Operator: Greetings, and welcome to the Weyerhaeuser Q3 2026 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. To ask a question, please press star one 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce Andy Taylor, Vice President of Investor Relations. Thank you, Mr. Taylor. You may begin.
Andy Taylor: Thank you, Rob. Good morning, everyone. Thank you for joining us today to discuss Weyerhaeuser's Q3 2026 earnings. This call is being webcast at www.weyerhaeuser.com. Our earnings release and presentation materials can also be found on our website. Please review the warning statements in our earnings release and on the presentation slides concerning the risks associated with forward-looking statements, as forward-looking statements will be made during this conference call. We will discuss non-GAAP financial measures, and a reconciliation of GAAP can be found in the earnings materials on our website. On the call this morning are Devin Stockfish, Chief Executive Officer, and Davey Wold, Chief Financial Officer. I will now turn the call over to Devin Stockfish.
Devin Stockfish: Thanks, Andy. Good morning, everyone, and thank you for joining us. Yesterday, Weyerhaeuser reported Q3 GAAP earnings of $61 million, or $0.08 per diluted share, on net sales of $1.9 billion. Adjusted EBITDA totaled $248 million, a 14% increase compared to Q3 2025. I would like to start by thanking our teams for their continued focus and resilience against an increasingly challenging market backdrop. Elevated interest rates continue to weigh on consumers and housing activity, while rising diesel and transportation costs have added to the broader inflationary environment. Notwithstanding recent headwinds, we remain well-positioned given the strength of our portfolio and balance sheet, our deeply ingrained OpEx culture, and the flexibility of our capital allocation framework.
Devin Stockfish: As we outlined at our Investor Day last December, we are advancing growth initiatives across our integrated portfolio to increase the value and resilience of our company over time. Our objective is to increase cash generation capabilities, reduce volatility across market cycles, and improve our competitive position. The current environment only reinforces the importance of this strategy, and we have made meaningful progress on several growth initiatives in recent months. Construction of our Monticello EWP facility is progressing well, with startup expected in mid-2027. In biocarbon, we broke ground on our first facility in McComb, Mississippi, and are making good progress on site selection for additional locations across our portfolio. Construction has also commenced on two additional solar sites, bringing our portfolio to two operational sites and five under construction.
Devin Stockfish: Turning to forest carbon, we have monetized approximately 340,000 credits year-to-date, putting us on pace for our highest annual sales volume since the program's inception. Finally, we recently signed an agreement to explore geothermal energy opportunities across 145,000 acres in Oregon and Washington. We are making meaningful progress, and I am incredibly proud of what our teams have achieved as we have continued to execute against our growth strategy. Before moving on to our business results, I will comment briefly on a recent action to optimize our Timberlands portfolio. As we reported yesterday, we entered into an agreement to divest approximately 81,000 acres of non-core Timberlands in Arkansas for $146 million. The transaction is expected to close by year-end and further demonstrates our ongoing commitment to active portfolio management and our disciplined approach to enhancing the quality and value of our Timberlands over time.
Devin Stockfish: As always, we will continue to evaluate strategic opportunities to optimize the return profile of our Timberlands, while also creating additional flexibility for broader capital allocation and growth priorities. More broadly, we remain focused on allocating capital in a manner that creates the most long-term value for our shareholders. Consistent with this approach, and given where our shares are currently trading, we view share repurchase as a particularly attractive opportunity right now and expect to increase repurchase activity in Q4. Turning now to our Q3 business results. I will start with Timberlands on pages 6 through 9 of our earnings slides. Timberlands contributed $67 million to Q3 earnings. Adjusted EBITDA was $133 million, an 8% increase compared to Q2, largely driven by higher sales volumes in the South.
Devin Stockfish: In the West, Adjusted EBITDA was $67 million, which was comparable to the prior quarter. Starting with the Western domestic market, log demand was healthy at the outset of Q3, as mills responded to a stronger lumber market and maintained elevated log inventories during wildfire season. As the quarter progressed, the typical seasonal increases in logging activity by non-industrial landowners, combined with a lighter-than-expected fire season in Western Washington and Oregon, added log supply to the system. At the same time, Western fiber markets became more challenging due to operational disruptions at several pulp and paper mills. For our operations, fee harvest volumes were comparable to Q2, while domestic sales volumes were moderately lower, largely due to a decrease in fiber log sales. Our average domestic sales realizations increased slightly, driven by a higher mix of grade logs.
Devin Stockfish: Forestry and road costs were comparable to the prior quarter, and per-unit log and haul costs decreased, primarily due to a lower mix of export volumes, which carry higher associated costs. This was partially offset by higher fuel costs. Moving to our Western export business. Log markets in Japan were relatively stable in Q3, and our customers remain well-positioned relative to imported European lumber, which continues to face challenges in the Japanese market. Demand and pricing for our logs were comparable to Q2. Our sales volumes were lower due to the timing of vessels. Turning briefly to China. During the quarter, we delivered one vessel to strategic customers in the region, and our average sales realizations were comparable to the prior quarter.
Devin Stockfish: Also, on a positive note, as a result of the recent meetings between President Trump and President Xi, we understand that the 10% tariff on logs exported into China will be removed relatively soon. Turning to the South, Adjusted EBITDA for Southern Timberlands was $65 million, a 12% increase compared to Q2. Southern log markets were relatively balanced in Q3, as improved weather conditions supported greater log availability alongside steady mill demand. Sawmills continued to replenish inventories after weather-related supply constraints in Q2, while fiber mill activity increased following spring outages. Given favorable weather conditions, our fee harvest and sales volumes increased significantly compared to Q2. That said, our average sales realizations decreased slightly, reflecting a higher mix of fiber logs from increased thinning activity.
Devin Stockfish: Despite higher fuel costs, our per-unit log and haul costs decreased slightly, benefiting from operating efficiencies associated with higher volumes. Forestry and road costs were moderately higher, reflecting typical seasonal activity. In the North, Adjusted EBITDA increased slightly, largely due to higher sales volumes resulting from the seasonal increase in harvest activity that is typical in Q3. Turning now to our Strategic Land Solutions business on pages 10 and 11. In Q3, Strategic Land Solutions contributed $67 million to earnings. Adjusted EBITDA was $86 million, a $43 million decrease compared to Q2, largely driven by the timing and mix of real estate sales. It is worth noting that real estate results are typically more heavily weighted towards H1.
