Weyerhaeuser reports net earnings of $283M in Q3 2020
Forest products and lumber giant Weyerhaeuser has reported third-quarter net earnings of $283 million, or 38 cents per diluted share, on net sales of $2.1 billion. This compares with net earnings of $99 million, or 13 cents per diluted share, on net sales of $1.7 billion for the same period last year - a growth of 26.3 percent.
This growth is despite severe weather disruptions, forest fires, and COVID-19.
This marks a significant turnaround for the company, who has seen a steady sales decline since 2018. It has been getting rid of land to help turn things around, selling 555,000 acres of Michigan timberlands for $300 million in cash in September 2019. It also sold its Montana timberlands for $145 million last December.
Third quarter results include after-tax charges of $103 million for special items, primarily a non-cash timber casualty loss associated with Oregon fire damage. Excluding special items, the company reported third quarter net earnings of $386 million, or 52 cents per diluted share. This compares with net earnings before special items of just $59 million for the same period last year.
Adjusted EBITDA for the third quarter of 2020 was $745 million compared with $308 million for the same period last year and $386 million for the second quarter of 2020.
“In the third quarter, each of our businesses delivered outstanding operational and financial results despite disruptions from severe weather, unprecedented forest fires and the ongoing COVID-19 pandemic,” said Devin W. Stockfish, president and chief executive officer. “We achieved record wood products Adjusted EBITDA, surpassing the previous high by nearly 60 per cent. In addition, we redeemed $325 million of debt maturities and announced transactions to strategically upgrade our Oregon timberland holdings.
“Entering the fourth quarter, Weyerhaeuser is operating from a strong financial position, and we are increasingly confident that the recent strength in U.S. housing will continue notwithstanding ongoing macroeconomic headwinds,” Stockfish continued. “Today, we are re-initiating a quarterly dividend and implementing a new dividend framework that will enhance our ability to return meaningful and appropriate amounts of cash to our shareholders across a variety of market conditions. This framework positions Weyerhaeuser to deliver superior long-term value creation through our unmatched portfolio, industry-leading performance and disciplined, prudent capital allocation.”
In the West, fee harvest volumes decreased 15 percent compared with the second quarter as wildfire conditions restricted harvest activity. This was largely offset by higher average sales realizations for domestic logs. Domestic log sales volumes decreased modestly compared with the second quarter, and export log sales volumes were significantly lower as the company shifted volume to the domestic market to take advantage of higher margin opportunities. In the South, fee harvest volumes decreased five per cent as the company continued to implement the previously announced reduction in its 2020 fee harvest volumes. Average log sales realizations were comparable to the second quarter and forestry spending increased seasonally.
Third quarter special items consist of an $80 million timber casualty loss related to the Oregon wildfires. This non-cash charge represents the estimated book value of timber and related assets that will not be able to be salvaged based on currently available information.
Weyerhaeuser expects fourth quarter earnings and Adjusted EBITDA will be higher than the third quarter. In the West, the company anticipates higher average sales realizations for domestic and Japanese export logs and improved log sales volumes as Oregon harvest activity resumes and salvage operations begin. In the South, the company expects slightly higher forestry expense and slightly lower average log sales realizations due to mix.
Benchmark prices for lumber and oriented strand board reached record levels in the third quarter, and average sales realizations for lumber and oriented strand board improved 54 per cent and 65 per cent, respectively, compared with second quarter averages. Sales volumes for engineered wood products also increased significantly. These improvements were partially offset by higher raw material costs.
Excluding the effect of changes in average sales realizations, the company expects fourth quarter earnings and Adjusted EBITDA will be significantly lower than the third quarter, though both are expected to exceed previous record levels attained in 2018. The company expects a modest seasonal reduction in sales volumes, higher Western and Canadian log costs, and lower operating rates for some product lines due to planned maintenance outages.
Weyerhaeuser Company, one of the world's largest private owners of timberlands, began operations in 1900. The company owns or controls approximately 12 million acres of timberlands in the U.S. and manages additional timberlands under long-term licenses in Canada. The company also is one of the largest manufacturers of wood products, and a real estate investment trust. In 2018, Weyerhaeuser generated $7.5 billion in net sales and employed approximately 9,300 people who serve customers worldwide.
Have something to say? Share your thoughts with us in the comments below.