Rayonier Inc. REIT

Q1 2023 Earnings Conference Call


spk00: Welcome and thank you for joining Ray and Ir's first quarter 2023 teleconference call. At this time, all participants are in a listen-only mode. During the question and answer session, please press star 1 on your telephone keypad. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Mr. Colin Mings, Vice President, Capital Markets and Strategic Planning.
spk03: Thank you and good morning. Welcome to Ray Anear's Investor Teleconference, covering first quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayanear.com. I would like to remind you that in these presentations, we include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release in Forms 10-K and 10-Q, followed with the SEC, lists some of the factors that may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on page two of our financial supplement. Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measures in our earnings release and supplemental materials. With that, let's start our teleconference with opening comments from Dave Nunes, our CEO. Dave?
spk02: Thanks, Colin. Good morning, everyone. First, I'll make some high-level comments before turning it over to Mark McHugh, President and Chief Financial Officer, to review our consolidated financial results. Then we'll ask Doug Long, Executive Vice President and Chief Resource Officer, to comment on our U.S. and New Zealand timber results. And following the review of our timber segments, Mark will discuss our real estate results as well as our outlook for the remainder of 2023. For the first quarter, we generated a adjusted EBITDA of $55 million and pro forma net income of $1.1 million, or one cent per share. as our team navigated numerous market challenges. The total adjusted EBITDA generated by our timber segments collectively declined 30 percent relative to an extraordinarily strong first quarter 2022 amid weaker end market demand, continued macroeconomic headwinds, and the harvest disruptions associated with Tropical Cyclone Gabriel, which hit New Zealand's North Island in February. As anticipated, real estate closings were relatively light in the first quarter. However, our full-year real estate pipeline remains relatively strong, and we continue to expect that closing activity will be heavily weighted toward the second half of the year. Drilling down further in our operating segments, our southern timber segment generated first quarter adjusted EBITDA of $43 million, down $6 million from the prior year period. as weaker demand for pulp products and lumber, coupled with drier weather conditions, drove a 14 percent reduction in net stumpage prices. Both demand and pricing were impacted by softer market conditions during the quarter, as our customers worked through elevated log inventories and recalibrated for slower end market demand. Compared to less tensioned markets in the US South, the relative price elasticity in a majority of our markets translated to a sharper pullback in pricing from 2022 levels. However, our absolute pricing levels, EBITDA per acre and EBITDA per ton, remain very favorable compared to the US South overall. In our Pacific Northwest timber segment, first quarter adjusted EBITDA of $7 million was down $14 million from the prior year quarter. The decrease versus the prior year period was attributable to a 24% decrease in harvest volumes and a 12% decline in domestic saw timber prices. Overall, market conditions in the region softened due to weaker lumber demand and pricing, less tension from the export market, and general macroeconomic uncertainty. Given the pricing declines we saw during the quarter, we opted to defer some planned harvests until end market demand and mill inventories normalize. Turning to our New Zealand timber segment, first quarter adjusted EBITDA of $6 million declined $4 million versus the prior year quarter due to lower carbon credit sales, unfavorable foreign exchange impacts, and 7% lower harvest volumes resulting from the impacts of Cyclone Gabriel. While delivered export saw timber prices also declined by roughly 11%, stumpage realizations were relatively flat as shipping costs returned to more normalized levels. As it relates to Cyclone Gabriel, our thoughts go out to all of those who were affected by the storm. While we sustained some timber and property damage fortunately no rainier employees or contractors were injured by the storm during the quarter we completed our damage assessment and determined that a $2.3 million write off was necessary due to timber damage on roughly 2600 acres. From an operational standpoint, we also lost several production days during the first quarter. However, access to the forest has been restored, and we currently expect that much of this production will be recaptured by the end of the year. In our real estate segment, we generated adjusted EBITDA of $7 million for the first quarter, down $18 million from the prior year period, as higher weighted average per acre prices were more than offset by 76% fewer acres sold. Despite the increase in interest rates as compared to a year ago, demand for rural land remains strong, and we remain pleased by the favorable momentum in both our Wild Light and Heartwood development projects. With that, let me turn it over to Mark for more details on our first quarter financial results.