Devin Stockfish: That being said, real estate markets have remained steady year to date, and we continue to capitalize on steady demand and pricing for real estate properties with significant premiums to timber value. We have also seen steady demand for our climate solutions offerings in 2026. Through Q3, we have generated $140 million of Adjusted EBITDA from this business, already exceeding our full-year results in 2025. We are encouraged by the momentum in this business and the opportunities that we see to drive continued growth in the years ahead. Now moving to Wood Products on pages 12 through 14. Wood Products contributed $32 million to Q3 earnings. Adjusted EBITDA was $91 million, a $38 million decrease compared to Q2. This was largely driven by lower pricing across most products and higher costs, including increased transportation costs from record-high diesel prices.
Devin Stockfish: It is worth noting that we continue to pass along these higher transportation costs in our delivered realizations wherever possible. Starting with lumber, the framing lumber composite entered Q3 on an upward trajectory, reaching a multi-year high in late July. Pricing was supported by a seasonal improvement in building activity, along with tighter supply following previously enacted mill curtailments and closures, as well as lower European imports. Elevated transportation costs and trucking availability constraints have also provided support to lumber pricing this year. As the quarter progressed, however, composite pricing steadily declined as housing activity softened amid higher interest rates and typical late summer seasonality. For our lumber business, Q3 Adjusted EBITDA was $69 million, a 5% decrease from the prior quarter, primarily due to slightly higher unit manufacturing and log costs. Production and sales volumes increased as transportation-related operating challenges from Q2 eased.
Devin Stockfish: Our average delivered sales realizations were slightly higher compared to the prior quarter. Turning to the OSB market, demand was relatively stable in Q3, with very little movement in composite pricing for much of the period. Pricing moved higher in September, albeit from a low base, as buyers responded to newly announced mill curtailments, and pricing has since stabilized over the last couple of weeks. For our OSB business, Q3 Adjusted EBITDA was a loss of $18 million, a $12 million decrease compared to the prior quarter. This was largely driven by slightly lower production and sales volumes and higher unit manufacturing costs due to more extensive planned annual maintenance relative to Q2. Resin costs were also higher, while fiber costs were comparable. Our average sales realizations decreased by 2%, which was slightly unfavorable to the OSB composite.
Devin Stockfish: This is largely due to the length of our order files, which results in a lag effect for OSB realizations. Moving to engineered wood products, Adjusted EBITDA was $41 million, a $13 million decrease compared to Q2, primarily driven by lower average sales realizations and higher freight costs. A key driver impacting sales realizations in the quarter was an unfavorable mix shift in solid section products. In addition, previously announced price increases came through at a slower pace than initially anticipated, given the more challenging macro environment and softer homebuilding activity. That said, as we enter Q4, we are seeing incremental benefit from these recent price increases across solid section and I-joist products, and we currently expect our average sales realizations for EWP to be slightly higher sequentially.
Devin Stockfish: Our sales volumes increased slightly for most products compared to Q2, and raw material and unit manufacturing costs were slightly higher. In distribution, Adjusted EBITDA decreased by $4 million compared to Q2. Results reflect lower sales volumes and margins as we reduced inventory of certain siding and decking products following recent changes in supplier and distributor relationships. We anticipate some continued impact from this transition in Q4 as we work through remaining inventory. Looking further out, we have aligned with leading brands to ensure we maintain an attractive offering of siding and decking products across our distribution network. With that, I will turn the call over to Davey to discuss some financial items and our Q4 outlook.
Davey Wold: Thanks, Devin, and good morning, everyone. I will begin with key financial items, which are summarized on page 16. In Q3, we generated $193 million of cash from operations. We ended the quarter with approximately $350 million of cash and total debt of $5.4 billion. As a reminder, we have no remaining debt maturities until late 2027. We returned $151 million to shareholders through the payment of our quarterly base dividend and approximately $10 million through share repurchase activity in Q3. As Devin mentioned, we view share repurchase as a particularly attractive opportunity today and expect to increase our activity in Q4. Capital expenditures were $137 million in Q3, including $54 million related to the construction of our EWP facility in Arkansas.
Davey Wold: As Devin mentioned, construction is progressing well, and we remain on track for startup in mid-2027. For full year 2026, we now expect investments for Monticello to be approximately $250 million, which is modestly lower than our initial estimate due to normal variability in the timing of cash outlay. As a reminder, CapEx associated with this project will be excluded for purposes of calculating adjusted FAD as used in our cash return framework. Excluding the outlay for Monticello, we have also lowered guidance for our typical CapEx program to approximately $375 million in 2026. It is 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, alternative uses of cash, and to fund growth opportunities. Q3 results for our unallocated items are summarized on page 15.
Davey Wold: Adjusted EBITDA for this segment increased by $9 million compared to the Q2, primarily attributable to changes in intersegment profit elimination and LIFO. Looking forward, key outlook items for the Q4 are presented on page 18, and updates to full-year outlook items are presented on page 19. In our Timberlands business, we expect Q4 earnings and Adjusted EBITDA to be comparable to the Q3 of 2026. Turning to our Western Timberlands operations, log supply typically decreases into the winter months, which should provide some support for log pricing as the quarter progresses. We also expect some improvement in the fiber log market. That said, mills continue to navigate a softening lumber market. Given these dynamics, we anticipate slightly lower average domestic sales realizations compared to the Q3. We expect comparable per-unit log and haul costs, along with seasonally lower forestry and road costs.
Davey Wold: Our fee harvest volumes are expected to be slightly lower, given fewer working days in the Q4. Moving to the Western export program. In Japan, we anticipate steady demand from our customers and relatively stable pricing for our logs in the Q4. That said, we expect higher sales volumes compared to the Q3 due to the timing of vessels. Turning to China, log markets remain relatively stable, and we are seeing some improvement in demand from our strategic customers, partially supported by the favorable exchange rate. As a result, we expect to deliver three vessels to China in the Q4, up from one vessel per quarter since reestablishing our China export program in late 2025. We anticipate pricing for our logs will be comparable to the Q3, with potential upside if tariffs are lifted before year-end.
