Q3 2025 Weyerhaeuser Co Earnings Call
Greetings and welcome to the warehouser third quarter 2025 earnings conference call.
At this time, all participants are in listen-only mode. After the speaker's remarks, there will be a question-and-answer session. To ask a question, you will need to press *1 on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Mr. Andy Taylor, vice president of investor relations. Thank you, Mr. Taylor. You may begin.
Thank you rob. Good morning everyone. Thank you for joining us today to discuss warehouses third quarter 2025 earnings. This call is being webcast at www.weather.com, our earnings release and presentation. Materials can also be found on our website.
On the call this morning or Devin stockfish, chief executive officer and Devi, Wold Chief Financial Officer. I will now turn the call over to Devon stockfish.
Thanks Andy. Good morning, everyone and thank you for
Yesterday, Weyerhaeuser reported third quarter GAAP earnings of $800 million or $0.11 per diluted share on net sales of $1.7 billion.
Excluding special items, we earned $0 million or 6 cents per diluted share.
Adjusted EBA total 27 million for the quarter.
Our third quarter performance reflects solid execution by our teams against a very challenging Market backdrop.
Notwithstanding recent headwinds, we remain well positioned to navigate the current environment, given our deeply embedded Opex culture and competitive cost structure.
We've done considerable work over the last several years to align our strategy with the cyclicality of our businesses.
As a result warehouser is a much stronger company today than at any point in recent history and we continue to demonstrate the durability of our portfolio. The strength of our balance sheet and the flexibility of our Capital allocation framework across Market Cycles.
Looking forward. We remain constructive on the longer-term, demand fundamentals that support growth for our businesses.
And we're ready to capitalize on opportunities as market conditions improve.
Before getting into the businesses, I'd like to provide an update on recent actions to further optimize improve and grow our Timberland's portfolio.
Our recent Timberlands transactions are summarized on page 18 of our earnings slide.
In the third quarter, we completed 2 high quality Acquisitions, totaling 40059 million.
This includes our previously announced transaction for timberlands in North Carolina and Virginia, and another acquisition of exceptional timberlands in Washington State.
Additionally, in the third quarter, we Advanced 3 devesta.
1 of which closed earlier this month and the other is under contract and scheduled to close later in the fourth quarter.
And announced a compelling engineered wood products growth opportunity, all while maintaining a strong balance sheet.
Moving forward, we will continue to evaluate capital-efficient opportunities that enhance the return profile of our Timberlands while also balancing other levers across our capital allocation framework to drive long-term value for our shareholders.
Additionally, in the third quarter, we completed the sale of our Princeton Mill in British Columbia for $85 million.
In September, we received 61 million of the proceeds in conjunction with the closing of the Sawmill portion of the deal.
We expect to receive the remainder of the transaction proceeds, over the coming months, following the transfer of associated Timber, licenses in the province.
It's worth noting that our other Lumber operations in Canada, are not affected by this transaction. And we continue to serve our customers from our 2 saw mills in Alberta
Turning now to our third quarter business results, I'll begin with Timberlands on pages 6 through 9.
Timberlands contributed $80 million to the second quarter. Earnings adjusted EBITDA was $148 million, a million dollar decrease compared to the second quarter.
In the West, adjusted IBAAD decreased by $9 million. Log pricing in the domestic market faced downward pressure in the third quarter as supply remained ample, and mills continued to carry elevated log inventories while navigating a very challenging lumber market.
As a result, our average domestic sales realizations decreased moderately compared to the second quarter.
Per unit, log in Hall, costs increased in response to higher elevation Harvest activity. That's typical this time of year.
Higher quarter, our fee Harvest volumes were moderately higher and exceeded our initial plan for the quarter largely driven by fewer operational. Restrictions, given a relatively light Wildfire season.
Moving on to our export business to Japan.
Log markets in Japan. Softened, somewhat in the third quarter in response to ongoing consumption, headwinds in the Japanese housing market.
As a result, our customers' finished goods inventories increased and log prices decreased.
By this Dynamic, our customers remained well, positioned relative to imported European Lumber which continues to face headwinds in the Japanese Market.
For the quarter, our average sales realizations, for export logs to Japan, were moderately lower and our sales volumes were moderately, higher largely due to the timing of vessels.
Turning to the South.
Adjusted IBAA for Southern Timberlands was $74 million.
A $5 million increase compared to the second quarter.
Southern salog markets. Moderated slightly in the third quarter. As log Supply increased with drier weather conditions and as Mills further adjusted to weaker Lumber markets.
In contrast, Southern fiber, markets were relatively stable outside of a few localized regions impacted by recent Mill closures.
On balance, takeaway for our logs remained steady. Given our delivered programs across the region.
That said, our average sales realizations decrease slightly in response to a higher mix of fiber logs from increased thinning activity.
Given favorable weather conditions are fee Harvest volumes increase slightly compared to the prior quarter.
Per unit, log in Hall costs were lower and Forestry and Road costs were comparable.
In the north adjusted. Eva de increased slightly due to the higher sales volumes. Resulting from the seasonal increase in Harvest activity. That's typical in the third quarter.
Turning now to real estate, energy and natural resources on pages, 10 and 11.
real estate and enr contributed, 69 million to third quarter, earnings and 91 million to adjust the debe de
Third quarter adjusted EBITDA was $52 million lower than the prior quarter but $28 million higher than our initial outlook for the segment, largely driven by the timing and mix of real estate sales.
It's worth noting that the real estate markets have remained healthy year to date, and we continue to benefit from strong demand and pricing for HBU properties. This has resulted in high-value transactions with significant premiums to timber value.
