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Forest products firm Weyerhaeuser Co. (WY) on Friday reported a loss for the second quarter that widened from a year ago, hurt by the continued weakness in the housing market amid the economic downturn. However, adjusted loss per share for the quarter came in narrower than analysts' expectations. Quarterly sales and revenues from continuing operations also dropped 36%. Weyerhaeuser, which produces wood products for housing and builds single-family homes, has been impacted by the downturn in the U.S. housing market. The company's problems have been compounded by tighter credit markets as banks are reluctant offer new home loans to customers.
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| | | {loadposition contentad} | | | | | However, the U.S. housing market is showing signs of life for the first time since 2006. According to the National Association of Realtors, home sales in the U.S. rose for the third straight month in June for the first time in years, totaling about 11%.
Further, the declining home prices, historically low interest rates and government stimulus programs, such as the $8,000 federal tax credit and the $10,000 California state tax credit has created unique home purchasing opportunities. Though job market weakness and tight mortgage lending standards continue to restrain demand, yet consumer confidence appears to be growing.
Among Weyerhaeuser's peer's, Memphis, Tennessee-based International Paper (IP) on Thursday reported a 40% year-over-year drop in profit for the second quarter, reflecting lower sales and hefty restructuring charges. Net income was $136 million or $0.32 per share, lower than $227 million or $0.54 per share last year. Quarterly net sales edged down to $5.80 billion from $5.81 billion last year.
Another peer, Nashville, Tennessee-based Louisiana-Pacific Corp. (LPX) is scheduled to report its second quarter results on August 4. Wall Street analysts expect the company to report a loss of $0.33 per share on revenues of $241.40 million for the second quarter.
In a bid to offset the slump in the U.S. housing market, Weyerhaeuser has closed down or sold more than fifty sawmills and wood product manufacturing facilities. The company also employs about 50% fewer employees than it did two years ago.
In a statement, president and chief executive officer, Dan Fulton said, "Although we've begun to experience some recovery in housing sales and starts, it is not yet clear that this improvement is driven by sustainable shifts in market fundamentals, and therefore our timberlands, wood products and real estate businesses continue to operate in an environment of uncertainty. We continue to reduce costs to make our businesses more competitive, and we continue to adjust our harvest and production levels to meet market demand."
Second Quarter Results The Federal Way, Washington-based company posted net loss of $106 million or $0.50 per share for the second quarter, wider than $96 million or $0.45 per share in the year-ago quarter.
Loss from continuing operations for the quarter narrowed to $116 million or $0.50 per share from $260 million or $0.98 per share in the comparable quarter a year ago.
The results for the latest quarter include after-tax charges of $36 million or $0.17 per share related to real estate, $14 million or $0.07 per share related to Wood Products asset impairments and $30 million or $0.14 per share related to restructuring activities. It also included after-tax gains of $72 million or $0.34 per share from alternative fuel mixture credits, $14 million or $0.07 per share from litigation and insurance settlements and $13 million or $0.06 per share from gain on sale of closed facilities.
Similarly, the year-ago results primarily included after-tax charges of $206 million or $0.98 per share related to real estate impairments, reserves and land-related charges as well as after-tax gains of $101 million or $0.48 per share related to ownership restructuring of Uruguay assets.
Excluding these items, adjusted net loss for the quarter was $125 million or $0.59 per share, compared to net earnings of $7 million or $0.03 per share in the prior-year quarter.
On average, thirteen analysts polled by Thomson Reuters expected the company to report a loss of $0.71 per share for the second quarter. Analysts' estimates typically exclude special items.
Total net sales and revenues from continuing operations for the quarter dropped 36% to $1.39 billion from $2.17 billion in the same quarter last year. Nine Wall Street analysts had a consensus revenue estimate of $1.46 billion for the quarter.
Net sales and revenues for forest products dropped to $1.19 billion from $1.82 billion in the prior-year quarter, and real estate net sales and revenues totaled $199 million, down from $354 million in the year-ago quarter.
Segmental Details Weyerhaeuser's timberland generated net sales and revenues of $208 million, down from last year's $224 million. Pre-tax segment earnings were $66 million, sharply down from $103 million in the year-ago quarter. The company expects third quarter segment earnings to be lower than the second quarter, citing additional harvest deferrals and lower log sales realizations.
Second quarter net sales and revenues for wood products plunged to $594 million from $1.07 billion in the year-ago quarter. The company incurred a marginally narrower pre-tax segment loss of $162 million from $164 million in the same quarter last year. Weyerhaeuser expects narrower operating loss for the segment in the third quarter, due to improved operating efficiencies, cost control initiatives, and modest improvements in softwood lumber and oriented strand board prices.
Cellulose fibers posted net sales and revenues of $349 million, down from $460 million reported in the prior-year quarter. Segment pre-tax earnings surged to $100 million from $42 million in the comparable quarter last year. Weyerhaeuser expects segment operating earnings for the third quarter to be higher than second quarter, primarily due to less maintenance downtime and continued cost control.
Weyerhaeuser's real estate and related assets realized quarterly net sales and revenues of $199 million, sharply lower than $354 million in the same quarter last year. Pre-tax loss for the real estate segment was $50 million, sharply narrower than $337 million in the year-ago quarter.Weyerhaeuser expects higher loss from homebuilding operations in the third quarter, due to lower average sales prices.
Net sales and revenues for corporate and other fell to $41 million from $126 million in the corresponding quarter a year ago. Segment pre-tax earnings for the quarter were $13 million, sharply down from $111 million in the comparable quarter a year ago.
Net sales and revenues for containerboard, packaging and recycling was $1.38 billion in the year-ago quarter. The company noted that it reclassified the containerboard, packaging and recycling operations as discontinued due to the sale of the segment's assets to International Paper in early August 2008.
Other Metrics Operating loss for the second quarter significantly narrowed to $62 million from $404 million in the prior-year quarter, while total costs and expenses declined to $1.45 billion from $2.58 billion in the year-ago quarter.
Half Yearly Highlights For the first six months, Weyerhaeuser posted net loss of $370 million or $1.75 per share, wider than $244 million or $1.16 per share in the prior-year period.
Loss from continuing operations for the period narrowed to $382 million or $1.75 per share from $501 million or $2.10 per share in the year-ago period.
Total net sales and revenues from continuing operations for the year-to-date period dropped to $2.67 billion from $4.22 billion recorded in the same period last year. Stock Quote
In Friday's regular trading session, WY is trading at $36.30, up $0.69 or 1.92% on a volume of 0.88 million shares. In the past 52-week period, the stock has been trading in a broad range of $18.67 to $65.50.
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