Davey Wold: Turning to the South, we expect saw log demand to improve in the Q4 as mills rebuild lean inventories ahead of the winter months. In addition, we expect increased fiber log consumption as mills achieve better operating performance alongside steady end market demand. At the same time, we expect a seasonal decrease in regional log supply. As a result, we anticipate slightly higher average sales realizations compared to the Q3. Our fee harvest volumes are expected to be moderately lower due to wet weather conditions and fewer working days, both of which are typical in the Q4. Per-unit log and haul costs are expected to increase slightly, while forestry and road costs are expected to be comparable. In the North, we expect our fee harvest volumes to be moderately higher than the Q3, with comparable sales realizations. Moving to our Strategic Land Solutions segment.
Davey Wold: Real estate markets have remained solid year-to-date, and we continue to anticipate a consistent flow of transactions with significant premiums to timber value. Additionally, we are delivering steady growth from our climate solutions and natural resources businesses in 2026. As a reminder, last quarter, we increased our segment guidance for full-year 2026 Adjusted EBITDA to approximately $450 million, representing nearly 10% growth compared to 2025. For the Q4, we expect Strategic Land Solutions Adjusted EBITDA to be approximately $45 million lower and earnings to be approximately $35 million lower than the Q3 of 2026, primarily due to the timing and mix of real estate sales. This reflects the typical seasonality of our real estate business, with results generally more heavily weighted toward the H1 of the year.
Davey Wold: For our Wood Products segment, we expect Q4 earnings and Adjusted EBITDA to be moderately lower than the Q3 of 2026, excluding the effect of changes in average sales realizations for lumber and OSB. We anticipate softer demand for wood products in the Q4, given the more challenging macro environment and typical seasonal moderation of housing and R&R activity into the winter months. Looking ahead, even without a meaningful improvement in macroeconomic conditions, we would expect some level of demand improvement seasonally as we enter next year's spring building season. As for product pricing, the lumber composite has continued to trend lower through October, while the OSB composite has moved slightly higher, although OSB has stabilized over the last couple of weeks. For our lumber business, we anticipate slightly lower production and sales volumes in the Q4 and slightly higher unit manufacturing costs.
Davey Wold: Our log costs are expected to be slightly higher, primarily for southern logs. For our OSB business, we expect slightly higher sales volumes and fiber costs in the Q4. Unit manufacturing costs are expected to decrease slightly, primarily driven by less planned annual maintenance compared to the Q3, partially offset by higher resin costs. For our engineered wood products business, we anticipate slightly higher average sales realizations compared to the Q3. Our sales volumes are expected to decrease slightly for most products, while raw material costs are expected to be moderately higher. For our distribution business, we expect Adjusted EBITDA to decrease compared to the Q3, primarily due to lower sales volumes and margins as we continue to reduce inventory of certain siding and decking products. With that, I will now turn the call back to Devin and look forward to your questions.
Devin Stockfish: Thanks, Davey. Before wrapping up this morning, I will make a few comments on the housing and repair and remodel markets, starting with housing. Overall, housing activity remained lackluster in the Q3 as weak consumer confidence and ongoing affordability challenges continued to weigh on the market. More recently, interest rates have moved higher, with mortgage rates now back over 7%, further impacting affordability. At the same time, the ongoing conflict in the Middle East continues to contribute to inflationary pressures and broader economic uncertainty. Given these headwinds, builder confidence remains low, and we expect housing activity to remain subdued through year-end. But putting aside the current challenges, we do continue to have confidence in the longer-term prospects for US housing.
Devin Stockfish: There remains significant pent-up demand given the level of underbuilding in the US, demographic trends remain supportive, there is growing recognition that policies at all levels of government need to better facilitate housing development and address affordability barriers. While we expect the housing market to remain choppy in the near term, the longer-term fundamentals remain firmly intact. Turning to the repair and remodel market. Activity has remained relatively steady this year, generally in line with 2025 levels. Similar to housing, the R&R market continues to be influenced by weak consumer confidence, higher interest rates, and broader economic uncertainty. In addition, turnover of existing homes remains well below historical levels, as higher mortgage rates and the ongoing lock-in effect continue to keep many homeowners in place.
Devin Stockfish: Looking out to Q4, we would expect the typical seasonal slowdown in repair and remodel activity as we move into the colder winter months. Without some improvement in the broader macro environment, consumer confidence, activity could remain relatively muted as we move into next year. Putting aside the near-term headwinds, we remain bullish on the medium to longer-term prospects for repair and remodel. Home equity levels remain favorable, the US housing stock continues to age, and we believe the deferral of large discretionary projects over the last few years will ultimately serve as a tailwind as the macro environment improves. As a final point, it's certainly worth reiterating that while housing and R&R activity are important drivers for our business, what ultimately matters is the balance between supply and demand within each product line.
Devin Stockfish: As housing activity has trended down over the past few years, we've also seen a meaningful amount of mill capacity come out of the system. As we've witnessed over prior housing cycles, supply ultimately adjusts to prevailing demand conditions, supporting industry profitability. In closing, we continue to make meaningful progress against our strategy, advancing key growth initiatives and taking disciplined actions to enhance the value of our portfolio. Our financial position remains solid, and the resilience of our portfolio and the flexibility of our capital allocation framework position us well to navigate the current environment while continuing to invest for the future. We remain intently focused on driving operational excellence, serving our customers, and creating superior long-term value for our shareholders. With that, I think we can open it up for questions.
Operator: Thank you. We will now be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to withdraw your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Susan Maklari with Goldman Sachs. Your line is now live.
Susan Maklari: Thank you. Good morning, everyone.
Devin Stockfish: Morning.
