Q4 2020 Rayonier Inc Earnings Call
Welcome and thank you for joining <unk> fourth quarter 2020 teleconference call. At this time all participants are in a listen only mode. During the question and answer session. Please press star one on your Touchtone phone today's conference is being recorded if you have any objections you may disconnect. At this time now I would like to turn the meeting.
Over to Mr. Collin Mings, Vice President capital Mark gets in strategic planning, Sir you may begin.
Thank you and good morning, welcome to Rangers Investor Teleconference, covering fourth quarter earnings our earnings statements and financial supplement for released yesterday afternoon and are available on our website at rayonier Dot Com I would like to remind you that in these presentations. We include forward looking statements made pursuant to the safe Harbor provisions of Federal Securities laws our earnings.
The release and form 10-K filed with the SEC, where some of the factors that may cause actual results to differ materially from the forward looking statements we may make.
They are also referenced on page two of our financial supplement throughout these presentations. We will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measure in our earnings release and supplemental materials with that let's start our teleconference with opening comments from Dave Nunes, President and CEO Dave.
Thanks, Colin and good morning, everyone first of all make some high level comments before turning it over to Mark Mchugh, Our senior Vice President and Chief Financial Officer to review, our consolidated financial results and then we'll ask Doug long Senior Vice President of Forest resources to comment on our U S and New Zealand timber results and following the review of our timber.
Segments, Mark will discuss our real estate results as well as our outlook for 2021.
We finished 2020 with encouraging momentum across all businesses generating adjusted EBITDA of $75 million and pro forma.
Forma EPS of <unk> <unk> per share in the fourth quarter.
Adjusted EBITDA exceeded the prior year quarter by 15% as favorable results in the Pacific Northwest timber, New Zealand timber and real estate segments more than offset a decline in adjusted EBITDA from the southern timber segment.
As we reflect on 2020 in its entirety, we are pleased with our performance across all our business lines, especially given the significant disruption and uncertainty created by the COVID-19 pandemic.
The diversity of our timber markets the positioning of our real estate portfolio and the resiliency of our people during challenging operating conditions all contributed to our solid performance.
Moreover, despite the logistical challenges created by the pandemic, we successfully closed and integrated the Pope resources acquisition. We continue to believe the assets acquired as well as the expertise and dedication of the <unk> team that are now.
That has now joined Rainier will play a critical role in our pursuit of long term value creation for shareholders.
For the full year, we generated GAAP EPS of <unk> 27 per share and pro forma EPS of <unk> 25 per share full year, adjusted EBITDA of $267 million increased 8% versus the prior year.
In our southern timber segment, we achieved full year adjusted EBITDA of $109 million, which represents a decrease of 9% versus the prior year.
For timber results were stable year over year with slightly higher volumes.
More than offsetting a slight decline in weighted average stumpage pricing. However, non timber income declined significantly due to lower pipeline easement income following a record year in 2019 and.
In our Pacific Northwest timber segment, we generated full year adjusted EBITDA of $37 million.
This result represents a more than doubling of the prior year result, which is attributable to a partial year contribution of our Pope resources acquisition as well as the sharp increase in log pricing given strong domestic demand and robust lumber markets.
In our New Zealand timber segment full year, adjusted EBITDA declined 27% to $55 million the year over year decline in adjusted EBITDA was primarily driven by lower volumes due to the government mandated lockdown in the first half of the year as well as lower log pricing amid COVID-19 related export headwinds.
Lastly, our real estate segment, we generated full year adjusted.
EBITDA of $91 million, an increase of over 50% from the prior year result, this year over year improvement was driven by an increase in acres sold amid growing buyer demand for rural land as well as residential lots and commercial properties within our real estate development project areas, while the bulk of our real estate sales activity.
Garnered significant premiums to timberland hold values. The successful completion of some low value non strategic sales in 'twenty 'twenty brought down our weighted average sales price. These non strategic sales reflect our ongoing focus on improving the quality of our portfolio through both addition, and subtraction.
With that let me turn it over to Mark for more details on our fourth quarter financial results.
Thanks, Dave let's start on page five with our financial highlights sales for the quarter totaled $206 million, while pro forma sales totaled $196 million operating income was $22 million, including $700000 of costs related to the Pope merger net income attributable to rayonier was $10 million or seven cents per.
Per share.
Excluding these costs and adjusting for the operating income attributable to the Noncontrolling interest in our timber funds segment pro forma operating income was also $22 million pro forma net income was $11 million or <unk> <unk> per share.
