Weyerhaeuser Hit by U.S. Housing

On Friday, before market opened, Weyerhaeuser Company (WY - Snapshot Report) reported discouraging results for the third quarter 2009. 

The company reported net sales of $1,407 million compared to $2,107 million in the year ago quarter. Excluding one time items, Weyerhaeuser reported a net loss of $56 million, or 26 cents per share versus a net loss of $3 million, or 1 cent per share, in the third quarter of 2008. 

Weyerhaeuser operates through four business segment such as Timberlands, wood products, cellulose fibers and real estate. Excluding a pre-tax gain of $163 million from the sale of 140,000 acres of non-strategic timberlands in northwestern Oregon, the segment’s quarterly results decreased $10 million. 

Excluding the pre-tax items, the wood product segment’s loss in the reported quarter decreased $55 million. During the quarter, cellulose fibers segment included a pre-tax gain of $122 million related to alternative fuel mixture credits, compared to $107 million in the second quarter. Excluding the credit, the segment’s earnings improved $51 million. Excluding the pre-tax items, the real estate segment’s quarterly loss decreased $5 million. 

With three of company’s four business segments linked closely to U.S. housing starts, the recession continued to affect the financial performance. 

On the same day, Weyerhaeuser also announced its intension to build a new cellulose fibers processing plant in Gdansk, Poland. The company won a competitive tender process to purchase 100,000 square meters of land for this project. The land sale agreement is expected to be completed by 2009 and the company plans to break ground for the 17,000-square-meter facility in 2010. 

The facility will process cellulose fibers for use in hygiene products. It will employ at least 45 people upon its expected completion in 2012. The facility will be Weyerhaeuser’s first cellulose fibers manufacturing plant outside of North America. 

There was improvement across the board, but the bottom line is that earnings remain depressed and it will take a housing recovery to bring them back to the level they were at a few years ago. Thus, Weyerhaeuser forecasts weaker results in the fourth quarter from its timberlands and wood products segments, a seasonal uptick in its real estate business and comparable results from its pulp business.