PotlatchDeltic(US:PCH)2023-08-01 21:28Financial Data and Key Metrics Changes - Adjusted EBITDDA for Q2 2023 was $46 million, down from $58 million in Q1 2023, primarily due to lower seasonal harvest volumes and fewer rural acres sold [11][14] - The Wood Products segment reported adjusted EBITDDA of $12 million in Q2 2023, compared to breakeven results in Q1 2023, driven by higher lumber prices [14][22] - The Timberlands segment generated adjusted EBITDDA of $29 million in Q2 2023, down from $47 million in Q1 2023, impacted by seasonal low harvest volumes [15][21] Business Line Data and Key Metrics Changes - The company shipped 280 million board feet of lumber in Q2 2023, an increase of 18 million feet from Q1 2023 and 26 million feet from Q2 2022 [3][39] - The Real Estate segment had adjusted EBITDDA of $12 million in Q2 2023, down from $19 million in Q1 2023, due to a decline in rural sales [5][40] - Residential lot sales in the Chenal Valley community included 42 lots sold at an average price of $107,000 per lot, with commercial land sales averaging over $800,000 per acre [16][40] Market Data and Key Metrics Changes - The company noted a steady improvement in housing demand, with single-family housing starts above 900,000 units for two consecutive months [7] - Homebuilder sentiment has increased for seven consecutive months, reaching the highest level since June 2022, indicating positive tailwinds for the housing market [34] - The company expects U.S. housing starts to return to levels above the long-term average of 1.5 million units per year once mortgage rates ease [17] Company Strategy and Development Direction - The company is focused on modernizing and expanding its Waldo, Arkansas sawmill, which is expected to increase annual capacity by 85 million board feet by the end of 2024 [4] - PotlatchDeltic is exploring natural climate solution opportunities, including a carbon credit project expected to generate significant revenue starting in the first half of next year [6][106] - The company remains committed to a disciplined capital allocation strategy, including share repurchases when trading at a significant discount to estimated net asset value [8][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the resilience of new home demand and steady improvement in homebuilder sentiment, indicating a bullish outlook on long-term housing fundamentals [26][34] - The company anticipates total adjusted EBITDDA to be higher in Q3 2023 compared to Q2 2023, based on expectations for higher lumber prices and seasonal increases in harvest volumes [25][26] - Management highlighted the importance of lower interest rates for a full rebound in housing construction, as many homeowners are opting to remodel rather than move due to high mortgage rates [17][18] Other Important Information - The company reported $331 million in cash and $630 million in total liquidity at the end of Q2 2023, providing a solid platform for growth [19][41] - The company received $23 million in insurance recoveries related to the Ola sawmill fire, totaling $73 million since the claim was filed in 2021 [43] - Capital expenditures for Q2 2023 were $12 million, with plans to spend $135 million to $145 million for the full year, excluding potential acquisitions [24] Q&A Session Summary Question: Impact of weather on Timberlands in Q2 - Management acknowledged adverse weather but noted that planned harvest volumes were met, indicating effective management despite challenges [27][50] Question: Future of existing home sales with changing interest rates - Management expects existing home sales to pick up as rates decrease, but does not foresee a significant impact on new home sales due to ongoing housing shortages [52][72] Question: Southern pulpwood prices and market conditions - Management indicated that while pulpwood prices may be slightly down, long-term prospects remain positive due to increasing renewable energy investments [57][60] Question: Inventory levels of European lumber imports - Management noted a significant decrease in European lumber imports, suggesting that inventory levels along the East Coast have also declined [61] Question: Carbon credit project details - Management provided insights into a carbon credit project in the U.S. South, expecting to generate high-quality credits and significant revenue [104][106] Question: Timberland transaction activity - Management observed a quiet timberland M&A market, with high prices for available properties, and emphasized a focus on off-market deals [108][109]