Potlatch Corp.'s third quarter net earnings jumped 41% from the same period a year ago to $25.6 million, despite an almost 4% drop in revenues to $152.9 million, the company reported today.

The Spokane, Wash.-based Real Estate Investment Trust's wood products segment swung into the black with operating income of $2.9 million, compared with a $600,000 loss during the same period last year. Segment revenues also rose 7% to $69.2 million.

The company announced a 2% increase in lumber shipments and a 10% increase in lumber sales prices. The segment was helped by a $2 million benefit from lumber hedges.

"In our wood products business, we expect lumber prices to soften through the end of the year due to typical seasonal factors," Potlatch president, chairman, and CEO Michael Covey said. "Nonetheless, we expect the segment to remain cash flow positive for the fourth quarter."

Potlatch's resource segment, which includes its harvesting operations, was driven by strong production in its Northern region. The company, which owns 1.5 million acres of timberland in Arkansas, Idaho, and Minnesota, announced a $1 million improvement in the segment's overall operating income to $25.6 million.

Sawlog volume in the Northern region increased 13% compared with third quarter 2010 due to a shift of a portion of the harvest from the Southern to the Northern region to take advantage of better pricing opportunities. Sawlog prices, meanwhile, grew 7%.

The Southern region was not as strong, however, as sawlog volume decreased 12% and sawlog prices fell 8% due to weak demand for pine.

The company's real estate segment's operating income increased by $100,000 to $9.9 million, even though revenues fell more than 50% to $14.8 million. During the quarter, Potlatch completed a non-strategic/rural real estate sale in Idaho that resulted in revenues of $9.1 million.

Corporate expenses, which include interest expense, totaled $11.2 million during the quarter, compared with $12.9 million during the same period last year.

"We continue to experience the impact of the weak domestic housing market that is limiting demand for both our logs and manufactured wood products," said Covey. He said the company's balance sheet remains strong, however, with $81 million in cash and short-term investments.