Notably, our average price per acre has steadily increased in 2025 and reached its highest quarterly level since late 2022.
I'll now turn to our natural climate Solutions business.
First on our carbon capture and sequestration project with accidental petroleum, which is expected to reach first injection in 2029.
In the third quarter, oxygen announced. The formation of a joint venture for the construction and operation of pipeline infrastructure between Regional customers and the CO2 storage facility and Livingston Parish Louisiana.
This represents another important Milestone associated with our CCS project.
And underscores the importance of selecting sophisticated counterparties with strong technical commercial and project development expertise.
Turning quickly to Forest carbon.
We have now received approval on our fourth project and currently have five additional projects under development.
We continue to see solid demand for our credits, given our commitment to developing projects that meet a high standard for quality and integrity.
For 2025, we still expect a significant increase in credit generation and sales relative to the last couple of years and overall, we remain on track to reach a hundred million dollars adjusted IBA de from our natural climate solutions by year end.
I'll note here that we are excited to go into much more detail. On our natural, climate Solutions business, including multi-year, growth targets at our upcoming investor day in December.
Now, moving to Wood Products on pages, 12 through 14.
Excluding a special item associated with the sale of our Princeton Mill.
Earnings for wood products were a $48 million loss in the third quarter.
Adjusted IBA was $8 million, a $93 million decrease compared to the second quarter.
These results reflect extremely challenging lumber and OSB prices in the quarter, which reached historically low levels on an inflation-adjusted basis.
Starting with Lumber third quarter. Adjusted Eva de was a 48 million dollar loss as several ongoing headwinds persisted across the North American Market.
Forward trajectory largely supported by improving, Western SPF pricing and broader concerns around the pending increase in duties on Canadian Lumber.
As the quarter, progressed demand, softened, seasonally and buyer sentiment, turned much more cautious.
In addition the supply demand imbalance worsened and response to elevated. Shipments of Canadian, Lumber into the US market ahead of the increasing duties.
Collectively, these dynamic strobe composite pricing significantly lowered through the balance of the quarter.
It's worth noting that we have seen pricing stabilize and move slightly higher for certain species over the last several weeks.
At this point, the industry is largely worked through the excess, Lumber volume, that entered the US prior to Canadian duties moving higher.
Although we do expect the typical seasonal softening of demand as we enter the colder winter months,
Leaner inventories, combined with elevated duties in the new 232 tariff, should support product pricing and bridge the market until we start ramping up for next year's building season.
For our lumber business production volumes decreased by approximately 3%, compared to the second quarter.
this reflects our election in September to slightly moderate production, across our Millet in response to the softer demand environment
As well as the volume impacts associated, with the closing of our sale of our Princeton Mill late in the quarter.
As a result, our sales volumes were slightly lower compared to the second quarter and unit manufacturing costs were higher.
Our average sales realizations decreased by 11% in the third quarter and were generally in line with the framing lumber composite. Log costs were moderately lower.
Now, turning to OSB third quarter adjusted ebit da was a $3 million loss primarily driven by weaker product pricing in response to subdued residential construction activity.
Following a steady decline for most of the year, the OSB composite stabilized in August and was generally ranged down for the balance of the quarter, albeit at a much lower level than the prior quarter average.
For our OSB business average sales realizations, decreased by 18% compared to the second quarter.
Our sales volumes were comparable to the second quarter.
Unit manufacturing costs and fiber costs were moderately lower.
I'll note that pricing is remained stable through October and similar to Lumber. We do expect demand to improve early next year as we approach the spring building season.
Engineered wood products. Adjusted IBA. Was 56 million which was comparable to the second quarter?
It's worth noting that third quarter results included a one-time $7 million benefit from insurance proceeds associated with the fire at our MDF facility in Montana earlier this year.
As for the performance of our ewp business, we continue to align our production with customer demand and single family home building activity, both of which softened somewhat in the third quarter.
As a result, our sales volumes decrease for most products, compared to the second quarter and unit manufacturing costs increased.
Notably, our average sales realizations for solid section and I joist products were comparable to the prior quarter.
And raw material costs decreased primarily for OSB webstock.
In distribution adjusted, ibaad decreased by 4.2% due to a decrease in sales volumes.
With that, I'll turn the call over to Davey to discuss some Financial items and our fourth quarter Outlook.
Thanks, Devin and good morning everyone. I'll begin with key financial items which are summarized on page 16.
In the third quarter, we generated $210 million of cash from operations and ended the quarter with approximately $400 million of cash and total debt of just under $5.5 billion.
Our balance sheet, liquidity position and financial flexibility remains solid notwithstanding the challenging Market backdrop and we are well, positioned to navigate a range of market conditions.
Share repurchase activity totaled, 25 million in the third quarter. And as of quarter end, we had completed approximately 150 million of share repurchase activity for the year.
Capital expenditures were $125 million in the third quarter, which includes $32 million related to the construction of our EWP facility in Monticello, Arkansas.
As we previously communicated, the total investment for the facility is expected to be approximately $500 million, to be incurred through 2027.
Used in our cash return framework.
Excluding capex for monicello. We have lowered, guidance for our typical capex program, to arrange of 380, to 390 million in 2025.
It's worth noting that we are always evaluating our capital allocation levers and have the flexibility within our framework to make adjustments. In response to market conditions, we alternate uses of cash to fund growth opportunities.