spk06: Thanks, Dave. Let's start on page five with our financial highlights. Sales for the first quarter totaled $179 million, while operating income was $11 million, and net income attributable to Rainier was $8 million, or six cents per share. On a pro forma basis, net income was $1.1 million, or one cent per share. Pro forma items in the first quarter included a $9 million net recovery associated with a legal settlement, as well as a $2.3 million timber write-off resulting from Cyclone Gabrielle. Adjusted EBITDA was $55 million in the first quarter, down from $98 million in the prior year period. On the bottom of page five, we provide an overview of our capital resources and liquidity. Our cash available for distribution, or CAD for the quarter, was $30 million versus $65 million in the prior year period. The decrease was driven by lower adjusted EBITDA and higher capital expenditures, partially offset by lower cash taxes and interest paid. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on page seven of the financial supplement. We closed the first quarter with $99 million of cash and $1.5 billion of debt. At the end of the first quarter, our weighted average cost of debt was approximately 3.1%, and the weighted average maturity on our debt portfolio was approximately six years, with no significant debt maturities until 2026. Our net debt of approximately $1.4 billion represented 22% of our enterprise value based on our closing stock price at the end of the quarter. I'll now turn the call over to Doug to provide a more detailed review of our timber results.
spk05: Thanks, Mark. Let's start on page 8 with our southern timber segment. Adjusted EBITDA in the first quarter of $43 million was 12% below the prior year quarter, driven by lower net stumpage pricing and higher costs, partially offset by higher non-timber income. Total harvest volume was relatively flat versus the prior year quarter, as an increase in pine saltimer volume offset reduced pine pulpwood and hardwood volumes. Average saw log stumpage pricing was $32 per ton, an 11% decrease compared to the prior year period. The moderation in pricing reflected reduced market tension across our operating areas due to drier weather conditions, softer demand from sawmills, and less competition from pulp mills for chip and saw volume. Meanwhile, pulpwood net stumpage pricing fell 28% versus the prior year quarter to roughly $17 per ton, as weaker in-market demand, drier weather conditions, and extended maintenance outages at pulp mills all contributed to softer market conditions. Overall, weighted average stumpage prices in the first quarter fell 14% versus the prior year quarter to roughly $24 per ton. As we had anticipated entering the year, both salt timber and pulpwood pricing have retreated from the exceptionally strong levels we saw a year ago, given the slowdown in residential construction activity and weaker in-market demand for pulp products. While we expect that macroeconomic-related headwinds will persist over the near term and constrain log pricing to some degree, we continue to believe that the relative strength and diversity of our U.S. South footprint is a key strategic advantage for us. Moving to our Pacific Northwest timber segment on page nine, adjusted EBITDA of $7 million was $14 million lower in the prior year quarter. The year-over-year decrease was primarily driven by lower net stumpage realizations, lower harvest volumes, and higher costs. Volume decreased 24 percent in the first quarter as compared to prior year period, as some planned harvests were deferred in response to soft market conditions. At $93 per ton, average delivered domestic saw log pricing in the first quarter was down 12 percent in the prior year period, primarily due to weaker demand from domestic lumber mills, as well as reduced tension from the export market. Meanwhile, at $48 per ton, pulpwood pricing increased 28% over the prior year first quarter, but did moderate from the exceptionally high levels achieved in the second half of 2022. Overall, sawmills in the Pacific Northwest had an ample supply of logs to start the year, which negatively impacted market conditions. However, as we progressed into the spring, we started to see some indications that log inventories are declining. As we look ahead to the remainder of the year, we expect declining mill inventories, coupled with improving in-market demand, to translate into positive momentum in solid prices. Turning to pulpwood, we expect pricing realizations will continue to moderate as the supply constraints that helped drive exceptional pricing in the second half of 2022 normalize over the near term. Moving to New Zealand. Page 10 shows results and key operating metrics for our New Zealand timber segment. Adjusted EBITDA in the first quarter of $6 million was $4 million below the prior year