Overview of the Company’s Financial Performance

Weyerhaeuser, a leading forest products company, has reported its financial results for the third quarter and year-to-date 2024. The company’s performance was impacted by moderating market conditions, with net sales decreasing 17% in the third quarter and 8% year-to-date compared to the same periods in 2023.

Operating income declined 78% in the third quarter and 40% year-to-date, primarily due to lower gross margins across the company’s business segments. Net earnings decreased 88% in the third quarter and 49% year-to-date. The declines were driven by weaker demand and pricing in the Wood Products segment, as well as a $10 million non-cash impairment charge related to the indefinite curtailment of the company’s New Bern lumber mill.

Revenue and Profit Trends

Weyerhaeuser’s Timberlands segment saw a 6% decrease in net sales to unaffiliated customers in the third quarter, and an 8% decrease year-to-date, primarily due to lower sales volumes and realizations in the Western and Southern regions. Operating income and net contribution to earnings for the segment declined 27% in the third quarter and 28% year-to-date.

In the Wood Products segment, net sales decreased 20% in the third quarter and 9% year-to-date, driven by lower sales realizations and volumes across most product lines, including structural lumber, oriented strand board, and engineered solid section. Operating income and net contribution to earnings for the segment plummeted 90% in the third quarter and 41% year-to-date.

The Real Estate, Energy and Natural Resources segment reported a 15% decrease in net sales in the third quarter, but a 7% increase year-to-date, due to fluctuations in acres sold and average price per acre. Operating income and net contribution to earnings for the segment declined 9% in the third quarter but increased 6% year-to-date.

Strengths and Weaknesses

A key strength for Weyerhaeuser is its diversified business model, with operations spanning Timberlands, Wood Products, and Real Estate, Energy and Natural Resources. This diversification helps to mitigate risk and provide stability during market fluctuations. The company’s significant timberland holdings and vertical integration also give it a competitive advantage in the industry.

However, the company’s performance is heavily dependent on the strength of the U.S. housing market, repair and remodeling activity, and export demand, all of which have faced headwinds in recent quarters. The Wood Products segment, in particular, has been impacted by softer demand and pricing, leading to significant declines in profitability.

Additionally, the company’s $10 million non-cash impairment charge related to the indefinite curtailment of the New Bern lumber mill highlights the need for Weyerhaeuser to carefully manage its asset base and production capacity to align with market conditions.

Outlook and Future Prospects

Looking ahead, Weyerhaeuser expects the U.S. housing market to remain favorable over the medium to long-term, supported by strong demographics and historically low housing inventory. However, the company acknowledges near-term challenges, including continued elevated mortgage rates, reduced affordability, and softness in the repair and remodeling sector.

To navigate these market conditions, Weyerhaeuser plans to maintain a disciplined approach to capital allocation, with a focus on returning cash to shareholders through a combination of dividends and share repurchases. The company’s cash return framework targets a total return to shareholders of 75-80% of annual Adjusted Funds Available for Distribution (Adjusted FAD).

Additionally, Weyerhaeuser sees opportunities in emerging carbon credit and carbon capture and storage markets, which could provide new revenue streams and contribute to the company’s sustainability efforts. However, the company’s ability to capitalize on these opportunities will depend on the development and adoption of relevant policies and technologies.

Overall, Weyerhaeuser remains a well-positioned forest products company, with a diversified business model and a focus on operational excellence and financial discipline. However, the company will need to navigate the current market challenges and continue to adapt its strategies to drive long-term value for shareholders.

Tables

Consolidated Results

DOLLAR AMOUNTS IN MILLIONS	QUARTER ENDED		AMOUNT OF CHANGE	YEAR-TO-DATE ENDED		AMOUNT OF CHANGE
	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023
Net sales	$1,681	$2,022	$(341)	$5,416	$5,900	$(484)
Costs of sales	$1,431	$1,520	$(89)	$4,407	$4,560	$(153)
Operating income	$78	$353	$(275)	$544	$908	$(364)
Net earnings	$28	$239	$(211)	$315	$620	$(305)
Earnings per share - basic and diluted	$0.04	$0.33	$(0.29)	$0.43	$0.85	$(0.42)

