From: Drew Desilver, The Seattle Times
Published October 23, 2004 12:00 AM

Weyerhaeuser Sets Record Profit for Quarter

Oct. 23—Maybe money really does grow on trees. At least, it's seemed that way for Weyerhaeuser this year. Consider:


—The $594 million, or $2.45 per share, third-quarter profit posted yesterday was the highest quarterly profit in the Federal Way-based company's 104-year history;


—The previous record, $369 million, was set in this year's second quarter;


—Weyerhaeuser could lose more than $200 million in the last three months of the year and still make more money than it did the previous three years — combined.


"What can you say? These are very good results for them," said analyst Steven Chercover, who follows Weyerhaeuser for D.A. Davidson in Lake Oswego, Ore.


Weyerhaeuser, the nation's third-largest wood-products company, had struggled during the recent recession, which cut into demand for its office paper and cardboard packaging. Other issues compounded the company's difficulties, including its heavy debt burden from the $8 billion purchase of Willamette Industries in 2002; the ongoing feud between the United States and Canada over softwood lumber; and weak pricing blamed on overcapacity in the industry.


This year, along with continued strong demand for new houses, Weyerhaeuser has benefited from higher prices across its multiple product lines, from structural lumber and oriented strandboard to corrugated cardboard and office paper. Third-quarter sales totaled $5.85 billion, up 12.8 percent from the same period a year ago.


"They're price takers, not price makers," Chercover said. "But they can take credit for running their systems well, and that's what they've done."


Several one-time events also fattened Weyerhaeuser's bottom line, including a $179 million gain from selling timberlands in Georgia and a $13 million gain from reducing its reserve for hardboard siding claims.


Even excluding all one-time events, Weyerhaeuser's per-share profit of $1.63 easily beat the Wall Street consensus estimate of $1.40, as reported by Thomson Financial.


But the company's forecast of lower fourth-quarter earnings, generally because of expected softening in product prices, helped push Weyerhaeuser's shares down 84 cents to a $60.30 close.


The stock is up 4.5 percent from a year ago, but that modest rise masks a series of surges and plunges that has sent the shares as high as $67.80 in April and as low as $56.01 in November.


The company also said yesterday it would buy back up to $700 million in notes, part of its ongoing efforts to whittle down its $10.4 billion in long-term debt. The notes, in four different series, carry interest rates from 5.25 percent to 6.125 percent.


© 2004, The Seattle Times. Distributed by Knight Ridder/Tribune Business News.


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