's six largest public forest and paper companies reporting a net loss of $36 million, down 108% from earnings of $431 million last year. Overall net earnings in Western Canada amounted to $107 million for the quarter ended September 30, down 76% from $451 million reported in 2004. Seven of the nine largest Western Canadian companies were profitable in the quarter. Half of these companies have operations in Alberta, including Ainsworth Lumber Co. Ltd., West Fraser Timber Co. Ltd., Millar Western Forest Products Ltd. and Canfor Corp., said Dave Thompson, director of advisory services of PricewaterhouseCooper's Alberta practice. The good news is that they were all profitable, despite the added pressures of rising energy and transportation costs, Mr. Thompson said. "From an Alberta perspective, the western part of the country has a relatively good business environment right now. We've got relatively low tax rates and a good work ethic here with the employees, so that has allowed us to withstand these tough markets perhaps somewhat better than our Eastern Canadian counterparts," Mr. Thompson said. Parker Hogan, spokesman for the Alberta Forest Products Association, said achieving profitability in a downtime is due to the continual reinvestment Alberta forestry companies make in their operations. "It's because of all of the reinvestments that have been made in the manufacturing capacity that we're able to weather these storms," Mr. Hogan said. That said, the rise of the Canadian dollar against the U.S. dollar is trying profit margins by a substantial margin, Mr. Hogan said. "It's significantly impacting the competitiveness of Western Canadian producers in any market, be it pulp, lumber, panel board or secondary manufacturing," he said. PricewaterhouseCooper's Thompson said labour is another cost pressure that factors in in Alberta, as the forestry industry competes with the energy industry for skilled tradespeople and truck drivers. Add to the overall mix weakening housing starts and softwood lumber duties in place with the U.S., and the end result is a challenging environment, he said. "The bottom line is if you're a very good commodity producer right now you can make a small profit, some of the niche players, it may be in specialty products, can do well, but if you're not near the top, it's a very challenging market right now and for the foreseeable future," Mr. Thompson said. Alberta's forest sector generates annual revenues of almost $8.4 billion and provides nearly 54 000 jobs.