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Weyerhaeuser (WY) Sells Washington's North Cascades Timberlands

Weyerhaeuser Company WY has divested 145,000 acres of timberlands in the North Cascades region of Washington to Hampton Resources in order to optimize its timberland portfolio. The transaction is valued at $266 million and no tax liability is expected related to the sale. The Washington sale marks the completion of Weyerhaeuser’s targeted large-scale divestiture of non-strategic acreage in the West.

The Washington timberlands, acquired through the buyout of Longview Timber in 2013, comprise high-elevation terrain in the North Cascades range, with 25% of the acres located in Chelan County on the east side of the mountains.

The divested acres do not supply Weyerhaeuser's internal mills or strategic export customers but supplies Hampton's nearby lumber mill in Darrington, WA. The property incurs the highest operating costs, and lowest site productivity and Douglas-fir mix in the company's western portfolio. It does not expect the property to materially contribute to near-term or future adjusted EBITDA.

Meanwhile, the company remains on track to seek prudent opportunities to enhance portfolio with high-quality, well-managed timberlands that will drive long-term value for shareholders.

Focus on Strategically Optimizing Portfolio

Weyerhaeuser has been optimizing the timberland portfolio via acquisitions and divestitures, thereby boosting core timber, land and forest products business. On Apr 27, 2021, it completed the acquisition of 69,200 acres of southwest Alabama timberlands for approximately $149 million.

On Nov 19, 2020, Weyerhaeuser completed the purchase of mid-coastal Oregon timberlands for $425 million. On Nov 17, 2020, it completed the sale of southern Oregon timberlands for $381 million in cash proceeds.

Share Price Performance

Weyerhaeuser, one of the world's largest private owners of timberlands, has been benefiting from improved housing market activity. Despite rapidly changing market conditions owing to the COVID-19 pandemic outbreak, the company’s first-quarter 2021 results improved significantly year over year. Adjusted earnings grew more than five times from the year-ago figure of 18 cents per share and adjusted EBITDA increased 166.6%.

For second-quarter 2021, it expects earnings and adjusted EBITDA in the Timberland segment to be in line with the first quarter.

However, the lumber market is highly volatile and the market swings have had a negative impact on various operations that are primarily focused on variable price products. Lumber prices have been declining of late from the all-time high reached in May. On the last trading day of June, prices fell 45%, suffering its biggest monthly drop since 1978.

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Shares of the company have declined 6.1% compared with the industry’s 5% decrease over the past three months. Nonetheless, it has outperformed other industry players like Louisiana-Pacific Corporation LPX, UFP Industries, Inc. UFPI and PotlatchDeltic Corporation PCH in the said period. Lumber prices have rebounded sharply in July (as of Jul 7, 2021), after plummeting more than 50% from record highs. As of Jul 7, the price of lumber grew 11% to $820.40 per thousand board feet from its Jun 30 low. This is may be due to the surge in demand in commercial construction, given growing focus on returning to workplaces, building infrastructure and leisure activities.

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