quarter. The decrease in adjusted EBITDA compared to the prior year period was driven by fewer carbon credit sales, unfavorable foreign exchange impacts, higher costs, and lower harvest volumes due to lost production days as a result of cyclone Gabrielle. Average delivered export salt summer prices of $113 per ton declined 11% compared to the prior year quarter. However, stumpage realizations on export volume were relatively flat as shipping costs fell to more normalized levels. Encouragingly, the Chinese economy appears to be showing some signs of recovery from the relaxation of COVID-19 containment measures in late 2022 and the implementation of government stimulus measures designed to boost confidence in the real estate market. While port offtake in China remains below normal for the post-Lunar New Year period, Port inventories have trended lower as consumption has outpaced the inflow of logs, giving us optimism that the export market will gradually improve as the year progresses. Shifting to the New Zealand domestic market, first quarter average delivered saw log prices fell 6% from the prior year period to $72 per ton, largely reflecting the change in the New Zealand dollar-U.S. dollar exchange rate. Excluding foreign exchange impacts, domestic software prices were relatively flat from the prior year period. Domestic pulpwood prices in New Zealand were likewise impacted by foreign exchange rates, declining 5 percent on a U.S. dollar basis compared to the prior year quarter, but up 1 percent when excluding foreign exchange impacts. Nondemar income in the New Zealand segment declined during the first quarter relative to the prior year period, as we deferred the sale of carbon credits amid pricing volatility caused by regulatory uncertainty. Going forward, we plan to remain opportunistic in our sale of carbon credits, depending on carbon credit market conditions and our pricing outlook. Lastly, in our trading segment, we posted a slight operating profit in the first quarter. As a reminder, our trading activities typically generate low margins and are primarily designed to provide additional economies of scale to our fee timber export business. I'll now turn it back over to Mark to cover our real estate results.
spk06: Thanks, Doug. As detailed on page 11, the first quarter contribution from our real estate segment was relatively light. consistent with our expectations entering the year. Real estate sales totaled $16 million on roughly 2,100 acres sold at an average price of $6,200 per acre. Real estate segment adjusted EBITDA in the first quarter was $7 million. Drilling down, sales in the improved development category consisted of two transactions in our Heartwood development project south of Savannah, Georgia. During the quarter, we closed on a 27-acre multifamily site to a regional developer for $4.5 million, or $169,000 per acre, as well as six residential lots to a national home builder for $300,000, reflecting an average base price of $50,000 per lot. In addition to these closings, we're also very excited about two sites that broke ground in Hartwood during the quarter. The first is the initial phase of the St. Joseph's Candler Health Care Campus, which will provide the community with convenient access to primary care, urgent care, specialty medical services, and other The second is the Hyundai Mobus Manufacturing Plant at Belfast Commerce Park, which will supply power systems and control units for electric vehicles. Combined with the Hyundai Meta plant that's currently under construction within a 30-minute drive from Heartwood, these facilities are expected to create an estimated 9,500 jobs in the area. We believe that the two Hyundai plants, as well as the new healthcare campus, will drive further demand within the Heartwood development project going forward. Overall, we continue to believe that both our wild light and heartwood development projects are well positioned and will benefit from favorable migration and demographic trends, relatively affordable price points, and a diverse mix of residential, commercial, and industrial end uses that each help catalyze demand for one another. Turning to the rural category, first quarter sales totaled $6 million, consisting of approximately 1,500 acres at an average price of roughly $4,200 per acre. Key transactions included the sale of 439 acres in Allen Parish, Louisiana, for $1.6 million, or $3,750 per acre, and the sale of 360 acres in Marion County, Florida, for $1.5 million, or $4,300 per acre. Overall, we're encouraged by the fact that demand for rural land has held up well, particularly from buyers not reliant on mortgage financing. Lastly, during the first quarter, we also closed on the sale of just over 500 acres of non-strategically holdings in Hardin County, Texas for $1.6 million, or roughly $3,100 per acre. Moving on to our