Fourth quarter, adjusted EBITDA of $75 million was above the prior year quarter, primarily due to significantly higher results in our real estate and Pacific northwest timber segments, partially offset by a lower contribution from our southern timber segment.
On the bottom of page five we provide an overview of our capital resources and liquidity at year end as well as the comparison to the prior year, our cash available for distribution or C. A D for the year was $162 million compared to $149 million in the prior year, primarily due to higher adjusted EBITDA and lower cash taxes.
The offset by higher capital expenditures and higher cash interest are.
A reconciliation of C E D. The cash provided by operating activities and other GAAP measures is provided on page eight of the financial supplement.
Consistent with our nimble approach to capital allocation, we raised over $30 million through our aftermarket or ATM equity offering program during the fourth quarter at an average price of $3 26 per share as discussed on our last earnings call. We view the ATM program as a cost effective tool to opportunistically raise capital strength.
Of our balance sheet and match funds bolt on acquisitions.
And some we closed the year with $81 million of cash and $1 $3 billion of debt, both of which exclude cash and debt attributable to the timber funds segment, which is non recourse to radio or net debt of $1 $2 billion represented 23 per cent of our enterprise value based on our closing stock price at year end I'll now turn the call over to Doug to provide a more deep.
[noise] tailed review of our fourth quarter timber results.
Thanks, Mark good morning.
Let's start on page nine with our southern timber segment.
<unk> EBITDA in the fourth quarter of $23 million was $5 million below the prior year quarter.
The decline in adjusted EBITDA relative to the prior year quarter was largely attributable to lower volumes due to the timing of harvest activity in 2020, as well as lower non timber sales.
For the full year harvest volumes totaled $6 2 million tons, an increase of 2% from 2019 and consistent with the high end of the revised guidance range. We provided in August.
However, following notable year over year increases during both the second and third quarter fourth quarter of harvest volumes of one 3 million tons for 15% below the prior year quarter.
The decline in volume during the fourth quarter was partially offset by stronger pricing.
Specifically average saw log stumpage pricing was roughly $25 a ton of 10% increase compared to the prior year quarter.
We are encouraged to see evidence of increased pricing tension in multiple U S south markets during the quarter amid robust lumber markets growing competition, among those for logs and improved demand for export grade logs in our coastal markets.
Geographic mix also contributed to stronger average pricing as the contribution from our higher price coastal Atlantic markets increased considerably year over year.
Pulpwood pricing climbed 6% from the prior year quarter also reflecting the favorable mix shift towards our Atlantic coastal markets.
Fourth quarter non timber income of $5 million was $2 million below the prior year quarter recall that 2019 marked a record high year for our non timber income business.
Moving to our Pacific Northwest timber segment on page 10.
Adjusted EBITDA of $14 million was $6 million above the prior year quarter.
The year over year improvement was driven by substantially higher solid pricing as market dynamics improved and then the historic surge in lumber prices.
Fourth quarter harvest volume was 5% below the prior year quarter.
The drop in volume was partially attributable to our decision to defer some stumpage sales in the region.
It's almost in the region junk of tend to run at full capacity during the quarter, but export market demand remains sluggish.
Tribute the continued softness in export market for the availability of European spruce salvage logs for construction applications in China as well as the increased price of logs from SOCAR of the west.
For the full year harvest volumes in the Pacific Northwest total $1 6 million tonnes.
The 32 per cent increase from 2019 was largely driven by the partial year contribution from appropriate source of acquisition and was in line with the revised guidance range. We provided in August.
At $96 per ton, our average delivered solid price during the fourth quarter was at its highest level since 2018 and up 23% from the prior year quarter.
Meanwhile, pulpwood pricing fell 14% in the fourth quarter relative to the prior year quarter as sawmill residuals remain plentiful of an increased number of production and soft chip export demand.
I'd also like to offer some comments on the impact of last year's wildfires in the Pacific Northwest.
Importantly, none of our fee timber properties were directly impacted by the fires, although roughly 10000 acres of timber from properties sustained some fire damage overall.
Overall, our operations in the region have not been materially impacted from the salvage efforts conducted by others. Thus far.
Although we are seeing some localized impact of market conditions in Oregon.
Primarily related to lumber producers that also in timberland.
While these producers had been harvesting burntwood on their own timberland to feed their mills the impact on overall market conditions has not been as widespread as we initially thought it could be.
We continue to closely monitor the situation, but would note that the quality of burnt logs deteriorates overtime.
The limiting any incremental impact of the first half of 2021.
