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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Weyerhaeuser
June 17, 2013 at 2:56 PM

Weyerhaeuser finds a big deal in its back yard

On the way to becoming a real estate investment trust in 2010, Weyerhaeuser got out of the fine paper business, closed mills and factories, sold its containerboard, packaging and recycling business and shrank its workforce by 70 percent. There seemed to be little left to see from this one-time titan except the mandatory funneling of most of its earnings to investors and benefiting from the tax break for REITs. That changed over the weekend, when the company, headquartered in Federal Way, announced that it would buy Longview Timber for $2.65 billion. Not only that, but it said it might dump its house-building subsidiary.

The former is a blockbuster deal that adds to Weyerhaeuser’s timberlands at a time when timber demand is rebounding. The latter, if it comes to pass, would represent a major shift from Weyerhaeuser’s strategy. In the mid 2000s, facing years of underperforming the S&P 500, Weyerhaeuser placed special hope in residential real estate and its Wreco (Weyerhaeuser Real Estate Co.) unit which includes Quadrant Homes and Pardee Homes. Also, one of the little-discussed appeals of focusing on holdings of timberlands, was the notion that exurban building would continue and some of the company’s land might become valuable subdivisions. Not for nothing did Wreco’s former chief, Dan Fulton, become chief executive of the new Weyerhaeuser. Then the housing crash hit, not only tanking demand for lumber but badly wounding Wreco like all house builders. As part of Sunday’s news, the company said Fulton, 63, will retire and Doyle Simons, former CEO of Temple-Inland, will become chief executive in August.

Simons, 48, came up through the executive ranks of Temple-Inland, a pulp and paper company which was purchased last year by International Paper. Even as it was converting to a REIT, Weyerhaeuser was saying “trees are our future.” This leadership reaffirms that mantra, and if the housing division is spun off the company will become even more of a pure play. Housing is recovering, but we’re not going back to a 2000s boom, nor is exurban mass building as appealing as it seemed before the crash.

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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.”

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April 30, 2012 at 10:00 AM

Timber still cuts a big footprint in state economy

We built this city on…no, not rock ‘n’ roll, but logs. Long before “Bill Luck” (Boeing and Gates), the Seattle and the Northwest economies were heavily dependent on timber and wood products. A new survey based on 2010 data from the Washington State Department of Natural Resources shows the sector still has some heft. “Though housing and global economic crises have deeply affected the industry, Washington’s wood products in 2010 were worth nearly $5 billion. Overall 5 percent more wood was consumed by the industry in 2010 than in 2008. Due to a vigorous demand by China, Washington’s export log sector grew 39 percent between 2008 and 2010.”

Among the other highlights: The 5 percent increase over 2008 in total volume of logs consumed by the primary wood products operations came after 10 years of declines; lumber mills used 67 percent of the total wood used by mills in the state; pulp mills made the highest revenue; almost all wood for the shake and shingle mills came from tribal forests. Meanwhile, from 2006 and 2010, the volume of lumber produced by Washington’s sawmills dropped 32 percent. Still, volume of lumber produced was enough to build 180,000 houses.

One of western Washington’s advantages is the relatively fast time (30 years) that Douglas fir and related species can reach a size that can be harvested. “A single acre of trees grown to a rotation age of 60 years can yield 30,000 to 60,000 board feet, enough to build two to three average-sized homes.” Georgia, the second largest producer of logs in the U.S. has annual yields of 3,000 to 10,000 board feet per acre.

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December 14, 2010 at 9:50 AM

Lessons from Weyerhaeuser and the decline of the U.S. economy

If you want a snapshot into today’s American economy and its inability to create productive jobs, look no further than Weyerhauser. The iconic Northwest company was once one of the largest integrated timber and paper companies in the world. It made things. It was the jobs engine for thousands in small mill towns in the Northwest, as well as at its headquarters in Tacoma, and later, Federal Way.

Now it’s preparing to convert to a Real Estate Investment Trust, where most of its profits will go directly to investors. On Monday, it announced a tripling of its dividend ahead of the conversion. Today’s Weyerhaeuser is essentially a large owner of timberland, most of its productive manufacturing operations shut or sold off.

This transformation may be very profitable for investors. (Maybe not, considering how much of the profit base depends on a housing market that may be sick for many years to come; the REIT idea was hatched during the real-estate bubble). For new jobs, productive activity and exports, not so much. The company employed 37,900 in 2007 — the number of jobs had dropped to 14,900 by 2009. In 2008, Weyerhauser eliminated 1,500 well-paid white-collar jobs, most at its headquarters. The damage reached from scores of small towns to metro Seattle.

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