Rayonier Inc. Q1 2023 Earnings Call

Welcome and thank you for joining <unk> first quarter 2023 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 telephone Keypad. Today's conference is being recorded if you have any objections you may disconnect at this time.

Now I will turn the meeting over to Mr. Collin Mings, Vice President capital markets and strategic planning.

Thank you and good morning, welcome to Rangers Investor Teleconference, covering first quarter earnings our earnings statements and financial supplement were released yesterday afternoon and are available on our website at <unk> 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 are.

Earnings release, and Form 10-K, and 10-Q filed with the SEC list. 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 measures in our earnings release and supplemental material.

With that let's start our teleconference with opening comments from Dave Nunez, our CEO Dave.

Thanks, Colin Good morning, everyone first I'll make some high level comments before turning it over to Mark Mchugh, President and Chief Financial Officer to review our consolidated financial results. Then we'll ask Doug long Executive Vice President and Chief Resource Officer 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 the remainder of 2023.

For the first quarter, we generated adjusted EBITDA of $55 million and pro forma net income of $1 1 million or one cent per share as our team navigated numerous market challenges.

Total adjusted EBITDA generated by our timber segments collectively declined 30% relative to an extraordinarily strong first quarter 2022 amid weaker end market demand continued macroeconomic headwinds and the harvest disruptions associated with tropical cyclone Gabriel which hit New Zealand.

North Island in February .

As anticipated real estate closings were relatively light in the first quarter. However.

Our full year real estate pipeline remains relatively strong and we continue to expect that closing activity will be heavily weighted toward the second half of the year.

Drilling down further on our operating segments, our southern timber segment generated first quarter, adjusted EBITDA of $43 million down $6 million from the prior year period.

As weaker demand for pulp products and lumber coupled with drier weather conditions drove a 14% reduction to net stumpage prices.

Both demand and pricing were impacted by softer market conditions during the quarter as our customers worked through elevated log inventories and recalibrated for slower end market demand.

Compared to less tension markets in the U S south the relative price elasticity and a majority of our markets translated to a sharper pull back in pricing from 2022 levels.

However, our absolute pricing levels EBITDA per acre and EBITDA per tonne remained very favorable compared to the U S South overall.

In our Pacific Northwest timber segment first quarter, adjusted EBITDA of $7 million was down $14 million from the prior year quarter.

The decrease versus the prior year period was attributable to a 24% decrease in harvest volumes and a 12% decline in domestic saw timber prices.

Overall market conditions in the region softened due to weaker lumber demand and pricing less tension from the export market and general macroeconomic uncertainty.

Given the pricing declines we saw during the quarter, we opted to defer some planned harvest until end market demand and mill inventories normalize.

Turning to our New Zealand timber segment.

First quarter, adjusted EBITDA of $6 million declined $4 million.

Versus the prior year quarter due to lower carbon credit sales unfavorable foreign exchange impacts and 7% lower harvest volumes, resulting from the impacts of cyclone Gabriel.

While delivered export sawtimber prices also declined by roughly 11% stumpage realizations were relatively flat as shipping costs returned to more normalized levels.

As it results to cycle as it was as it relates to cycling Gabriel our thoughts go out to all of those who were affected by the storm.

While we sustained some timber and property damage Fortunately no ranier employees or contractors were injured by the storm.

During the quarter, we completed our damage assessment and determined that a $2.3 million write off was necessary due to timber damage on roughly 2600 acres.

From an operational standpoint, we also lost several production days during the first quarter.

However, excess to the forest has been restored and we currently expect that much of this production will be recaptured by the end of the year.

And our real estate segment, we generated adjusted EBITDA of $7 million for the first quarter down $18 million from the prior year period as higher weighted average per acre prices were more than offset by 76% fewer acres sold <unk>.

Despite the increase in interest rates as compared to a year ago demand for rural land remains strong and we remain pleased by the favorable momentum in both our wildlife and heartwood development projects with that let me turn it over to Mark for more details on our first quarter financial results.

