The paragraph is the introductory segment of Weyerhaeuser's First Quarter 2025 Earnings Conference Call. Andy Taylor, the Vice President of Investor Relations, begins by mentioning the call is being webcast and emphasizes reviewing the risks associated with forward-looking statements. The discussion involves non-GAAP financial measures. Devin Stockfish, the CEO, shares that Weyerhaeuser reported first quarter GAAP earnings of $83 million, or $0.11 per diluted share, on net sales of $1.8 billion, with an adjusted EBITDA of $328 million. Despite macro-economic uncertainty, the operational performance is praised. Timberlands contributed $102 million to the first quarter earnings.

In the first quarter, the company saw an increase in adjusted EBITDA to $167 million, driven by strong domestic sales in the West due to healthy log demand and rising lumber prices. Domestic sales volumes increased as the company shifted focus from exports to China, which were halted due to a new Chinese ban on U.S. log imports. Harvest volumes grew, and costs decreased with seasonal transitions. In Japan, log demand rose due to reduced European lumber imports, boosting sales volumes. Conversely, demand in China declined during the Lunar New Year, prompting the company to reduce exports significantly, resulting in decreased sales volumes and lower average realizations.

The paragraph discusses the impact of a log ban, noting minimal effects on first-quarter results and the ability to shift volumes to other buyers. In Southern timberlands, adjusted EBITDA decreased by $3 million due to stable log markets, muted sawlog demand, and balanced fiber markets, with consistent sales realizations and costs compared to the previous quarter. Northern adjusted EBITDA saw a slight increase with higher sales realizations and volumes. Real Estate, Energy, and Natural Resources contributed significantly to earnings, with a $6 million increase in first-quarter EBITDA driven by real estate sales. The real estate market remains strong, capitalizing on high-demand, high-value properties. The paragraph ends with a brief mention of news in the Natural Climate Solutions business related to a carbon capture agreement.

Earlier in the month, Occidental Petroleum reached a significant milestone in its CCS project in Louisiana by signing a 25-year agreement to source 2.3 million metric tons of CO2 annually from a facility expected to be operational by 2029. This step advances the CCS project and highlights the importance of partnering with skilled counterparties. In the Wood Products segment, first-quarter earnings were $106 million, with an adjusted EBITDA of $161 million, consistent with the previous quarter. The Lumber division saw a $19 million increase in adjusted EBITDA to $40 million, attributed to supply constraints, seasonal building activity improvements, and tariff concerns, leading to a 5% rise in average sales realizations and slight increases in sales volumes and reduced manufacturing costs.

In the first quarter, both sales volumes and unit manufacturing costs were slightly below initial expectations due to winter weather and softer demand, with log costs rising moderately. For oriented strand board (OSB), adjusted EBITDA fell by $4 million from the previous quarter due to lower pricing and demand. Although there was a slight improvement early in the quarter, concerns over tariffs later reversed this trend. OSB sales realizations decreased by 1%, aligning better than the composite due to order lag effects. Engineered wood products (EWP) adjusted EBITDA dropped by $16 million, partly due to a fire at a Montana facility that halted operations, costing $11 million, though production has since resumed. Overall EWP sales remained steady, with slight increases for most products compared to prior averages. The company plans to recover lost volumes by 2025.

In the first quarter, sales volumes decreased mainly for MDF and solid section products, although i-joist volumes were stable. Most unit manufacturing costs were lower except for MDF, which faced higher raw material costs. Despite EWP sales and pricing holding steady, demand was softer than expected. However, a slight increase in orders is anticipated to boost second-quarter sales, aligning closely with trends in new home construction, particularly single-family homes. In distribution, adjusted EBITDA fell by $4 million due to reduced sales. Financially, the company ended the first quarter with $560 million in cash and just under $5.2 billion in debt. They repurchased $25 million in shares, bringing total repurchases to $925 million out of a $1 billion authorization. The company also increased its quarterly dividend by 5% to $0.21 per share, marking the fourth consecutive annual increase. This strategy aims to drive long-term value by returning cash to shareholders.

In the first quarter, the company had capital expenditures of $93 million, including $16 million for an Arkansas EWP facility, and generated $70 million in cash from operations, typically the lowest due to seasonality. They refinanced $210 million of debt with a $300 million loan, with no further debt maturing in 2025. The company's financial position remains strong. Unallocated adjusted EBITDA decreased by $13 million due to intersegment adjustments. Looking to the second quarter, Timberlands business earnings are expected to decrease by $15 million due to increased forestry and road costs in the west. While log demand and supply are set to balance out with stable pricing, average domestic sales realizations are expected to be slightly lower.

