PotlatchDeltic(US:PCH)2022-07-26 19:54Financial Data and Key Metrics Changes - The company reported total adjusted EBITDA of $175 million for Q2 2022, marking the second highest EBITDA for a second quarter in its history, although it was lower than the $246 million generated in Q1 2022 [5][21] - The decline in EBITDA was primarily attributed to lower lumber prices and harvest volumes [21] - The company had $511 million in cash and total liquidity of $810 million at the end of Q2 2022 [18][28] Business Line Data and Key Metrics Changes - Wood Products segment generated adjusted EBITDA of $107 million in Q2 2022, down from $150 million in Q1 2022, with average lumber price realizations decreasing by 20% [6][24] - Timberland segment's adjusted EBITDA decreased from $76 million in Q1 to $58 million in Q2, with sawlog harvest volumes affected by weather conditions [9][22] - Real Estate segment's adjusted EBITDA was $22 million in Q2, down from $30 million in Q1, influenced by the timing and mix of transactions [10][27] Market Data and Key Metrics Changes - Lumber prices moderated during Q2, with the random length framing lumber composite price decreasing by 33% compared to Q1 [6][24] - The company shipped 254 million board feet of lumber in Q2, an increase of 21 million board feet from Q1 [7][26] - The housing shortage in the U.S. is estimated to be around 4 million units, supporting long-term demand for lumber [11] Company Strategy and Development Direction - The company is focused on modernizing and expanding its Waldo, Arkansas sawmill with a $131 million investment, expected to increase annual capacity by 85 million board feet [14] - The CatchMark merger is anticipated to close late in Q3 2022, which is expected to provide strategic and financial benefits [15][16] - The company remains committed to sustainable dividend growth and plans to review its regular dividend in Q4 2022 [17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that while the long-term housing fundamentals remain favorable, recent factors such as higher mortgage rates and declining consumer confidence have moderated housing starts [12] - The company expects a modest decline in housing starts to around 1.5 million units in the near term, with a potential recovery by 2024 [70][71] - Management remains optimistic about lumber demand in the repair and remodel markets, supported by strong consumer balance sheets and job market conditions [13] Other Important Information - The company repurchased $5 million of its shares at approximately $44 per share under its share repurchase plan [18] - Capital expenditures for Q2 were $31 million, with plans for total capital expenditures in 2022 estimated between $85 to $90 million [28][32] - The company published its third Annual ESG report in May and is committed to enhancing its ESG initiatives [19] Q&A Session Summary Question: What is the expected decline in Northern sawlog prices for Q3? - Management indicated a potential decline of approximately 35% to 40% in indexed sawlog prices for Q3 due to the drop in lumber prices [39] Question: Can you provide details on the three bolt-on transactions? - The company is acquiring three bolt-on deals totaling about 46,000 acres in Mississippi and Arkansas for approximately $101 million, expected to generate about $7 million of incremental EBITDA [40] Question: What are the expectations for Southern harvest levels next year? - Management suggested that Southern harvest levels could exceed 6 million tons next year, especially with the CatchMark merger and the Ola mill coming back online [45] Question: How is the company addressing the impact of rising mortgage rates on demand? - Management noted that while there is a pullback in housing starts, demand remains solid in the home center channel, with order files stretching out a couple of weeks [48][73] Question: What is the outlook for the CatchMark merger? - The merger is on track to close late in Q3, with key milestones including finalizing the registration statement and conducting the shareholder vote [69] Question: How does the company plan to manage harvest volumes in a slowing housing market? - Management believes that production cuts will primarily occur in Canada and from lower imports, allowing Southern mills to maintain operations without significant harvest volume reductions [88]