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Potlatch profitable despite falling prices

Fri., April 25, 2008

Potlatch Corp. reported improved first quarter earnings of $10.3 million Thursday, despite a continued slump in the nation’s housing market that’s depressed prices for 2-by-4s.

Strong sales in the company’s real estate, pulp and paperboard divisions helped Potlatch buffer a $10 million loss in the wood products division. All of the company’s mills lost money during the first quarter, with the exception of a cedar processing plant in St. Maries and a plywood operation there.

Potlatch recently announced the closure of an Arkansas sawmill, which led to a charge of $13.7 million in the first quarter earnings.

“There is no indication that we will see a turnaround in the lumber business in 2008,” Mike Covey, the company’s chairman and chief executive officer, told analysts during a conference call.

Potlatch’s main concern is a continued weakness in housing starts, which has led to one of the worst markets for wood products in decades, Covey added.

Meanwhile, the weak U.S. dollar is contributing to the best pulp market since the mid-1990s, officials said. Pulp prices rose 4 percent and global demand is strong. Potlatch’s exports of paperboard to Europe are five times higher than they were a year ago, and Asian exports rose 20 percent. Paperboard is a thin cardboard used in packaging.

The company’s real estate division also had a strong quarter, generating $16.7 million from the sales of timberlands in Idaho, Wisconsin and Minnesota. Per-acre prices averaged $2,400 in Idaho and Wisconsin.

Potlatch’s earnings compared to a loss of nearly $29 million during the first quarter of 2007. Last year’s losses include a one-time charge of $33 million related to the sale of the company’s hybrid poplar farm near Boardman, Ore.


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