Weyerhaeuser Co Q4 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 maybe digging in a bit to the commentary on demand around housing. I think Devin, it was good to hear that you see a path to some growth there for both new homes and R&R. I guess could you just give some more details on how you're thinking about inventories heading into the spring and the busy season there. And especially, any thoughts on retailers and how they're approaching this market given the potential for some inflation in commodity prices against a more uncertain macro backdrop?

Question: Susan Maklari - Goldman Sachs Group, Inc. - Analyst : Well, inventories at the product level, more than the housing side of things, yes.

Question: Susan Maklari - Goldman Sachs Group, Inc. - Analyst : Okay. That's helpful. And then following up, there's been obviously a lot of talk on tariffs or the potential for tariffs that could come through with the new administration. Can you talk about the implications across the various wood products and how that could potentially come in? And what it could mean for your margins and business?

Question: Ketan Mamtora - BMO Capital Markets Equity Research - Analyst : Devin, to start with, on the EWP side, can you talk a little bit about the progress you guys are making in recapturing share from open web floor trusses and this sort of dynamic this year when -- and it's been going on for a little while where sort of builders are providing more incentives to customers. So how is the competitive dynamics there on the pricing side?

Question: Ketan Mamtora - BMO Capital Markets Equity Research - Analyst : Understood. And then on the NCS side, Devin, you talked about a pretty nice uptick coming in 2025 in Forest Carbon. Can you give us some sense as to kind of -- how much did you -- credits did you sell in '24? And what do you expect in 2025 and roughly sort of the price expectation there?

Question: Ketan Mamtora - BMO Capital Markets Equity Research - Analyst : That is a big jump, Devin. Congrats on all the progress you've made there.

Question: George Staphos - BofA Securities - Analyst : Congrats on the progress during the year. I guess I want to come back to lumber. And Devin, you were saying that from your vantage point, inventories are relatively lean in the channel. We also read and hear that there's uncertainty about the tariffs. But as you were commenting a few minutes ago, certainly, the tariff does go in place is probably more inflationary than deflationary, right? And so why are we not seeing in your view or what you're hearing from the field more uplift in lumber pricing right now? It seems like we have some supply constraints. We have inventories lean, we have the potential optionality, but that's probably more up and down in terms of the optionality from tariffs. Why aren't we seeing more of an uplift? Does it give us any worry, perhaps, about the overall demand outlook for this year? How would you have us think about that?

Question: George Staphos - BofA Securities - Analyst : Okay. Next question is really around capital allocation. Certainly, the company going back to its goals that have set out back in 2020 has been hitting or exceeding its capital return goals and the value return. The last year the value return to shareholders has been in excess of FAD. How should we think about your priorities in the next couple of years in terms of the dividend, should we continue to expect it grows at 5% or better? You certainly have the maturities coming up in 2026. Not that Weyerhaeuser can't handle that given it's asset based. But nonetheless, should we expect a little bit more focus on deleveraging relative to dividend relative to value return to shareholders, given that construct.

Question: Hamir Patel - CIBC Capital Markets - Analyst : Devin, can you speak to your operating rates in lumber and OSB in the quarter? And how would that compare between the US and Canadian operations? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 31, 2025 / 3:00PM, WY.N - Q4 2024 Weyerhaeuser Co Earnings Call

Question: Hamir Patel - CIBC Capital Markets - Analyst : Okay. Great. And just the last question I had. If we do end up seeing tariffs driving maybe a larger uplift in US industry production, how much flexibility do you have to increase your harvest levels in the south and west to meet perhaps a window of higher US output.

Question: Mark Weintraub - Seaport Research Partners - Analyst : Devin, thanks for the color on both potential impact from tariffs. And then also, when you're talking about the operating rates in the different businesses. So I sort of want to put those two things together. I mean, it sounds like in lumber, you actually have a fair bit of flexibility maybe you could make a little more wood in the US if need be? And as you noted, you're actually not making that much in Canada that you're shipping to the US to begin with. And it sounds like OSB, though, you wouldn't necessarily have that type of flexibility. And then I guess in EWP, it might be more complicated. You've got the -- if you look at operating rates, it sounds like you have flexibility, but they're different products, and they're made in different places. So to the extent that you could provide us a little bit more thinking on how it might within the business that -- where you'd have flexibility to adjust versus not so much?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Got you. And then maybe just a quick follow-up on harvest. I mean it looks like you're probably up 3% to 4% in the US South in 2025 versus 2024? Maybe tell me that's about right?

Question: Mark Weintraub - Seaport Research Partners - Analyst : Yeah. And then is that just a function of the acquisitions that you've made? And is this fairly reflective of what we should think about as the sustainable harvest level?

Question: Matthew McKellar - RBC Capital Markets - Analyst : Looking at OSB, you're expecting moderately higher sales volume in Q1 but also slightly higher unit manufacturing costs. So I was wondering if you could just please expand on what's driving your expectations on cost there.

Question: Matthew McKellar - RBC Capital Markets - Analyst : Okay. Mostly (inaudible) then. Okay. And then just on the LSL facility, you talked about $100 million in EBITDA there before portfolio integration benefits. How do you think about those portfolio integration benefits look like? Is that mostly, I mean, tightening that pulpwood market in the area, which benefits Timberland's business, being able to serve that demand in a more freight logical way? Or are there other potential considerations as well? And is it possible to quantify all this. I mean, if we're thinking about the economics more holistically, is this more like a 4 times build multiples and a 5 times multiple?

Question: Mike Roxland - Truist Securities - Analyst : Congrats on all the progress. First question I had, just Devin, I'd love to get your thoughts on what the new administration and what they're doing in terms of suspending the Inflation Reduction act funding, suspending funding for the infrastructure and investment in Jobs Act. So long story short, the new administration is cutting funding for, let's say, offshore wind power, trying to minimize wind, there probably are negative read-throughs for CCS, if they continue along this track. So would love to get your thoughts about what the -- anything you're hearing from your contacts, from your involvement in the industry in terms of risks to Natural Climate Solutions, particularly given the new administration?

Question: Mike Roxland - Truist Securities - Analyst : Got it. I appreciate the color. And then just for my second question, in terms of the new EWP capacity in Arkansas, obviously, you currently produce TimberStrand in Canada using hardwood, you're going to be using Southern yellow Pine in the South. Can you just comment about how the testing has gone, using that [furnish] How has it performed? Do you anticipate any issues as you roll it out on a larger scale because assuming that the testing was done on a smaller scale. And then lastly, just your expectations for EWP operating rate in 1Q.

Question: George Staphos - BofA Securities - Analyst : Just a quick follow-on on the Timberstrand project. And piggybacking on what Mike was talking about. Recognizing that you've produced these products in the past, EWP Timberstrand is different perhaps than panels different than dimensional lumber. How do you feel about your ability to ultimately hire to run the facility, how do you feel about your ability to staff on R&D and the like related to what you're going to need to build the facility? And then separately, perhaps you've mentioned this before, if you have apologies, do you have a figure that we should pencil in for the CapEx related to that project in 2025, what the cadence might look like, recognizing it's $500 million? And then maybe philosophically, just why not include that CapEx in your FAD. And good luck in the quarter and the year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 31, 2025 / 3:00PM, WY.N - Q4 2024 Weyerhaeuser Co Earnings Call