Weyerhaeuser Co.'s wood products group posted a $3 million contribution loss to pretax earnings in the second quarter, recovering from a $162 million loss in 2009's second quarter and a $19 million deficit in this year's first quarter, as sales revenues jumped 32.8% to $789 million. But the company predicted its loss will widen "significantly" in the current quarter as market prices for its lumber and oriented strand board decline.
"Although second-quarter market conditions were extremely volatile, quarterly average sales realizations improved across nearly all product lines in the second quarter compared to the first," the company said in a news release. "Sales volumes for most products increased moderately compared to very low first quarter levels. These improvements were partially offset by higher log costs.
"Market conditions deteriorated substantially beginning in mid-May," the Federal Way, Wash.-based company continued. "Sales realizations for lumber and oriented strand board declined sharply. The company also experienced a considerable drop in sales volumes for engineered wood products. The segment reduced operating rates significantly in the latter half of the quarter to match lower market demand."
Based on the financial statement, here are the wood products group's sales by product type and their changes from the second quarter of 2009, along with output figures for the second quarter and the changes from the year-earlier quarter:
- Structural lumber--Sales: $308 million, up 42.%. Production: 884 million board feet, down 0.1%.
- Engineered solid section--Sales: $79 million, up 27.4%. Production: 4 million cubit feet, unchanged.
- Engineered I-joists--Sales: $49 million, up 14%. Production: 41 million lineal feet, up 12.2%.
- Oriented strand board--Sales: $116 million, up 100%. Production: 437 million square feet (3/8-inch), up 16.8%.
- Softwood plywoodSales: $23 million, 64.3%. Production: 75 million square feet (3/8-inch), up 36.4%.
- Hardwood lumberSales: $64 million, up 14.3%. Production: 76 million sqare feet, up 10.1%.
- Other products purchasedSales: $38 million, down 2.6%.
- Other products purchased for resaleSales: $112 million, up 5.7%.
This year's wood products pretax earnings were boosted by an $8 million gain on the sale of property. The 2009 second-quarter results showed a $1 million property sale, but the company also booked $16 million worth of impairments.
Company-wide, Weyerhaeuser rebounded to a $14 million net profit in the second quarter from a year-earlier loss of $106 million and a $20 million loss in the first quarter. Net sales climbed 29.8% to $1.81 billion.
Aside from the wood products group, the timberlands segment's contribution rose 6.1% to $70 million from $66 million in the April-June 2009 period, the cellulose fibers group's contribution shrank 26% to $74 million from $100 million, and the real estate group swung to a $27 million pretax contribution profit from a $50 million loss.
"In the second quarter we returned to profitability and all businesses were cash positive from operations," said Dan Fulton, president and chief executive officer. "I'm encouraged by our ability to profitably manage operations in an uncertain climate and with the lack of a sustained housing recovery. On July 11, we announced the final major milestone in our plan to become a REIT [real estate investment trust] by declaring our special dividend. We look forward to the benefits that the REIT structure will bring to our shareholders."
That special dividend totaled $5.6 billion. (Story). A REIT differs from a typical public company in that it specializes in real estate and mortgages. REITs receive special tax considerations and typically offer investors high yields. A large number of Weyerhaeuser's competitors already are owned by REITs.