Q2 2020 PotlatchDeltic Corp Earnings Call
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If he would like to ask a question. During this time simply press star Little over one on your telephone keypad. If he would like to try your question press the pound Pcie. Thank you I would now like to turn the call over to Mr., Jerry Richards, Vice President and Chief Financial Officer.
For opening remarks, Sir you May proceed.
Thank you Meghan good morning, everyone and welcome to Potlatch Deltic second quarter 2020 earnings Conference call.
With me in the rumor My Kabi, Chairman and Chief Executive Officer, and our Crammers, President and Chief operating Officer.
This call will contain forward looking statements. Please review the warning statements in our press release on the presentation slides and in our filings with the FCC concerning the risks associated with these forward looking statements.
Also please note that a reconciliation of non-GAAP measures can be found on our website at www Dot potlatch Deltic Dot com.
I'll now turn the call over to Mike for some comments and then I will cover our second quarter results and our outlook.
Thanks, Jerry and good morning.
What a difference a few months makes a very short period lumber markets shifted from liquidity to historic run.
It was not possible to accurately forecast the severity and duration of the effect of the cold pandemic on our end markets earlier this spring.
A massive de stocking of lumber in the supply chain send a signal that led to significant curtailment of North American lumber manufacturing capacity to balanced production with existing visible demand.
Spring developed it became clear that industry fundamentals not only remains strong but it strengthened.
Historically low mortgage rates, the millennial demographic cohort entering prime home buying years and the old age of U.S. housing stock all bode well for housing and repair and remodel demand both of which lead to higher lumber sales.
Additionally, a potential shift from urban to suburban living and continuation of working remotely.
Maybe two ways that the cobot pandemic positively impacts housing demand.
The atypical early spring pullback in lumber production led to an acute shortage, which underpins the current historic run lumber prices.
It will likely take several months for lumber supply to catch up with demand, particularly given increasing housing construction reports of transportation constraints traditional holiday downtime and the potential effect of the late summer fire season, which is now upon us.
Turning to the quarter, we generated adjusted EBITDA of $35 million.
Our employees did an excellent job managing through the constraints and challenges posed by the coal would pandemic.
Our three business segments performed well during what is typically are seasonally lightest quarter.
As we continue to face the span damage operating safely as our top priority and as a core value.
As discussed on last quarter's call <unk>, we have increased the frequency of cleaning out of physical distancing words, practicable and are screening visitors and vendors.
We also bad most travel and all group meetings and most employees, who can work from home continue to do so.
Well our positive Cosan cobot cases have been limited, thus far or middle managers have had to actively and creatively manage work schedules do the absenteeism caused by contact tracing requirements to self weren't gene or lack of child care for families.
The cobot pandemic presents a risk that could cause our operations to be disrupted and requires continued diligence.
I want to thank our employees, especially those in our mills for their continued efforts and safety precautions. During this challenging time.
We are running as much overtime, as we can or sawmills to meet strong customer demand.
The home center business remains, particularly robust, which benefits our legs states businesses as well as southern yellow pine sold to treaters.
Our lumber order files currently extend into late August continued high prices.
As a result, we currently expect wood products adjusted EBITDA to be over $50 million in the third quarter.
Our industrial grade plywood facility room resumed operations in May after taking three weeks of market downtime during the quarter.
As a reminder of the specialty in industrial grade plywood product, we manufacture used in the boat.
RV and furniture industries in the steel home orders forced many of our customers to shut down in April.
[noise] plywood mill renter to reduce offering posture for the remainder of the quarter to balance production with customer orders and returned to a normal operating posture in July.
In Idaho or timberlands business was in spring break up mode before resuming log deliveries in early may saw log demand remained strong in the region. The third quarter is our seasonally highest harvests quarter.
As you know about 70% of our Idaho saw log deliveries are pegged to lumber prices through it indexing formula on a lag basis.
Therefore, we expect or Idaho, timberlands, adjusted EBITDA to increase materially compared to the second quarter due to higher prices and harvest volumes.
In the South third party milk customers restarted operations. They had curtailed as a result of the cobot pandemic on our saw log demand improved as the quarter progressed.
