PotlatchDeltic(US:PCH)2024-10-29 22:18Financial Data and Key Metrics Changes - Total adjusted EBITDDA for Q3 2024 was $46 million, a significant decrease from $103 million in Q2 2024, primarily due to a large land sale in the previous quarter [31] - Adjusted EBITDDA for the Timberlands division was $36 million, slightly higher than the previous quarter, with harvest volume in Idaho increasing to 427,000 tons from 365,000 tons [32] - Adjusted EBITDDA loss in the Wood Products segment widened from $7 million in Q2 to $10 million in Q3, driven by lower lumber prices and increased manufacturing costs [34] - The Real Estate segment generated $32 million in adjusted EBITDDA, down from $90 million in Q2, largely due to the absence of significant commercial land sales [37] Business Line Data and Key Metrics Changes - Timberlands division harvested 1.5 million tons in the South, consistent with Q2, while Southern pine sawlog prices remained stable despite slight moderation [33] - Wood Products segment saw average lumber price realization decrease by 5% from $423 per thousand board feet in Q2 to $402 in Q3, with shipments dropping to 267 million board feet [35][36] - Real Estate development business experienced increased EBITDDA due to higher residential lot sales, with 53 lots sold at an average price of $205,000, a record for the community [15] Market Data and Key Metrics Changes - Lumber markets hit cyclical lows early in Q3 but began to recover mid-quarter, with prices increasing from $359 to $418, a 16% rise [10] - The U.S. housing market showed resilience, with new home sales in September reaching the highest level in 16 months, despite elevated interest rates [24] - Multifamily construction faced challenges due to an oversupply of units and restrictive financing, while long-term housing fundamentals remained strong [25][26] Company Strategy and Development Direction - The company is focused on optimizing product mix, efficiently running mills, and managing costs to navigate challenging lumber markets [14] - The modernization and expansion project at the Waldo sawmill is expected to increase annual capacity by 85 million board feet and improve recovery by approximately 6% [13] - The company is exploring natural climate solutions, including solar development and lithium opportunities, which are anticipated to drive future growth [17][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the lumber market's recovery, attributing recent price increases to supply constraints and anticipated demand growth due to Federal Reserve interest rate cuts [54] - The company expects to harvest 1.8 million to 1.9 million tons in Q4, with a forecasted increase in Northern sawlog prices and improved production levels at the Waldo sawmill [44][45] - Long-term demand fundamentals in housing and repair and remodel sectors are expected to support growth, with anticipated increases in residential improvement spending [28][29] Other Important Information - The company repurchased $2 million worth of shares in Q3, with $98 million remaining under the repurchase program [23] - Total liquidity was reported at $460 million, including $161 million in cash [40] - Capital expenditures for the year are projected to be between $100 million and $110 million, with a significant portion allocated to the Waldo project [42] Q&A Session Summary Question: Recent uptick in lumber prices - Management indicated that the recent increase in lumber prices is largely supply-driven, with significant capacity reductions in the market [52] Question: Southern sawlog prices and inflation - Management expects log prices to improve as lumber markets recover, particularly in the Southeast region [60] Question: Northern sawlog pricing clarification - The anticipated increase in Northern sawlog prices includes a seasonal density factor [63] Question: Timeline for natural climate solutions contracts - Management is optimistic about solar options but expects significant impacts on P&L to materialize around 2026 [66] Question: Timberland deal activity - The timberland M&A market is currently sluggish, with a lack of high-quality properties available for sale [70] Question: Manufacturing costs in Wood Products - Management expects a significant drop in processing costs as the Waldo mill ramps up production [75] Question: Supply trade flow on lumber markets - Imports from Europe have decreased by about 10% this year, with expectations of moderated import levels [80] Question: Capital spending priorities for 2025 - Management is still in the budgeting process for 2025 and has not finalized capital spending plans [85]