Given the location of our timberland the solid demand for green logs for many of our customers and the steady business. We have been able to provide for logging crews in the region. We are optimistic that the impact for operations from fireless other type of efforts in the region or made minimal.
In sum, we believe we are well positioned to capitalize on the solid demand trends and favorable pricing conditions. We currently see in the Pacific Northwest.
Especially given our increased presence and operational flexibility in the region. Following the successful integration of Pope resources.
Page 11 shows results and key operating metrics for our New Zealand timber segment.
EBITDA in the fourth quarter of $17 million was slightly above the $60 million that was reported a year ago.
Fourth quarter harvest volume of 702000 tons was up 2% compared to the prior year quarter.
As discussed on previous earning calls following the exploration of the government mandated lockdown our team did an excellent job ramping up production.
For the full year, we were pleased to see harvest volumes and New Zealand total of approximately $2 5 million tonnes.
<unk> with the high end of the revised guidance range, we provided in August.
Turning to pricing average delivered prices for export saw timber increased 2% from the prior quarter of two $105 per ton.
Largely reflecting improved China demand.
In addition, ethylene tensions between China, and Australia resulted in China implementing a ban on Australian log imports during the fourth quarter further increasing the demand for New Zealand logs.
For context parts of the ban Australia was exporting approximately 400000 cubic meters of softwood logs of months of China or roughly 10% of the total volume imported by China.
Shifting to the market the domestic market in New Zealand.
Average delivered price for domestic saw timber increased 6% from the prior year period to $74 per ton the.
The increase in U S. Dollar pricing was driven primarily by foreign exchange rates as New New Zealand dollar domestic pricing was relatively flat from the fourth quarter versus the prior year quarter.
Average domestic pulpwood pricing slipped, 2% as compared to the prior year quarter.
As we enter 2021, we're pleasantly surprised to see a more moderate seasonal slowdown in demand from China had the Chinese new year.
Well, we've seen a slight increase in inventories as we entered the Chinese new year, we don't believe the build the nearly as significant as last year, when China was battling COVID-19.
We are currently seeing stronger demand with some of those even running through the holiday.
Employees from trying to their home cities and risking exposure to Covid.
As demand improves seasonally past the holidays, we believe we are well positioned to capitalize on further strengthening of the Chinese economy, as well as any prolonged for production and log exports imports from Australia.
I'll now briefly discuss the results of our timber funds segment.
Highlights on page 12, the timber funds segment generated consolidated EBITDA of $5 million from the fourth quarter when harvest volume of 115000 tons.
The EBITDA, which of flex the lift through contribution the timber funds was $900000.
Lastly, in our trading segment, we reported breakeven adjusted EBITDA in the fourth quarter.
As a reminder, our trading activities typically generate low margins and are primarily designed to provide additional scale to our fee timber export business.
I'll now turn it back over to Mark to cover our real estate results Mark.
Thanks, Doug as.
As detailed on page 13 of real estate team capitalize on growing demand for rural land as well as finished lots of commercial parcels within our development projects. After a very slow start to 2020, given the uncertainty created by the pandemic. We saw a sharp rebound in activity and finished the year with encouraging momentum across our real estate categories in the fourth quarter.
Sales totaled $32 million of roughly 12500 acres sold at an average price of over $2400 per acre real estate adjusted EBITDA was $26 million in the fourth quarter, marking our second strongest quarter since 2018.
Sales in the improved development category totaled $6 $7 million, specifically, we sold of parcel in the Belfast Commerce Park development project, South of Savannah, Georgia for $4 $6 million and our Wildlife development project North of Jacksonville, Florida, We sold 25 residential lots for $1 $6 million or <unk> $64000 per lot.
In addition, we sold a small development property in Washington State from the Pope real estate portfolio for roughly $500000.
In the rural category fourth quarter sales totaled $14 million on roughly 3600 acres sold at an average price of $3900 per acre interest in rural recreation and residential lots in the 5% to 40 acre size range continues to build as households are planning for more permanent work from home arrangements and desire to leave crowded urban and.
Suburban areas the space privacy and recreational opportunities offered by these properties are attracting buyers and we believe this momentum will continue into 2021.
Timberland and non strategic sales of $9 $6 million comprised just over 8700 acres. In total these properties were non strategic to our core timber operations as they consisted of numerous scattered parcels with a relatively high percentage of non plant of the lands.
Overall, we believe favorable tailwind for our real estate business are growing and remain optimistic that a combination of demographic trends historically low mortgage rates and an increased need for space will benefit our various real estate sales categories on the.
