Rayonier Inc. recently reported fourth quarter net income attributable to Rayonier of $10.3 million, or $0.07 per share, on revenues of $205.5 million. This compares to net income attributable to Rayonier of $16.0 million, or $0.12 per share, on revenues of $178.8 million in the prior year quarter. The fourth quarter results included costs related to the merger with Pope Resources1 of $0.7 million. Excluding this item, pro forma net income2 was $11.0 million, or $0.08 per share, versus $16.0 million, or $0.12 per share, in the prior year quarter.
Overview of fourth quarter results
Fourth quarter operating income was $22.4 million versus $26.1 million in the prior year period. The current quarter operating income included costs related to the merger with Pope Resources of $0.7 million. Excluding this item and adjusting for $0.7 million of operating income attributable to non-controlling interest in the timber funds segment, current quarter pro forma operating income was also $22.4 million. Fourth quarter Adjusted EBITDA2 was $74.5 million versus $65.0 million in the prior year period.
Overview of full-year results
Full-year 2020 net income attributable to Rayonier was $37.1 million, or $0.27 per share, on revenues of $859.2 million. This compares to net income attributable to Rayonier of $59.1 million, or $0.46 per share, on revenues of $711.6 million in the prior year. Full-year results included $28.7 million of income from a large disposition, partially offset by costs related to the merger with Pope Resources of $17.2 million and timber write-offs resulting from casualty events of $7.9 million. Excluding these items, pro forma net income was $33.5 million, or $0.25 per share, versus $59.1 million, or $0.46 per share, in the prior year.
Full-year operating income was $74.4 million versus $107.0 million in the prior year. Full-year operating income included $28.7 million of income from a large disposition, partially offset by costs related to the merger with Pope Resources of $17.2 million and timber write-offs resulting from casualty events4 of $15.2 million (of which $7.9 million was attributable to Rayonier). Excluding these items and adjusting for the operating loss attributable to non-controlling interest in the timber funds segment, full-year pro forma operating income was $82.3 million. Full-year Adjusted EBITDA2 was $267.4 million versus $247.8 million in the prior year.
Full-year cash provided by operating activities was $204.2 million versus $214.3 million in the prior year. Full-year cash available for distribution (CAD) of $162.4 million increased $13.1 million versus the prior year primarily due to higher Adjusted EBITDA ($19.6 million) and lower cash taxes paid ($0.9 million), partially offset by higher capital expenditures ($0.2 million) and higher cash interest paid ($7.1 million).
“Given the significant disruption and uncertainty associated with the COVID-19 pandemic throughout 2020, we were very pleased with our fourth quarter and full-year financial results,” said David Nunes, president and CEO. “The diversity of our timber markets, the positioning of our real estate portfolio and the resiliency of our people during challenging operating conditions all contributed to our solid performance in 2020, and we finished the year with encouraging momentum across our business segments. Moreover, we successfully closed and integrated the Pope Resources acquisition, and we are already seeing the benefits of our enhanced scale and portfolio quality. As we look to 2021, we believe we are well-positioned to capitalize on favourable sawlog trends associated with increased residential construction activity, continued strong end-market demand for products derived from our pulpwood, improved log export market opportunities and growing interest in finished lots as well as rural and recreational properties.
“Our U.S. and New Zealand businesses were fully-operational throughout the fourth quarter as we continued to follow enhanced safety protocols in response to the COVID-19 pandemic. Fourth quarter Adjusted EBITDA of $74.5 million was 15 per cent higher than the prior year quarter, as favourable results in the pacific northwest timber and real estate segments more than offset an 18 per cent decline in Adjusted EBITDA from the southern timber segment. The decline in southern timber Adjusted EBITDA was attributable to a 15 per cent decrease in harvest volumes due to the timing of 2020 harvest activity as well as lower non-timber income, while weighted average pricing showed a meaningful improvement over the prior year quarter. In pacific northwest timber, Adjusted EBITDA improved 65 per cent versus the prior year quarter, as strong domestic demand drove a 22 per cent increase in weighted-average log prices. Meanwhile, New Zealand timber Adjusted EBITDA rose four per cent relative to the prior year quarter, as a modest increase in weighted-average log prices, coupled with higher harvest volumes, more than offset lower carbon credit sales.
