Rayonier(RYN) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2019, the company generated adjusted EBITDA of $65 million and earnings per share of $0.12, with adjusted EBITDA exceeding the prior year quarter by approximately 30% [6][13] - For the full year, adjusted EBITDA was $248 million, a decline of 27% compared to the previous year, primarily due to lower contributions from the Real Estate segment [7][14] - Cash available for distribution (CAD) for the year was $149 million, down from $240 million in the prior year, attributed to lower adjusted EBITDA and higher capital expenditures [14] Business Line Data and Key Metrics Changes - Southern Timber segment achieved full-year adjusted EBITDA of $120 million, a 16% increase over the prior year, driven by increased volume and non-timber income [7][20] - Pacific Northwest Timber segment reported full-year adjusted EBITDA of $17 million, a significant decline of 59% from the prior year due to lower log prices and export volumes [9][23] - New Zealand Timber segment's full-year adjusted EBITDA declined 17% to $76 million, primarily due to decreases in export and domestic sawtimber prices [10][28] - Real Estate segment generated full-year adjusted EBITDA of $60 million, roughly half of the prior year's result, driven by a lower number of acres sold [11] Market Data and Key Metrics Changes - The Southern Timber segment saw a 23% increase in Q4 harvest volume compared to the prior quarter, while the Pacific Northwest Timber segment experienced a 60% increase in Q4 harvest volume [16][21] - In New Zealand, the average delivered export sawtimber price was $102.69 per ton, 11% unfavorable compared to the prior year quarter due to increased competition from European Spruce salvage volume [25][26] - The company noted that approximately two-thirds of its export from New Zealand historically goes to China, with plans to redirect some volume to other markets during the coronavirus outbreak [55] Company Strategy and Development Direction - The company is focused on unlocking long-term value from its development and rural property portfolio, with a strong pipeline of identified opportunities [38] - Rayonier plans to close the acquisition of Pope Resources around mid-2020, which is expected to enhance its portfolio and increase annual adjusted EBITDA by approximately $38 million [42][44] - The company aims to improve its portfolio through acquisitions and redeploy land sale proceeds into capital allocation opportunities that enhance long-term value per share [46] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the Phase I trade agreement with China, anticipating potential benefits for log exports [81][88] - The company acknowledged challenges in the near term due to the coronavirus outbreak, which could impact demand and log flow into China [50][54] - Management highlighted the importance of operational flexibility and coordination in navigating challenging market conditions while maximizing long-term value [40][41] Other Important Information - The company reported a modest increase in debt due to acquisitions totaling $60 million during the fourth quarter, with net debt representing 19% of enterprise value [14][15] - The average price per acre of Real Estate sales in 2019 was over $4,300, the highest level since 2007, despite lower volume sold [11] Q&A Session Summary Question: Impact of coronavirus on export markets - Management noted that the situation is fluid, with potential decreases in demand for logs due to labor restrictions and port slowdowns in China [50][54] Question: Update on European spruce beetle epidemic - Management indicated that the spruce volume in China has significantly increased, with expectations that the epidemic may peak in 2020-2021 [62][66] Question: Sustainable harvest levels - Sustainable harvest levels were disclosed as 5.9 to 6.3 million tons for the South, 1.4 million tons for the Pacific Northwest, and 2.4 to 2.6 million tons for New Zealand [94][98] Question: Pricing expectations for New Zealand and Southern pricing in 2020 - Management expects EBITDA per ton to fall 5% in the South and closer to 25% in New Zealand, reflecting market conditions and geographic mix [108]