On the development front, we have been encouraged by homebuilder demand for finished lots and entitled infrastructure served land. We believe we are well positioned to meet this demand with the building pipeline of opportunities and Wildlife, Florida, Richmond Hill, Georgia, and the West Puget Sound area of Washington, with 'twenty 'twenty, marking our fourth year of development of Wildlife. This project is looking <unk>.
Creasing, the like an established community with a growing list of amenities, helping to drive additional interest from builders.
Meanwhile, in Richmond Hill, the new Iron Ninety-five interchange embedded within our land Holdings recently opened we view the interchange as an important catalyst for our real estate holdings in the area and have been encouraged by recent interest in land entitled for Industrial uses at the Belfast Commerce Park as well as land entitled for commercial and residential uses adjacent to the interchange.
Now moving onto our guidance for the year page 15 shows our financial guidance by segment for 2021 and schedule G of our earnings release provides the reconciliation of our adjusted EBITDA guidance to net income attributable to revenue and EPS.
For full year 'twenty 'twenty, one we expect total adjusted EBITDA of $285 million to $315 million net income attributable to rainier of $44 million to $56 million and EPS of <unk> 32 to 41.
The projected year over year increase in adjusted EBITDA is driven by our expectation that the contribution from each of our key timber segments will increase in 2021. However, we believe this will be partially offset by a lower contribution from the real estate segment. Following an exceptionally strong 2020 overall, we are encouraged by the positive momentum across our business segments to start.
The year.
In our southern timber segment, we expect to achieve full year harvest volumes of six two to $6 4 million tons. As we start 2021, we are seeing some upward momentum in grade timber pricing driven by increased mill capacity strong lumber prices and improved log export markets. In addition, we are seeing strong demand for pulpwood in our core markets.
Driven by continued positive trends in containerboard and tissue markets.
Overall, we expect a modest improvement in our weighted average pricing relative to full year 2020, driven by these demand trends as well as the higher mix of soft timber partially offset by an increased proportion of planned harvest volume from relatively lower priced markets.
In sum, we expect that southern timber will contribute 2021, adjusted EBITDA of $114 million to $120 million.
Now of Pacific Northwest timber segment, we expect to achieve full year harvest volumes of one seven to $1 8 million tonnes as we realize the full year contribution from the Pope resources acquisition.
We further anticipate higher average sawtimber prices in 'twenty 'twenty, one versus 'twenty 'twenty as we expect continued strong domestic demand trends given the favorable outlook for lumber prices that said, we expect that this increased log pricing coupled with continued competition from European spruce salvage will limit China export demand growth overall, we expect 2021 adjusted.
EBITDA in the Pacific Northwest timber segment of $50 to $55 million.
And our New Zealand timber segment, we expect to achieve harvest volumes of two six to $2 8 million tons up modestly year over year following the operational disruptions and posed by the pandemic in 2020.
We believe strong demand from both China and local markets, coupled with reduced supply from Australia will lead to improved export and domestic prices that said, we anticipate some increase in shipping costs due to reduced ship availability.
Overall, we expect 2021 adjusted EBITDA in the New Zealand timber segment of 71% to $75 million.
And our real estate segment, we continue to focus on unlocking the long term value of our HBU development and rural property portfolio. Following the exceptionally strong real estate results in 2020, we currently anticipate more normalized transaction activity in 2021 as.
As such we expect that of real estate segment will contribute adjusted EBITDA of $70 million to $85 million in 2021, we anticipate a relatively light first quarter. This year with the heavy proportion of our real estate activity concentrated in the second half of the year.
Details on other elements of our financial guidance, including Capex DD&A noncash basis of land sold interest expense taxes and minority interest are provided on page 15 of the financial supplement and schedule G of the earnings release I'll now turn the call back to day for closing comments.
Thanks Mark.
Reflecting back on our earnings call a year ago, we certainly couldn't have imagined the events that would unfold in 2020 I'm very proud of how our team responded to all of the unforeseen and unprecedented challenges associated with the COVID-19 pandemic.
They figure it out new ways to work together in a safe yet distant manner and rose to the many challenges posed by the pandemic while at the same time remaining intensely focused on our strategic priorities as.
As such I want to take a moment to recap some of the key milestones we achieved in 2020, despite the extraordinary circumstances, we faced.
Underscoring our focus on always looking to improve our portfolio through active portfolio management, we executed several transactions that we believe better position us to create value for our shareholders first and foremost in May we successfully completed the acquisition of Pope resources announced last January. The addition of these high quality.