Thanks, Dave let's start on page five with our financial highlights sales for the first quarter totaled $179 million, while operating income was $11 million and net income attributable to rayonier was $8 million or <unk> <unk> per share.

On a pro forma basis, net income was $1 $1 million or.

Per share.

Oklahoma items in the first quarter included a $9 million net recovery associated with a legal settlement as well as a $2 $3 million timber write off resulting from cyclone Gabrielle.

Adjusted EBITDA was $55 million in the first quarter down from $98 million in the prior year period.

On the bottom of page five we provide an overview of our capital resources and liquidity, our cash available for distribution or <unk> for the quarter was $30 million versus $65 million in the prior year period.

The decrease was driven by lower adjusted EBITDA and higher capital expenditures, partially offset by lower cash taxes and interest paid a reconciliation of <unk> to cash provided by operating activities and other GAAP measures is provided on page seven of the financial supplement.

We closed the first quarter with $99 million of cash and $1 5 billion of debt at the end of the first quarter. Our weighted average cost of debt was approximately three 1% and a weighted average maturity on our debt portfolio was approximately six years with no significant debt maturities until 2026, our net debt of approximately 1.4.

Yeah.

It represented 22% of our enterprise value based on our closing stock price at the end of the quarter I'll now turn the call over to Doug to provide a more detailed review of our timber results.

Thanks, Mark let's start on page eight with our southern timber segment.

Adjusted EBITDA in the first quarter of $43 million was 12% below the prior year quarter, driven by lower net stumpage pricing and higher costs, partially offset by higher non timber income.

Total harvest volume was relatively flat versus the prior quarter and an increase in pine saltwater volume offset reduced pine pulpwood and hardwood volumes.

Average saw log stumpage pricing was $32 per ton and 11% decrease compared to prior year period.

The moderation in pricing reflected reduced mark attention across our operating areas due to drier weather conditions softer demand from sawmills and less competition from pulp mills for chip and saw volume.

Meanwhile, pulpwood stumpage pricing fell 28% versus the prior year quarter to roughly $17 per ton as weaker end market demand drier weather conditions and extended maintenance outages at pulp mills.

Contributed to softer market conditions.

Overall weighted average stumpage prices in the first quarter fell 14% versus the prior year quarter to roughly $24 per ton.

As we had anticipated entering the year, both saw timber and pulpwood pricing have retreated from the exceptionally strong levels. We saw a year ago, given the slowdown in residential construction activity and weaker end market demand for pulp products.

While we expect macroeconomic related headwinds will persist over the near term and constrained log pricing to some degree we continue to believe that the relative strength and diversity of our U S. South footprint is a key strategic advantage for us.

Moving to our Pacific Northwest timber segment on page nine adjusted EBITDA of $7 million was $14 million lower than the prior year quarter.

The year over year decrease was primarily driven by lower net stumpage realizations lower harvest volumes and higher costs.

Volume decreased 24% in the first quarter as compared to prior year period.

Some planned harvest were deferred in response to soft market conditions.

At $93 per ton average delivered domestic solid pricing in the first quarter was down 12% from the prior.

Our year period, primarily due to weaker domestic lumber mills as well as reduce tension from the export market.

Meanwhile, at $48 per ton pulpwood pricing increased 28% over the prior year first quarter, but did moderate from the exceptionally high levels achieved in the second half of 2022.

Overall sawmills in the Pacific Northwest had an ample supply of logs to start the year, which negatively impacted market conditions.

However, as we progressed into the spring we start to see some indications that log inventories are declining.

As we look ahead to the remainder of the year, we expect declining mill inventories, coupled with improving end market demand should translate into positive momentum and solid prices.

Turning to pulpwood, we expect pricing realizations will continue to moderate as the supply constraints that helps drive exceptional pricing in the second half of 2022 normalized over the near term.

Moving to New Zealand.