The paragraph discusses expectations for fee harvest volumes and costs, noting slightly higher volumes due to favorable conditions, with increased forestry, road, and logging costs. Log exports to Japan should see steady demand, despite anticipated lower sales volumes due to vessel timing. Sales realizations are expected to rise. Southern log prices are expected to be stable, with slight improvements in sawlog demand and fiber demand as mills resume operations. In the north, sales realizations should rise, but harvest volumes will drop due to spring conditions. Real estate transactions are expected to continue steadily, with high premiums over timber value.

In the second quarter of 2025, adjusted EBITDA is expected to be $50 million higher and earnings $40 million higher than the first quarter due to real estate sales timing and mix. Full-year adjusted EBITDA guidance remains at $350 million, with a $100 million target from the natural climate solutions business. Basis as a percentage of real estate sales is anticipated to be 30% to 40%. In the wood products segment, second quarter earnings and adjusted EBITDA are expected to be slightly higher, excluding fluctuations in lumber and OSB prices, driven by seasonal sales volume increases. Demand is improving, particularly in the U.S. South's treater segment, with better orders for EWP products and higher lumber sales realizations due to increased pricing for southern yellow pine lumber. OSB realizations are slightly lower, with higher expected sales volumes and log costs in the lumber business and increased fiber costs and manufacturing costs due to planned maintenance in the OSB business.

In the engineered wood products business, sales volumes are expected to increase slightly in the second quarter with stable average sales realizations, while unit manufacturing costs should decrease due to improved production at the MDF facility in Montana and lower raw material costs. The distribution business anticipates a slight rise in adjusted EBITDA as sales volumes increase seasonally. Regarding the housing and repair markets, housing starts were steady in the first quarter, though homebuilder sentiment weakened due to economic uncertainties and tariffs. This caution persisted into April, leading to a slower-than-expected start to the spring building season for 2025. The future of the housing market depends on economic conditions and employment. A stable economy and potential decreases in mortgage rates could boost housing activity in 2025.

The paragraph discusses the current and future outlook for the housing and repair and remodel (R&R) markets. In the short term, housing activity could face volatility due to economic adjustments and trade negotiations, but there is long-term optimism supported by demographic trends and low home inventories. The R&R market remained stable in the first quarter despite seasonal slowdowns, with robust demand fundamentals. However, challenges like higher interest rates and reduced home transactions due to the lock-in effect and weaker consumer confidence are present. Looking ahead, R&R demand is anticipated to increase as economic conditions improve, driven by factors such as increased home equity and an aging housing stock. The pandemic's impact on project timelines is now transitioning to providing opportunities for future R&R growth. Additionally, the company reports solid first-quarter results, increased its quarterly base dividend for the fourth year in a row, and made progress in a carbon capture and storage (CCS) agreement in Louisiana.

The paragraph is part of a Q&A session following a presentation by Devin Stockfish. An unidentified analyst, filling in for Susan Maklari from Goldman Sachs, inquires about the demand for lumber as the building season begins. They mention that builders have lowered their closing targets, and there's been mixed demand from DIY sectors. The analyst asks about retailer demand expectations for the spring, potential inventory ramp-ups amid demand uncertainty, and the possible impacts of higher tariffs on Canadian lumber. Devin Stockfish responds, stating that overall lumber demand is currently steady but not as robust as expected due to recent declines in builder confidence. He also notes the removal of approximately 4 billion board feet of capacity from the system last year.

The paragraph discusses the current state of the supply and demand in the lumber and building materials market. There's a slight increase in demand with the arrival of spring, but uncertainty about the housing market has led to less inventory building than usual. Although there is currently enough supply to meet demand, a potential increase in building activity could create short-term supply shocks and price hikes. Factors such as tariffs and duties, including an upcoming increase in softwood lumber duties and a 232 investigation, are on buyers' minds but aren't significantly affecting current buying behavior. This situation may change as the quarter progresses.