The Pacific Northwest Timberlands, as well as an attractive real estate portfolio improved our species mix smoothed out our age class distribution and our <unk> and increased our proportion increased our operational flexibility.
And market reach within the region as we well as we welcomed the Pope's outstanding team to the range of your family. We are encouraged by the benefits that are already starting to accrue from this transaction.
Moreover, we believe the uprate structure, we employed as part of the transaction has great potential to be used in other timberland transactions in the future.
Well dedicate.
Significant resources to ensure pope's successful integration, we also executed on some smaller acquisitions throughout the year totaling roughly $25 million. In addition, we executed a large disposition of 67000 acres in Mississippi for $116 million. These transactions reflect our unwavering.
Commitment to nimble capital allocation and active portfolio management as well as our focus on maintaining balance sheet flexibility.
As it relates to capital allocation. We also took advantage of opportunities to both to both issue and repurchase shares in 2020.
We repurchased a modest amount of stock early in the year amidst the turmoil in the financial markets, but also established and utilized and at the market equity offering program in late 2020.
We believe that the symmetry afforded by maintaining both buyback and issuance of Optionality will allow us to deploy these tools opportunistically to build <unk> NAV per share over the long term.
We've also continued to reinvest in our business, particularly in technology and systems designed to optimize our long term performance. Despite the social distancing necessitated by the pandemic our investments in technology allowed us to push forward and achieve goals related to improving efficiencies reducing.
Costs, and enhancing our market intelligence and proprietary analytical tools.
Furthermore, selective and measured real estate investments continued throughout 2020, leaving us increasingly well positioned to optimize the returns of our portfolio in the years to come.
As we look back over a very challenging year I'd like to highlight the importance and durability of our culture, which is the cornerstone of rain year's financial and strategic success I'd also like to thank our employees for embracing the values that serve as the foundation of our culture, our commitment to safety collaboration accountability and excellence.
Throughout the organization.
Secondly, we remain focused on our mission to provide industry, leading returns while being a responsible steward of our lands I'm proud of the dedication and accomplishments of our people and their unwavering commitment to building long term value for our shareholders.
This concludes the prepared remarks, I'd now like to turn it back over to the operator for questions.
Thank you we will now begin our question and answer session. If you'd like to ask a question. Please press star one please on mute your phone and record your name slowly and clearly when prompted the name is required to introduce to your question again Thats Star one if you'd like to ask a question. Our first question comes from Anthony Pettinari with Citi. Your line is open.
Good morning, guys. This is actually Randy tole sitting in for Anthony.
I just wanted to touch on the the price improvement in the U S. South specifically on for a number I think pricing was up 10% year over here and you've commented on the clean.
Right from Clinton and multiple U S south market from the prepared comments I just wanted to.
Maybe a little bit more color on which regions and what's driving that thank you.
Sure. This is Doug I'll be happy to answer that.
So as we mentioned we did have some geographic shift crossed from Alabama to our coastal markets that was roughly about 15% year over year difference. So it wasn't it wasn't a major contributor but it was a contributor in there where we've seen strength in particular as our coastal Atlantic markets in Florida, and Georgia and.
The attributable to we've got a lot of capital investment that area, but we also have exposure to the export markets net area. So we've seen pricing tension from demand from China, primarily and some of the India and also just that investments that we've seen in those of those markets and saw mills.
Understood and then maybe moving to guidance I'm, just looking at the EBITDA at.
Harvest the guidance it looks like Youre expecting something like 20 to 40 per cent even if the.
For an improvement in the northwest and 15% to 30% in New Zealand.
The northwest and proof of it makes sense given the Pope resources acquisition, but I was just wondering if you could comment on what you think of driving the improvement in New Zealand.
Yes, Doug and I'll I'll take a start at that so if you recall, we had China facing COVID-19 as they went in December and January of last year, and so we saw significant slowdowns in the China economy, which impacted the export markets and so that caused a lot of price decreases early in the year in New Zealand and then the domestic market followed behind that.
As China got control of Covid, and New Zealand had their lockdown of came out of that thing started for improved significantly you can move back through the rest of the year and so we've seen them significant increases and movement in both pricing and domestic and export.
China's economy is really roaring back and we've seen increased demand some actually some of the highest volume we've seen in the fourth quarter. So we're feeling strong about that and some pricing responding that also.
This is mark recognize as well that we we finished the year with the lower volume than we anticipated going into the year largely due to the of Covid related shutdowns in the kind of the April timeframe and so we you know just given that we're kind of we're expecting a return to more normalized volume level in 'twenty 'twenty, one you're getting incremental kind of operation.