Given the timing of cash inflows and outflows associated with recently announced Timberland transactions and typical liability management activities, we took advantage of the beneficial rate environment in the third quarter to secure a 3-year, $800 million term loan with an effective interest rate of 4.3%. We used $500 million of the proceeds to prepay a portion of our 2026 maturities.
Third quarter results for our unallocated items or summarized on page 15.
Adjusted EBIT for this segment increased by $30 million compared to the second quarter, primarily attributable to changes in intersegment profit elimination and LIFO.
Looking forward key Outlook items for the fourth quarter are presented on page, 19 and updates to full year outlook items are presented on page 20.
In our Timberlands business, we expect fourth quarter (Q4) earnings before special items and adjusted EBITDA to be approximately $ million, lower than third quarter (Q3) of 2025, largely driven by lower sales volumes and realizations in the West.
Turning to our Western Timberlands operations.
Log demand in the domestic Market remains soft at the outset of the fourth quarter as Mills, continue to work through elevated, log, inventories, and navigate a challenging Lumber Market.
That's said log Supply typically moderates into the winter months which should provide some support for log pricing as the quarter progresses.
On balance, our domestic sales realizations are expected to be moderately lower compared to the third quarter.
Our fee harvest volumes are expected to decrease largely due to fewer working days in the fourth quarter and the pull forward of volume over the summer, with minimal wildfire-related operational restrictions.
Our per unit logging haul costs are expected to be lower, and forestry and road costs are expected to decrease seasonally.
Moving to our log export program to Japan as Devin mentioned log inventories have expanded in the Japanese Market in response to ongoing consumption headwinds. As a result, we expect softer demand for our logs in the fourth quarter and lower sales volumes compared to the prior quarter.
That said we anticipate. Our Japanese log sales realizations to be slightly higher largely driven by Freight related benefits.
It's worth noting that we expect demand for our logs to improve over time, as inventories normalize in the Japanese market. As our customers continue to take market share from competing imports of European lumber.
Turning to the South.
Salog markets remain muted as mills continued to navigate lower pricing and takeaway of lumber while working through elevated log inventories.
However, we anticipate a slight uptick in log demand as supply decreases seasonally into the winter months.
In contrast, fiber, markets are expected to remain relatively stable outside of a few localized regions impacted by recent Mill closures.
On balance, takeaway for our logs is expected to remain steady given our delivered programs across the region. We anticipate our sales realizations to be comparable to the third quarter.
Our fee harvest volumes and forestry and road costs are expected to decrease seasonally.
And per unit, log-in costs are expected to be higher.
In the North, our fee harvest volumes are expected to be moderately lower due to seasonal wet weather conditions, and we anticipate slightly lower sales realizations due to mix.
Moving to our real estate energy and natural resources segment. Real estate markets have remained healthier to date and we have capitalized on strong demand and significant premiums to Timber value.
As a result, we are increasing our guidance for full year 2025 adjusted ibida to approximately 390 million an increase of 40 million from prior guides.
We now expect basis as a percentage of real estate sales to be 25 to 30% for the year and we remain on track to reach 100 million of ibido from our natural climate Solutions business by year end.
For the segment we expect fourth quarter earnings, before special items to be approximately 5 million lower and adjusted ibida to be approximately 15 million dollars, lower than the third quarter of 2025 due to the timing and mix of real estate sales.
Our wood product segment, excluding the effect of changes in average sales realizations for lumber and OSB. We expect fourth quarter earnings before special items and adjusted ibida to be slightly lower than the third quarter of 2025
We anticipate a slightly softer demand environment for wood products in the fourth quarter as housing and RNR activity, typically moderates into the winter months.
Looking further out, we would expect demand to increase into next year's spring, building season and more broadly as the macro environment. Improves.
Composite pricing for lumber and OSB has been relatively stable through October.
That said, pricing for both products remains at historically low levels on an inflation-adjusted basis and slightly below third-quarter averages.
For our lumber business, we slightly reduced our production. At the end of the third quarter, in response to the softer demand environment and have maintained a similar operating posture through October.
Assuming we continue with this reduced posture for the remainder of the quarter combined with the effect of the Princeton sale, our lumber production would be approximately 10% lower quarter over quarter.
As a result we anticipate lower sales volumes in the fourth quarter.
Unit manufacturing costs are expected to be comparable to the prior quarter, and log costs are expected to decrease moderately.
Looking forward, we will continue to ensure our operating postures are aligned with driving optimal financial performance.
For our OSB business. We expect sales volumes and fiber costs to be comparable to the third quarter.
Unit, manufacturing costs are expected to be higher due to plan and annual maintenance outages that are typical in the fourth quarter.
For our engineered wood products business, we continue to align our production with customer demand, which is most notably tied to single-family home building activity.
As a result, we anticipate lower sales volumes for most products compared to the third quarter with our average sales realizations in raw material costs, expected to be comparable.
For our distribution business, we expect adjusted EBITDA to be comparable to the third quarter.
With that, I'll now turn the call back to Devon and look forward to your questions.
Thanks Davey before, wrapping up this morning, I'll make a few comments on the housing and repair and remodel markets.
Starting with housing.
Overall, housing activity has remained lackluster this year, with total starts hovering around 1.3 million units on a seasonally adjusted basis and single-family starts below 1 million units.
Based on conversations with our home builder customers, the biggest issues continue to be ongoing affordability challenges and weaker consumer confidence.
While mortgage rates have declined to the low 6% range, many potential home buyers remain on the sidelines, given elevated uncertainty about the economy, inflation, and employment.
The ongoing government shutdown is likely also having an impact on overall sentiment.
All said, consumers have been less inclined to jump into the housing market in 2025, given all the noise in the broader macro environment.