The paragraph discusses the growing interest in transitioning from SPF to Southern Yellow Pine as it becomes a larger part of the market. Although it's still early in this transition, there are increasing inquiries. An unidentified analyst inquires about the outlook for engineered wood products (EWP), noting a slight pricing lift despite builders attempting to cut costs due to affordability issues. Devin Stockfish responds that near-term pricing is expected to remain stable, with a slight increase in volumes anticipated in the second quarter due to increased building activity. Long-term success depends on the value proposition offered to homebuilders, emphasizing high-quality products and ongoing customer support.

The paragraph involves a discussion during an earnings call, where George Staphos from Bank of America asks Devin Stockfish about the company's response to the softer demand in the summer building season, specifically regarding their harvest profile. Devin Stockfish responds by saying that, barring a major recession, the company's harvest levels remain stable over time, and there won't be changes to the full-year harvest levels of 35.5 million tons. Additionally, Staphos inquires about the Occidental Petroleum agreement. Stockfish expresses enthusiasm about the potential of carbon capture and storage (CCS) as a significant opportunity for generating cash flows over time, detailing no specific milestones or timings.

The paragraph discusses the slower-than-expected progress of a CCS (carbon capture and storage) project due to extended permitting processes, which has impacted the industry's economic evaluations of off-take agreements. Despite this, the speaker expresses excitement about the project, noting it's one of the largest off-take agreements in North America's CCS space. They emphasize the importance of partnering with sophisticated companies like OXY. While specific economic details are not disclosed, they aim to secure favorable terms for future agreements. Infrastructure construction is expected to begin soon, with first injection anticipated by 2029, when financial impacts will start appearing in their P&L. The paragraph concludes with a transition to questions from RBC Capital Markets' Matthew McKellar.

In the paragraph, Devin Stockfish discusses the potential impact of Section 232 tariffs on wood products on timberland valuations. He mentions that there's currently a lack of clarity on the details of the tariffs, such as which products they will cover and the tariff levels, making it difficult to predict their impact. He suggests that these tariffs are unlikely to significantly affect timberland valuations in the near term, as timberlands are long-term assets and investors focus on long-term trends rather than short-term changes. Matthew McKellar then inquires about maintenance activities in the OSB business. Stockfish explains that the maintenance was part of their annual plan, scheduled well in advance, and not influenced by current market conditions.

In the discussion, Mark Weintraub from Seaport Research Partners asks about the impact of OSB annual maintenance on operating rates, which Devin Stockfish indicates will be minimal, expecting rates to remain in the low to mid-90s. Mark then inquires about the $11 million first-quarter impact of a fire on EWP operations. Devin confirms that normal operations have resumed with a small impact expected in Q2, and they plan to recuperate lost volumes throughout the year. Lastly, Mark questions the 16% tax rate in Q1, suggesting optimism for the Wood Products business. Devin implies that a strong income from the TRS is expected, and if the business underperforms, the tax rate could adjust downward.

The paragraph features a conversation between Devin Stockfish and Mark Weintraub, discussing the projected tax rate influenced by REIT and TRS earnings, particularly from the Wood Products business. Due to unpredictable factors like commodity prices and regional earnings mix, they refrain from giving full-year guidance. However, Stockfish is optimistic about the Wood Products segment given the strong lumber prices and other favorable conditions, conditional on the stable employment and broader macroeconomic environment. Ketan Mamtora from BMO Capital Markets inquires about channel inventories in lumber and SP & EWP, noting a cautious start to the spring season and cautious homebuilders. Stockfish responds that inventories are currently lighter than usual but balanced with demand, reducing the urgency to build significant inventories.

The paragraph features a conversation about building activity and market dynamics. Devin Stockfish mentions that if building activity increases, a spike in pricing might occur due to lean inventories. Ketan Mamtora then asks about progress in forest carbon projects, which Stockfish confirms are on track, with significant increases expected depending on audit times. There's good demand from customers, suggesting a positive outlook. Hong Hang from JPMorgan inquires about OSB pricing dynamics, and Stockfish notes that the supply and demand are currently balanced, though prices are lower than before.

The paragraph discusses the state of the OSB market, noting initially low buying activity in the home improvement warehouse segment with slight improvement over Q1 before stabilizing. It is expected that building activity will increase in Q2 and during the summer, leading to more units being constructed. Despite stable pricing, a decrease in interest rates could potentially boost buying activity. Additionally, executive actions have opened public land for timber harvest to increase production, although the company does not log on federal lands except for a minimal amount in Montana. The company relies on its own and other private timberlands, and there is potential to improve fire resilience in federal forests through better management.