outlook for the balance of 2023. Based on our first quarter results and our expectations for the balance of the year, we now anticipate full year adjusted EBITDA toward the lower end of our prior guidance range of $280 to $320 million. Similarly, we anticipate pro forma EPS towards the lower end of our prior guidance range of $0.36 to $0.50. With respect to our individual segments, in our southern timber segment, we are on track to achieve our full-year volume guidance but anticipate lower quarterly harvest volumes for the remainder of the year following a relatively strong first quarter. Over the near term, we expect weighted average net stumpage realizations will remain below first quarter levels as demand, particularly for pulpwood, has been negatively impacted by the macroeconomic environment. we continue to anticipate higher non-timber income for full year 2023 as compared to full year 2022. In our Pacific Northwest timber segment, we expect harvest volumes toward the lower end of our prior guidance as we have deferred some planned harvests in response to unfavorable market conditions. Following the pullback in pricing to start the year, we anticipate the weighted average delivered log prices will improve modest first quarter levels over the balance of 2023 as end market demand and mill inventories normalize. In our New Zealand timber segment, we expect harvest volumes toward the lower end of our prior guidance given the lost production days resulting from Cyclone Gabrielle. Compared to the first quarter, we anticipate the weighted average delivered log prices will remain relatively flat over the balance of the year. We further anticipate a higher contribution from carbon credit sales over the balance of the year following no activity in the first quarter. In our real estate segment, we remain encouraged by the interest in our development projects and rural properties. Overall, there continues to be strong demand for HBU properties and Timberland assets despite the higher interest rate environment. Consistent with our prior guidance, we expect significantly higher transaction volume and operating results in the second half of the year from this segment. I'll now turn the call back to Dave for closing comments.
spk02: Thanks, Mark. While the current macroeconomic backdrop and near-term outlook are challenging, we remain optimistic about the long-term prospects for our business and and have been pleased with the progress made over the past few years in both growing and improving the quality of our portfolio. We believe that favorable long-term housing fundamentals coupled with burgeoning business opportunities around nature-based solutions should support long-term growth in Timberland cash flows and corresponding valuations over time. As we discussed in our recent annual shareholder letter, Timber as an asset class is enjoying somewhat of a renaissance in terms of its investment appeal, given the role forests can play to address the impacts of climate change. In addition to sequestering carbon, a variety of alternative uses for land and wood fiber are evolving to support the transition to a low-carbon economy. We are advancing several initiatives to better understand how these opportunities can add value to our timberland portfolio over time. While we are excited about these new opportunities, our team remains extremely focused on navigating the near-term headwinds associated with a challenging macroeconomic environment. The operational flexibility afforded by our pure play timber reed model, coupled with the diversity and relative strength of the markets we operate in, remain a key competitive advantage for us. On this note, the integration of the 137,800 acres of timberland we acquired back in December has gone very well and has afforded us greater flexibility to navigate the rapidly evolving market conditions that we've seen so far this year. That said, it's important to reiterate that we don't believe in growth for growth's sake, and pursuant to our active portfolio management strategy, we also continuously evaluate opportunities to recycle less productive capital towards uses with a better risk return profile. In sum, I believe that our team, our culture, our timberland and real estate assets, and our strategies are well aligned to achieve future success. I'm very proud of how our team is working together to adapt quickly to changing market conditions while also advancing important initiatives that will enable us to continue to build long-term value for our shareholders. This concludes our prepared remarks and I'll now turn the call back over to the operator for questions.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 2 on your telephone keypad. Once again, to ask a question, please press star 1. Our first question comes from Anthony Pettenary, Winston City. Your line is open.