Well, we still do not anticipate making up the volume in the back half of the year. There is a possibility that the arbor shortfall will be less than we originally expected.
So a log pricing remains relatively flat quarter over quarter across to all of our southern markets with little change expected in the second half of the year.
And our real estate business, we remain cautiously optimistic about our should all valley real estate development business near a little rock.
We still expect to so over 100 residential watch this year.
In June we announced an agreement to sell approximately 72000 acres in Minnesota to the conservation fund for approximately $48 million.
This is a significant milestone in our long term strategy maximize shareholder value through the sale of rural real estate.
Our partnership with the Conservation Fund has also been a catalyst to conserve more than 200000 acres in Minnesota for various conservation purposes. Once this transaction and others underway are completed.
We expect the sale to close in the fourth quarter and the proceeds will further enhance our already strong liquidity position and flexibility.
During the second quarter, we returned $30 million to shareholders in the form of dividends and share repurchases, including the purchase of $3 million of company stock.
In aggregate over the last two years, we spent $41 million to purchase 1.2 million shares potlatch Deltic stock at an average price of $34 for sure.
To wrap up my comments business conditions are extremely good we expect to report extraordinarily strong results in the third quarter.
<unk> electric Deltic is well positioned to take advantage of favorable industry fundamentals and our strong liquidity provides a high degree of flexibility as we seek to maximize shareholder value.
I'll now turn it back to jury to discuss second quarter under outlook.
Thank you Mike starting with page four of the slides adjusted EBITDA was $35.3 million in the second quarter compared to $47.6 million in the first quarter.
On a sequential decline in the second quarter is normal due to seasonally lower harvest volumes during spring break up in Idaho.
Having said that lumber prices and shipments both exceeded our expectations for the quarter.
I'll now review each of our operating segments and provide more color on the second quarter results.
Information for our Timberland segment as displayed on slide five through seven.
The segment's adjusted EBITDA was $25.6 million in the second quarter compared to $35 million in the first quarter.
We harvest at 303000 tons of Sawlogs in the north in the second quarter.
This is down seasonally from the 434000 tons that we harvested in the first quarter.
Northern Sawlog prices were 6% higher on a per ton basis in the second quarter compared to the first quarter.
A higher Sawlog prices were the result of the positive effect of a normal seasonal decrease in the density logs and slightly higher index prices.
In the south or harvest volume was lower quarter over quarter as expected due to market curtailments taken by third party no customers.
Sawlog deliveries increased each month during the quarter as milk customers restarted their operations.
Our southern Sawlog prices were 1% lower in the second quarter compared to the first quarter.
Turning to what products on slides eight and nine adjusted EBITDA was $10.9 million in the second quarter compared to $13.2 million in the first quarter.
Lumber shipments declined from 283 million board feet in the first quarter to 249 million board feet in the second quarter.
Our saw mill production hours were constrained in the quarter for multiple reasons, particularly in April when we lost a week or production at our Warren Arkansas Mill due to a tornado caused power outage.
We resumed production overtime hours near the end of April when the pace of lumber orders increased.
Our average lumber price realization increased 4% from $396 per thousand board feet in the first quarter to $412 per 1000 board feet in the second quarter.
To provide context. It is helpful to look at our lumber prices by month.
Our average lumber price realizations were below our first quarter average in April.
Increased modestly in may and accelerated to $452 per 1000 board feet on June or $40 higher than the quarterly average.
Moving to real estate on slides 10, and 11, the segment's adjusted EBITDA was $9.3 million in the second quarter compared to $7.3 million in the first quarter.
An increase in rural acres sold more than offset slightly lower ethanol belly lots sales.
Shifting to financial items, which are summarized on slide 12, our total liquidity remained strong at $460 million.
This amount includes cash of $81 million and availability on our revolver, which remains undrawn.
As Mike mentioned, we spent $3 million to purchase 89000 shares in the second quarter for an average at $33.81 per share.
We plan to refinance $46 million of debt scheduled to mature in December 2020, and have walked the interest rate.
Annual interest expense will decline approximately $900000 on this debt beginning in December.
Capital expenditures were $10.8 million in the second quarter.
While we currently expect that our capital expenditures will be $40 million to $44 million. In 2020, we are reviewing options to pull some 2021 high return no projects forward to this year.