Southern timber
Fourth quarter sales of $44.4 million decreased $1.4 million, or three per cent, versus the prior year period primarily due to lower pipeline easement revenue and lower volumes, partially offset by higher prices and a significantly higher proportion of delivered log sales. Harvest volumes decreased 15 per cent to 1.34 million tons versus 1.58 million tons in the prior year period. The decline was largely attributable to the timing of harvest activity, as a smaller proportion of full-year harvest volume occurred in the fourth quarter of 2020 as compared to the prior year. Average pine sawtimber stumpage prices increased 10 per cent to $25.48 per ton versus $23.25 per ton in the prior year period. Rayonier was encouraged to see evidence of increased pricing tension in multiple U.S. south markets during the quarter amid robust lumber pricing, growing competition among mills for logs and improved demand for export grade logs in select markets. Favourable geographic mix also contributed to the increase in Rayonier’s average sawtimber price during the quarter. Average pine pulpwood stumpage prices increased six per cent to $15.71 per ton versus $14.82 per ton in the prior year period, largely due to favourable geographic mix. Overall, weighted-average stumpage prices (including hardwood) increased seven per cent to $19.36 per ton versus $18.10 per ton in the prior year period. Operating income of $9.9 million decreased $2.1 million versus the prior year period due to lower non-timber income ($2.2 million), lower volumes ($1.8 million) and higher costs ($0.2 million), partially offset by higher net stumpage prices ($1.7 million) and lower depletion rates ($0.4 million).
Fourth quarter Adjusted EBITDA of $23.3 million was 18 per cent or $5.0 million below the prior year period.
Pacific northwest timber
Fourth quarter sales of $34.7 million increased $7.1 million, or 26 per cent, versus the prior year period. Harvest volumes decreased five per cent to 396,000 tons versus 417,000 tons in a particularly strong prior year period. Average delivered sawtimber prices increased 23 per cent to $96.23 per ton versus $78.51 per ton in the prior year period, as the historic surge in lumber prices translated to significantly improved log demand. Average delivered pulpwood prices decreased 14 per cent to $33.78 per ton versus $39.24 per ton in the prior year period, as higher lumber mill residuals and the deterioration of pulpwood export markets continued to drive excess domestic supply. Operating loss of $0.5 million improved $0.8 million versus the prior year period due to higher net stumpage prices ($6.2 million) and higher non-timber income ($0.8 million), partially offset by higher depletion rates ($5.4 million) and higher overhead and other costs ($0.8 million).
Fourth quarter Adjusted EBITDA of $14.4 million was 65 per cent or $5.7 million above the prior year period.
Outlook
In 2021, Rayonier expects to achieve net income attributable to Rayonier of $44 to $56 million and Adjusted EBITDA of $285 to $315 million. The projected year-over-year increase in Adjusted EBITDA is driven by Rayonier’s expectation that the contribution from each of the company’s key timber segments will increase in 2021. However, the company believes this will be partially offset by a lower contribution from its Real Estate segment following an exceptionally strong 2020. Overall, Rayonier remains very encouraged by the stability of its business and the strength of its end markets.
In Rayonier’s southern timber segment, the company expects to achieve full-year harvest volumes of 6.2 to 6.4 million tons. The company expects a modest improvement in weighted average pricing relative to full-year 2020 driven by strong sawtimber demand and a higher mix of sawtimber, partially offset by an increased proportion of planned harvest volume from relatively lower-priced markets.
Rayonier expects the largest year-over-year improvement in its pacific northwest timber segment, bolstered by a full-year contribution from the Pope Resources acquisition. The company expects to achieve harvest volumes of 1.7 to 1.8 million tons in the region. The company also anticipates higher average sawtimber prices as compared to full-year 2020 given strong domestic demand trends and favourable lumber pricing.
In the company’s New Zealand timber segment, Rayonier expects to achieve harvest volumes of 2.6 to 2.8 million tons, up modestly year-over-year following the operational disruptions imposed by the COVID-19 pandemic in 2020. The company further expects that strong demand from China coupled with strong local markets will lead to improved export and domestic pricing.
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