Document 5beOnz8qZ7YM5vndKMryoykrD

19 wooa-ireaiing business. Utility sales were considerably above me year-earlier figures. Improved prices absorbed increased cosis. A strong U.S. residemial construction market stimulated sales of treated wood products, wood-treating chemicals and hard wood lumber. Prices of spruce lumoer soid into the U.S. from the Company's Canadian ooerations were very strong. The housing market /S spurring other construction--oi churches, schools, ana recreational and commercial structures--ana demand from these areas for treated and laminated wood continued to grow. Backlog Forest Products year-end backlog was S33.6 million, versus S69.9 million a year earlier. The total backlog is expected to be shipped during 1979 and. although all orders are considered firm, cancellation can be effected at any time except on finished material or mat in process. Forest Products backlog peaks in the first quarter, and the high point represents approximately 50% of annual sales. Forest Products Business Koppers is a major producer of chemically treated wood, specialty wood-treating chemi cals and laminated wood products, supply ing both U. S. and Canadian markets. The Company is also a major producer of hard wood lumber in the U. S. and spruce lumber in Canada. Chemical treatment of wood under pressure results in products that resist de cay. invasion by insects and damage from fire. Products include railroad crossties: util ity, transmission, distribution and lighting poles and accessory equipment: building poles and timbers: fence posts: foundation and marine piling: red cedar shakes and shingles: and construction lumoer and plywood. Koppers also provides contract wood-treating services for industrial and commercial customers. Wood pressure treatments use conventional creosote, pentachlorophenol and waterborne salt preserva tives. as well as proprietary processes with specialty chemicals under such trademarks as C6LLON. NON-COM, NCX and WOLMAN. ...Koppqrs also licenses these proprietary processes and their trademarks and pro duces and supplies a broad range of chemi cals used in pressure treatment, primarily to the more than 70 licensees using Koppers wood-treating processes and trademarks. Koppers engineers and manufactures glue-laminated wood products for industrial, commercial and residential applications, such as structural wood beams, arches, columns, girders, trusses and lighting stan^^dards^anctpoweuransmission structures. ^^^Koppeminternational Canada. Ltd., a wholly owned subsidiary, carries out wood treating and laminating operations in Can ada. it also manufactures laminated wood bridges and corrugated metal pipe for sewer and drainage lines. U. S. sawmiils. ooerated primarily to produce railroad crossties, also manufacture a substantial volume of harowooa iumoer soia lor flooring, furniture, pallets, paneling and otner end products. Swanson Lumoer Comcany Ltd., a wnoiiy owned suosiciary, conducts logging a.no sawmill operations m western Canada to produce soruce lumoer. wmch is sold predominantly in the U. S. housing market. Raw Materials and Fuel Timoer is the predominant raw material used by Forest Products. The major requirements are Eastern and Soutnern hardwood to sup ply railroad crossties and furniture products: and softwood timber, primarily Southern yel low pine and West Coast species, to supply utility poles and construction timber. Ap proximately 10% of me Group's hardwood and sofiwood needs are supplied by Company-owned timberlands. Demand and price for softwood are directly influenced by housing starts, and thanks to the breadth'of Koppers product mix and location of proc essing plants, the Company is able to pur chase the necessary timber and finished raw materials needed. The long-term availability of Eastern hardwood is adequate, since the timber growth rate currently exceeds the rate of cut. All of the spruce timber used by Koppers in Canada comes from land on which it has Provincial cutting rights that extend into the future and are renewable in definitely if certain minimum cutting perform ances are met. Koppers intends to continue to satisfy these minimums. Natural gas accounts for about half of Forest Products fuel use. fuel oil represents slightly more than one-third, and coal and wood supply the balance. All major plants are equipped to operate on alternative types of fuel. Fuel supply is adequate, and only the usual short-term plant shutdowns that have occurred each winter during periods of cold weather are anticipated. Competitive and Seasonal Conditions The wood-preserving industry is highly com petitive and fragmented. As the major nation wide supplier. Koppers usually has competi tion from regional operators. In addition, Forest Products 1978 Sales by End Market Transportation Lumber and Wood Products Utilities Architectural Construction Engineered Construction Other - (S Millions) % $113.7 70.0 49.4 41.7 23.S 15.4 37 22 16 13 7 5 $313 * 100 treated and laminated wood products com pete agamst such other materials as steel, concrete and aluminum. Price and service are the principal requirements for competi tion. Kopoers broad range of products and strategic plant locations provide a significant competitive advantage in this business. Most products supplied by Forest Prod ucts are soid directly to the end user by the Group's sales force. Much of Forest Prod ucts business is seasonal, since most prod ucts are related to the building industry. Sales are reduced during winter months, usually by about 30%, from the peak level of sales through summer months. Although sales of lumoer are relatively stable, produc tion is. for the most part, controlled by weather conditions. Inventory represents a significant factor in the total investment of Forest Products. Sizable pole inventories must be maintained to ensure prompt, dependable service. US. homebulldtng Is the primary market lor spruce lumber supplied by Koppers Canadian operatlona. Home Improvement Is a new and fast-growing application for Koppers treated wood and specialty wood^png^^efnlgUgj^^^, Railroad crosattes represent the major appli cation tor pressure-treated wood.