Note that the amounts I just mentioned include real estate development expenditures, which are included in cash from operations and our cash flow statement and exclude timberland acquisitions.
I will now provide some high level outlook comments. The details are presented on slide 13.
Harvest volumes in the north are planned to be seasonally higher in the third quarter compared to the second quarter.
We expect northern Sawlog prices to increase significantly in the third quarter due primarily to higher index prices.
Higher volumes in the south in the third quarter are expected to increase seasonally we expect southern sawlog prices to be comparable to the second quarter.
Lumber prices continue to increase in the third quarter at an accelerated pace.
Our average lumber price, thus far including orders that extend into late August is approximately 30% higher than our second quarter average lumber price.
As a reminder, at $10 per 1004 foot change in lumber price equals approximately $12 million of consolidated EBITDA for us on an annual basis.
We plan to ship 270, 280 million board feet of lumber in the third quarter.
Shifting to real estate, we expect to sell 11000 12000 acres of rural land and approximately 27, all valley lots in the third quarter.
For the year, we now expect to sell 93000 to 97000 acres of rural land, including the 72000 acre, Minnesota transaction that we announced in June and expect to close in the fourth quarter.
Virtually all of our remaining 102000 acres in Minnesota are now under contract in transactions expected close through 2022.
Given that the bulk of the rural acres that we sold historically were in Minnesota, the focus of the rural land sales program will shift Arkansas in the future.
As a reminder, that 2018 Deltic merger included approximately 57000 acres that we identified as having value higher than timberlands, including a portion proximate to little rock as well as the should all valley Master plan community.
Overall, we estimate that third quarter total adjusted EBITDA will be at least three times higher than second quarter due to significantly higher lumber prices, including index, Idaho Sawlog prices.
Seasonal increase in harvest volumes and higher lumber shipments.
We believe it at the primary risks to achieving our third quarter outlook remains the cobot pandemics potential to disrupt our operations or to cause further damage to the economy.
We're very well positioned to take advantage of favorable industry fun.
That concludes our prepared remarks, Megan I'd now like to open the call Tonight.
First question comes from John with Bank of America. Your line is open.
Hey, good morning, and thanks for providing all the detail here.
Starting out I want to obviously talked about lumber prices, we've clearly seen a sharp rise over the last couple of weeks, which you indicated and so I was wondering if you could share how youre thinking about pricing levels from year end what factors you see it's likely to drive reversal in this kind of at some point, whether as demand or supply driven and ultimately how that might work.
Yeah, John So this is a this is eric.
Well, we began 2020 very solid footing with our Q1 prices about 8% higher than our Q4 2019 prices largely driven by better than expected housing starts.
Forecast for housing starts for 2020, we're moving into the 1.4, even 1.5 million range the highest since the great recession and then the pandemic hit late in Q1 customer stopped buying lumber and liquidated inventories and our prices in April dropped about 8% from where they were in March.
Then you saw as Mike mentioned, a massive curtailment by the industry and some people reporting that curtailment represented as much as 40% of industry capacity roughly 20 to 25 billion board feet of capacity came off the market.
So the pandemic then resulted in millions of people staying at home basically with nothing to do what do they do with their time, while they turned up repair and remodel projects.
Furthermore, weather across the us it's been very favorable for outdoor our and our projects. So demand really didn't collapse nearly as much as expected in prices firmed up our may lumber prices were up 3% over April and then June was up 13% over May and total Q2 was up 4% over Q1, but that was heavily impacted by a red.
Relatively low April just to give you a sense of at three months ago Reese expected North American demand to be down about 6 billion board feet for the year and now they expected to be down just 2 billion board feet.
And so while they thought our and our expenditures were going to be down roughly 5% year over year before and now expect them to be up 2% year over year. So you've had a huge huge change.
So as you know lumber prices are they're very hard to predict but we have very good visibility here into Q3 is were roughly two thirds through the quarter at this point in time with the with our selling.
We know that inventories are very lean through distribution channels.
Our order files are very long and demand remains very firm so.
As Mike and Jerry mentioned in the call script prices are roughly up 30% Q3 over Q2. So the real question is what happens is get into Q4, you are likely to see a typical seasonal slowdown.