Susan Maklari: Good morning. My first question is on the Wood Products segment. As we think about the builders' initial preliminary outlooks for 2027, that suggests things are continuing to moderate and may stay tougher for a while against that inflationary backdrop that we're seeing. Can you talk about the OpEx initiatives and what that means for your ability to perform in that kind of an environment. Also, as we see capacity coming out in some of these commodity areas, how does OpEx allow you to perform, and what can it mean for Weyerhaeuser and your business as we think about an eventual recovery?
Devin Stockfish: Well, great question. We have been focused on OpEx for over a decade, and as we have said previously, this has just become part of the DNA of how we run the company, and that is true across the businesses. It is true in the corporate environment. We are constantly looking for new ways to improve efficiency and drive costs out of the business. What that has resulted in is, by and large, having industry-leading margins across all of our businesses, and I think certainly within our manufacturing operations, having the low cost. Ultimately, when you are in these cyclical businesses, the key is to have low-cost production, and that is what we have been striving for for many years. The positive is there is still plenty more to do.
Devin Stockfish: Even after we have taken millions and millions and millions of dollars out of our cost structure over the years, we have many initiatives going on at present, more in the pipeline to continue to take costs out of the business. I think that is one of the things that is core to how you navigate some of these tougher market conditions. This will happen from time to time, and we have certainly seen this in the past. But it positions you well to navigate through the downturn, where you really start to see that benefit, though, as the market turns. I think we have been doing a lot of things, making investments to really enhance our operations. At some point, the market will turn. It is hard to predict exactly when that will happen, but there is just a tremendous amount of leverage to the upside.
Devin Stockfish: In the meantime, as you are looking at what the industry is working through, we have certainly seen a lot of capacity coming out of the system over the last few years. I think we will continue to see that until you see the supply-demand dynamic come back into equilibrium. How you navigate that is to have the lowest cost, so that is certainly something that we have been focused on and will continue to be focused on.
Susan Maklari: Okay. Thank you for the color. Then turning to capital allocation, it is nice to see the deal in Arkansas that you announced for some of your Timberlands that will happen for October, and the commentary on the buybacks picking up in Q4. I guess, can you just talk a little more about your willingness to further divest non-core assets to support shareholder returns, the market for timberland transactions, and also what the current dividend structure allows you to do in this kind of an environment?
Davey Wold: You bet, Sue. So I guess just starting with the general Timberlands M&A space, I think it has been fairly consistent over the last period of time. We have continued to see a good amount of capital out there looking to be placed in the asset class, recognizing all the benefits that come with the asset class. Whether that is alternate values, increasing appreciation of that, whether it is the long-term inflationary hedge aspects, a lot of capital continues to pursue the asset class. So we have continued to see very strong interest in the asset class. For us, having the right dividend framework really is critical to allowing us to withstand periods of time with more challenging market conditions.
Davey Wold: The last few years have been a great example of this, really demonstrates why our dividend is set at the appropriate level, so it allows us to make sure we are doing all of the things that we are able to do today in a more challenging condition. That has not been true in previous downturns, so we are really pleased that we are able to be opportunistic and take advantage of that. Really, that kind of brings me to your question on the portfolio and ability to continue to look at opportunities there.
Davey Wold: We are always looking at capital allocation opportunities, including the ability to generate additional capital through portfolio optimization while ensuring we are maintaining an appropriate capital structure. So we are going to look at a variety of metrics as we do that, but ultimately, it is all about ensuring we are allocating capital in the way that creates the most value for shareholders.
Davey Wold: We will not get into any specifics on transactions beyond those that we have announced, but including the recent Arkansas agreement, we are at approximately $450 million in divestitures year-to-date across several transactions. We have long been focused on optimizing our asset portfolio, and we have a handful of additional divestiture opportunities in various stages of evaluation. To the extent we look at those and conclude there are opportunities to continue to improve the portfolio or capture value in excess of our internal values, we will not hesitate to pursue those.
Susan Maklari: Great. Thank you for the color, and good luck with the quarter.
Davey Wold: Thank you.
Operator: Thank you. Our next question comes from George Staphos with Bank of America. Please proceed with your question.
George Staphos: Thanks. Hi, everyone. Good morning. Thanks for the details. First question I had was on the Super El Niño and how it could affect the markets as you see them and as you are hearing in the field. More importantly, Devin, what are you doing, if anything, to position ahead of what those effects might be into 2027? Then I had a question on lumber.
Devin Stockfish: Sure. With respect to the weather events, I think it is primarily going to be impactful in our southern operations more so than the West. I do not think it will have quite the impact in the West, not at least in the near term. It will have puts and takes. I think we have seen historically when you have very heavy rain events, it can slow construction activity down a little bit, so that can be a little bit of a headwind on in-demand.
Devin Stockfish: The flip side of that is, on the Timberlands side, typically when you see wet weather, that tensions the log supply. One of the benefits of our portfolio is just because of the scale and diversity that we have across geographies, we have also become pretty sophisticated in ensuring that we have wet weather ground to be able to access logs even in wet conditions.
Devin Stockfish: We probably got a little bit more complex road network that is allowing us to get into the woods when you have a lot of that rain. So, I think the net impact in Timberlands in the South will probably be positive if you have a lot of rain events. That will be offset a little bit to the extent that it slows construction activity.
George Staphos: Sure. To the extent, just as a follow-on on that point, would it make sense to build your inventories a little bit ahead of time in anticipation of what might be some constraints, and therefore you could be sort of out in front of your peers? Or you do not need it given what you just said, you have already the access should, in fact, you have that weather supply constraint show up?
Devin Stockfish: There are a variety of things that we can do, George, with respect to that. You can do a little bit of decking in the woods, and we have done that in the past. But again, we are pretty sophisticated in our planning activities to ensure that we have wet weather ground to be able to get in and access that wood even when you have extended rain events. So, we would not necessarily need to do a lot of that. But we have lots of mechanisms in place to be able to handle that if it comes to pass.