The paragraph discusses the potential effects of executive orders on forest service activities and logging on federal lands. While proactive measures to reduce forest fires are seen as positive, there is uncertainty about a significant increase in logging, particularly in the West, due to practical limitations like infrastructure and trucking capacity. The administration's focus on U.S. manufacturing jobs is praised, but it's unclear if federal forests will yield more logs soon. Hong Hang thanks the speaker, and Hamir Patel from CIBC Capital Markets asks Devin Stockfish about interest in transitioning to Southern Yellow Pine from SPF. Devin notes this interest is mainly in Midwest regions traditionally reliant on SPF, spanning dealers to home improvement warehouse customers.

The paragraph discusses anticipated changes in the wood products market, highlighting a reduction in SPF (spruce-pine-fir) availability due to factors like beetle infestations, fires, and trade issues, while noting an increase in Southern Yellow Pine lumber capacity. Devin Stockfish suggests there is growing interest in Southern Yellow Pine as a substitute. Regarding the Renovation and Remodeling (R&R) sector, despite a sluggish start to the year, there is optimism for growth later in the year fueled by substantial home equity and potential increased financing activity due to interest rate changes. However, economic uncertainties or a recession could impact this outlook.

The paragraph is a discussion about the current state and outlook of the business. Despite market negativity and uncertainty, the speaker is optimistic about having a good year, citing stable operations and a good pricing environment. Although there might be challenges, they are not as pessimistic as some others. The conversation then shifts to Devin Stockfish addressing a question from Michael Roxland regarding a slight increase in order files for Engineered Wood Products (EWP). Stockfish attributes this uptick to seasonality and improved weather compared to the slower first quarter, leading to increased building activity, though not as strong as initially expected.

In the conversation, Devin Stockfish addresses the outlook on Carbon Capture and Storage (CCS) opportunities. Despite initial expectations for CCS projects to begin around 2026 or 2027 being delayed, Stockfish believes the overall opportunity for CCS remains significant, primarily due to its necessity for reducing greenhouse gas emissions in heavy manufacturing. The delay is attributed to the complexity of starting a new business. Stockfish also confirms that CCS tends to have higher margins compared to other natural climate solutions like wind, solar, carbon credits, and mitigation banking, due to the practice of leasing subsurface spaces.

In the paragraph, the conversation focuses on the low-cost nature of managing timberland infrastructure, highlighting that the investment is mainly an upside with minimal expenses. Michael Roxland and Devin Stockfish discuss this before the operator introduces Buck Horne from Raymond James, who then inquires about potential strategic moves to address the company's significant stock price discount to net asset value (NAV). Dave Wold responds by stating that the company maintains a balanced capital allocation strategy, evaluating shareholder value creation opportunities without urgency due to solid leverage and dividend positions. Wold emphasizes confidence in the increasing value of timberland over time while stressing the importance of disciplined transaction approaches to avoid overpaying.

In the paragraph, the company discusses its strategy for optimizing its portfolio by reallocating capital more efficiently, whether through real estate initiatives or transactions like those in late 2023, aiming to enhance portfolio quality and cash flow. They are also actively repurchasing shares, nearly completing a $1 billion authorization, and will continue to pursue opportunities that create shareholder value. On solar leasing, they are making progress, with one operating solar site and two more under construction, and expect these to be online soon. The company is signing agreements with large, savvy partners capable of handling permitting and supply chain challenges, and anticipates adding several sites each year, making solar a growing component of their business.

The paragraph discusses the impact of tariffs on lumber pricing. Devin Stockfish mentions that currently, tariffs are not significantly affecting prices, although there was a temporary increase following an April announcement before it was revealed that Wood Products would be exempt, causing prices to stabilize. As new duties are expected around August or September, there could be some price impact. The effect of tariffs largely depends on overall demand; strong demand could drive prices up, with tariffs adding slightly to that increase, while weak demand mainly influences cost floors and capacity decisions. There's also uncertainty surrounding broader tariff policies and their potential influence on lumber pricing.

In the teleconference, there is a discussion regarding hesitancy in building inventories due to uncertainty about upcoming tariffs. George Staphos thanks Devin Stockfish, who then offers closing remarks, expressing gratitude for the participants' interest in Weyerhaeuser. The operator concludes the call, thanking everyone for their participation.

This summary was generated with AI and may contain some inaccuracies.