Timberlands Segment

DOLLAR AMOUNTS IN MILLIONS	QUARTER ENDED		AMOUNT OF CHANGE	YEAR-TO-DATE ENDED		AMOUNT OF CHANGE
	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023
Net sales to unaffiliated customers	$357	$380	$(23)	$1,153	$1,259	$(106)
Intersegment sales	$136	$141	$(5)	$416	$433	$(17)
Total sales	$493	$521	$(28)	$1,569	$1,692	$(123)
Costs of sales	$410	$417	$(7)	$1,275	$1,317	$(42)
Operating income	$57	$78	$(21)	$217	$302	$(85)
Net contribution to earnings	$57	$78	$(21)	$218	$302	$(84)

Third-Party Log Sales Volumes and Fee Harvest Volumes

VOLUMES IN THOUSANDS	QUARTER ENDED		AMOUNT OF CHANGE	YEAR-TO-DATE ENDED		AMOUNT OF CHANGE
	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023
Third-party log sales - tons:
West	1,379	1,479	(100)	4,499	4,814	(315)
South	4,062	4,180	(118)	12,305	12,907	(602)
North	160	148	12	453	450	3
Total	5,601	5,807	(206)	17,257	18,171	(914)
Fee harvest volumes - tons:
West	2,184	2,137	47	6,753	6,674	79
South	6,070	6,146	(76)	18,353	19,008	(655)
North	247	223	24	676	683	(7)
Total	8,501	8,506	(5)	25,782	26,365	(583)

Wood Products Segment

DOLLAR AMOUNTS IN MILLIONS	QUARTER ENDED		AMOUNT OF CHANGE	YEAR-TO-DATE ENDED		AMOUNT OF CHANGE
	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023
Net sales	$1,235	$1,537	$(302)	$3,958	$4,355	$(397)
Costs of sales	$1,132	$1,195	$(63)	$3,424	$3,572	$(148)
Operating income and Net contribution to earnings	$27	$277	$(250)	$351	$590	$(239)

Third-Party Sales Volumes

VOLUMES IN MILLIONS	QUARTER ENDED		AMOUNT OF CHANGE	YEAR-TO-DATE ENDED		AMOUNT OF CHANGE
	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023
Structural lumber - board feet	1,116	1,184	(68)	3,386	3,524	(138)
Oriented strand board - square feet (3⁄8”)	675	683	(8)	2,093	2,176	(83)
Engineered solid section - cubic feet	5.4	6.2	(0.8)	16.8	16.9	(0.1)
Engineered I-joists - lineal feet	36	42	(6)	114	113	1
Softwood plywood - square feet (3⁄8”)	88	86	2	259	263	(4)
Medium density fiberboard - square feet (3⁄4”)	35	33	2	104	93	11

Production and Outside Purchase Volumes

VOLUMES IN MILLIONS	QUARTER ENDED		AMOUNT OF CHANGE	YEAR-TO-DATE ENDED		AMOUNT OF CHANGE
	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023	SEPTEMBER 2024	SEPTEMBER 2023	2024 VS. 2023
Structural lumber - board feet:
Production	1,046	1,174	(128)	3,294	3,481	(187)
Outside purchase	25	38	(13)	97	113	(16)
Total	1,071	1,212	(141)	3,391	3,594	(203)
Oriented strand board - square feet (3⁄8”):
Production	683	724	(41)	2,162	2,212	(50)
Outside purchase	17	19	(2)	55	55	-
Total	700	743	(43)	2,217	2,267	(50)
Engineered solid section - cubic feet:
Production	5.0	5.6	(0.6)	16.8	16.1	0.7
Outside purchase	2.6	3.7	(1.1)	8.9	9.7	(0.8)
Total	7.6	9.3	(1.7)	25.7	25.8	(0.1)
Engineered I-joists - lineal feet:
Production	31	42	(11)	115	105	10
Outside purchase	1	2	(1)	3	2	1
Total	32	44	(12)	118	107	11
Softwood plywood - square feet (3⁄8”):
Production	81	77	4	235	235	-
Outside purchase	7	10	(3)	24	33	(9)
Total	88	87	1	259	268	(9)
Medium density fiberboard - square feet (3⁄4”):
Production	37	34	3	105	101	4
Total	37	34	3	105	101	4