WEYERHAEUSER CO Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Alabama Timberland Acquisitions: Completed remaining transactions for approximately 84,000 acres totaling $244 million, on track to reach $1 billion in strategic timberland acquisitions by 2025.
• Timberlands: Discussed western domestic log pricing challenges, mixed trends in export markets, performance of southern and northern timberlands.
• Real Estate & ENR: Mentioned real estate sales timing and mix impact, progress in Natural Climate Solutions projects, and strong solar demand in Renewables.
• Wood Products: Addressed performance of lumber, OSB, and Engineered Wood Products, including outlooks for each segment.

Segment Performance

• Timberlands: Contributed $57 million to third quarter earnings. Adjusted EBITDA was $122 million, a $25 million decrease from Q2. Western domestic log pricing faced downward pressure, export markets had mixed trends. Southern timberlands adjusted EBITDA slightly increased, while the North had a slight decrease in adjusted EBITDA.
• Real Estate & ENR: Contributed $51 million to earnings. Adjusted EBITDA was $77 million, a $25 million decrease from Q2. Real estate markets remained solid, Natural Climate Solutions projects were on track for approvals, and Renewables had strong solar demand.
• Wood Products: Excluding a special item, contributed $37 million. Adjusted EBITDA was $91 million, a $134 million decrease from Q2. Lumber had a loss, OSB performance was down, and Engineered Wood Products also saw a decrease in adjusted EBITDA.

Guidance

• Timberlands: Expected 4Q earnings and adjusted EBITDA to be comparable to Q3. Western domestic log market stable, export markets mixed. South expects stable sawlog demand, North to have moderately higher fee harvest volumes.
• Real Estate, Energy and Natural Resources: Raised full-year 2024 adjusted EBITDA guidance to ~$340 million. 4Q earnings and adjusted EBITDA expected to be lower due to sales timing.
• Wood Products: Anticipated 4Q earnings before special items and adjusted EBITDA to be slightly higher, with different outlooks for lumber and OSB based on market trends.

Risks

• Market Volatility: Affects sales and pricing across segments.
• Permitting Delays: For carbon capture and sequestration projects, causing potential timeline extensions.
• Weather Impacts: Can limit operating activities and affect harvest volumes in certain regions.

Question and Answer

• Q: On lumber supply demand dynamics, A: Devin Stockfish discussed supply reduction in the industry and pickup in demand, noting supply capacity has decreased and demand from single-family housing and R&R is improving.
• Q: On western exports in the first half of 2025, A: Devin Stockfish mentioned Japan should have a solid demand environment next year, while China remains a wildcard with variables like fiscal policy in China and volume from other supply regions.
• Q: On EWP demand vs starts, A: Devin Stockfish said they expect to recapture market share from open web products as lumber prices normalize, though it's been challenging in current pricing environment.
• Q: On capital returns, A: David Wold talked about base dividend coverage with adjusted FAD and potential for supplemental dividends or increased share repurchases depending on market conditions.
• Q: On hurricanes impact, A: Devin Stockfish said hurricanes had limited impact on timberlands but affected operating volumes in the south, with potential for both demand and supply impacts in the market.
• Q: On NCS projects, A: Devin Stockfish discussed solar developments and CCS permitting, noting permitting delays for CCS projects and progress in Natural Climate Solutions projects.
• Q: On European lumber imports, A: Devin Stockfish mentioned reduced European lumber imports due to changed supply dynamics, but potential for some uptick around margins.
• Q: On lithium mining in US South, A: Devin Stockfish said it's early to quantify the opportunity, but there's overlap with lithium deposits and their land base.
• Q: On EWP operating rates, A: Devin Stockfish discussed Q4 and 2025 rates, expecting EWP rates to ramp up in 2025 to normal levels seen in prior years.