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Weyerhaeuser Vends Montana Timberlands, Optimizes Portfolio

Zacks Equity Research

Weyerhaeuser Company WY has been focusing on optimization of the timberlands portfolio. The company had earlier sold Michigan timberlands to Lyme Great Lakes Holding LLC — a subsidiary of The Lyme Timber Company LP — for $300 million.

Recently, Weyerhaeuser announced that it has sold 630,000 acres of Montana timberlands to Southern Pine Plantations for approximately $145 million in cash. It anticipates minimal tax liability related to the same.

The transaction, which was announced in December 2019, does not impact Weyerhaeuser’s three manufacturing facilities located in Montana. The Northern region, which includes Montana timberlands, encompasses a diverse mix of hardwood and softwood acres.

Operating Initiatives to Boost Performance

Weyerhaeuser — one of the world's largest private owners of timberlands — remains focused on operational excellence that includes merchandising for value, harvest and transportation efficiencies, along with flexing harvest to capture seasonal and short-term opportunities. Also, it focuses on optimizing silviculture spend, reducing growth costs, and improving log and hauling efficiencies across all geographies.

Over the last few quarters, the company has been registering lower profits due to volatility in various markets served. In 2019, the Timberlands segment’s net sales declined 12% year over year. Reduction in average sales realizations for domestic and export logs, and seasonally lower domestic sales volumes in the West resulted in the decline. Adjusted EBITDA also declined 24.6% from 2018.

For first-quarter 2020, the company expects sequentially higher earnings and adjusted EBITDA in the Timberland segment. Shares of Weyerhaeuser have declined 43%, comparing unfavorably with the industry's 36.8% fall.


Nonetheless, its focus on operational excellence is likely to drive performance going forward. The company had achieved $42 million of improvements in Timberlands in 2018, which was within the $40-$50 million target, for a cumulative total of $214 million since the initiation of the plan. In 2019, it achieved more than $100 million of additional operational excellence improvements. The figure came in higher than the company’s expectation.

Zacks Rank

Weyerhaeuser — 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 — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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