Page 10 shows results and key operating metrics Foreign Zealand timber segment.

Adjusted EBITDA in the first quarter of $6 million was $4 million below the prior year quarter.

The decrease in adjusted EBITDA compared to the prior year period was driven by fewer carbon credit sales unfavorable foreign exchange impacts higher costs and lower harvest volumes due to lost production days as a result of cyclone Gabriel.

Average delivered export sawtimber prices of $113 per ton declined 11% compared to the prior year quarter.

<unk> stumpage realizations on expert volume were relatively flat as shipping costs fell to a more normalized levels.

Encouragingly, the Chinese economy appears to be showing some signs of recovery from a relaxation of COVID-19 contingent measures in late 2022, and the implementation of government stimulus measures designed to boost confidence in the real estate market.

While port Offtake in China remains below normal for the post lunar new year period port inventories have trended lower as consumption has outpaced the inflow of logs, giving.

Giving us optimism that the extra market will gradually improve as the year progresses.

Shifting to the New Zealand domestic market first quarter average delivered saw log prices fell 6% from the prior year period to $72 per ton largely reflecting the change in the New Zealand dollar U S dollar exchange rate.

Excluding foreign exchange impacts domestic sulfur prices are relatively flat from the prior year period.

Domestic pulpwood prices and New Zealand were likewise impacted by foreign exchange rates declining 5% on a U S dollar basis compared to prior year quarter, but up 1% when excluding foreign exchange impacts.

Non timber income in the New Zealand segment declines during the first quarter relative to prior year period, as we deferred the sale of carbon credits amid pricing volatility caused by regulatory uncertainty.

Going forward, we plan remain optimistic in our sale of carbon credits, depending on carbo credit market conditions, and our pricing outlook.

Lastly, in our trading segment, we posted a slight operating profit in the first quarter as a reminder, our trading activities typically generate low margins and our primary designed to provide additional commies of scale to our fee timber export business.

I'll now turn it back over to Mark to cover our real estate results.

Thanks, Doug as detailed on page 11, the first quarter contribution from our real estate segment was relatively light consistent with our expectations entering the year real estate sales totaled $16 million on roughly 2100 acres sold at an average price of $6200 per acre real estate segment adjusted EBITDA in the first quarter was seven.

<unk>.

Drilling down sales in the improved development category consisted of two transactions in our heartwood development project South of Savannah, Georgia during the quarter. We closed on a 27 acre multifamily site to a regional developer for $4 $5 million or $169000 per acre as well as six residential lots to national.

Homebuilder for $300000, reflecting an average base price of 50 $50000 per watt.

In addition to these closings were also very excited about two sites that broke ground and heartwood during the quarter. The first is the initial phase of the Saint Joseph Candler Health care campus, which will provide the community with convenient access to primary care urgent care specialty medical services.

The second is the Hyundai <unk> manufacturing plant at Belfast, Commerce Park, which will supply power systems and control units for electric vehicles.

Combined with the Hunt Hyundai met a plant that's currently under construction within a 30 minute drive from Heartwood. These facilities are expected to create an estimated 9500 jobs in the area. We believe that the two Hyundai plans as well as the new health care campus will drive further demand within the heartwood development project going forward.

Overall, we continue to believe that both our wildlife and heartwood development projects are well positioned and will benefit from favorable migration and demographic trends relatively affordable price points and a diverse mix of residential commercial and industrial end uses that each help catalyze demand for one another.

Turning to the rural category first quarter sales totaled $6 million, consisting of approximately 500 acres at an average price of roughly $4200 per acre key transactions included the sale of 439 acres in Allen pack parish, Louisiana for $1 6 million or <unk> $37 50 per acre and the sale of 360 <unk>.

Acres in Marion County, Florida for $1 5 million or $4300 per acre overall, we're encouraged by the fact that demand for rural land has held up well, particularly from buyers not reliant on mortgage financing.

