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Economy still tough for timber company

Sat., Aug. 1, 2009

Weyerhaeuser reports wider second-quarter loss

Timber and wood products company Weyerhaeuser Co. said Friday its second-quarter loss widened as the slumping housing market suppressed demand for its building supplies.

The weak real-estate market has weighed on sales of the company’s two-by-fours and other products used by home builders, resulting in losses in six of the last seven quarters.

The Federal Way, Wash., company lost $106 million, or 50 cents per share, compared with a loss in the year-earlier period of $96 million, or 45 cents per share.

Sales fell 36 percent to $1.39 billion from $2.17 billion a year ago.

Before one-time items, Weyerhaeuser lost $125 million, or 59 cents per share.

Although the company’s loss widened on a year-over-year basis, it actually diminished in comparison to this year’s first quarter.

“Although we’ve begun to experience some recovery in housing sales and starts, it is not yet clear that this improvement is driven by sustainable shifts in market fundamentals, and therefore our timberlands, wood products and real-estate businesses continue to operate in an environment of uncertainty,” CEO Dan Fulton said.

He also said Weyerhaeuser continues deferring timber harvests, especially in the South, due to weak prices. It also continues to cut costs. Since last year’s second quarter, selling, general and administrative expenses are down by a third.

Weyerhaeuser shares fell 58 cents, or 1.6 percent, to $35.04.

UBS analyst Gail Glazerman, who has a “Buy” rating on the stock, said she was encouraged that cash and cash equivalents rose $50 million, “given very difficult markets in the second quarter.” Much of the improvement stemmed from working capital reductions.

Goldman Sachs analyst Richard Skidmore, who also has a “Buy” rating, also noted the improved balance sheet.

The company’s outlook remains guarded, with lower earnings in timberlands and real estate offset by smaller loss in wood products and a return to profitability in pulp.

“Despite the encouraging headlines about June new home sales and the turnaround in the Case Schiller home price index, there are indications that the housing market will undergo some minor downturns on its way to recovery,” CEO Fulton said.


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