We'll leverage off of those additional tons.
Got it understood. Thank you I'll turn it over.
Thank you. Our next question comes from Mike Willoughby with BMO capital markets. Your line is open.
Hi, This is Jesse barone of sitting on for Mark first question for you guys give us kind of an update on the timber fund management business kind of what your options still are there.
Yes.
Well I'd say right now you know we're still in the process of of reviewing the fund business and all options are on the table everything from <unk>.
Retaining the business too.
The fully exiting the business to partially exiting the business and so.
Now that's about all we can we can really speak to at this juncture.
But as we've said on earlier calls everything has been on the table.
Okay, and then just one follow up can you just kind of give us more color on what youre seeing in the export log market in the U S L.
Sure. This is Doug again.
Yeah as I mentioned, we were starting to see some real strength in that market, particularly the recent ban with Australia, and China has improved demand coming out of coming out of the south but even before that we really saw a lot of growth. So we're impressed with what we're seeing we're.
We're on target to basically double roughly what we did in 2020 and I've had the second yard net Savannah markets, where we're really seeing a lot of growth net market right now.
Great I'll turn it over thanks.
Thank you. Our next question comes from Mark Weintraub with Seaport Global Your line is open.
Yeah, Hi, Salvator tiano filling in for Mark.
So firstly following up it'll be going to the export markets in the South you mentioned contracts of doubled your exports, but first of all how does this compare essentially to where you were before China impose the tariffs from the U S. When things were growing at a very high rate as well are you getting back to those levels and kind of elaborate a little bit from India.
It seems like more and more companies folks from the export market have been mentioning because of big source of growth.
Yeah, I'd say, we you are correct. We were we just gotten started the export markets before the tariffs went in in June of 2018. So we were we are growing fast that point in time, obviously, you have taken a pause, but I'm really since Q2 of of this year, we've seen a significant ramp up in that day and I'd say, we're well above the pace we were at.
For so we've seen demand stronger than we saw in 2018 overall, China demand continues to grow year over year just for logs in general what we're seeing in Europe as.
Put some tailwind in the market, particularly for the northwest on that construction side well. We are seeing is that the southern yellow pine is being used in peeling for plywood also being used for treating and other things. So it's got a niche market. There. So the demand continues to increase so it's been a it's been a strong market for us and we continue to expect it to rise.
Okay perfect.
And a couple of additional questions slip at all of the harvest in the Pacific Northwest of you didn't mentioned.
It was a little bit lower year on year, you had very strong harvest of a year ago, but you also did have a pope resources, which I think of on a normalized basis would be 100000 tons of quarter.
So can you provide a little bit more color of why you know the combined business will stay lower.
Sure.
We saw we had record pricing lumber pricing in Q3, we saw still strong in November as it moved into December It took a pause I think people were very concerned about what the sustainable what was going on the economy. The election things like that so what we saw was that while the milk tend to run they were they were less likely to speculate as what I would say basically they were there for share.
But what the future looks like in Q1, So we took a little bit of a pause and held back some volume of our stumpage markets and weighed the six we thought there was going to be without the fundamentals were strong. It was just really more kind of social parameters of our causing things and we're seeing just that since January has come back around peoples move forward, we're seeing the markets return back to extremely high pricing and strong demand again. So it was just a good.
Turning to take a pause for a for a little bit and Salvatore. This is mark specifically on the quarter over quarter decline relative to Q4 of last year recognized the we had a much heavier proportion of our harvest volume in Q4 last year relative to this year and so you know in 2019 I'm.
I'm sorry of last year, I mean, 2000 2019 relative to 2020, but in 2019 Q1 through Q3, we averaged about 260000 tons of volume in the Pacific Northwest and then we did 417000 tons in Q4, and so you know the this this this year of 2020, we had a kind of more even spread of over the quarters and not.
That sort of very heavy concentration in Q4.
Okay, perfect and the last question I will become the real estate.
Clearly you know it's going to be another good year, we should be down around 80 million.
With the improvement in housing do you believe you kind of sustain that the EBITDA level beyond 2021 at the kind of you break down it'll be the profitability between the legacy rayonier and the benefits from the bolt the.
Real estate the operations.
You know, we're not going to get into the specifics around the breakdown between legacy and the Rainier and Pope at this juncture certainly not with any within any particular timeframe.
