POULSBO, Wash. - Impacted by expired tariffs on Canadian log imports, lumber and wood products firm Pope Resources (NASDAQ: POPE) reported net income more than tripled, to $2 million, as revenue declined by $2 million, to $13.2 million for the quarter ended September 30, 2016.
"Our overall average log price realizations remained relatively flat compared to the previous several quarters," said Tom Ringo, President and CEO, "though we started to ramp up harvest volume at the tail end of the quarter in anticipation of modest price appreciation over the next several months."
Ringo said the most noteworthy event of the quarter was the 7,324-acre Carbon River tree farm acquisition that closed in July. "Pairing Carbon River with a series of other small-tract timberland acquisitions completed of late underscores the significant progress we are making toward our objective to grow the Partnership's land base as an engine for future earnings and distributions," he said.
Pope closed on a 7,324-acre timberland acquisition for $32 million consisting of 6,746 owned acres and a timber deed on 578 acres that expires in 2051.
The Partnership closed on the sale of two parcels of undeveloped land comprising 265 acres for $1.7 million.
Since the October 2015 expiration of the Softwood Lumber Agreement (SLA), Canadian lumber has been sold duty-free into the U.S. market. The combination of this duty-free entry and a weak Canadian currency has boosted Canadian exports of softwood lumber to the U.S. during the first eight months of 2016 by 34 percent over the corresponding period of 2015, based on data from the U.S. Census Bureau. The influx of Canadian lumber has played a role in keeping log prices in check when compared to last year.
Timberland Management: Operating losses incurred by this segment for Q3 2016 and Q3 2015 totaled $644,000 and $494,000, respectively, after eliminating revenue earned from managing the Funds of $772,000 and $779,000 for Q3 2016 and Q3 2015, respectively. The increase in operating loss is attributable to costs associated with our fourth timber fund which we expect to launch by the end of 2016.
Operating losses incurred by this segment for first nine months of 2016 and 2015 totaled $1.9 million and $2.0 million, respectively, after eliminating management fees earned from the Funds of $2.4 million for each of the first nine months of 2016 and 2015.
Over the course of 2016, we have made investments that we believe will pay off in the fourth quarter. In our Fee Timber segment, we expect to realize over 40% of our planned annual harvest volume in the fourth quarter. This back-end loading of our 2016 harvest is timed to coincide with anticipated log pricing improvement, consistent with typical seasonal patterns. We expect our total 2016 harvest volume to be between 96 and 100 MMB.
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