That wouldn't be unusual when you probably we'll see some pricing pressure in the fourth quarter.
What's probably going to happen is our and our work is going to start to slow, but you are probably going to see that offset by new home construction.
If you've been following the past couple of days the builders have been releasing their results and their June orders are very very strong 50% up year over year. For example, so roughly our and our is going to come down, but new home starts are going to continue to increase and hopefully the starts offset the our and our decline.
So help answer your question.
Yes, yes, probably I mean I guess.
I was kind of because obviously like typically when we see prices spike like this and maybe it continues higher.
There is typically some sort of bounce back on the other side of that and that's I guess I'm trying to get a sense for what might cause that and I guess, maybe the next part of next question I had which is just generally what's kind of keeping alumbera supply from entering the market might help answer that but.
If you could just kind of comment on that supply and whether you're seeing any new supply enter the market at this point.
Obviously being kind of this pilot was taken out.
That might be helpful.
Yeah, I think any of that that 40% of curtailment that I've mentioned previously all that has come back on.
Everybody I would guess is running as hard as they possibly can given these prices.
Conversation with the sales Department yesterday, and said Hey are you seeing any signs of a slowdown and they said absolutely not theres no sign of a plateau in here in fact, if you go look at lumber futures on the see a meat you see that prices are continuing to rally so.
So theres no sign of this thing rolling over and.
If you had any lumber capacity whatsoever, you're you're using it to produce lumber.
Yeah. Shaun this is Mike I don't think Theres any no new mills startups scheduled the Canadian Mills that are down would have been restarted already are down due to log supply constraints.
No it's challenging to run in a code environment to run over time and.
More ships are more people. So I think the supply is what it is.
Do you have a sense for what percent of the market ultimately has been impacted by the constraints.
Whether what.
By the log can log conference August.
Yes, I mean, what's what's been commonly reportage on is the jury speaking.
About $2 billion board feet of capacity in Western Canada was shutdown as it relate as as a as it relates to the log constraints I mean, obviously, the the roughly 40% curtailments that are just mentioned a bit ago. In response to the question that was really market curtailments temporary downtime, but in terms of permanent due to log supply like said that it's around 2 billion.
Okay, and you said that of the 40% that went down basically all of those are back up and running at this point.
Virtually all you have.
Okay well.
And then just next question I guess.
Before I turn it over I was just wondering it can you talk about the southern Sawlog markets I mean, it seemed like volumes are still pretty decent during the quarter.
Have you seen any notable changes in that market, particularly I guess with rising lumber prices on.
Curtailments in and out kind of coming to an end.
No there was any production.
Well I'll make a general commentary can add detailed color too.
A story of southern log pricing in southern log markets, just does not change quarter over quarter. It's log prices remain in a very narrow band between 40 and $45 a ton and they have kind of through thick and thin, we get small temporary spikes due to weather.
And harvesting constraints and then the quickly revert to normalize again, yes. The only thing I would add to that John is if you FDA just hosted a webinars.
I don't know a month ago and one of the topics they covered was growth to drain.
In the U.S., South and what you're seeing is that timber inventories are continuing to increase in the U.S south. So it's hard it's all about supply and demand at the end of the day.
And as long as you've got incremental growth that's outstripping demand.
Harvest volume, it's hard to see prices turning up.
Sure. The I'll just finished but by adding known that's I think one of the strategic and unique benefits that we have.
The position of our company is.
With a large southern manufacturing business.
We can capture these converting margins, especially in this environment in our wood products business, while the trees continue to grow and provide stable returns to support the dividend.
Yes, thanks for all the color yes.
Our next question comes from to Tim.
With BMO capital markets. Your line is open.
Hi, Mike Jamie and Eric.
Morning, obviously, obviously a much different discussion from three months back Baca, that's how it goes some banks.
Yes.
First question.
Maybe just you mentioned in your prepared remarks running.
The som as non over time pulling back from projects.
From Fytwenty wanting to Twentytwenty, maybe just now without getting into specifics. If you don't feel comfortable at this point, but maybe just give us some sense off.
Walked into mentioned room you on have.
The increase capacity on the lumber side and.