Yeah look as you know real estate results can be very lumpy period to period, we've seen periods of of very strong volume and pricing and we've seen periods, where it's come off if you look at over a very long time period I think that there is some measure of consistency to that business you know in.
General and the first of all of its primarily our southern business at least on the rural land front. You know development is a much more specific to where youre, putting a capital investment dollars, but on the rural land from you know we've generally sold in the vicinity of of one 5% of our southern land acreage annually and we and you know over time you know the.
The the premiums on those sales relative to the underlying timberland value.
It's probably been as tight as 20% in a in a in a less opportune market to as high as you know a 100% in a really strong market.
So the <unk>.
Over time, that's our expectation you know I think we're going to sell.
25000 acres annually give or take at call. It 50 to 75 per cent premium to timberland value in a kind of normalized market. The last couple of years have been stronger than that and obviously, we're looking at a pretty attractive market right. Now that's also going to be skewed by the proportion that's in <unk>.
The development properties as well you know recognizing that when you're putting real dollars into the ground of your per acre value realizations are substantially higher than an unimproved land.
So again, hopefully that gives you a flavor for kind of what our long term expectation is and you know how happy to kind of walk you through the math around that offline, but the other thing I'd add is keep it keep in mind that the improved development projects have have a fairly long entitlement process and as well as as construction and so.
We're further along that process and both are.
Our wildlife.
In Richmond Hill projects relative to where the the pulp projects are on there.
The additions to our improved development portfolio.
Okay. Thank you very much.
The appointment I think 2021 is reflective of a quote unquote more normalized transaction the level of transaction activity.
Great. Thank you.
Thank you. Our next question comes from Paul Quinn with RBC capital markets. Your line is open.
Yeah, Thanks, very much our solid results in the greater like here.
It looks like the guidance for Pacific Northwest, New Zealand are up quite a bit over 2020.
I'm just trying to attribute that what portion of of the increase is attributable to higher volume and what portion of two two of higher realized price.
I mean, its certainly both.
We can Paul if you want to walk up or talk offline about just you know kind of the the contribution on an EBITDA per ton basis, but you know we're anticipating pricing in both the Pacific Northwest and New Zealand timber being up pricing increases tend to be of straight pass through to the bottom line, whereas the volume increases you're obviously getting kind of that margin contribution from the incremental tonnes.
So it's definitely a mix of of both.
And as you know I'd say, it's more heavily weighted towards pricing.
Alright, that's all ahead of like I think.
Thank you our last question comes from John Babcock with Bank of America. Your line is open.
Thanks for taking my questions just for.
I know you talked a little bit about the wildfires in the Pacific Northwest I was wondering if you could gauge.
How much land, that's harvestable was ultimately damaged by that and it doesn't sound like it was all of that significant but I was wondering if you could quantify that for some extent.
Yeah for for rain here as I mentioned, none of our fee ground, but approximately 10000 acres of the timber fund business.
So that's for Rainier, but across the board there was hundreds of thousands of acres that were burnt in Oregon across the industry and in the National Forest in other lands, so, but we're very small percentage of that overall.
Gotcha.
And now that you've had pope resources now for too.
Two quarters or so I was wondering if you could talk about whether or not there aren't any adjustments that youre, making to the harvest plans that they had you know any.
Any sort of changes on that front that are worth noting.
Yeah. This is Doug again, you know I'd say, where we're nothing I would say that is notable what we're doing is bringing that property into ours rerunning. The harvest schedule of looking for opportunities. So there may be cases, where we can allow things to grow or just different opportunities to get different grade out of things. So it's really just optimizing what we have so it will impact our <unk>.
Stands of our harvesting, but not really the volume that we're looking at.
Yeah.
Gotcha.
With regards to Australia, you talked about the log Bam there do you have any color on how long that that band might be in place or is it.
Not that specific and then also where those long is going.
At this point with that logjam.
Yeah, I don't have any color on the length of that that's anyone's guess kind of like the U S band them. So so unsure of what I can tell you that folks are looking at the being something that's going to last for a little while so it's not just something that's happened and going on it feels like it's something to be around for a while those logs of lot of logs went to Korea and India. So immediately the the shifts the mark.
Shifting to those areas. So we've seen a shift away from China into those two markets.
And how does the.
For the volume that the question into those markets without significant impact of pricing in those regions.
I would say it has some impact but what we've seen is demand in China has really increased and so when we kind of look at that inventory demand ratio in China, where we're sitting we kind of look at between one five and two two months kind of being a good a good ratio in China really does set the export prices and right now we're sitting at that low end around the one five so well it seems overall.