Lastly, during the first quarter. We also closed on the sale of just over 500 acres of non strategic holdings, and Harden County, Texas for $1 6 million or roughly $3100 per acre.

Moving onto our outlook for the balance of 2023 based on our first quarter results and our expectations for the balance of the year. We now anticipate full year adjusted EBITDA towards the lower end of our prior guidance range of $280 million to $320 million. Similarly, we anticipate pro forma EPS towards the lower end of our prior guidance range.

A 36% to 50 cents.

With respect to our individual segments and our southern timber segment. We are on track to achieve our full year volume guidance, but anticipate lower quarterly harvest volumes for the remainder of the year. Following a relatively strong first quarter over the near term. We expect the weighted average net stumpage realizations will remain below first quarter levels as demand, particularly for pulp.

It has been negatively impacted by the macroeconomic environment, we continue to anticipate higher non timber income for full year 2023, as compared to full year 2022.

In our Pacific Northwest timber segment, we expect harvest volumes toward the lower end of our prior guidance as we have deferred some planned harvests in response to unfavorable market conditions.

Following the pull back in pricing to start the year, we anticipate the weighted average delivered log prices will improve modestly.

First quarter levels over the balance of 2023 is end market demand and mill inventories normalize.

In our New Zealand timber segment, we expect harvest volumes toward the lower end of our prior guidance given the loss production days, resulting from cyclone Gabrielle compared to the first quarter. We anticipate the weighted average delivered log prices will remain relatively flat over the balance of the year. We further anticipate a higher contribution from carbon credit sales over the balance of the year following.

Activity in the first quarter.

In our real estate segment, we remain encouraged by the interest in our development projects and rural properties. Overall, there continues to be strong demand for HBU properties and timberland assets. Despite the higher interest rate environment consistent with our prior guidance, we expect significantly higher transaction volume and operating results in the second half of the year from this segment I'll now turn.

On the call back to Dave for closing comments.

Thanks Mark.

While the current macroeconomic backdrop and near term outlook are challenging we remain optimistic about the long term prospects for our business and have been pleased with the progress made over the past few years in both growing and improving the quality of our portfolio. We believe that favorable long term housing fundamentals coupled with <unk>.

Bargaining business opportunities around nature based solutions should support long term growth and timberland cash flows and corresponding valuations overtime.

As we discussed in our recent annual shareholder letter timber as an asset classes enjoying somewhat of a Renaissance in terms of its investment appeal given the roll force can play to address the impacts of climate change. In addition to sequestering carbon a variety of alternative uses for for land and wood fiber.

<unk> are evolving to support the transition to a low carbon economy.

We are advancing several initiatives to better understand how these opportunities can add value to our timberland portfolio over time.

While we are excited about these new opportunities our team remains extremely focused on navigating the near term headwinds associated with a challenging macroeconomic environment.

The operational flexibility afforded by our pure play timber REIT model, coupled with the diversity and relative strength of the markets. We operate in remain a key competitive advantage for us.

On this note the integration of the 137800 acres of Timberland, we acquired back in December has gone very well and has afforded us greater flexibility to navigate the rapidly evolving market conditions that we've seen so far this year.

That said, it's important to reiterate that we don't believe in growth for growth's sake, and pursuant to our active portfolio management strategy. We also continuously evaluate opportunities to recycle less productive capital towards uses with a better risk return profile.

In sum I believe that our team our culture, our timberland and real estate assets and our strategies are well aligned to achieve future success I am very proud of how our team is working together to adapt quickly to changing market conditions. While also advancing important initiatives that will enable us to continue.

To build long term value for our shareholders.

This concludes our prepared remarks, and I'll now turn the call back over to the operator for questions.

Thank you if you would like.

Okay.

Yeah.

Yes.

Thank you if you would like to ask a question. Please press star one on your telephone keypad to withdraw your question Press Star two on your telephone keypad. Once again to ask a question. Please press star one or.

First question comes from Anthony Pettinari with Citi. Your line is open.

