Weyerhaeuser Co Q3 2024 Earnings Call Transcript

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

Question: Susan Maklari - Goldman Sachs Group, Inc. - Analyst : My first question is on lumber and focusing in on the improving supply-demand dynamics that you talked to in your comments. Can you just give us some more color on how you're seeing that building as we think about not just the fourth quarter, but then going into 2025? And how are you thinking about the ability for yourselves and for the industry in general to respond if we do see that demand recovery coming through over the next couple of quarters. how quickly do you think you'll ramp production? And what will that look like across the next several quarters?

Question: Susan Maklari - Goldman Sachs Group, Inc. - Analyst : Okay. That's very helpful color. And then maybe focusing on the other side of that, which is the cost piece of it. Can you talk a little bit about the OpEx has obviously been very effective here. How are you seeing that coming through over the course of '25, the opportunities there? And what that could mean for your margins as things do tighten up?

Question: George Staphos - BofA Securities - Analyst : First question and recognizing the color you gave on the fourth quarter for Timberland in the West and in particular export markets, and there are no guarantees in life, we get it. But what are your contacts in the field saying, what are your partners saying about the outlook for exports in the first half of '25? As we mix the macro I don't know if there's any trade policy consideration we need to have but what's your view on Western exports in particular, first half?

Question: George Staphos - BofA Securities - Analyst : Okay. Appreciate it. So it sounds -- where that provides us, it sounds like it's probably getting better from second half of the year.

Question: George Staphos - BofA Securities - Analyst : For wood, and this is up there with what have you done for me lately, right, in quotes? And Weyerhaeuser has done a tremendous job on margins in the lumber business with OpEx or black at the bottom. It's a question that comes up periodically. Will you be able to -- if you hold the market constant can you get to breakeven EBITDA with whatever program you have in place for OpEx in '25, recognizing it's a very challenging market and the like? Or if there's no improvement -- hopefully, it will be, but assuming there's no improvement, do we need to resign ourselves to a modest EBITDA losses in lumber for the foreseeable future? How would you have us think about that?

Question: George Staphos - BofA Securities - Analyst : Understood. And should we expect OSB kind of flat to up based on current prices and EWP to be down sequentially 3Q to 4Q?

Question: Kurt Yinger - D.A. Davidson & Co. - Analyst : Devin, you touched a couple of times on kind of the improved demand in the South, specifically from the treaters. Does that improvement buck typical seasonal trends at this stage and maybe even seeing a positive inflection on a year-over-year basis? And I guess, secondarily, do you think that's an indication of better takeaway from the end consumer or perhaps an inventory positioning what looks like attractive price levels?

Question: Kurt Yinger - D.A. Davidson & Co. - Analyst : Got it. Okay. That makes sense. And moving to EWP, a lot of discussion in the past couple of years around shifts in floor systems, I-joist versus Open Web truss, part of that certainly seemed to stem from availability. But if I look at I-joist volumes this year, it looks like they're going to be down about 25% from peak, starts will be down maybe mid-teens percentage Curious how you would reconcile that difference in how you think about EWP demand relative to starts going forward and the potential for maybe some share recapture?

Question: Kurt Yinger - D.A. Davidson & Co. - Analyst : Okay. And then just one more quick one on capital returns. Year-to-date base dividends and share repurchases have outpaced FAD. And I'm curious how that factors into the thought process or potential for a supplemental dividend in and how important having at least some level of supplemental dividend is kind of within that variable returns framework that you have?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Since we've covered a lot on Wood Products and Timberlands, I thought I'd ask some NCS questions. Maybe starting with -- can you give us a sense of how much acreage are tied to the 3 solar development projects that are under construction?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Right. And I really was trying to get to, what type of economics might be forthcoming with the projects under development? I don't know if that's something you can speak to off the cuff.

Question: Mark Weintraub - Seaport Research Partners - Analyst : Right. And any color you can give us on maybe the number of contracts that -- or options that are expiring in 2025? And does that heighten the possibility that those start moving forward? Or is that not necessarily the way to think about it in solar specifically?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Right. So it sounds like though that the hit ratio, recognizing your refilling isn't necessarily super high yet in terms of people actually moving forward as the projects are expiring?

Question: Mark Weintraub - Seaport Research Partners - Analyst : That's helpful color. And then lastly, just on CCS, any progress on permits. Any update on the time frame for how that might be moving forward?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Okay. And you mentioned...

Question: Mark Weintraub - Seaport Research Partners - Analyst : Great. And you had mentioned you got approval in the 2 additional forest carbon projects. Anything else that sort of we should be thinking about in terms of the details in NCS that are meaningful impactful?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Great. And obviously, it's got magnificent cash conversion. So that's all good, too.

Question: Matthew McKellar - RBC Capital Markets - Analyst : First, what role do you think European lumber in boards play if we see an uptick in lumber demand and pricing in 2025, particularly if European demand remained soft?

Question: Matthew McKellar - RBC Capital Markets - Analyst : That's helpful. And then just last for me. are you seeing a potential longer-term revenue stream opportunity related to lithium mining as it relates to your land in the US South, maybe around Texas, Arkansas, maybe Louisiana in particular? And if so, how would you have us think about the potential size and time line of those opportunities?

Question: Ketan Mamtora - BMO Capital Markets Equity Research - Analyst : Devin, maybe to start with on the Engineered Wood side. Can you just help me understand a little better in terms of just the sequential pressure in the engineered wood business given that prices were sort of flat quarter-over-quarter, and I would imagine some modest benefit on the cost side from lower OSP prices. What are the 2 or 3 key challenges in the quarter?

Question: Ketan Mamtora - BMO Capital Markets Equity Research - Analyst : Got it. That's helpful. And then very quickly, what were your operating rates in either lumber and OSB in Q3?

Question: Ketan Mamtora - BMO Capital Markets Equity Research - Analyst : Got it. Okay. And then just one last one for me. Devin, anything going on in terms of log exports out of US South at this point. Is there anything happening on that front?