Strength in export prices across kind of.
Asia and so while it's having some dampening impact in India and Korea those markets are still on the rise because they're following that overall, China trend. So it has had some impact but overall, we're seeing of price increase in the in all of the markets.
Okay.
And then I can't remember if you guys mentioned, a log inventories in China of where those stand now relative to where they had been over the last couple of months.
Yeah. So right now we're tracking roughly about $3 five to $3 7 million cubic meters and China, but importantly, radiata is at at of almost a record low over the last few years. So we're seeing that the radar of inventories are down and all of which again is the big influx of that European salvage I mentioned before which is primarily is that construction.
Number so the.
The good news for New Zealand and U S South as the demand for these other grades of news for appealing in the other products, but probably the little bit the dampening news for Pacific Northwest, which we havent done much exports out of is that construction grade is still seeing a lot of competition from the European salvage.
So, but right now really with the Pacific northwest domestic pricing, where it sits it's pretty hard to get any volume to go to China right. The smid anyhow. It's just a there's a significant premium to go to the domestic market.
Okay.
And then just my last question before.
Before I turn it over I was just wondering if you can talk a little bit of the little bit more about what's driving the demand in China and also how sustainable you see it I guess I was also wondering if there's you know how about how much of this is temporary I mean, we have seen in other commodities that the person is up quite a bit so one of the kind of get your thoughts there.
Sure Yeah. So broadly speaking we've seen the demand in Q4 as I mentioned for the strong with linking weekly consumption of around 800000 cubic meters and that is historically strong and it's really being fueled they've had a really strong second half economic recovery and right now the investments that the government is making a lot of it is in.
Infrastructure and so we do believe that's going to last for a long time. It doesn't appear like it's just a short term rebuild of commodities from from the prior you know shut down when they had the early in the year or so.
All indications we have right now is we're in for a good sustained boom, they're looking at the improving you know economic inputs of where we're thinking of Satsuma has some legs to it.
Okay. What was there a weekly consumption on average are in the kind of last year or so.
What's the normal more normal consumption there.
More normal might be in the 600007 six 700000, it's looking more like 800000 in the fourth quarter. So we've seen a strong increase.
We had.
Kind of you asked about I think for kind of where things of that in the beginning of the year. We had inventories of almost 7 million cubic meters sitting in China, obviously that was during the Covid lockdowns.
From there it's dropped down as I mentioned roughly half of that now so we've seen a pretty significant decrease a little bit of a build in January as we expect to see in February with Chinese new year, but it's still well below what we would expect to see so that drawdown has been having a snick in impact.
Alright, great I appreciate all of the color okay.
Thank you and we do have another question from Mark Weintraub with Seaport Global Your line is open.
Hi, some of their kind of again, thanks for taking the the follow up just wanted to understand a little bit from the south of you obviously had the year on year benefits you mentioned the export market. The mix. However, I'm trying to understand you know in the same region. It's kind of like for like are you seeing measurable changes in price.
And are there any specific new lumber mill projects that are coming online, but you see benefiting your you're holding some of the south.
So yeah Youre right, we are seeing improvements across across different areas as we as we look and as I mentioned before that kind of the Florida, Georgia area has significant investments earlier in and kind of 2018 2019, we've been tracking since 2017, I think about $8 3 billion board feet of capacity coming into the south.
And roughly half of that's already happened and we have another kind of 4 billion, that's still out in front of us and particularly for US you know the Georgia markets have seen some significant improvements in that in that area.
And we're excited to see klausner opening up in Florida, again, so and one of the reasons that was vendor holtz's bought that mill in live oak and it impacts, both our Florida and Georgia markets.
And along with that J P. Albany in the area. So we're seeing a lot of strength net area and so with that the Milken's back one that's about 300 million.
The million board feet of capacity coming into that area. So we're seeing a lot of strength. There so really that that Florida, Georgia, and Alabama also we've seen some strength in that as new mills of come online in that area too. So we're seeing across the board strength in those areas, but we're way of export and the new capacity seem to be what we're seeing in those price tension.
And keep in mind that these of these coastal markets have a heck of a fairly balanced growth drain relationship and so as such theyre going to be much more.
Much greater price elasticity, when we see changes in the market be it.
A new mill coming along coming on or adding capacity or the export market improving and so that's one of the reasons that you're seeing.
The nice price movement in the south is because of that factor.
Thank you and at this time, we have no further questions on the audio line.
Alright. Thank you. This is Collin mings I'd like to thank everyone for joining us please contact contact us with any follow up questions.
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