Good morning. This is Greg on droplets on for Anthony Thanks for taking my questions.

Quick one I'm looking across your broader southern portfolio are there any regional trends pricing, maybe log inventories at mills mills approaches to hold inventories or end market demand.

Densify it in your various operating markets and maybe if you could just touch on the southern acquisitions versus like a sea ray in your portfolio.

Yeah. Good morning. This is Doug I'll start with that so.

In our prepared remarks, the recent pressure on log pricing yourself has been most pronounced in the markets that are registered the largest pricing gains last year in.

And that's really reflective of that price elasticity that we've seen are more attention markets and a few additional points I'd like to make on that is at the absolute so much price realizations and most of our markets remain quite favorable compared to a south overall, reflecting a favorable growth drain dynamics that exist in areas, where our portfolio is concentrated in where we've grown recently on the acquisitions you mentioned.

That said the year over year comps are down given the very tough year ago Q1 comps, we had heading into 2022 most of our wood baskets had very strong end market demand for both sawtimber and pulpwood products. We also had a wet winter at the end of 2021 the constraining supply available. So overall a significant amount of tension was created markets that already had favorable supply demand dynamics.

And that's what drove that particularly strong pricing that we achieved a year ago.

This is in contrast on the other operating areas and yourself that didn't see the same momentum last year given those markets didn't have the underlying growth drain dynamics that allow for that increased pension.

If there's an impact on the pricing.

So while there's a quite a bit of volatility in the market. Some we still believe these are the more attention baskets are better positioned for long term can absolute price pricing pricing levels and spirit EBITDA per ton generation that we have and to your question around kind of where we're seeing things you know across the region.

Rainfall patterns are definitely different and across the south and so that Mississippi River Delta area, particularly wet winter.

Winter and spring and then over here along the Atlantic Coast, it's been much drier so even below normal rainfall. So we have seen some difference in markets as I mentioned about the wet weather there as well as along the Atlantic Coast Mills here have a higher percentage of exports and so we've seen some weakness as it had been with less demand for exports both to Europe and China.

Ana So it's been a little bit difference between kind of the east coast versus our kind of Gulf State Mills and regions.

Interesting that that's very helpful. Thank you and just a quick follow up last year, you provided us an update on global log flows after the Russian vision of Ukraine, and the weaker European economy. So my question I guess is given your global footprint can you discuss the current global log supply demand environment and any notable exports.

Trends you'd identify out of Russia and Europe .

On the on your on what's the opportunity to flex in New Zealand and Pacific Northwest volumes to other destinations outside of China.

Yeah, I'll take a stab at that also so.

Things up.

I've kind of sorted out the way, we thought they with respect to the Russian and Ukraine volumes one of the biggest things has probably been the ramp up in China is still working its way through so as we mentioned there are kind of comments before the prepared remarks, we're encouraged by the fact that for inventories in China are trending lower over the past few months as Consumptions outpaced inflow.

Logs it kind of lays reports we have from April show that softwood with where inventories are at $4 3 million cubic meters.

And that's down about 8% of remarks. So we are seeing some drawdown and so that's the good news for us and what we have seen probably lessen the logs Glenn China is the fact that the.

Loss from Europe through that Ukraine War were moving to China and that seems to have slowed down now so that last that salvage logs those kind of contracts are in place have slowed down. So we're seeing a reduction in European spruce, starting to move into China, We haven't seen an increase in Russian logs to them to China, what we see more is lumber being made in.

Shifted into into China, basically from from Russia area.

And probably more we've seen is just the weakness in Europe overall on the macro level and so we've seen imports of lumber from.

Europe heading into the United States I think is something that's impacted and kept a damper here on the log side, where we're seeing demand in China now starting to pick up so.

We've seen you know past the lunar holiday in April estimate daily takeaway in China was around 75000 cubic meters, which is up 55% compared to April 2022. During the height of the Covid Lockdowns. That's more typically in the 80 to 90000 cubic meter range. So you know good progress when we were last year, but still some room to go there. However, theres a few factors, giving us smart.