spk07: Good morning. This is Greg Andropoulos on for Anthony. Thanks for taking my question. Quickly, looking across your broader Southern portfolio, are there any regional trends in pricing, maybe log inventories in mills, mills approaches to holding inventories, or in market demand that you identify in your various operating markets? And maybe if you could just touch on the Southern acquisitions versus the legacy right in your portfolio.
spk05: Yeah, good morning. This is Doug. I'll start with that. So as we know in our prepared remarks, the recent pressure on log pricing in the U.S. South has been most pronounced in the markets that registered the largest pricing gains last year. And it's really reflective of that price elasticity that we see in our more tensioned markets. A few additional points I'd like to make on that is that absolutely so much price realizations in most of our markets remain quite favorable compared to the U.S. South overall, reflecting that favorable growth drain dynamics that exist in the areas where portfolio is concentrated and where we've grown recently on the acquisitions you mentioned. That said, the year-over-year comps are down given the very tough year-ago Q1 comps we had. Heading into 2022, most of our wood baskets had very strong in-market demand for both salt timber and pulpwood products. We also had a wet winter at the end of 2021 that constrained the amount of supply available. So overall, a significant amount of tension was created in markets that already had favorable supply-demand dynamics, and that's what drove that particularly strong pricing that we achieved a year ago. This is in contrast to some of the other operating areas in the South that didn't see the same momentum last year, given those markets didn't have the underlying growth-drain dynamics that allowed for that increased tension to have such an impact on the pricing. So while there's quite a bit of volatility in our markets, we still believe the more tension baskets are better positioned for the long term, given the absolute pricing levels and superior EBITDA per ton generation that we have. And to your question around kind of where we're seeing things across the region, rainfall patterns were definitely different across the south. And so that Mississippi River Delta area had particularly wet kind of winter and spring And then over here along the Atlantic Coast, it's been much drier, so we've been below normal rainfall. So we have seen some difference in markets, as I mentioned about the wet weather there, as well as along the Atlantic Coast. Mills here have a higher percentage of exports, and so we've seen some weakness as there's been less demand for exports both to Europe and China. So there's been a little bit difference between kind of the East Coast versus our kind of Gulf state mills and regions.
spk07: Interesting. That's very helpful. Thank you. And just a quick follow-up. Last year, you provided us an update on global log flows after the Russian invasion of Ukraine and the weaker European economy. So my question, I guess, is given your global footprint, can you discuss the current global log supply-demand environment and any notable export trends you identify out of Russia and Europe? And on your end, what's the opportunity to flex New Zealand and Pacific Northwest volumes to other destinations outside of China?
spk05: Yeah, I'll take a stab at that also. So, you know, things... It's kind of sorted out the way we thought they would with respect to the Russian-Ukraine volumes. One of the biggest things has probably been the ramp-up in China is still working its way through. So as we mentioned in our kind of comments before in the remarks, we're encouraged by the fact that port inventories in China are trending lower over the past few months as consumption has outpaced the inflow of logs. The kind of latest reports we have from April show that softwood port inventories are at 4.3 million cubic meters. And that's down about 8% over March. So we are seeing some drawdown. And so that's the good news for us. And what we have seen, probably less than the logs in China, is the fact that logs from Europe through that Ukraine war were moving to China. And that seems to have slowed down now. So that salvage logs, those kind of contracts that are in place have slowed down. So we're seeing a reduction in European spruce starting to move into China. We haven't seen an increase in Russian logs to China. What we've seen more is lumber being made and shifted into China basically from Russia area. And probably more what we've seen is just the weakness in Europe overall on the macro level. And so we've seen imports of lumber from Europe heading into the United States that I think is something that's impacted and kept the damper here. On the log side, we're seeing demand in China now starting to pick up. So we've seen past the Lunar Holiday In April, estimated daily takeaway in China was around 75,000 cubic meters, which is up 55% compared to April 2022 during that height of the COVID lockdowns. But it's more typically in the 80,000 to 90,000 cubic meter range. So, you know, good progress from where we were last year, but still some room to go there. However, there's a few factors giving us some optimism that prices will improve once log imports normalize and demand increases. China's National Bureau of Statistics reported that the year-over-year GDP expansion of 4.5% in the first quarter of 2023 which exceeded both economist estimates and the prior growth for the quarter before. And then residential floor space sold in the first quarter of Q1 basically grew also, so we're seeing growth in that. This is typically viewed as a leading indicator of the residential construction market and may signal a turning point in demand for construction materials that our export logs are used for. How long it takes place to play out is yet to be determined, but relative to what we saw last year, as I mentioned, quite an increase in log demand from the ports as we go after the COVID restrictions. So we're feeling much better about the current environment as we move forward.