Moving forward, it seems we could see some of the tariff-related concerns easing over time. We might also get additional support from the Fed on interest rates in the coming months, and hopefully, the government shutdown will end soon. Perhaps clarity in these areas could alleviate some of the uncertainty that's been weighing on consumers in the housing market.
And while I suspect we'll see the typical seasonal pattern of slowing construction activity over the winter months, we do expect to improve as we approach next year's spring building season.
Over the longer term, our outlook on housing, fundamentals remains favorable, supported by strong demographic, Tailwind in a vastly underbuilt housing stock.
In addition there seems to be a growing appreciation that government policies need to better accommodate building activity to address housing shortages across the country. All of this will ultimately support healthy demand for housing over time.
Turning to the repair and remodel Market.
Activities has been softer this year compared to 2024, largely driven by many of the same factors, impacting the residential construction Market, namely lower consumer confidence, higher interest, rates and concerns around the trajectory of the ricono of the economy.
We've also seen less RNR activity in response to lower turnover of existing homes, given higher mortgage rates in the lock-in effect.
Looking forward while we do expect seasonal, moderation in R&R activity around the holidays. We're optimistic that demand will recover as interest rates, move lower and consumer confidence improves. In addition. We think the dynamic around deferral of large discretionary projects over the last few years will ultimately serve as a Tailwind as the macro environment improves.
Reporting repair and remodel activity remains intact, including favorable home equity levels and an aging housing stock.
In closing, I'm extremely proud of the focus and resilience demonstrated by our teams. In the third quarter, despite the challenging market backdrop, we continue to execute against our strategy and demonstrate the durability of our portfolio and capital allocation framework across market cycles.
Our financial position is strong and we continue to capitalize on strategic opportunities to enhance the value of our portfolio.
And looking forward, we maintain a favorable outlook on the longer term, demand, fundamentals. That support growth in housing repair, and Remodel and climate Solutions. And we remain focused on driving, operational excellence, serving our customers and creating long-term value for our shareholders,
And finally, we look forward to connecting with many of you at our upcoming investor day on December 11th.
Dave and I will be joined by other members of our senior management team to present, a detailed overview of our strategic growth plan, Enterprise capabilities and financial targets through 2030.
For those of you who plan to attend the event virtually, please visit our website to register in advance for the live webcast. With that, I think we can open it up for questions.
Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press *1 on your telephone keypad.
A confirmation tunnel. Indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we pull up for questions.
Our first question comes from Susan Maclari with Goldman Sachs. Please proceed with your question.
Thank you. Good morning everyone.
My first question is on.
Good morning, everybody.
I want to talk a bit about how you're thinking of lumber and OSB capacity, appreciating the comments around the fact that your lumber production will be 10% sequentially lower in the fourth quarter and expectations that housing activity could pick up as we get into the spring. But I guess as we think about what the builders are telling us, especially the big publics, that they're going to slow starts late this year. And that sounds like it could hold into early 2026 as well. How are you thinking about the potential for further capacity to come out of your business? What are you watching for as a sign to determine if that's necessary? And how are you thinking about balancing the near-term and the initiatives that you've put through with Opex?
Which are obviously coming together and allowing, perhaps, for some share gains relative to the longer-term demand outlook.
Yeah, I mean, great question. So you know the reality is this has been a a really challenging Year from a lumber standpoint and of late from an OSB standpoint and that's largely been driven by just the dynamic that we've seen in the housing market primarily. But to a certain degree, by repairing our model as well. And, you know, I think there are a lot of reasons to expect that over the, the medium to longer term. You know, we need a lot of housing in the US and so we're still, uh, very bullish on housing in the us. But as you say in the near term, both from the standpoint of just the the general consumer confidence environment, affordability, uh, and then obviously we're going into that time of year. Where we would typically see some slowdown, in, in residential construction, you know, I don't think we have, uh, an expectation that we're going to see the demand environment for those products pick up dramatically here as we close out the year. So as we think about our operating posture, you know, we we look at a number of different factors.
As you would expect, when we think about consumer commitments, we think about balancing our fee volumes to maximize profitability across our integrated portfolio. We think about trying to maximize our earnings at both the mill and the regional level. Because of the nature of our portfolio, there are some dynamics that play with us, maybe that wouldn't.
Cost curve uh and so we're going to continue to watch that. As we progress through the quarter I will say you know stepping back from our operating posture specifically. When we look at the industry as a whole
You know, it's been a tough environment. Uh and we've seen some level of capacity uh announcements here recently. I think there's some quiet downtime going on in the market as well. But producers are not going to continue to operate below, cash, break, uh, back cash, Break Even indefinitely. Something is going to have to change and absent. You know some Dynamic with the demand environment that's going to have to come on the supply side.
And that's just kind of the reality of where we are at least until we start getting ramped up for the building season next year.
Yeah, okay. I appreciate all those comments and then maybe turning to the Timberland side of the business. You know, it's nice to see the um, the the, the Acquisitions. And and some of those sales that you announced, this quarter, that will be coming through. I guess, as you think about your Timberland's portfolio and having reached the goals that you had set for yourself at the last investor day. How are you thinking about the positioning today? What should we expect going forward? And can you talk a bit about, you know, how you're thinking of the the general footprint there?
