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Weyerhaeuser Company (WY - Analyst Report) intends to reduce its debt balance by redeeming its 6.750% Notes due March 15, 2012, amounting to $517.9 million. The calculation of the redemption price will be done on May 27 and the payment of the Redemption Price plus interest is scheduled on June 2, 2011.

The company's long-term debt balance at the end of the first quarter of 2011 stood at $5.1 billion while cash and cash equivalents were approximately $1,463 million. As the company is highly leveraged with debt to total capital of 52%, we believe the redemption of notes is a positive move, which will help to bring down the debt-to-capital ratio to 49%.

Weyerhaeuser is one of the leading US forest product companies with approximately 6.6 million acres of timberland in North America. We believe the company stands well positioned to manage its timber portfolios with its conversion into a REIT structure. In addition, other attributes like effective cost control initiatives, solid balance sheet, and robust guidance bode well for the company's future growth prospects.

The recently declared financial results shows that the company's earnings improved from net loss reported in the year-ago quarter to a break-even level in the first quarter of 2011.    The top line registered a year-over-year growth of 11.2% based on stronger revenue from all segments.

However, the positives are offset by concerns over the industry's sensitiveness to macroeconomic conditions and its cyclical nature.  Three of the company's five business segments are highly dependent on the US housing market, which is still at the early stages of recovery after plunging badly following the recent economic crisis.  Weyerhaeuser also faces stiff competition from privately-held Canfor Corporation, International Paper Co. (IP - Analyst Report), and Louisiana-Pacific Corp. (LPX - Snapshot Report). 

We currently expect the company’s performances to be in line with the market, and thus maintain a Neutral recommendation on the stock.

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