Weyerhaeuser’s reporting a year-end net gain of $120 million on sales of $3.1 billion in its wood-products division—up from a loss of $268 million on $2.3 billion in revenues a year earlier—signaled that more starts and higher commodity prices are not only yielding profits for firms that harvest, manufacture, and distribute lumber and OSB but also are being relayed into talk of increased production capacity. While that’s a sign many industry experts have been waiting for, Weyerhaeuser execs made it clear in a call with analysts Jan. 25 that they’re still waiting to bite.
“The increased production should show up as demand increases,” CEO Dan Fulton said. “We’re not producing excess inventory, and we’re not producing inventory at prices that don’t give us the margins we think are appropriate.” He noted that the company anticipates a 30% increase in housing starts, and has already made moves to increase OSB production.
The wood division’s gains were driven primarily by OSB and lumber, while increased raw material costs and a lagging EWP sector proved a drag on growth. The company expects increased production rates to cut unit manufacturing costs in 2013. Segment sales grew by $16 million over the previous quarter to $832 million, netting a $38 million earnings gain.
Plum Creek’s timber segment recorded annual revenues of $641 million and fourth-quarter revenues of $161 million, up 12% and 6% respectively from the year-earlier period. The company anticipates 950,000 to 1 million starts in 2013, volume it says would require a 3-billion-board-foot increase in North American production. CEO Rick Holley told analysts in a call Monday that the company expects half of that growth to come from the southern U.S. The company’s southern resources division recorded a $90 million operating gain during 2012 on revenues of $417 million, an increase of 22% and 16% respectively.
“In the first quarter, we’re already seeing $1 (billion) to $2 (billion) and we believe if you see that kind of production increase, you’ll see more than that for the year,” he said. “So it’s headed in the right direction.”
Holley also discussed the company’s large-scale capital investment earlier this year in 4.7 million tons of mature Southern yellow pine timber that would grow and be harvested during an eight-year period.
Interfor agreed to buy Rayonier’s wood-products division for $80 million in a transaction that is expected to close by the end of the first quarter. Interfor will gain three sawmills, which together produce 360 million board feet annually of Southern pine dimension lumber, bringing its annual production capacity to 2 billion board feet.
Next week: USG, Eagle Materials