Yeah, looks to you. I mean, we're really pleased with the Timberland portfolio activity, that we've been able to complete over the course of this year, in advance, into early next year, uh, look, that's something that is a core part of who we are. And and what we do, we're always going to be active in this space. Uh, we're very pleased to have completed the Target that we set out a few years ago. As a reminder, I'd say that was that was really our view of what we thought was a, a realistic level of programmatic m&a that we could affect, uh, on in a discipline fashion over a multi-year period. Uh, and so as we said at the time, we expect to be active looking for opportunities, to optimize our Timberland's portfolio in a discipline fashion and that will continue to be true going forward where we can find Acquisitions that. We think create value. So I think we've we've demonstrated that we can create value, anytime we transact whether on the buy or sell side. So we'll continue to look for opportunities to to optimize our portfolio moving forward.
Okay, thank you for the color and good luck with the quarter.
Thanks.
Our next question comes from George tapos with Bank of America. Please proceed with your question.
Hey everyone. Good morning. Thanks for all the details. I appreciate the commentary and take my question. So I wanted to um.
Dig in a little bit more into the portfolio transactions that you made in Timberland.
Devin, what do you think? Uh, the net cash Generation, Um, has been benefited by by the the Acquisitions relative to the Devastators. What do you think the sort of cash flow? If you had to look at it per acre as benefited just across, you know, uh, what your you sold relative to what you gained.
Yeah, George. I, this is Davey, I'll take that 1 and I'll mention that in a, in a couple of ways. I mean, obviously we've got the the transactions that we're executing on here in the in the current environment, I think, if you look back to 2020 over the series of Acquisitions investors that we've completed, uh, that's somewhere in the neighborhood of 50 million dollars of of an increase to our annual ibida that we've been able to generate through the buy and sell activity. So, it's a, it's a phenomenal way for us to continue to look to to increase the cash flow, generating capabilities, and, and optimize the portfolio. Uh, the transactions that we've, uh, that, that we're working on this year, on the buy side. We, we've said that that's on a, on a 21 times evidon, multiple compared to the 45 times, multiple from a Devastator perspective. We've disclosed the, the cash yields. So I think you can go do the math on on what you think that looks like. Uh again I think it's really important to note that we have the ability to create value anytime.
We're transacting on our portfolio, whether on the buy side, whether on the sell side, uh and I think our our integrated portfolio, the scale and diversity, that gives us a way to unlock value, on these types of transactions. That others may not be able to do with the, the tools and teams that we've invested in over time. I think it uniquely positions us to execute in a disciplined fashion in this space.
Thanks Davey. Um,
To improve the cash flow kind of irrespective of what everybody else was doing where you were at and recognizing there's been a lot of progress when we look at ebata losses, this quarter versus I guess last year's third quarter pricing was about the same but the ebata loss was a bit further what? And maybe we'll talk more about this at the analyst day but what are you doing to lower costs and try to get to a break? Even at these very, very, you know, um, labored if you will, uh, price levels for lumber, thanks so much.
Yeah, I mean, I'll make a few high level comments on that George. I mean, we've been focused on costs and Opex for going on a decade at this point. And I think you can see that you know, in our relative position, you know, against most of the industry. You know the reality is we are operating in an environment that is extremely challenged at present. You know, the the pricing Dynamic that we are seeing currently uh is really 1 of the toughest pricing environments. We've seen in a very long time. Now I think when you when you think about black at the bottom uh I do think kind of pre-pandemic and the high single digit inflationary environment that we saw for a few years, we were there. Um the reality is you know when you see inflation go up like that, it's going to take us a little bit longer to kind of work all the way back down there.
There's just there's a scenario in any environment where prices go so low that you know it's going to be very difficult.
I think that's where we are right now. Uh, and you can kind of see that hitting the entire industry again. We're we're well position on the cost curve. I think we're navigating the environment better than most, um, but the driver for negative earnings was just the weak price environment. And, you know, we did elect to reduce our operating posture a little bit, uh, in in September and, and we're carrying that through to October. Um, but, you know, we're going to keep focused on efficiencies. We're going to keep focusing on reliability and costs and all the things that we do to make sure that we have world-class manufacturing operations and to the extent that we do, see a little bit of improvement in pricing, we'll be back in the positive from an IBA standpoint on Lumber
Devin if I could just, um, if price is held at these levels and we recognize why they can't because of where prices are for everybody in the the fourth quartile and so on. But let's assume just for instance that price is held at these levels. Would you be able to within the course of a year or 2 years through whatever actions and things that you know you have on your whiteboard to actually get you know to a break even level on a cash basis? Thanks so much and good luck in the quarter.
Yeah, I mean, we've got a path there. Every Mill, has a road map to get to first quartile cost structure, where frankly, largely there at most of our Mills. So we have lots of things on the drawing board. And we're going to talk about some of that in our investor day and the continuing Opex uh work that we're doing. And we're we're supplementing that with some of the things that we're doing from an innovation standpoint. So we're never done. Uh but again, tough environment right now. It's not going to stay this way forever. It's unsustainable. Uh and we'll be well positioned to take advantage of the market as things start to improve.
All right, thanks so much.
Yep, thank you.
Our next question comes from Anthony Pinara with City. Please proceed with your question.
Uh, good morning.
Um, morning, when we look at, hey, when we look at leverage, you know, net debt to debit uh, at 4.3 times. I know that's backwards looking on what should be kind of trough Wood, Products earnings. But I'm just, you know, if if we do have a more muted year in 26, like, you know, it seems like we have had in 25. Can you just talk about kind of, you know, guard rails on Leverage, you know, the levers that you can pull, you know, potentially did the Weber, uh, you know, Capital allocation priorities, maybe, uh, in if you, if we kind of Imagine maybe a bit of a tougher scenario in 26 or just generally kind of how you think about that.
um, uh, you know, given what's kind of an optically at least, uh, elevated Leverage
Point we remain committed to maintaining that investment-grade credit rating, and that's going to be a guiding principle as we think about all the ways that we navigate these challenging markets. But again, I think our view is that eventually we're going to see these markets improve, and we'll see that number normalize over time.
