Weyerhaeuser
2Q
| Weyerhaeuser
2Q
|
| (FOOL
CONFERENCE
CALL
SYNOPSIS)* By Debora Tidwell (MF Debit) Weyerhaeuser Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: WY)") else Response.Write("(NYSE: WY)") end if %> UNION CITY, Ca., July 17, 1996/FOOLWIRE/ --- Weyerhaeuser Co reported Q2 1996 earnings this morning. The company reported net earnings of $103.2 million or $0.52 per share, $0.10 per share above analyst estimates.
Net sales were $2.9 billion, down 4% from the same quarter last year. They have continued to benefit from their business improvement plans which are showing in these earnings and, particularly, in the wood products and timberlands area where they did not have any market-related downtime.
As far as the segment earnings, they were very pleased with their pulp paper and packaging segment given the market conditions. They reported $35 million in Q2 1996 compared with $305 million for Q2 last year. The timberlands and wood products segment operating earnings were $217 million in Q2 compared with $188 million for the year ago period. Those earnings reflect the positive contribution of their recently announced timber acquisitions.
Corporate expenses were lower than normal, reflecting lower variable compensation and benefits as a result of these lower earnings levels and various cost containment efforts that they have been doing.
Weyerhaeuser started to see the benefits of the significant increase in shipments (up 33% from Q1) in the pulp business. They began realizing some price increases in June in some of the minor grades which they produce and then July 1st they announced a price increase in Northern bleach kraft pulp. They are selling pulp at that price and expect it to be fully implemented by the end of this month. Order rates are still good and they are still in the process of reducing inventories further.
Their coated paper customers, particularly in Europe, are reporting that their business is improving and Weyerhaeuser is optimistic that the order rates will stay healthy during what is normally the slow season in this business (the Summer).
In the corrugated box business, which is their second most important business in that segment, their shipments were up 14% from the first quarter and 26% from a year ago. A good deal of that is due to their acquisition. On a same-facility basis, shipments were up 6%. Their system has been in balance since the end of last year and, with the exception of the media machine in Longview Washington which has been curtailed indefinitely still, they are running full and running well.
They announced a $40 liner board price increase effective July 15th. For them, the only practical application is in the export market where they expect to realize a portion of that increase by the first of August.
Box prices are beginning to stabilize in the U.S. and they are optimistic that market conditions will continue to improve through the rest of the year and that will increase the likelihood that the environment will support some improved pricing sometime before the end of the year.
In fine paper, their uncoated free-sheet shipments are higher than a year ago, their lightweight coated shipments are somewhat lower. Uncoated free-sheet orders remain somewhat slow since early in the quarter when they had a strong rebound that seems to have been driven primarily by customer restocking. The April price increase held in most grades and the first increase was effective only in a limited number of high quality grades.
In newsprint, the domestic market continues to weaken but the export market is good. Their domestic price for newsprint has dropped to about $630 per ton from a high of $750. They continue to shift more of their production to Japan -- in Q2 54% of their volume went to Japan as opposed to 45% in the same period last year.
Recycled fiber shipments are improving, up 16% from Q1 and 46% over last year which is largely due to the acquisition and expansion in that business since last year. Prices are still mixed.
On the wood products and timberlands side of the businesses where they had a particularly good quarter, most of the improvement in Q2 over year-ago levels has been in the lumber business. Their average realizations were up 12% from last quarter and shipments were up a similar amount. The log export business was good -- shipments were 15% higher than Q1 but were 10% below what was a very strong quarter in Q2 1995. The lower volumes are primarily due to the scheduling of their harvest plan this year rather than reflective of market conditions. Where their harvest plan last year was heavy to the first half of the year versus the second half, this year the harvest plan is more even-flowed through the year. Domestic log shipments were up 7% from the first quarter and down 1% from last year. Log realizations are up slightly from Q1 and down 12% from year ago levels. The strong lumber market and low log inventories, particularly for Douglas Fir logs, are continuing to put pressure on log prices in the West and in the South. Hemlock in the West is still in ample supply and remains relatively weak in both export and domestic markets.
Structural panels are continuing to show the effect of increasing OSB capacity. The recent market strength brought on by Hurricane Bertha is expected to be short-lived as these kinds of spurts generally are. With more capacity additions in the second half of the year, they expect some continued softness in those markets. * A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. | |
Copyright 1996,
The Motley Fool |