Weyerhaeuser Company (WY) recently consummated the sale of its hardwoods business to American Industrial Partners for estimated proceeds of $108 million.
The sale agreement was signed in June 2011, and included assets located in Tuscumbia, Ala.; Elkhart, Ind.; Grand Rapids and Lewiston, Mich.; Brainerd, Minn.; Coos Bay, Eugene and Garibaldi, Ore.; Titusville, Pa.; Arlington, Centralia and Longview, Wash.; and Dorchester and Onalaska, Wis.
The hardwoods division sold will continue to operate from Tacoma under the new name of Northwest Hardwoods Inc. The division specializes in manufacturing and selling 15 species of hardwood lumber, including alder, oak, maple, cherry, walnut, ash and hickory. It also operates seven sawmills, two yards, four remanufacturing plants and one log yard in the U.S.
Weyerhaeuser, a leading private holder of merchantable softwood timber in North America, principally engages in the growing and harvesting of timber; manufacturing of wood products targeted at home construction; distribution and sale of forest products; and real estate construction and development.
The company recently reported its second quarter 2011 financial results with earnings per share of 6 cents, down compared with 20 cents in the comparable quarter of 2010. The results were hit hard by a fall in revenues and increase in cost of sales.
Moreover, management’s third quarter outlook for the timberland division of lower earnings raises our concern. Selling prices and harvest volumes for western logs are expected to be lower, while silviculture and road expenses are likely to be higher. Furthermore, the company’s close rival International Paper Co. (IP) posted encouraging second quarter results with earnings more than double on a year-over- year basis.
For the third quarter 2011, the Zacks Consensus Estimate stands at 18 cents and for the fiscal year 2011 and 2012 at 43 cents and 85 cents, respectively.
We currently maintain a Neutral recommendation on the stock.