What kind of projects, we are looking at maybe pulled forward into from 2021.
Yes. So keen this is this is Eric we are we are looking at a number of projects here.
We haven't talked our board about this yet so I don't want to get too far ahead of myself.
But it roughly totals $5 million.
And the improvements that it would make to the business improved include things like improved grade yield.
Increased production volume decreased labor costs.
Expanded product mix. So there's nothing extraordinarily unusual about these projects, they're all kind of at the margin incremental in existing mills.
We're not talking about a greenfield mill or anything like that.
So.
Some of that money roughly 5 million some of that would get spent this year, but some of that would get spent in early next year and I would expect that on the on the next call will provide more more color about those those projects, but you know Keaton every you asked a question about our incremental production volumes every year, we find a way to eke out.
Anywhere from 2% to 5%.
Volume gains and I don't want to talk about 2021 production volumes, yet because we're not prepared to give guidance, but I.
I don't think it would be out of the ordinary for us to.
Announced come January that 2021 is going to see higher production volume in our mills and then 2020.
Got it okay. So thats a handsets are you still paying on that there is room.
Existing Ms can do it hangs on an add capacity videos cost you a something that is from there.
Yeah, absolutely you know what I'd, what I'd remind you is that just this year with art with our forecast. This year, we expect to be 3% higher than what we did last year, which you know the this will be a record year for us, but even this year, we had to take out roughly 40 million feet of production.
Due to do to covert that was overtime that we took out in Q1 in Q2.
So if we have margin in our mills next year, we're going to get that extra 40 million feet.
Got it not central London.
No just sticking with number for a second.
Do you think there is any risk with the kind of rally that we've seen in lumber prices.
Imports from Europe.
We'll go up.
Yes, I think at the margin they can they can go higher when you're starting to see the dollar roll over a little bit here, which is I think it's down year to date, now which is which is helpful.
There might be a little bit more room, but I think we're we're talking about maybe this being measured on in terms of.
100000, 200000, 300000 board feet.
Central Europe has been pushing lumber into this market now for past year or two and it appears that there isn't a whole lot more room.
For them to to produce more lumber and by the way the quality of that lumber is not as high as what is produced here domestically.
So I think it can go higher can it go a lot higher I don't I don't think so.
Got it that pencil and then just wanting to capital allocation priorities August seek you'll see.
Got it and have a big been far.
On the strict card lumber prices spot.
Sort of how do you how do you think about capital allocation at this point given how much things have changed from what we've talked me pardon me.
What we are seeing right now.
Well.
This is Mike.
You can't get.
Such a cyclical lumber market and we've been through this many times in the past you can't get carried away with.
These increases or.
Or big follow ups that happen periodically.
I guess as a reminder, we've increased our dividend about 116% since 2012.
Almost all of those increases in our dividends have come from sustainable changes in our timberland, earning stream, whether it's through aquas acquisitions, or where price recovery, especially in Idaho.
We have refinance just about all the debt that we can we have as Jerry mentioned, one small tranche left of $46 million will mature at the end of this year that will refinance.
Our stock has appreciated 50% since the start of Q2 and prior to that we purchased.
$41 million worth of stock price at $34 and as Eric mentioned, we have is just a small handful of capital projects that will try to pull forward.
So really it comes down to looking and waiting for.
Timberland acquisition opportunities that make sense to grow the company and to grow the dividend. So we've had a history of doing and being patient looking for those so that's where our focus will shift in these better markets.
Got it Thats very helpful. I wanted to look good luck in the back half of the year.
Thank you thanks.
Our next question is from Mark Weintraub.
Global your line is open.
Thank you had a slew of questions, but the great majority had been answered so a little bit.
Peripheral perhaps but.
As you think about all that the cash that you're generating any on the capital allocation question, you noted either growing the dividend slowly over time or.
Hi, growing the dividend or timber acquisitions.
Conceptually in the path you've talked about.
Wanting to time kind of match that dividend to the underlying.
Timberland.
Business and its ability to generate cash.
Would you shift when you have.
Quarters like what the third quarter North of 100 million EBITDA that you're essentially are building potentially a bank of cash would you contemplate using that.
I'm thinking of amortizing, it and increasing the dividend as opposed to just thinking about.