George Staphos: Okay. My second question is on lumber and Wood Products, and Sue touched a little bit on it in her question related to OpEx. A number of years ago, obviously, the company was the pioneer, in my view, on Black at the Bottom. You certainly have industry-leading margins. Nonetheless, let us say we are in a more challenging period, and certainly where pricing is right now, I get it is Q4. Seasonally, we tend to see worse trends anyway across the industry. You are going to be at relatively thinner margins in lumber in particular. Is there anything else you can do in line with Black at the Bottom to further improve your cash generation in maybe what is going to be an extended down period in construction? The lumber industry tends to run with, on paper, a lot of excess capacity because you are not running 7 days.
George Staphos: Is there anything you can do from an operations standpoint as you have toured the mills that could help you position and take further cost out and generate cash in a tougher period? Thank you.
Devin Stockfish: Yeah, I would say a few things on that front. We have obviously taken a lot of costs out of the system over the years. We continue to have annual OpEx targets across all of our businesses, with the goal being every single mill that we own has a path to be first quartile cost structure if they are not there already. So, that is a never-ending process. I would say we have sort of juiced the opportunity set there as we have leaned into innovation. We have some really interesting things going on.
Devin Stockfish: For example, AI in the manufacturing environment, I think, has an opportunity to create some additional efficiencies. So, the journey to continue to reduce costs is never-ending, and that is true, frankly, whether you are in good times or bad times. There is more to be done. We are going to continue getting after that. That is true at the corporate level, by the way.
Devin Stockfish: I think we've got nearly 50 different initiatives on cost going on at the corporate level. We're going to continue to stay focused on that. I would say the other piece that maybe we don't talk about quite as much is we're also working on differentiated products. So, things like our WarpStable product in the lumber business, which typically comes with a premium, and finding other opportunities where we can get a higher margin regardless of where we are in the market cycle. We're looking at all of those opportunities. I would just pivot back to what I mentioned earlier, though, at the outset. You can find yourself in difficult market conditions in this industry. You've been around it for a while, George. You've seen this story play out. Ultimately, you're going to see additional capacity come out until it balances with the level of demand.
Devin Stockfish: We've seen this story playing out over the last few years. Q4 is a little bit more challenging. It's always a little bit more challenging. We'll see how that plays out. But I do think that the floor is higher as we move into next year, given all of the capacity that's come out of the system. I would expect that to continue to happen until the market, the industry gets in a little bit better margin position overall.
George Staphos: Thanks, Devin. Appreciate it. Good luck in the quarter.
Devin Stockfish: Thank you.
Operator: Our next question comes from Anthony Pettinari with Citi. Your line is now live.
Anthony Pettinari: Good morning.
Devin Stockfish: Morning.
Anthony Pettinari: Hey, Devin, I was wondering if you could talk a little bit more about OSB and maybe specifically your operating rates, what you are seeing in the market. You have been EBITDA negative for, I guess, four out of the last five quarters. But we have seen, I think, two pretty meaningful curtailments, including one this week. I am just kind of wondering, if we have flattish demand next year, is it enough? I just wonder if you could dig a little bit deeper just on OSB and kind of expectations there.
Devin Stockfish: Well, as you know, it is a product that is primarily driven by what is going on in single family, and that has been soft for a while. I will just reiterate the main point, though, which is, you can make a lot of money at 1.1.2 million housing starts, even if it fell further from where we are today, as long as the supply is more or less in balance with that level of demand. We have seen that probably play out a little bit more slowly in the OSB market than we did lumber. on the lumber side, we are probably close to 60 mills that have shut down over the last few years. We have not seen that level of capacity reduction on OSB.
Devin Stockfish: But ultimately, as a general matter, the industry will at some point blink, and you'll see more capacity come out of the system until that gets into balance. I do think, when you look at what's happened with OSB pricing here recently, it's not as though the price increases that we've seen over the last handful of weeks have been driven by an increase in demand. It is almost entirely supply-driven. I do not know that we've necessarily fully seen the impacts of the latest closure announcement, but I would expect that to have an impact as well.
Devin Stockfish: We'll see, as the market plays out over the next, call it 3 to 6 months, if you do not see a meaningful improvement in OSB prices, I would not be surprised to see more capacity come out. That's obviously beyond our control. Our operating rates are pretty comparable quarter over quarter.
Devin Stockfish: We have less planned annual maintenance in Q4, and so that will have an impact on our Q4 results. But ultimately, we're focused on what we can do to drive value, and that is primarily continuing to take costs out of the system, run efficiently, and look for opportunities for higher value products that we can go out and drive a little bit of extra margin in this environment. That all being said, unfortunately, this is just kind of what happens once in a while when you go through these housing cycles. The one thing I would point out on that front, however, is, when you see capacity come out to match demand in a down market, eventually markets turn over, and you have a period where you have a pretty significant profit opportunity there for some period of time.
Devin Stockfish: I'm not going to tell you I can predict exactly when that's going to happen, but it's out there, and it will come.
Anthony Pettinari: Okay. That's very helpful. And then, just switching gears, I think you mentioned that the 10% tariff on logs to China could be reduced. I thought that there was differential tariffs between the US West and the US South. Maybe that's dated, but is there any action on southern logs, and just more generally, relaxation of Chinese tariffs on US logs, West and/or South? Like, how meaningful could it be?
Devin Stockfish: This has moved around a lot over the last several years. Where we are today is there is a 10% tariff. It is not necessarily specific to one species versus the other. The issue that you have right now is there is a phytosanitary concern, which we think is not really an issue, but it is something we have been dealing with for several years that is really prohibiting southern logs from going into China. We are continuing to work that both with the US government and the Chinese government.
Devin Stockfish: The issue today that we are optimistic about is the 10% tariff coming off, really allowing us to have a little bit more optionality and, frankly, capture a little more price on our export logs out of the West into China. As we noted, we are going to be increasing our shipments to China in Q4. The market in China is not great.
Devin Stockfish: The housing market is still pretty challenged. That being said, our customers are looking for more volume. If we can take that 10% tariff off, that just gives us some additional opportunity to capture margin. Obviously a net positive for us.
Anthony Pettinari: Okay. That is helpful. I will turn it over.
Devin Stockfish: Thank you.
Operator: Our next question comes from Ketan Mamtora with BMO Capital Markets. Your line is now live.
