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Weyerhaeuser Updates on Business Activities Amid Coronavirus

In the wake of coronavirus pandemic, Weyerhaeuser Company WY provided an update on its operating activities.

Devin W. Stockfish, president and chief executive officer of Weyerhaeuser, stated, "Given the broad-based uncertainty regarding the ultimate economic impact of the COVID-19 pandemic, we are taking action to position our businesses for changing market dynamics and prudently enhancing our financial flexibility. Weyerhaeuser is operating from a strong financial position, and we have demonstrated that the company has the cost structure, agility, and resilience to deliver industry-leading performance through rapidly changing market conditions.”

Moreover, the company believes that it is well positioned to manage through the disruption. Notably, it has already undertaken proactive steps to safeguard the health of its employees.

Financial Actions

Weyerhaeuser has a strong financial position, with excellent liquidity, investment grade credit ratings of BBB/Baa2 and no debt maturities in 2020. Its 11 million acres of high-quality timberlands also provide strong asset coverage.

Apart from these tailwinds, the company has undertaken certain precautionary measures to further strengthen its balance sheet as well as maintain flexibility and liquidity. It is limiting or deferring non-essential operating expenses; reducing 2020 capital expenditures by $70-90 million; and increasing cash on hand by $550 million through a draw on its revolving credit facility (expires in January 2025). The company has $950 million of capacity remaining in the facility.

Moreover, Weyerhaeuser has received approximately $145 million cash from the sale of its Montana timberlands. Also, the company issued 4.0% notes worth $750 million, through a public bond offering with proceeds to be used to refinance its outstanding 2021 maturities.

Operational Update

Weyerhaeuser has been experiencing solid demand through late March. The company has been working actively to mitigate minor supply chain disruptions related to transportation and delivery of export logs, particularly in Asia. Moreover, it is adjusting operating capacity at certain manufacturing facilities, per customers’ sentiment and order flow.

For April, the company expects to reduce operating capacity by approximately 20% for lumber, nearly 15% for oriented strand board or OSB, and 15-25% for engineered wood products or EWP, through temporary mill curtailments and reduced shift postures.

Importantly, the U.S. Department of Homeland Security marked the forest products industry as an "essential critical infrastructure workforce", as timber and wood products supports critical infrastructure and construction projects as well as manufacturing of important personal hygiene items.

Price Performance

Share of this Zacks Rank #3 (Hold) company have plunged nearly 44% compared with the industry’s 36% decline. Estimates for 2020 moved 2.8% south in the past 30 days. The downside reflects rapidly evolving market conditions due to the pandemic. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Meanwhile, market pundits are expecting the current market situation to prevail in the first half but will regain momentum by the second half of the year.

Weyerhaeuser’s — which shares space with Universal Forest Products, Inc. UFPI, Louisiana-Pacific Corporation LPX and Trex Company, Inc. TREX in the Zacks Building Products - Wood industry — focus on improving the productivity of harvesting and hauling operations, reducing road cost, optimizing forestry spending as well as maximizing revenues from every log harvest is likely to drive growth.

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Weyerhaeuser Company (WY) : Free Stock Analysis Report
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