Okay, that that's helpful. And then um you know, your 2, public Timber eaters are combining into 1 company and I'm not asking you to comment on competitors, but I'm just wondering if you can share, you know, any thoughts on the consolidation we've seen in the timber space over the years, maybe you can remind us how much you actually face off against, you know, pot latch and reer in your local markets and if you know if public Timber eats are moving, I guess to, you know, Coke and Pepsi like, how should investors think about warehouses relative value proposition
Yeah. I mean, like I said, we're not probably going to comment too much on that acquisition. I I will just say, you know, from a high level, you know, we obviously agree that there's a significant benefit to scale and to having an integrated business, we've been operating that way for a very long time. We think that there are a lot of opportunities to create value, uh, in in having a scaled integrated model. You know, we compete against each of them in local markets, uh, as we compete against other land owners.
Both small private land owners Teemo Etc. We'll compete against them in more or less the same way, once they combine, I do think, you know from our standpoint. You know, it's important to keep in mind, right? So we have 10.4 million Acres. We're 1 of the largest wood products manufacturers in North America. Um, I don't think this fundamentally changes in terms of the competitive operating environment in any region in any sort of meaningful way. But again, you know, I I do think scale and and integrated business makes sense. So there's some logic in the deal
Okay. That's that's very helpful. I'll turn it over.
Thank you.
All right, next question comes from Mark Weintraub with C Port Research Partners. Please proceed with your question.
Thank you. Uh, first a small 1, maybe leads into a bigger 1. Um so on the HBU you had pointed out uh that the prices have been rising um over the course of this year is is that a function of of just the mix of what you're selling or is it that you're seeing higher pricing for like properties than you were before.
Yeah, I mean I think it's a little bit of both there. There's always a component of mix, right? Because every, you know, every quarter there's going to be a slightly different mix of the properties that you're selling. So there there's a part of it, that's that and there's some geography, uh, Dynamics at play there as well. But I would say on balance. What we are seeing is on a like, for like basis, we're continuing to see the prices that people are paying for this go up and I think so it's it's a combination of both of those things, mark.
Okay great. And then also I I I hear you on the the buying and the selling of Timberlands and and how optimizing the portfolio's uh very very beneficial makes total sense. Um, at at the the same time, it's it's very interesting that the per acre at least to me, the, the per acre values, uh, that we're seeing as, as well as the multiples of cash flow that you were relaying. Um, are you know, as as high as they are. Um, and if anything it does seem like Timberland Valley is like HBU in the private Market transactions, seems to be trending higher too and obviously, your, your stock, um, hasn't fared as well. Lots of other variables that play, um, but does that color your appetite to be more aggressive on the sell side than on the buy side? And um, and also as, as you've gone out particularly and and uh, sold some uh, acreage is your sense that there's uh, you know,
A fair bit of money, still looking to be deployed in the Timberland space kind of color on. That would be great.
All of the decisions, uh, that that we have made over the last several years. And and so I think that's that's guided our strategy and I think it's an important element as we move from here.
I I would just make 1 other kind of comment generally on that Mark and that is you know when you think about both the values that we're paying to to bring the Timberlands into our portfolio and the value of the Timberlands that we're selling, you know,
Embedded in. That is really a our team on the A and D side spends. A lot of time out looking for high-quality deals and I think you can see that really in all of the transactions that we've brought in. We're looking for very high quality Timberlands with good cash flow generation. That can also create value through our integration in CS alternative values. And so, to some degree, the value that we're paying is reflective of the team's work and what we're looking for. But also even on the sell side, you know, I think in in maybe this was part of your question, we have a very high quality Timberlands portfolio existing and so, even when you think about some of the deals that we're selling which are non-core to us,
It is reflective of what is a very high-quality Timberlands portfolio that we've assembled over, you know, frankly a hundred years. I think both of those things play into the value that you're seeing on the buy side and sell side when we do deals.
That that's how helpful and and and and speaks to maybe just 1 quick follow on. Given that is the case, uh, it would seem that that discrepancy between how the public markets are valuing your stock recognizing. It's it's tough times in wood products and that's certainly playing playing a role. But are there other things that you are contemplating to help?
Bridge. At least, what is a? A temporary seeming, very very wide gap between nav and um you know, where the stock trades.
Yeah, look Mark. That's that's always on our mind. I mean, we're always out here, trying to think about how we can create shareholder value. And, and part of that means, looking at that very item. I think we're going to have a lot of items that that we'll walk through at our investor day in. December, on that topic. I think we we've been focused for a while now on how we can ultimately uh grow the value of the company and and drive cash flow Improvement through the cycle. So I I think we'll have more to say about that in December.
Okay, thanks guys.
Thank you.
Our next question comes from Kurt Younger with D.A. Davidson. Please proceed with your question.
Great, thanks. Um,
I think Mark had a lot of good questions there, but maybe just Doug tailing and trying to kind of wrap it up, like,
Dave, you talked about remaining kind of active from a portfolio management perspective and does that mean that we should expect that?
You guys will remain in a quiz of going forward or just help me, understand kind of that balance between being a buyer and versus maybe a net seller. Looking ahead.
