Weyerhaeuser reports net earnings of $283M in Q3 2020
Weyerhaeuser Company today 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.
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 $59 million for the same period last year and $77 million for the second quarter of 2020.
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.”
Q3 2020 performance
In the West, fee harvest volumes decreased 15 per cent 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.
Q4 2020 outlook
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.
In September 2020, the company announced an agreement to sell 149,000 acres of southern Oregon timberlands and a separate agreement to purchase 85,000 acres of mid-coastal Oregon timberlands. The two agreements are subject to customary closing conditions and are both expected to close in fourth quarter 2020.
Q3 2020 performance
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.
Q4 2020 outlook
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.