Ism that prices will improve once log imports normalized demand increases.

China's National Bureau of statistics reported that year over year GDP expansion of four 5% in the first quarter of 2023, which exceeded both economist estimates and have higher growth for the quarter before.

And then residential floor space sold in the first quarter of Q1 basically grew also so we're seeing growth in that there's typically viewed as a leading indicator of the residential construction market and may signal a turning point in demand for construction materials that our export laws are used for how.

How long it takes place to play out is yet to be determined.

But relative to like what we saw last year as I mentioned, you know could increase in log demand from the ports as we go after the recovered restrictions. So we're feeling much better about the current environment as we move forward.

Thank you very much for the call appreciate it I'm sorry, Bob.

Thank you. Our next question comes from Keaton Montara with BMO capital markets. Your line is open.

Thank you and good morning, I'm curious if you can.

Alright.

Kind of what you are seeing.

Carbon credits.

In New Zealand.

Also in the U S, which is kind of increasingly becoming a very topical.

You know area.

And what is the work you guys have been doing that all on that.

Sure Ken This is Dave.

Keep in mind, our New Zealand has a regulated carbon market and so that's something that we've been we've been participating in.

For a number of years carbon prices were very strong last year and so we.

We've always sort of taken an opportunistic approach to selling carbon we sold a fair number of carbon credits last year, we were off the market earlier this year the market.

The market was softer due to some uncertainty from a regulatory standpoint within our new.

New Zealand and the perception of that market and so we're we're waiting for things to firm.

Having said that the that market is a lot further developed than in the U S. I think the U S is really a looking at a voluntary carbon market and as many as many have pointed out.

There's lots of concern around the potential for Greenwashing and so a number of participants ourselves included have taken a fairly cautious approach to make sure that any any carbon projects that we advance.

Pass the smell test for things like conditionality.

And and.

And so we're continuing to progress.

Those projects, but we do not have one that's that's up and running as of yet for those reasons.

Again similar to many other participants we are.

We are seeing a lot of interest you know kind of related to that and carbon capture storage. That's an area that has progressed faster than we thought we have we have.

<unk> put in place our first lease on our carbon capture and storage project, we have a number of others that we're working on right now so that's one that we're encouraged by.

Keep in mind, it'll it'll take a number of years for revenues to start flowing as as the permitting process is fairly complex, but we're very encouraged by the general.

Market interest in that.

Got it that's helpful.

Dave can you provide any sort of any quantitative insight into kind of you know what the prices are both in New Zealand and the U S. At all kind of carbon credits and how you guys kind of view.

With that.

Yeah.

Last year, the carbon credits in New Zealand, we're roughly 50 U S dollars per New Zealand unit, they're down they're down right now from where they were last year.

Thats a substantially higher price than then the the U S market, reflecting the difference between our regulated and our voluntary market.

We've seen we've seen voluntary carbon prices in the U S are really all over the map from low single digits to two.

<unk> prices that are that are over $10.

Per per metric ton, but.

I'd say that.

Till until carbon prices get to a meaningfully higher level, you're likely not to see a lot of change in the way that industrial timberlands are managed BS V that tradeoff between log production and carbon sequestration.

Got it that's very helpful and then.

Last question from my side.

Like there is incrementally more pressure on the southern pulpwood market.

Can you talk about how much of this is you know kind of specific issues related to Q1 or is it kind of more.

More of a cyclical thing that you are actually seeing kind of.

Pressure on the demand side, which could continue in school quite a party three at least.

Yeah. This is Doug I'll answer that one a lot of pressure we saw on the on the pulpwood market was was result of Q4 of last year and so we really saw operating rates for a lot of the mills reduce in Q4 as they salt is demand decreasing for them and us that's weighing through we're starting to see things pick up a little bit but.

