Weyerhaeuser(US:WY)2022-10-28 18:34Financial Data and Key Metrics Changes - Weyerhaeuser reported third quarter GAAP earnings of $310 million or $0.42 per diluted share on net sales of $2.3 billion, with adjusted EBITDA totaling $583 million, approximately 52% lower than the second quarter [4][19] - The company generated approximately $560 million of cash from operations in the third quarter and nearly $2.7 billion year-to-date, ending the quarter with approximately $1.9 billion of cash and cash equivalents and total debt of just over $5 billion [19][20] Business Line Data and Key Metrics Changes - Timberlands contributed $107 million to third quarter earnings with adjusted EBITDA of $168 million, a $3 million increase compared to the year-ago quarter, but a decrease of $51 million compared to the second quarter due to lower sales volumes and realizations [6][12] - Wood Products contributed $344 million to third quarter earnings and $395 million to adjusted EBITDA, with adjusted EBITDA down $517 million from the second quarter, largely driven by decreased lumber and OSB pricing [14][15] Market Data and Key Metrics Changes - In the Western domestic market, log demand remained steady despite lower lumber pricing, with domestic sales realizations comparable to the second quarter [7] - Japanese log sales volumes decreased significantly due to increased European lumber imports and reduced export activity from the work stoppage, while in China, demand softened modestly due to disruptions in the real estate market and pandemic-related lockdowns [8][9] Company Strategy and Development Direction - The company continues to engage with high-quality developers for renewable energy and carbon capture opportunities, encouraged by the Inflation Reduction Act, which is expected to drive demand for Natural Climate Solutions [13] - Weyerhaeuser maintains a positive long-term outlook for housing fundamentals, supported by strong demographic trends and a significantly underbuilt housing stock [30][32] Management's Comments on Operating Environment and Future Outlook - Management noted that the near-term housing outlook remains less favorable due to rising mortgage rates, housing affordability challenges, and high inflation, but homebuilder backlog may support wood products demand [29][30] - The company expects fourth quarter earnings and adjusted EBITDA to be significantly lower than the third quarter due to work stoppage impacts and lower average sales realizations [22][26] Other Important Information - The work stoppage resulted in approximately 360,000 tons of deferred volumes in the third quarter, translating to an EBITDA impact of approximately $25 million, with expectations to recover this volume over the next year [33][34] - The company returned $133 million to shareholders through dividends and $145 million through share repurchases, with a commitment to grow dividends by 5% annually through 2025 [20][21] Q&A Session All Questions and Answers Question: Can you talk about the ability to hold some of the price in your EWP business and its implications for profitability? - Management expects to see some input costs on the wood product side coming down, particularly log costs in the West and OSB web stock, which may provide some relief [38] Question: How are you thinking of valuations in Timberlands going into next year? - Management noted strong interest in Timberland assets, with expectations that prices will remain stable due to ongoing interest in Climate Solutions [40][42] Question: What are your thoughts on continued buybacks given the stock's trading position? - Management views share repurchase as a useful tool for returning cash to shareholders and will evaluate it alongside other options [44] Question: Will the deferred volumes from the strike be recovered in Q3 and Q4 of next year? - Management plans to sprinkle the recovery of deferred volumes across the entire year of 2023 [46][47] Question: What is the outlook for log realizations in the West? - Management indicated that log pricing is primarily driven by domestic lumber prices, which have been declining [54][56] Question: Can you provide insights on export markets and realizations? - Management noted headwinds in Japan due to increased European competition but sees opportunities to move volume to Japan and China despite challenges [59][60] Question: What is the guidance for timber prices in the U.S. South? - Management guides on a delivered basis and noted that stumpage prices have been declining, which could impact delivered pricing in the future [62][63]