spk07: Thank you very much for the call.
spk05: I appreciate it.
spk07: I'm sorry, Tom.
spk00: Thank you. Our next question comes from Keaton Montora with BMO Capital Markets. Your line is open.
spk08: Thank you, and good morning. I'm curious if you can provide some color on kind of what you're seeing um around carbon credits both in new zealand and and also in the us which is kind of increasingly becoming a very topical um you know area um and what is the work you guys have been doing around that sure um kate this is dave um yeah keep in mind uh new zealand has a regulated carbon market uh and so that's something that we've been um we've been participating in um
spk02: For a number of years, carbon prices were very strong last year, and so we've always sort of taken an opportunistic approach to selling carbon. We sold a fair number of carbon credits last year. We were off the market earlier this year. The market was softer due to some uncertainty from a regulatory standpoint within New Zealand and the perception of that market, and so we're waiting for things to firm. Having said that, that market is a lot further developed than in the U.S. I think the U.S. is really looking at a voluntary carbon market. And as many have pointed out, there's lots of concern around potential for greenwashing. And so a number of participants, ourselves included, have taken a fairly cautious approach to make sure that any carbon projects that we advance kind of pass the smell test for things like additionality. And so we're continuing to progress those projects, but we do not have one that's up and running as of yet for those reasons. Again, similar to many other participants. We are seeing a lot of interest kind of related to that in carbon capture and storage. That's an area that has progressed faster Then we thought we have put in place our first lease on a carbon capture and storage project. We have a number of others that we're working on right now. So that's one that we're encouraged by. Keep in mind, it'll take a number of years for revenues to start flowing as the permitting process is fairly complex. But we're very encouraged by the general market interest in that.
spk08: Got it. That's helpful. Dave, can you provide any sort of any quantitative insight into kind of, you know, what the prices are both in New Zealand and the U.S. around kind of carbon credits and how you guys kind of view that?
spk02: Yeah, you know, last year the carbon credits in New Zealand were roughly 50 U.S. dollars per New Zealand unit. They're down right now from where they were last year. That's a substantially higher price than the U.S. market, reflecting the difference between a regulated and a voluntary market. We've seen voluntary carbon prices in the U.S. really all over the map, from low single digits to prices that are over $10 per metric ton, but I'd say that until carbon prices get to a meaningfully higher level, you're likely not to see a lot of change in the way that industrial timberlands are managed vis-a-vis that tradeoff between log production and carbon sequestration.
spk08: Got it. That's very helpful. And then last question from my side. It just sounds like there is incrementally more pressure on the southern pulp food market. Can you talk about how much of this is, you know, kind of specific issues related to Q1 or is it kind of more of a cyclical thing where you are actually seeing kind of, you know, pressure on the demand side which could continue through kind of 2023 at least?
spk05: Yeah, this is Doug. I'll answer that one. You know, a lot of the pressure we saw on the pulpwood market was a result of Q4 of last year, and so we really saw operating rates for a lot of the mills reduce in Q4 as they saw demand decreasing for them. And as that's weighing through, you know, we're starting to see things pick up a little bit, but through Q1 we saw that reduce capacity. A lot of the mills this time of year, they take their spring shutdown, and so we saw those extend a little bit. But what we're hearing now kind of through supply chains is that kind of a lot of their end customers have started that destocking process and it's starting to ripple back. So as some of the mills have come back from their spring maintenances, they're starting to increase their production rates. So I think what we've seen is most of that weakness has already happened through Q4 into Q1. And really as we look at our kind of average weighted net stumpage going forward, A lot of what we're seeing is we have an increased amount of thinning that happens in Q2, Q3, and that's just a seasonal thing that typically happens. And those thinning volumes increase production of pulpwood. And then some geographic mixes, we also shift some of that harvest around. So on a kind of product per pricing basis, we've seen things stabilize.