Yeah, look again, we're going to consider all the options to to create shareholder value. We think we can create value on both the buy side and the sell side. I I mean I will know 1 of the realities here in in the current environment as we look at all of the capital allocation Alternatives that are available to us. When the inputs on some of the other alternatives are more attractive. That does raise the bar on, what it's going to take from a Timberland acquisition perspective. But, you know, I think it's it's indicative of the, the quality of the Acquisitions that we're completing this year, uh, that they cleared that bar. And that's, that's something we're always going to be looking at as we as we make those decisions.
Okay. Um Switching gears to the to the wood product side uh a little bit surprising to see the ewp realizations up a bit in Q3, it sounds like you're expecting pricing to be stable in in Q4, is there anything temporarily
Benefiting from that, I mean, it seems to kind of diverge, at least from what we've heard around the market. Um, how are you thinking about, kind of overall competitive dynamics and what you're seeing out there?
Of, you know, the power of our trust Choice, brand the quality of our products and and really I think to a large degree, the service model that we provide to our customers. And so, you know, while there has been some pressure on price, and we're doing everything that we can to bring value to our customers and what is a tough environment. And I'd also say, you know, in in this environment, which is, which has been challenging. We're also out there working to, to take market share, take market share from competitors. Take market, share from open web. So, you know, we're, we're out there really pushing and I think it's a testament to the team that, you know, we've been able to, to keep, you know, our market share, uh, grow, our market share, keep the pricing relatively stable and, and what is a very challenging environment. And, you know, we'll, we'll adjust our, our operating posture, you know, as needed, you know, through Q4 as we said. But, but ultimately, we feel like we have a, a really good brand, a really good business here in ewp, and
And we're going to continue to look for ways to, uh, take advantage of whether we're in good markets or bad markets.
Okay, got it. Appreciate it.
Tell her. Thank you.
Yep, thank you.
Our next question comes from Katon Mamura with BMO Capital Markets. Please proceed with your question.
Uh, thank you. Good morning, and thanks for taking my question. Um, maybe to start with on the timeline side, uh, particularly in the US South. Um, we've seen a lot of pressure on bulk for prices here in the last 4, to 6 quarters. And, you know, I mean these are a kind of multi-day lows right now. Some of it, is it shows or cyclical weakness, but it's we've also seen a lot of Pulp and people will shut down.
Which it seems like kind of will be hard to reverse here. So can you sort of talk to, you know, kind of what you guys are seeing out there in the pulp food side? And, um, you know, how you at least in your sort of, you know, good baskets. What can you do to help mitigate some of that? I guess the engineered wood plant that you are building will help, but anything outside of that?
Sure. Well, the the reality is, as you say, I mean, it's it's unfortunately been the case that we have seen a lot of Pulp and Paper, uh, capacity coming out of the system. And that's something it's not new. This has been going on for a while, but even this year, you know, we've seen several fairly large Pulp and Paper Mills, uh, shutting down. Now I will say 1 of the benefits to the diversification.
That we have G, you know, geographically as well as just the the integrated model that we have, the scale that we have, we do have levers that we can pull when you see those market dynamics and even with the the Mills that have shut down. Recently, we're typically able to just move volume to to different customers, so it probably impacts us maybe to a lesser degree than some others. We also have some levers. For example, 1 of the IP Mills that that shut down. We were able to move some of that volume to our OSB Mill. And so we have some levers as you say the engineered wood products, uh, Timber strand, facility that we're building in Arkansas, will be using a fair bit of Pulp wood in that geography but it's an issue. It's an issue for the industry. Uh I think it's going to be challenging. Uh we do have some ideas and frankly we're going to lay some of those out at our investor day so I'm not going to I'm not going to front run that but it's an issue. I would say though for us, on balance fiber demand.
It has been pretty steady lately. You see a few dips here and there on pricing, at least temporarily, when you see a mill closed down. But I think we're doing a pretty good job overall in navigating that impact.
Got it. No, that's that's helpful and then
you know switching here to sort of cap allocation you know obviously a lot of discussion here on the call around um both Acquisitions and the restrictions and Timberlands I'm curious on the downstream side. Given how um, you know, extended the downturn has been in Lumber. Um
Would that be sort of an area of interest from an inorganic growth standpoint for warehouse?
Got to be cohesive with our longer term strategy, and drive significant value for our shareholders. So, that's that's really how we think about it.
No, that's, uh, that's helpful. I've done it a lot. Good luck.
Thank you.
Our next question comes from her Patel with CIBC, please. Proceed with your question.
Hi. Uh, good morning, Dave. I I was just wondering how you think about the opportunity to to grow Southern Pine, uh, log exports. You know, you know, China's cut off but what's the opportunity to see in India over time?
Yeah, I mean, we're really excited about the opportunity, you know, obviously we would prefer the the China Market get open back up and I can tell you we're we're having conversations with the administration about that topic, uh uh, on an ongoing basis. But in the interim, I I do think the Silver Lining behind the, the China log band has been, it's really increased our focus on on India. And I do think that there's a pretty significant opportunity. There we've been growing our India export business as well as frankly, you know, trying some additional markets in Southeast Asia. Uh, again, we're going to go into a lot more detail about that opportunity at our investor day, but I would just leave you with. Um, I think it's it's a real opportunity for us. We have been growing it, and we have some uh, some plans to grow at meaningfully from here.
Okay, fair enough. Uh, that's all I had. I'll turn it over. Thanks.
Thank you.
All right, the next question comes from Matthew McKellar with RBC Capital Markets. Please proceed with your question.