Through Q1, we saw that reduce reduce capacity a lot of the mills. This time of year, they take them their spring shut down and so we saw those extend a little bit but what we're hearing now captive supply changes that put a lot of their end customers have started that destocking process and are starting to ripple back. So as some of the mills have come back from their spring maintenance is they're starting to increase their production rates.

So I think what we've seen is most of that weaknesses has already happened through Q4 into Q1 and really as we look at our kind of average weighted net stumpage going forward like what we're seeing is we have an increase amount of spending that happens in Q2 Q3, and that's just a seasonal thing that typically happens and there's thinning volumes increased production of pulpwood and then some geographic mix as well.

Also shifts on the harvest around so on a per product per pricing basis, we've seen things stabilize.

Got it that's very helpful.

I'll turn it over good luck.

Thank you.

Thank you. Our next question comes from Buck Horne with Raymond James Your line is open.

Hey, Thanks, Good morning, guys I kind of wanted to follow up a little bit on that the pulpwood discussion in more detail just I mean can we isolate.

You know exactly kind of what the demand drivers in the end markets, where they created it has created some of that softness why the mills are taking are slowing down their operating rates for pulp.

Pulp production.

And I guess the follow up to that is do we see any near term catalysts on the horizon that could.

Increase pulpwood pricing whether that would be.

Pellets.

Or or some sort of you know whether it's sustainable aviation fuel uses anything else on the pulpwood side that could could increase that demand usage.

Yeah, I like I've mentioned before I mean, what we've heard is that are you know coming through Covid a lot of the kind of the end user of the boxes in different linerboard materials had stocked up and I think you know things move down and as people are kind of changed your patterns. After COVID-19. There was a need for destocking at that at that end level basically on the conversion side.

And so I think that's really what impacted from my understanding a lot of the allowed the demand, particularly in Europe , but also in China and what we're hearing is and that obviously is through the mills. So they would know better than myself, but does that that we really start to see some of the destocking both in China and Europe . So that's starting to starting to play out and I think that's why there's some improved production moving forward when it comes.

To the pellets from and what else what I've heard there is demand still strong in Europe , and so we see that some of the pulp mills, we've provide too have had basically some maintenance issues and things like that separate run at full capacity and we're seeing them back up and running at full capacity. So I see some upside there and then the last point you bought outcome with respect to <unk>.

Fiber for bioenergy and stable aviation fuel manufacturer <unk>, that's an emerging opportunity that we're exploring right now with quite a few people and I think really comprise solutions.

To folks in that area and we're pretty excited about that but again, it's going to take us like the carbon capture storage, it's going to take a while for those plants get built the first one I'm aware of and archon operating areas in Texas.

And they're starting to strike ground on that now and so we're excited to see that happen. So we do believe that's going to be a growing opportunity for us in the future.

Awesome, Okay. Appreciate the color there.

And secondly, I you know.

With the.

Unfortunately, the stock price being where it is these days and where your NAV I think is sustainably at and the disconnect. There is there a interest or do you have.

Authorizations for potentially using stock repurchases or selling acreage to fund repurchases to close the disconnect here.

Yeah, Buck I'd say first of all we are.

Keeping to our nimble approach to capital allocation, we always have an open.

Our buyback authorization as well as an open ATM authorization. So we have both of those sort of levers at our disposal and we've always felt that that that land and timber is as a as an asset that can be sold readily if if if such an opportunity. We're we're press.

And so I think we we continue to believe we have lots of flexibility on that front.

Alright, Thanks, Good luck guys.

Thank you if you would like to ask a question. Please press star one on your telephone keypad. Our next question comes from Paul Quinn with RBC capital markets. Your line is open.

Yes, thanks, very much good morning, guys.

Whether if you could give us some overall comments north American timberland markets themselves. It sounds like according to third party sources.

Sort of a dearth of transactions out there do you see that improving over the year.

Yeah, It's it's Ben.

There've been a few transactions.