Ketan Mamtora: Appreciate my question. Maybe to start with, Devin, can you provide any more color on just the profile of the Arkansas land, the non-core Timberlands that you are divesting in the context of roughly about $1,800 an acre value?
Devin Stockfish: Well, this is a continuation of an effort we have had ongoing for a number of years, both on the buy side and the sell side, always looking to improve our portfolio of Timberlands. These Timberlands are fine, but for us specifically, they are pretty fragmented. They are not necessarily really close to any of our existing mills. I do not know that they have a ton of Strategic Land Solutions optionality involved. So, really, as we look at our overall portfolio, these did not make sense for those to stay within our portfolio. So, that was the opportunity. We feel like it is good value. I think the buyer will be happy with them. It just did not really fit with what we are looking for within our existing portfolio.
Ketan Mamtora: Understood. That is helpful. Then, maybe just switching to freight and transportation challenges. Any way to quantify what was the drag in Q3, and how are you all thinking about freight transportation in Q4? Are you seeing things sort of stabilize, or could this potentially continue into 2027?
Davey Wold: Sure, Ketan. This is Davey. Broadly speaking on the freight environment, I think we have seen some improvement in the broader transportation availability. When we look at the cost profile and think about the impacts of the conflict of the Middle East, we have certainly had an impact not only in the transportation space, but also as we think about things like additives and resin, Timberlands, of course, log and haul costs, ocean freight, Wood Products. Of course, that is the outbound transportation piece. Back at the outset of the Iran conflict, I think our guidance was we had anticipated somewhere around $10 million per month on a gross basis.
Davey Wold: But of course, with energy costs, particularly diesel costs increasing dramatically over the course of the summer, and even more so here as we got deeper into the fall, we are now probably somewhere around $20 million to $25 million per month. Of course, our teams are focused every day on doing everything they can to offset those costs where possible, leveraging our procurement, logistics expertise, seeing opportunities for us to share those costs with vendors and customers. I would say today, we are probably somewhere in the ballpark of sharing half of those costs and then absorbing the remainder.
Davey Wold: As we think about looking forward for our guide for Q4, we have assumed that the environment remains roughly consistent with where it was late in Q3. But of course, certainly if we see fuel costs move significantly one way or another, that is going to have an an impact on our results.
Davey Wold: Again, we will continue to monitor that and be focused on disciplined execution and cost control, as always.
Ketan Mamtora: Understood. That is very helpful. Good luck here in Q4. I will jump back in the queue.
Davey Wold: Thank you.
Operator: Our next question comes from Kurt Yinger with D.A. Davidson. Your line is now live.
Kurt Yinger: Great. Thanks, and good morning, everyone. I wanted to talk a little on the capital spending side. I was just hoping you could speak at a high level to how you are thinking about 2027, sort of between baseline, Monticello, McComb, and then maybe bigger picture, the flexibility that you have to maybe remain below that $400 million to $450 million range over a multi-year period.
Davey Wold: You bet, Kurt. So, high level, we are not going to give specifics on 2027 numbers today. We will provide guidance for 2027 at the outset of the year, as we typically do. I will note, this year, we did reduce the CapEx guidance for that programmatic ongoing bucket to $375 million, down from the $400 million to $450 million multi-year guide. We are always looking at the appropriate amount of spend given factors like market conditions, capital allocation alternatives, alongside that commitment to returning significant cash back to shareholders. Ultimately, for 2026, we thought that was appropriate and the right path. We are pleased that we have been able to maintain meaningful investment in that programmatic ongoing CapEx bucket, even through these more challenging market conditions over the past several years. Those are often some of our highest return dollars that we can invest.
Davey Wold: Ultimately, making sure we are investing in our businesses is going to allow us to capitalize when we do ultimately see improvement in broader market conditions. We view that as really important. But again, it is also a lever to us as we think about it. Monticello, again, that is progressing quite well. We will provide more of an update on that as we get into 2027. But we are on track for that startup midway through 2027, which is aligned with our initial schedule for the project. Our original cost estimate was about $500 million when we announced it back in 2024. But as we have mentioned, we have seen pressures on the cost side, and so we are ultimately working through that, finding ways to minimize that where possible.
Davey Wold: But we have also seen some opportunities for increased upside on that project, whether it is some of that increased spend going through to additional benefits, finding opportunities in tax-exempt financing or R&D tax credits. So, we do at this point believe that it is going to be moderately higher than that $500 million initial estimate, and so that is kind of the remaining piece that we would spend in 2027. But in short, the profile, the return profile remains very attractive, particularly with all the integration benefits that it provides across our plywood basket.
Kurt Yinger: Okay. All right. That is helpful. Just second on the Climate Solutions business. You highlighted success on a couple of initiatives, and there is a lot of different moving pieces there. I was just hoping you could talk about maybe what you think is going to be most incremental as we kind of think about 2027 and that continued growth path towards the 2030 targets.
Devin Stockfish: I would say by and large, things are going pretty well for Climate Solutions. We are seeing good progress across almost all of the various initiatives. We highlighted several. Some of these are just going to continue to build year over year. I will give an example for solar. We have got five under construction in addition to the two that are currently operational. I would expect we will probably have, by the end of the year, eight under construction, and we are just going to keep piling these on year after year.
Devin Stockfish: Those will grow over time, and the beauty there is it is just an ongoing revenue stream that we will have for 30 or 40 years. We are really excited about biocarbon. That is probably one of the most exciting things that we have going on in the Climate Solutions space right now. As we mentioned, we broke ground on our first facility.
Devin Stockfish: We're looking at several new facilities. That's probably a couple years out before it really starts generating meaningful EBITDA, but the opportunity set there is really large. The total addressable market for metallurgical coal is enormous, so that could be a growth engine for many, many years to come. We've got a whole host of things. They're going to just incrementally keep building. I'd say forest carbon is another one. We're seeing really good momentum this year, pretty significant uptick relative to carbon sales last year. We've got new projects in the pipeline, so that all is progressing well. I would say on balance, I'm pretty impressed with the team and their ability to continue to drive this business forward, and we keep finding new opportunities every day. For example, the geothermal deal that we just announced. So, we're going to keep at it.