spk08: That's very helpful, Doug. I'll turn it over. Good luck.
spk05: Thank you.
spk00: Thank you. Our next question comes from Buckhorn with Raymond James. Your line is open.
spk04: Hey, thanks. Good morning, guys. I kind of wanted to follow up a little bit on that, the pulpwood discussion in more detail. I mean, can we isolate exactly kind of what the demand drivers and the end markets were that has created some of that softness, why the mills are taking or slowing down their operating rates for pulp production? And I guess the follow-up to that is, do we see any near-term catalysts on the horizon that could increase pulpwood pricing, whether that be, uh, you know, uh, pellets, you know, uh, or, or some sort of, you know, whether it's sustainable aviation fuel uses, anything else on the pulpwood side that could, could increase that demand usage?
spk05: Yeah, I, I, like I was mentioning before, I mean, what we've heard is that, uh, you know, coming through COVID, a lot of the kind of the end users, the boxes and different liner board materials had stocked up and I think, you know, things moved down and as people, uh, kind of changed their patterns after COVID, there was a need for destocking at that end level, basically, in the conversion side. And so I think that's really what impacted from my understanding a lot of the demand, particularly in Europe, but also in China. And what we're hearing is, and obviously this is through the mills, so they would know better than myself, but is that we really start to see some of that destocking both in China and Europe. So that's starting to play out. And I think that's why there's some improved production moving forward. When it comes to the pellets, you know, from From what I've heard there is demand still strong in Europe, and so we see that. Some of the felt mills we provide to have had basically some maintenance issues and things like that that run at full capacity, and we're seeing them back up and running at full capacity, so I see some upside there. And then the last point you brought out, you know, with respect to supplying fiber for bioenergy and sustainable aviation fuel manufacturing facilities, that's an emerging opportunity that we're exploring right now with quite a few people, and I think really can provide solutions to folks in that area, and we're pretty excited about that. But, again, it's going to take – it's like the carbon capture storage. It's going to take a while for those plants to get built. The first one I'm aware of in our kind of operating area is in Texas, and they're starting to strike ground on that now, and so we're excited to see that happen. So we do believe that's going to be a growing opportunity for us in the future. Awesome.
spk04: Okay, appreciate the color there. And secondly, you know, with the – unfortunately the stock price, uh, being where it is these days and where your NAV I think is, is sustainably at, um, and the disconnect there, is there a, um, interest or do you have, uh, any authorizations for potentially using stock repurchases or, or selling acreage to fund, uh, repurchases to close the disconnect here?
spk02: Yeah, Buck, I'd say, um, first of all, we, we, um, keeping to our nimble approach to capital allocation, we always have an open, um, uh, buyback authorization as well as an open ATM authorization. So we have both of those sort of levers, um, at our disposal. And, and we've always felt that, uh, that, um, that, that land and timber is, is, uh, is an asset that can be sold readily if, if, uh, if such an opportunity were, uh, We're present, and so I think we continue to believe we have lots of flexibility on that front. Got it. All right, thanks. Good luck, guys.
spk00: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Paul Quinn with RBC Capital Market. Your line is open.
spk09: Yeah, thanks very much. Good morning, guys. Just whether if you could give us some overall comments of North American Timberland markets themselves. It sounds like, according to third-party sources, that there's sort of a dirt to transactions out there. Do you see that improving over the year?
