Weyerhaeuser posted a 52 percent drop in earnings yesterday and announced plans to close mills in Aberdeen and nearby Cosmopolis, Grays...
Weyerhaeuser posted a 52 percent drop in earnings yesterday and announced plans to close mills in Aberdeen and nearby Cosmopolis, Grays Harbor County, to become more profitable.
The forest-products giant said earlier this month it plans to sell or close a 690-employee pulp and paper mill in northern Saskatchewan as a result of poor market conditions.
Chief Executive Steven Rogel said the moves are “by no means the final steps” as the company reviews its businesses. “There are more tough decisions ahead.”
Weyerhaeuser expects fourth-quarter earnings to be even lower in all business segments except real estate, largely because of a seasonal drop in demand for wood products.
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A major exporter, it has been squeezed by overcapacity, high fuel prices and greater global competition. For example, manufacturers that have moved their factories to China are buying their boxes there now. And, the rising Canadian dollar has made operations there more expensive.
In Washington, Weyerhaeuser will close an 81-year-old large-log sawmill in Aberdeen and a pulp mill in Cosmopolis, affecting 342 employees, some of whom could find jobs elsewhere in the company. It took a $22 million pre-tax charge from closing facilities, primarily for the Cosmopolis mill.
“In a world of weakening markets and tightening economics, we reached the point where we have no alternative,” Rogel said. Aberdeen still has a small-log sawmill with about 140 employees.
Weyerhaeuser’s stock climbed 24 cents a share yesterday to $62.11, despite disappointing earnings.
Net income for the third quarter was $285 million on net sales of $5.6 billion, down 52 percent from profit of $594 million a year ago, when net sales were $5.7 billion.
After several one-time items, earnings per share came to 93 cents, which is five cents below what analysts expected, according to Thomson Financial.
The company took a $5 million pre-tax charge related to timber damage caused by Hurricane Katrina. About 300,000 acres were damaged, out of 2.5 million acres it owns in Alabama, Louisiana and Mississippi.
Harvesting that timber will pose challenges both to safety and sawmill production, because the trees are smaller, more twisted and scattered than during regular harvests. Weyerhaeuser expects to spend an additional $7 million in each of the next two quarters for that harvest.
Its manufacturing operations sustained little or no damage and lost only one or two days of production from storm power failures.
The company has nearly 5,000 employees in that area. All survived the storms, but some lost family members and homes, said spokesman Frank Mendizabal.
Profits dropped in every Weyerhaeuser business segment during the third quarter.
The timberlands segment posted a 58 percent decline from last year, to $191 million, partly because of higher fuel prices that drove up the cost of logging and hauling.
In the wood-products unit, earnings dropped 66 percent to $124 million. Demand for building products remained strong, but readily available supply caused prices to decline in the first two months of the quarter.
The cellulose fiber and white-papers business had a loss of $2 million, primarily because of the charge for facilities closures. The containerboard, packaging and recycling unit earned $36 million, down 56 percent from a year earlier.
The real-estate segment and its related assets saw a 6 percent decline in earnings, to $145 million. Single-family home closings were down slightly from the second quarter. Weyerhaeuser expects the real estate business to post significantly higher earnings in the fourth quarter due to seasonally stronger single-family home closings.
The company also decided this summer to continue independent audits of its manufacturing facilities, Mendizabal said. Last year, the Occupational Health and Safety Administration (OSHA) fined Weyerhaeuser $77,000 for keeping false safety records at a West Virginia location and required it to conduct independent safety audits of 16 plants operated in the U.S. by its Trus Joist subsidiary.
The independent audits ended in the spring, but Weyerhaeuser asked the firm that did them, Shaw Environmental and Infrastructure, to look into safety at 24 more Weyerhaeuser locations.
Melissa Allison: 206-464-3312