Devin Stockfish: I wouldn't say it's going to have a step change improvement next year, but we're building towards something that's going to be a really important part of our overall earnings stream.
Kurt Yinger: Understood. Appreciate the color. Thank you.
Devin Stockfish: Thank you.
Operator: Our next question comes from Matthew McKellar with RBC Capital Markets. Your line is now live.
Matthew McKellar: Good morning. Thanks for taking my questions. You mentioned AI as a potential cost savings driver in your manufacturing operations in response to an earlier question. Certainly not a new theme, and you talked about AI at your Investor Day last December, but just given the pace of change in that space, could you maybe provide some updated perspective on any incremental opportunities that you might be seeing develop on that front over the past year? Thanks.
Devin Stockfish: Sure. We have got a whole host of things going on in the AI front. We brought somebody over from Amazon to lead our AI efforts, and we have been continuing to staff and resource that group. I would say the AI efforts really cut across the entirety of our businesses. I mentioned AI in the manufacturing environment. If you think about all of the various decisions and opportunity to drive efficiencies in that environment, if you can layer AI on top of the expertise that we have, it is just a really big opportunity. I think preventative maintenance could be a significant driver, and so that is actually progressing quite well. We have got a whole host of pilots going. They are going pretty well, and so we are expecting to start rolling this out more meaningfully as we get into 2027.
Devin Stockfish: In the Timberlands business, we have got a variety of efforts going on, things ranging from leveraging AI and machine learning on drone imagery to really eliminate some of the work that our folks have to do out in the woods. Think survival checks and post-thinning checks. There are a variety of things we can do there. Geospatial mapping with AI, that feeds into both how we operate our Timberlands, but also how we think about A&D activity. So we have got a variety of things going, and it is a really exciting time, and I really think this is an area, if we lean into it, we can have a period of time where we are going to generate a real meaningful competitive advantage in the marketplace.
Matthew McKellar: Great. Thanks for the detail there.
Devin Stockfish: Yep. Thank you.
Matthew McKellar: Then second for me, just regarding site selection for future biocarbon projects, McComb seems like a really good template here, but could you maybe just provide a bit more detail on how you evaluate where to site these assets, given the breadth of your Timberlands and Wood Products portfolios? Maybe anything you have learned as you have developed the first facility, you have spoken to more customers, et cetera? Thank you.
Devin Stockfish: There are a few things that go into that decision-making. One of the reasons why we are out leading in this space is because we have the scale of Timberlands operations, we have scaled manufacturing operations for generating residuals, we have a very sophisticated forest supply chain, and we bring those to the table with our partners at Aymium, and it is just a very powerful combination. As you think about where do you want to site these, to some degree it is about logistics, to some degree it is about finding the right community that is going to provide support to do these projects.
Devin Stockfish: I would say the biggest one is really, where do we have, say, an excess of pulp log supply and maybe not enough pulp log demand? Or, if there is an area where a pulp mill has gone down and we need a home for residuals.
Devin Stockfish: We've just got a lot of opportunity, and it's an effort that combines our SLS group together with our Timberlands group, together with our Wood Products group, to really dial in what are the right places to put this. The beauty of it is, we have the ability largely to site these in areas that benefit Weyerhaeuser specifically, and I think that's just in addition to the EBITDA opportunities, which are significant. I'd say equally important is the ability to look across our portfolio and find places where it's most impactful and helpful to our ongoing Timberlands and Wood Products operations.
Matthew McKellar: Very helpful. Thank you. I'll turn it back.
Devin Stockfish: Thank you.
Operator: Our next question comes from Hamir Patel with CIBC Capital Markets. Your line is now live.
Hamir Patel: Hi. Good morning. Devin, could you comment on how the current rate backdrop is changing discount rates for Timberlands in the private market? Also, just on that private market for Timberlands, are you seeing any signs of potential conversions of Timberlands to ag land in some areas, just given where farmland values have moved relative to Timberlands?
Devin Stockfish: Sure. With respect to discount rates, you really don't see meaningful changes year-over-year. I mean, over a very long period of time, obviously, if you see a step change in the rate environment, you'll see that eventually move. We really haven't seen, either to the upside or the downside, a whole lot of movement in discount rates in terms of Timberlands. Typically, this is a buyer community that has a very long-term view, so you just don't see a lot of variability, and we haven't seen that here recently. With respect to land conversions, you're seeing a little bit around the margins.
Devin Stockfish: To be candid, I'm a little surprised you haven't seen more of that given what's happened, as you say, with farm prices, particularly in some of these areas where you do have access to water, and I think there are plenty of places in the South where, over time, that could potentially happen. I wouldn't say it's been meaningful, at least not to my understanding as of yet, but that is something that could increase over time.
Hamir Patel: Okay, great. Thanks. That's all I had. I'll turn it over.
Devin Stockfish: Thank you.
Operator: Our next question comes from Mark Weintraub with Seaport Research Partners. Your line is now live.
Mark Weintraub: Thank you. Maybe just probing a little bit more into the Timberlands private market valuations. Recognizing I do not want to make too much of one transaction, but the Arkansas transaction at roughly $1,800 an acre, if you were to have been moving forward on this a couple of years ago, is it fair to say you would have thought the values would have been relatively similar? Also, just you had talked about that when you are going through the evaluation of potential sales, that you are going to look for situations where you get in excess of your internal values. Presumably, I just want to clarify that is separate than where your equity might be trading, so implied values, which presumably, at this juncture, where your stock is significantly lower than what your internal values are. Is that a fair way to understand that?
Davey Wold: This is Davey. That is a fair way to think about that. That is right. We think about our internal values over the long term, kind of our intrinsic value of that, which can be different than what is implied in our share price, certainly. On the Arkansas acreage, I think broadly speaking, I think you have seen strong improvement in timberland price per acre over the last 5, 10, 15 years. You have seen quite a bit of improvement in that, and so I do think you have seen an increased price. But yeah, over the last couple of years, I think in the relative ballpark, maybe perhaps a little bit higher than what it would have traded on a couple years ago.
