Weyerhaeuser Co Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Charles Perron - Goldman Sachs Research - Analyst : This is Charles Perron in for Susan. Just first, I want to talk a bit about what you're hearing on demand for lumber as we enter the building season. I think we've heard some of the builders taking down their closings guide for the year. And (inaudible) demand in your prepared remarks. But what are you hearing from retailer demand through the spring and their willingness to ramp inventory given the demand uncertainty? I guess you have the expectations for higher tariffs through this summer. And specifically, given the risks of tariffs on Canadian lumber, do you see any shift in order patterns between SPF and Southern yellow pine that could sustain over time?

Question: Charles Perron - Goldman Sachs Research - Analyst : Got it. That's helpful, Devin. And then second, I want to talk a bit about EWP. It was encouraging to see that you were able to get a little bit of pricing lift sequentially across both solid section and I-joust this quarter, despite the builders trying to cut cost and find savings wherever it can given the affordability issues. How do you see the outlook for realization for EWP going forward? I know I think you guided for comparable for the second quarter. But considering the dynamics with the builders looking for savings against rising inflation in some of the raws and overall the market, what do you see the impact for realization and the expectations for volume for those products going forward as well?

Question: George Staphos - BofA Global Research - Analyst : So I guess the first question I had for you, given what's been the softer pickup to the summer building season, demand being a little bit soft just given the uncertainties that you mentioned, have you adjusted your harvest profile at all? Or should we still be expecting a 35.5 million tons? And can you give us a bit more color in terms of what you're seeing in terms of the profile of what you're going to do relative to what you might have been looking at two, three months ago?

Question: George Staphos - BofA Global Research - Analyst : Okay. Fair enough. Appreciate that. And then you mentioned the Occidental Petroleum agreement. Can you give us a bit more color relative to what we should be expecting in terms of cash flows, milestones, timing in that regard? And I'll turn it over with that.

Question: George Staphos - BofA Global Research - Analyst : Okay, Devin. So in terms of just the cash flows -- I recognize you're not going to quantify. We're looking at sort of '29 and then next decade in terms of when we'll start seeing it actually show up in the P&L then?

Question: Matthew McKellar - RBC Capital Markets - Analyst : Maybe first, if we do see some meaningful Section 232 tariffs on wood products announced, how do you think about the likely impact to timberland valuations over the medium term? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 25, 2025 / 2:00PM, WY.N - Q1 2025 Weyerhaeuser Co Earnings Call

Question: Matthew McKellar - RBC Capital Markets - Analyst : Okay. And last for me, just on the OSB business, you mentioned some planned annual maintenance in the quarter. I recognize this as planned maintenance, but have you been intending to perform this maintenance in Q2 for some time? Or are you pulling forward any maintenance maybe based on what you're seeing in the market?

Question: Mark Weintraub - Seaport Research Partners - Analyst : A few quick follows. One, on that OSB annual plan maintenance. Order of magnitude, how much impact would you expect that to have in 2Q?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Maybe $10 million or something or less -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 25, 2025 / 2:00PM, WY.N - Q1 2025 Weyerhaeuser Co Earnings Call

Question: Mark Weintraub - Seaport Research Partners - Analyst : Less than that. Okay. And then in terms of the EWP, the fire impact, so that was $11 million in the first quarter. So does that $11 million disappear in the second quarter and then you actually hope to recoup some of it with stronger volumes in the back half of the year, all else equal?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Okay. And then lastly, just -- so you have a 16% tax rate in the first quarter, which I assume means that you are expecting a healthy share of your income to come from your TRS this year which presumably would mean that you're still pretty optimistic on how the Wood Products business is going to turn out for the rest of the year. Is that fair? And if it ends up being a little bit weaker, does just the tax rate go down for the balance of the year? Is that how it would play out?

