Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.
April 30, 2013 at 9:00 AM
Weyerhaeuser’s got game again — a new game
You remember Weyerhaeuser. Or, if you moved here in the past five years, maybe you don’t. At one time, the Federal Way-based corporation was one of the largest and most powerful integrated paper-and-timber companies in the world and a major asset to the Puget Sound, especially in its former home of Tacoma. It also attracted criticism for its clear-cutting, among other environmental controversies. Then, in 2008, it cut 1,000 of its 2,500 headquarters jobs as it completed a transformation into a smaller real-estate investment trust that included selling its packaging and paper units. It was immediately slammed by the housing collapse, which dried up demand for its timber and shattered the ambitions of its housebuilding unit.
But Weyerhauser is back, after a fashion. Last week, it reported robust first-quarter earnings that beat Wall Street’s expectations. Earlier this month, it increased its dividend. The news attracted the attention of Financial Times’ influential Lex column, which proclaimed on Monday, “Now streamlined around its forest-based segments, the company can capitalise on America’s reinvigorated homebuying.” Behind the strong earnings was the best performance by its wood products unit since 2005, during the prime of the housing boom.
In a Friday conference call with analysts, Chief Executive Dan Fulton said the company was seeing benefits from a recovering U.S. housing market, as well as strong export demand from Asia. The company’s timber holdings in the West especially benefit from exports, while Southern forests were more closely tied to the U.S. housing market. “The positioning of our Western lands allows us to fully realize the opportunity to supply strong export markets, as well as to serve recovering domestic demand. In the South, we’re well positioned to meet increasing demand as log markets improve.”
The new Weyerhauser is still one of the world’s largest forest-products companies, with offices or operations in 10 countries. It consists of four units: Timberlands, wood products, housebuilding and cellulose fibers, used to make absorbent products such as paper towels. The first three have especially benefited from a housing rebound, both in demand for wood and wood products, as well as helping Weyerhaeuser’s housebuilding division dig out of holes in places such as Phoenix, Las Vegas and California. Fulton said, “I’m optimistic about our ability to continue to improve our operational results as the housing market remains on a path to return to trend levels of demand and global markets stabilize for our Cellulose Fibers segment.”
As a real-estate investment trust, Weyerhaeuser must distribute at least 90 percent of its taxable income to shareholders. Its conversion followed pressure from mediocre financial performance in the mid-2000s and the successful REIT transition of Seattle’s Plum Creek Timber. The REIT structure also brings substantial tax benefits for corporations, which is causing some that hardly fit the original intention of the REIT legislation to convert.
Weyerhauser shares closed above $30.50 on Monday. Five years ago, they were below $20. The company no longer leads corporate power in the Puget Sound or is the lifeblood for numerous Northwest mill towns. But it’s still around and starting to fulfill the vision of its remake before the recession.
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Today’s Econ Haiku:
Guess the arena
Got switched to the slow lane
Sound, fury, missed shot