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PotlatchDeltic(PCH) - 2023 Q3 - Earnings Call Transcript
PCHPotlatchDeltic(PCH)2023-10-31 21:04
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Financial Data and Key Metrics Changes - The company reported total adjusted EBITDDA of 56millionforQ32023,anincreasefrom56 million for Q3 2023, an increase from 46 million in Q2 2023, driven by improved performance across all business segments [6][15][33] - The Wood Products segment's adjusted EBITDDA rose to 15millioninQ3from15 million in Q3 from 12 million in Q2, attributed to slightly higher average lumber prices [6][25] - The Timberlands segment's adjusted EBITDDA increased from 29millioninQ2to29 million in Q2 to 42 million in Q3, with a record quarterly volume in Southern Timberlands [8][15] Business Line Data and Key Metrics Changes - The Wood Products segment shipped 276 million board feet of lumber in Q3, slightly below the 280 million board feet shipped in Q2 but 11 million feet more than in Q3 of the previous year [7][25] - The Timberlands segment harvested 2 million tons in Q3, achieving the high end of the forecast range, with stable sawlog and pulpwood markets [8][24] - The Real Estate segment contributed 14millioninadjustedEBITDDA,withsalesof32residentiallotsatanaveragepriceof14 million in adjusted EBITDDA, with sales of 32 residential lots at an average price of 89,000 per lot [9][16] Market Data and Key Metrics Changes - Homebuilder sentiment has trended downward due to higher mortgage rates and housing affordability challenges, impacting demand [11] - The company noted a significant underlying shortage of housing stock in the U.S., estimated between 2 million and 4 million units, which could provide long-term demand support [11] - The repair and remodel market remains strong, with a 15% year-to-date increase in home center takeaway compared to the previous year [19] Company Strategy and Development Direction - The company is focused on executing its capital project plan, including a 131millionprojecttomodernizeandexpandtheWaldo,Arkansassawmill,expectedtobecompletedbytheendof2024[7][14]−Thecompanyisexploringnaturalclimatesolutions,includingacarboncreditprojectonapproximately50,000acresoftimberlands[17]−Thecompanymaintainsadisciplinedcapitalallocationstrategy,havingrepurchased283,000sharesfor131 million project to modernize and expand the Waldo, Arkansas sawmill, expected to be completed by the end of 2024 [7][14] - The company is exploring natural climate solutions, including a carbon credit project on approximately 50,000 acres of timberlands [17] - The company maintains a disciplined capital allocation strategy, having repurchased 283,000 shares for 13 million in Q3 and an additional 264,000 shares for 12millionsincetheendofSeptember[12][28]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutlong−termhousingfundamentalsdespitecurrentmacroeconomicconcerns,includinghighmortgageratesandeconomicuncertainty[11][33]−ThecompanyanticipatestotaladjustedEBITDDAtobelowerinQ4comparedtoQ3duetoexpecteddeclinesinlumberandsawlogprices[33]−Managementnotedthatthehousingmarkethasnotcollapsed,withsignsofstabilityinnewresidentialconstructiondemand[60]OtherImportantInformation−ThecompanyfinalizeditsOlasawmillfireinsuranceclaimforatotalof12 million since the end of September [12][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about long-term housing fundamentals despite current macroeconomic concerns, including high mortgage rates and economic uncertainty [11][33] - The company anticipates total adjusted EBITDDA to be lower in Q4 compared to Q3 due to expected declines in lumber and sawlog prices [33] - Management noted that the housing market has not collapsed, with signs of stability in new residential construction demand [60] Other Important Information - The company finalized its Ola sawmill fire insurance claim for a total of 89 million, which included property replacement and business interruption coverage [29] - The company has a total liquidity of 602million,including602 million, including 303 million in cash and availability on its undrawn revolver [27] Q&A Session Summary Question: Southern sawlog realizations were flat from Q2 to Q3. What are the regional differences? - Management indicated that sawlog prices were generally consistent across regions, with some earlier differences flattening out [37] Question: What are the dealer inventory levels and willingness to restock at current lumber prices? - Management noted that dealer inventories are low, with dealers nervous about the macroeconomic environment, leading to cautious restocking [38] Question: What is the outlook for European lumber imports? - Management observed a decline in European imports due to high prices and geopolitical factors, expecting further decreases in the coming months [42][44] Question: What is the company's strategy regarding share repurchases versus timberland acquisitions? - Management stated that share repurchases have become more attractive than timberland acquisitions due to current market conditions, but they remain open to opportunistic timberland purchases [79][80] Question: What is the outlook for the repair and remodel market in 2024? - Management expects the repair and remodel market to remain strong, with a potential slight increase in demand as consumers invest in their homes [62]