Question: Ketan Mamtora - BMO Capital Markets - Analyst : First question, can you talk a little bit about the channel inventories as you guys see it in lumber or OSB and EWP in the context of what we've discussed today with slower start of the spring season, homebuilders sounding a little more cautious. How would you characterize inventories? Is it still lean, more balanced, or probably a little bit more than balanced at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 25, 2025 / 2:00PM, WY.N - Q1 2025 Weyerhaeuser Co Earnings Call

Question: Ketan Mamtora - BMO Capital Markets - Analyst : Got it. That's helpful. And then second question -- good to see the progress on the CCS side. I'm just curious. On forest carbon, Devin, last quarter, you talked about a pretty meaningful jump over 2024. Is that still on track for 2025?

Question: Hong Hang - JPMorgan - Analyst : I guess my first question, you've talked a little bit about the demand dynamics that are causing weakness in OSB pricing. I guess, in the near term, what do you think needs to change for us to see a stabilization in prices?

Question: Hong Hang - JPMorgan - Analyst : Got it. And I guess my second question, the administration signed a lot of executive actions trying to increase timber production. That has recently opened up, I guess, land or public land for timber harvest. How do you expect that to play out in the timber market?

Question: Hamir Patel - CIBC Capital Markets - Analyst : Devin, you mentioned more inquiries around transitioning to -- customers looking to transition to Southern yellow pine from SPF. Can you speak more to perhaps where are you seeing that interest? Is that more larger public builders versus private? And any maybe differences across regions.

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay. That's helpful. And you also indicated you expected R&R activity to pick up later this year. Do you think that end market for wood products

Question: Mike Roxland - Truist Securities - Analyst : Devin, I just wanted to follow up on the sense that was driving the slight uptick in order files in EWP over the last several weeks. Is that -- you mentioned seasonality. I mean, have you seen a pickup in building activity? Because it (inaudible) for your comments that there's been much in the way of restocking. So is the seasonality of pickup in drilling activity that's led to better order files in EWP? And can you remind us the operating rate you ran at an EWP in 1Q and what you expect for Q2? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 25, 2025 / 2:00PM, WY.N - Q1 2025 Weyerhaeuser Co Earnings Call

Question: Mike Roxland - Truist Securities - Analyst : Got it. Okay. And then just congrats on the Occidental progress and progress overall in terms of CCS. Just at a recent conference, you mentioned that -- and you said it again today here that CCS is a big opportunity, but not as big as you originally planned. Can you give us a sense of the scale of the opportunity as you now see it and how that compares to your original outlook? And why the change in expectations? Is that solely due to the permitting process? And (inaudible)

Question: Mike Roxland - Truist Securities - Analyst : Got it. And I appreciate the clarity there. And then just one last. In terms of CCS, does it tend to be higher margin relative to wind, solar, and carbon credits and mitigation banking? Is that typically the highest margin product that you have in Natural Climate Solutions?

Question: Buck Horne - Raymond James - Analyst : Just wanted to maybe zoom out a little bit, just take stock of where we're at in terms of the stock price performance and obviously, the discount to NAV here, probably one of the widest discount since the pandemic. Does that strategically give you any thoughts about -- are there any maybe non-core timber positions you would think about monetizing or could monetize in the near term and maybe accelerate some share repurchase activity to maybe close this NAV gap or take advantage of the dislocation?

Question: Buck Horne - Raymond James - Analyst : Got you. Appreciate that. And just a follow-up on solar leasing. Is there any update in terms of market momentum in terms of option conversions? Or how do you view the opportunity set for solar uptake in the next couple of years?

Question: George Staphos - BofA Global Research - Analyst : A couple of quick follow-ons just on tariffs. So to the extent you can comment -- and I know it's really hard to parse this, Devin and Davie. Do you think -- and recognizing the tariffs are moving to target, has there been much from what you see and what you talked to in terms of the field impact from tariffs built into lumber pricing as you see it right now? And the related question, given the fact that there's been so much capacity that's gone into the US over the last number of years and that gap between supply and demand has diminished. I recognize in a stronger housing market, that gap would widen out again. Do you think tariffs would have had much effect on lumber pricing as we sit here today?