Using the.
Cash generating capability of the timber the timber holdings as your core base.
Hopefully the question was kind of clear.
Oh I understood I understand the question, it's a discussion that.
Periodically we have with the board.
I think whatever whatever we have these markets that are just.
So toppy, it's a good reminder to look back at as recently as 29 to one or wood products business generated $12 million and EBITDA in total so.
[music].
Things of.
Things can change very quickly.
And that's why we've.
At a premise to really kind of underpin the dividend with the timberlands, earning stream and certainly this excess cash that we're going to have an in part from the sale of Minnesota, I think certainly would give us more confidence to help support or increase the dividend overtime. If we can't find an acquisition opportunity that makes sense, we can't sit on cash forever needs to be returned to shareholders and.
Certainly increasing the dividend would be one way to do that.
Makes sense and any any update on what might be happening in Chanel Valley and all these different changes and.
Anything that you can provide to us any color about.
If there are certain.
Trends that might be more recent to think about.
Well. This is Eric marked with what I would tell you is that we have been very happy with the performance of.
Im showing all you know into pandemic hit every everybody thought residential real estate commercial real estate would would completely collapsing and certainly our lot sales are going to be less than we expected. It to started here I think we guided to 140 and we're now expecting I don't know 100 120, something like that.
The business is coming back and holding up better than we had expected it would given the pandemic and I'd.
I am hearing that theres commercial activity kicking around Incheon all.
Which.
Did surprises me frankly that there'd be commercial activity anywhere but.
There is interest and should all because it's such a a hot product in in little rock and I would tell you that are lot sales will come in below what we guided to earlier in the year, but theyre, they're holding up better than we had expected. So we're very pleased with how should all is coming along.
Great I almost would have expected to hear that.
It might improve to be better.
With all the homebuilders now talking about getting more aggressive about buying lots et cetera are you are you seeing any evidence that the set up for next year could prove you could make up ground next year is it too early to comment on that.
Yeah, I hate to give guidance for 2021, we've got a precedent that will we give guidance for the year in January when we release, our fourth quarter results, but I would I would certainly given what I'm looking at right now I would expect next year to be better than this year that's for sure.
Super Thank you.
Our next question is from Steve Chercover with D.A. Davidson Your line is open.
Yes, thank you everyone.
So my first question pertains to Minnesota and that sale that closes in Q4, it looks like it's big enough that you're not going to run it through the the income statement early says it will be.
Treated is extraordinary is that.
Accurate.
Yes, Steve This is Jerry so we actually will run it through the income statement.
Expectation as you would see it run through real estate revenue and real estate cost of sales just like all the other.
Total land sales I mean, this is certainly a large transaction larger than than most and certainly in my memory, but from time to time, we have some pretty large rural sales as well. So we saw I'm, scoring it internally.
Planning on running through normal results.
Okay, well, we'll have some good guidance three months.
With respect to that the conservation group will they continue to manage it as commercial timberlands with the obvious.
Restrictions as to future development or is that volume out of the market.
No I think Steve This is Eric I think their intention is to continue to operate it as as timberland.
Now, we'll they hold the land not likely they have a tendency to flip these properties to other conservation groups, but in all likelihood. There's this will be a conservation outcome with continued.
Harvest activity.
Got you, which is not a bad thing.
Can you tell us financial contribution.
That it's been making.
On an annual basis in terms of maybe EBITDA.
Yeah and term in terms of timberland contribution our timberland business in Minnesota is a pretty nominal contributor in fact, it pretty much covers holding costs to be the way I think about that Steve when we think about Minnesota, It's really a real estate land play and certainly you can see the track record over time on on rural land sales. So.
That would be the I think the more appropriate way to think about it.
So no no lost EBITDA nice check a change.
For future reference, okay switching gears to log prices in Idaho.
Since there's such a substantial lag and since we're still going parabolic on lumber in Q3 does that imply that we're going have extraordinarily strong log prices in Q4.
[music].
Well, yes, it all depends on how lumber plate prices play out C., but you know what I'd tell you right now certainly in Q3, we're seeing very strong log prices in the 25% kind of plus 25% kind of range.
So we'll see how Q4 plays out, but I would expect Q4 to be pretty strong as well.