Good morning. Thanks for all the, uh, great details so far. Just two quick questions on Japan for me. Uh, first, should that inventory destocking phenomenon be relatively short-lived in your view, uh, maybe a one quarter headwind, or could that persist longer? And then, you addressed, uh, demand conditions, but I was wondering if you could also provide some perspective on how supply has trended over the last quarter or so. Is there anything we should be thinking about around transit, the supply side, and around imports from Europe or elsewhere that, uh, maybe also contributed to the situation? Thanks very much.
Yeah, happy to answer that. I I do think it's going to be relatively short-lived, you know, the issue without getting into too much detail. There was a regulatory change in Japan that impacted the timeline and getting permits for smaller houses, and that created a real backlog in, in managing those permits. And so what you saw was a bit of a Slowdown in the housing environment
Uh, we expect our customers, expect that will resolve itself and things should normalize. I mean they have some headwinds from a, a demographic standpoint, of course. But that being said, um, our customers are really, really well positioned in that market. And, you know, candidly notwithstanding some of the challenges that they have in Japan. The customer base that we have, the cost structure that they have the mill Investments that they're making. Uh, I'm I'm as optimistic about the Japanese opportunity in the midterm as I have been in a while. So we think that that will the the headwind on on consumption should resolve itself relatively soon, the the big Dynamic at play currently is just that, that relative cost position of our customers with our logs, from the Northwest competing against European Supply, in Europe, log costs, and many of the key producing regions have been going up, fairly dramatically, add in some other cost, uh, uh, competitive, uh, Dynamics at play. Uh,
It's it's just a really challenging environment for European Lumber coming in that market. And so our customers taking advantage of this. Uh, and they're really looking to grow market, share and and so like I say I'm I'm pretty optimistic about that opportunity over the medium term.
Thanks very much. I'll turn it back.
Our next question comes from Han Hang with JP Morgan. Please proceed with your question.
Yeah. Hey, thanks for taking my question. I guess you've adjusted lumber production in response to the weakness in prices, but with OSB pricing where it is, would you potentially reduce production as well? I'm just asking relative to your guidance of comparable volumes in the fourth quarter.
Yeah, I mean so OSB just like Lumber it's something that we're going to continue to watch and monitor we'll adjust as necessary. Most of the same considerations that I talked about earlier with respect to our decisions on Lumber capacity are equally applicable. I will say as as we mentioned with lumber from a cost curve standpoint, we're in a pretty good spot. And so, you know, that that certainly plays into our consideration there, but, you know, like Lumber we're going to continue to watch that and we'll make adjustments if necessary.
Thank you.
Yep, thank you.
All right. Final question is from Mike roxland with truist Securities. Please proceed with your question.
Uh yes thank you. Uh Devon Davie. Andy for taking my questions. Um,
The first one I have is, you know, Devin, you mentioned that there are some items you consider as an integrated producer in terms of running lumber.
That smaller not integrated. Producers don't have to consider anyway to expand them. What factors your referencing?
Yeah, I mean, so there there are a few things, right? So we can adjust log flow to our Mills to make sure they're getting the optimal log mix to maximize profitability. You can take a little bit more risk on log Supply because, you know, you have the full power uh, of the the Timberlands business. If, you know, you have a rain event or a weather event and you start to lose inventory. Uh, you can Flex that very quickly, uh, I would say just in general the uh, planning on Ultimate, uh, product. Mix coming out of the lumber mill. When you work closely with your Timberland's business, you can get that dialed in, uh, to make sure that you're optimizing the mix to maximize profitability. So there are a bunch of planning things that you can do. When those 2 businesses are working together to really maximize profitability across Market Cycles. It's always important. But I would say particularly in the environment that we're in today where every dollar counts. And so,
Uh, our teams as you can imagine, are working together every single day to make sure that we're maximizing the profitability across our portfolio and Mike. I would, I would just add. I mean those are a lot of the things that we can do from a day-to-day operational perspective. But you know, when you think medium-term longer term some of the, the larger scale strategic things. We can do like, putting a, a Timber strand, facility in a place. That's very advantageous for our Timberland's business. That's another huge advantage that we can drive with that integrated portfolio.
Got it. And then this 1, I know we're running over here, but just 1 quick, um, like second question, in terms of natural climate Solutions, any concerns over the, the, uh, government cutting funding. I, I know you've spoken about this in past calls, but obviously, the co the government from the get-go has been aggressive with wind, from the outset, it's become more. It seems to become more aggressive on solar. So any concerns about, you know, the government and maybe restricting Federal funding for these types of projects.
You know, at a high level, I'm not particularly concerned about that. Certainly, some of the things that came out of the big, beautiful build did impact, particularly on the renewable side.
Uh, I do think for our, uh, Partners you know, we we align with more sophisticated larger Partners who to a large extent saw this coming and so their pipeline feels pretty good. So I don't think it's going to have any meaningful impact over the next several years. There may be an air pocket when you get towards the end of the decade on some of these renewable projects. But these are typically long-term
And I would just say, you know, CCS with the 45 Q tax incentive, that did make it through the bill. And overall even though the rhetoric certainly has changed in this current environment behind closed doors. You know, most big company management teams. Understand this is a long-term issue that they're going to have to address. And so I haven't really seen a meaningful drop off in the level of interest in these Solutions, even in this uh current environment.
Uh, thank you very much.
All right. Thank you.
There are no further questions at this time. I'd like to turn the floor. Back over to Devon stockfish for closing comments.
All right. Well, thank you, everyone, for joining us today. Thank you for your interest in Weyerhaeuser, and we look forward to seeing you at our Investor Day in December. Take care.
This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.