Tags: Weyerhaeuser | WY | paper | wood | products

Weyerhaeuser: Moving Beyond US Housing

By    |   Friday, 06 May 2011 03:48 PM

Weyerhaeuser (WY) used to be famous as a paper company. But it got rid of the paper unit four years ago and is now one of the world’s largest wood-product companies.

The company actually has four divisions: wood products, cellulose fibers, timberlands, and real estate. That’s in order of size from largest to smallest.

All of the divisions are closely tied to the housing market, except cellulose fibers. Since the housing bust, the latter unit, which consists mostly of absorbent pulp for diapers and other products, has contributed an outsized portion of Weyerhaeuser’s profit.

Weyerhaeuser converted itself into a real estate trust (REIT) in 2010, so you can count on a regular dividend. The stock yielded 2.83 percent as of May 4.

The company’s 6.15 million acres of timberland provides a solid foundation of assets. The land is more profitable per acre than that of Weyerhaeuser’s main competitors, according to Morningstar calculations, thanks to its heavy concentration on the productive West Coast. That location also helps the company supply logs to China, which is in constant need of imported wood.

Importantly, Weyerhaeuser has learned how to cope with the long period of weakness in U.S. home sales.

"The U.S. housing market has been in intensive care for the last couple of years," Weyerhaeuser CEO Dan Fulton said on a conference call to discuss the company’s earnings. "Perhaps the worst is behind us, but our experience from the last several years causes us to be cautious; and we are focusing on being profitable."

Gradual improvements

The company registered profit of $99 million in the first quarter, reversing a loss of $18 million a year earlier. This year’s result was buttressed by a $96 million gain from the sale of 82,000 acres of forest land in Washington. Revenue rose 11 percent to $1.56 billion.

“We look for conditions to continue to improve gradually in coming months,” writes Standard & Poor’s analyst Stuart Benway, who has a four-star buy rating on the stock. “We see sales rising 10 to 12 percent in 2011, following recovery of 18.5 percent in 2010.”

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Weyerhaeuser (WY) used to be famous as a paper company. But it got rid of the paper unit four years ago and is now one of the world s largest wood-product companies. The company actually has four divisions: wood products, cellulose fibers, timberlands, and real estate....
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Friday, 06 May 2011 03:48 PM
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