To date Paul.

The ones that the ones that are out there that have closed have generally been of lower quality and you see that reflected in the in the.

And the pricing Theres, roughly there's roughly 10 transactions right now out in the market for roughly a couple hundred thousand acres in total vast.

The vast majority of those being T modes that are selling them.

We keep a pretty active.

Look on the market, but we've been you know we.

It was a relatively quiet quarter for us we closed on.

And for small bolt on transactions.

Two in Florida, one in Georgia, and one in Washington.

During the first quarter for about 2500 acres. So.

Not a not a very.

Pretty pretty.

Small bites for us, but we're we're continuing to monitor those markets and generally this time of year, we start to see offerings for the second half starting to flow into the market.

How would you characterize the rest of the.

Forest products industry, and the effect of that cyclone to add on.

The rest of it.

Is your competitive position.

Or to that segment.

Yes.

Yeah. This is Doug Hum.

I think in the in the longer term it's.

I guess, you say somewhat improved net some of our peers had significantly more damage than we did in mature forest. So that will have a have a knock on effect as time goes on particularly the central North Island. So there were definitely some areas where people. Unfortunately suffered way more damage than we did in that'd be reduced supply of saw logs and particularly improved volume over the next couple of years, but right now.

Firstly, the short term influx of salvage volume that that's going to hit the market and so we're working through that as we go forward now and but we seen crew shipped away from.

Mature salvaged timber that wasn't damaged. So we think that'll kind of supplant that so I think you look out a year or two from now then it's probably a competitive advantage in that respect, they're just less volume out there which are wood to compete.

Yeah, Paul I do that I'd add to that you know our footprint in New Zealand is is fairly dispersed across the country and so you know as a result, we had roughly 2600 acres that were affected so it was a pretty.

Was it pretty small aerie area of impact and roughly.

Two thirds of the write down that we that we took was around pre merchantable timber and so to doug's comment we're.

We're seeing some market weakness right now due to a lot of mature timber that was blown down and so that has kind of clog the market from a supply stack.

Standpoint, but you know we we feel fortunate in that we were.

We werent very heavily impacted and again it gets back to one of the mitigation you have and any kind of hurricane impact is the less blocked up you are that that is a risk mitigate or and that certainly played out that way in New Zealand.

It's hard to how long does it take the salvage but it's definitely take more than a quarter, but I would think this is gonna be a 2023 event and shouldn't shouldn't really impact things the quality of the wood will start to deteriorate that they're moving into their winter, which will help some but also it'll still be a problem. So I think this is typically this kind of a hurricane salvage volume type thing, it's less than a year.

So I expect it will it'll play out there working on as quick as possible. So I think this is a 2023 couple of quarters and then it should be cleared through and then we see the impact of less volume on the market.

Okay understood and then just lastly on carbon.

You mentioned.

It's got a regulated market.

North America, basically voluntary how do we get some.

From a voluntary market to a regulated market.

Rainy are doing to accelerate that transition.

It's not clear to us Paul that the U S is going to see a regulated market anytime soon that's you'd think about some of the political elements to this and it's and it's why it's why you're seeing a lot of market participants really pursuing various.

Various efforts along voluntary front and you see a number of programs that are designed around improved forest management.

Lengthening of rotation.

That that sort of thing or are deferring deferring a lot of harvest for periods of time.

We're also seeing opportunities around a forestation, where youre converting land that is.

That has not been in timber production, which is a a cleaner way of looking at carbon are one of the things that we are looking at potentially doing in light of the fact that we don't see.

Prospect for a regulated market is looking for opportunities, where we can have direct discussions with counterparties.

And you know who value the need for some of that that carbon sequestration, but that's going to take some time to develop.

Alright, that's all I had best of luck guys. Thanks.

Yeah.

We have no further questions I will turn the conference back to Colin Thank you.

Thank you. This is Collin mings I'd like to thank everybody for joining us please contact us with any follow up questions.

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