RAYONIER INC Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Timberland Dispositions: Announced completed and pending timberland dispositions totaling 200,000 acres for $495 million, with pro forma CAD per share accretion of ~9%. These dispositions help delever the balance sheet and concentrate the portfolio in strong cash flow markets.
• Third Quarter Results: Generated third quarter adjusted EBITDA of $72 million and pro forma net income of $18 million or $0.12 per share. The decline in adjusted EBITDA was due to lower contribution from New Zealand Timber.
• Segment Details: Southern Timber adjusted EBITDA $38 million (comparable to prior year but with lower harvest volumes and net stumpage realizations offset by higher non-timber income). Pacific Northwest Timber adjusted EBITDA $9 million (up $1 million due to higher harvest volumes). New Zealand Timber adjusted EBITDA $15 million (down due to lower carbon credit sales and shipping costs). Real Estate adjusted EBITDA $20 million (up due to higher average per acre prices).
• Outlook: Updated full year adjusted EBITDA guidance to $275 million to $290 million, reflecting impact of completed and pending dispositions.

Segment Performance

• Southern Timber: Third quarter adjusted EBITDA was $38 million. Harvest volumes fell 13% and net stumpage realizations decreased 3%, but higher non-timber revenue offset some of the decline.
• Pacific Northwest Timber: Third quarter adjusted EBITDA was $9 million, up $1 million from prior year due to 10% increase in harvest volumes, partially offset by 7% decrease in net stumpage realizations.
• New Zealand Timber: Third quarter adjusted EBITDA was $15 million, down $9 million from prior year driven by lower carbon credit sales and 16% decline in net stumpage realizations due to elevated shipping costs.
• Real Estate: Third quarter adjusted EBITDA was $20 million, up $1 million from prior year with higher average per acre prices partially offset by lower acres sold.

Guidance

• Full year adjusted EBITDA guidance revised to $275 million to $290 million.
• Southern Timber: Full year harvest volumes ~7 million tons, slightly below prior guidance; Pacific Northwest Timber: Full year harvest volumes ~1.2 million tons, below prior guidance; New Zealand Timber: Adjusted EBITDA below prior range; Real Estate: Expects strong fourth quarter closing activity within prior guidance range contingent on transaction timing.

Risks

• Market Conditions: Saw timber markets face continued softness in housing and repair/remodel sectors.
• Shipping Costs: Impacted New Zealand Timber's net stumpage realizations due to elevated shipping costs.
• Economic Uncertainties: Continued economic uncertainty and elevated interest rates affecting real estate sales willingness of buyers.

Question and Answer

• Q: Color on evaluating strategic alternatives for New Zealand business and further dispositions toward $1 billion target. A: Ongoing evaluation of New Zealand joint venture with no new updates; transparent on disposition plans but not providing details on additional alternatives beyond current progress toward the $1 billion target.
• Q: Impact of Oklahoma sale on Southern portfolio quality and log price tailwinds. A: Oklahoma sale is a small portion (5%) of the Southern portfolio, with minimal impact on log pricing due to its small size; Oklahoma properties have lower productivity and thinner markets.
• Q: CAD and NAV accretion from dispositions. A: Dispositions monetize timberland at higher private market values than public, resulting in accretion to CAD and NAV per share.
• Q: Progress on solar and CCS projects. A: Solar and CCS projects have a backlog, but FERC reforms are expected to improve the process, with expectation of higher conversion rates from options to leases in the next year or so.