Mark Weintraub: Okay. I ask that in context of NCREIF. I think their latest estimate of average US Southern acre, recognizing all acres are different, is like $2,200, $2,300 per acre in the South, and this is obviously a fair bit below that. Any thoughts to share specific to that observation?
Davey Wold: Devin hit on some of the aspects. These are good quality Timberlands in the scheme of things. Certainly, lower half quality within our portfolio. Certainly strong in the context of the investable universe of Timberlands from an asset quality. But again, it is a nice opportunity for us to continue to upgrade the overall quality of our portfolio and capitalize on the disconnect between our internal value and what we are able to realize.
Mark Weintraub: Super. Thanks a lot.
Devin Stockfish: Thank you.
Operator: Our next question comes from Buck Horne with Raymond James. Your line is now live.
Buck Horne: Hey, thanks, guys. Appreciate you squeezing me in. I wanted to follow up on some of the comments about some of the mill closures and curtailments that we have seen across the industry. I think one of your large competitors just announced a couple more closures in the US South, I think one in Arkansas, one in Alabama. I was just wondering really if there is any potential impact on your log pricing or pulp pricing relative to those mill closures or acreage that you have that is nearby or adjacent to some of these mills that are shutting down.
Devin Stockfish: I would not really expect much from a log price or volume from us. Neither of those mills were big customers for Weyerhaeuser.
Buck Horne: Okay. That is very helpful. Appreciate that. Sounds like you are making a ton of progress with solar, these installations and these solar farms and access to utility-grade electricity. Does that potentially lead to any conversations with data center developers or any hyperscalers or any conversations? Is there any possibilities out there that you might be able to leverage some of your access to solar to offer a more complete solution to some of these developers?
Devin Stockfish: Absolutely, 100%. We have got active discussions today going on with seven or eight different sites for data center development, a variety of parties. What we can bring to the table, particularly we have been leaning into this a little bit more, going into the entitlement and starting to get some of the approvals upfront and working with parties on getting some of these sites powered. As you probably know, if you have got a site where you have got entitlement, you have got community support, and you have got access to power, that land becomes incredibly valuable. We are actively working that. Like I said, we have got a handful of conversations ongoing now, and we are continuing to build out a further pipeline. I think that is actually a pretty decent opportunity for us here in the relatively near term.
Buck Horne: Very cool. Congratulations. Appreciate all the color. Thanks.
Devin Stockfish: Yep. Thank you.
Operator: Our next question comes from Hong Zhang with JPMorgan Chase. Your line is now live.
Hong Zhang: Yeah. Hey, thanks for taking my question. I guess in light of your revised tax rate guidance, is there a rule of thumb to think about what level of Wood Products earnings contribution would be needed for your tax rate to be positive instead of a benefit?
Davey Wold: Hong. I think it is tough to get into any sort of rule of thumb on that. We did continue to see a tax provision credit in the current quarter. The way that works under GAAP, you are going to look at the estimated annual effective rate for the full year and then use that to record expense in each period. You are going to make adjustments for discrete items. That can move around from period to period. But yeah, the biggest driver is going to be the ultimate mix of earnings between the REIT and TRS. So that is probably what I would point you to there.
Hong Zhang: Got it. Thanks, and have a great weekend.
Davey Wold: Thank you.
Operator: Our last question comes from Mike Roxland with Truist Securities. Your line is now live.
Mike Roxland: Yeah. Thanks, Devin, Davey, Andy, for taking my questions. First one, you mentioned increasing the share repos in Q4. You bought back $10 million last quarter, I think $30 million year-to-date. How much do you intend to repurchase in Q4. And is this something that you intend to continue beyond Q4 if the valuation gap between private and public markets persists. And lastly, when you think about accelerating or increasing the amount that you intend to buy back, do you have to run this approach by your credit agencies given your elevated leverage as you would be selling EBITDA-generating assets?
Davey Wold: Yeah. Sure, Mike. So, I guess, with respect to share repurchase, we are not going to get into the specifics of a particular number for next quarter. Our process is consistent here. We think about it as a useful tool for returning cash back to shareholders in the right circumstance. And again, it has become an increasingly attractive lever in light of the disconnect to our underlying asset value. We did indicate that we are going to use a portion of the proceeds from the Arkansas divestiture towards share repurchase, and we are pleased with the opportunity to capitalize on the disconnect between our intrinsic value and the share price. So we will continue to look for opportunities to do that. With respect to the agencies, we have conversations with them all the time. We cannot speak for them.
Davey Wold: But I think when we look at our leverage position, maintaining that investment-grade credit rating is foundational for us. We have taken deliberate steps over the years to ensure we have got the right dividend framework, the operating performance, the strategy to be able to operate in cyclical businesses. And so importantly, you need to remember that the 3.5x net debt to EBITDA target is really designed to be evaluated over the cycle and not at the trough. As we have spoken to this morning, even in an environment where we do not see a meaningful uplift in housing demand, if we can just get supply-demand to the right place, it does not take much in terms of normalization from an EBITDA perspective to get us back to that 3.5x target.
Mike Roxland: Got it. And one quick follow-up, Davey. Just on Monticello, you lowered CapEx by $50 million. I realize the project timing has not changed, but is there something you are not pursuing with respect to that project, such that you have taken out $50 million of CapEx?
Davey Wold: Yeah. No, I think that is just the normal variability of the cash flows. Our initial estimate was $300 million for the year. As you get deeper into the year, you are always balancing, do you have any opportunities to manage some of that spend in a different way? And so we are always looking to make sure we can do that while still maintaining our project timeframe. So, the team has done a nice job of doing that, allowed us to defer some of that cash outlay into 2027. But it is on track. We are pleased with how that project is progressing.
Mike Roxland: Thank you.
Mike Roxland: Thanks.
Operator: There are no further questions at this time. I would like to turn the floor back over to Devin Stockfish for closing comments.
Devin Stockfish: Well, thanks, everyone, for joining us this morning, and thank you for your continued interest in Weyerhaeuser. Have a great day.
Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