Well, how long is the lag Eric it's it's six weeks six weeks weeks.
Got you. So if you got visibility on lumber almost at the end of September then at least in first half of Q4 should see some pretty dynamite pricing.
Yes, you will start to see the log density factor work against us as we get into the Q4's logs get denser on a per ton basis, but nonetheless, we still expect.
Really strong pricing in fourth quarter. We've also had a nice uplift on SEDAR log prices, which as you know make up about 10% of on mix.
Gotcha, Okay final question, and Mike kind of alluded to how.
Quickly things can change and.
With 12 million Bucks, an EBITDA out of lumber in 2019 Aster phenomenal 2018. So you go from feast to famine and.
Knowing that having experienced.
Recently.
Do you think the industry.
Try and prevent another.
Unhappy ending is there anything that we any lessons learned or maybe just start to.
Throttled back.
Even though the pricings goods due to seasonality.
We're just not going to we just we will make comments about supply and demand kind of industry fundamentals.
It's an antitrust red flag and we will touch that question.
All right and I won't push it okay, well, congratulations and stay safe. Thank you.
Thanks, Thank you.
Our final.
Next question is from Paulson with RBC capital markets. Your line is open.
Good morning, like Jerry Eric.
Morning.
Just I guess, starting with the wood products.
I understand this.
Shipment.
Guidance.
70 to 80 I mean.
The capability to read a lot higher than that and.
Given the.
Precedent lumber prices here I would've thought you'd been.
And as much as you can if not adding shifts in overtime to it.
Yeah, Paul So so our guide as to 70 to 80, I think theres, a pretty strong chance that we beat that number.
And.
We are running our mills as hard as we possibly can and we're shipping everything we possibly can.
Okay. And then just you guys are 50, 50 sort of randomly versus stead, we've seen a huge shift in that in that.
We're study has been I.
I guess number years down and now it popped above what do you can what do you associate that with.
Well I think to a large degree it's related to the home center demand.
You know that's it's not going for construction purposes is going for do I wire purposes, but out of our two great Lakes Stud Mills, where we produce I don't know 350 to 400 million feet of studs.
The home center demand is more than 50% of each of those product mixes and we just can't absolutely cannot keep up with it.
Okay. So then given your comments that you think repair remodel will slow down, but you're seeing a pickup in new home construction do we expect sort of that interplay between studying random prices to revert back to what we saw a lot a year ago.
It's off.
It's impossible to predict what's going to happen there I think.
Stood prices are at all time record levels.
You'd have to assume that that's not going to continue forever.
And then maybe just an update on what's going on with your industrial plywood businesses that says that come back through the quarter.
Well, yeah, it's definitely it's definitely gotten better.
We made money in the first quarter in plywood, we lost money in the second animal will make money in the third quarter.
The mill is not running as hard as we would like it to we'd like to put on overtime.
But the sales team is a is out working trying to extend the order file and.
We'd like better performance, but market conditions furniture demand is still not not back to where it needs to be.
So there's still some market segments that are that are under pressure.
But it is getting better.
Actual looks like a great quarter coming up here, thanks, very much yet.
Yes. Thanks.
Our final question is from Tim.
Capital markets. Your line is open.
Thank you I wanted to come back to capital allocation again.
You've been pretty keen on a more paal you how you think about the regular dividends and share repurchases.
Im just curious.
Absent M&A, how do you think about so special dividends are kind of onetime dividend.
How do you kind of think about there.
Well I can give you my perspective and.
On the time, we've discussed it with the board, but I can't speak for them, but.
I think it's our job to put the cash to work to create long term shareholder returns and the special dividend doesn't do that and I don't think we get any credit forward in the market for doing it its quicken forgotten done.
I think that would be absolutely the last resort that we'd come too.
It's up to us to find ways to put the money to work to enhance returns.
Got it.
Thank you I've done it or.
At this time Im showing there are no more questions I'll now turn the call back over to Jerry Richards.
Alright, Thank you Meghan and thanks, everyone for your participation on the call look forward to following up on any detailed modeling type questions be available the rest of today.
Everybody has a good day.
To sum.
This concludes today's conference call you may now disconnect.
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