spk02: Yeah, there have been a few transactions to date, Paul. The ones that are out there that have closed – have generally been of lower quality, and you see that reflected in the pricing. There's roughly 10 transactions right now out in the market for roughly a couple hundred thousand acres in total, the vast majority of those being TMOs that are selling them. We keep a pretty active look on the market, but it was a relatively quiet quarter for us. We closed on four small bolt-on transactions, two in Florida, one in Georgia, and one in Washington during the first quarter for about 2,500 acres. So not a very, you know, pretty small bites for us. But we're continuing to monitor those markets. And, you know, generally this time of year we start to see offerings for the second half starting to flow into the markets.
spk09: Okay, thanks. And then I appreciate the color on Cyclone Gabriel. How would you characterize the rest of the New Zealand forest products industry and the effect that Cyclone had on the rest of it? I.e., you know, is your competitive position improved or hurt through that Cyclone?
spk05: Yeah, this is Doug. I think in the longer term, it's – I guess you'd say somewhat improved in that some of our peers had significantly more damage than we did in mature forests. So that will have a knock-on effect as time goes on, particularly in the central North Island. So there were definitely some areas where people unfortunately suffered way more damage than we did, and that would be reduced supply of saw logs, and particularly in prune volume over the next couple of years. But right now, first, we have this short-term influx of salvage volume that's going to hit the market. And so we're working through that as we go forward now. But we've seen crews shift away from, you know, mature, you know, salvage timber that wasn't damaged. So we think that'll kind of supplant that. So, you know, I think you look out a year or two from now, then it's probably a competitive advantage in that respect. There's just less volume out there of mature wood to compete.
spk02: Yeah, Paul, I'd add to that. You know, our footprint in New Zealand is fairly dispersed across the country. And so, you know, as a result, we had, you know, roughly 2,600 acres that were affected. So it was a pretty small area of impact. And roughly, you know, two-thirds of the write-down that we took was around pre-merchantable timber. And so, you know, to Doug's comment, We're seeing some market weakness right now due to a lot of mature timber that was blown down. And so that has kind of clogged the market from a supply standpoint. But, you know, we feel fortunate in that we weren't very heavily impacted. And, again, it gets back to one of the mitigations you have in any kind of hurricane impact is, you know, the less blocked up you are, you know, that is a risk mitigator. And that certainly played out that way in New Zealand.
spk09: Okay, thanks for that. And then maybe just to follow in, that extra salvage volume that you're going to see in the short term, is that going to clear in a quarter? Is that going to clear this year, or is it dragging in 24?
spk05: It's hard to tell how long it's going to take to salvage, but it's definitely going to take more than a quarter. But I would think this is going to be a 2023 event and shouldn't really impact things. The quality of the wood will start to deteriorate. They're moving into their winter, which will help some, but also it will still be a problem. So I think this is typically – kind of hurricane salvage volume type thing, it's less than a year, so I expect it'll play out. They're working on it as quick as possible, so I think this is a 2023, a couple quarters, and then it should be cleared through, and then we see the impact of less volume on the market.
spk09: Okay, understood. And then just lastly on carbon, you know, you mentioned New Zealand's got a regulated market, North America basically voluntary. How do we get from from a volunteer market to a regulated market? And what is Rainier doing to accelerate that transition?
spk02: Yeah, it's not clear to us, Paul, that the U.S. is going to see a regulated market anytime soon. That's, you know, you think about some of the political elements to this, and it's why you're seeing a lot of market participants really pursuing various various efforts along voluntary front. And you see a number of programs that are designed around improved forest management, lengthening a rotation, that sort of thing, or deferring a lot of harvest for periods of time. We're also seeing opportunities around afforestation, where you're converting land that has not been in timber production, which is a a cleaner way of looking at carbon. One of the things that we are looking at potentially doing in light of the fact that we don't see a prospect for a regulated market is looking for opportunities where we can have direct discussions with counterparties who value the need for some of that carbon sequestration. But that's going to take some time to develop.
spk09: All right. That's all I had. Best of luck, guys. Thanks.
spk00: We have no further questions. I will turn the conference back to Colin. Thank you.
spk03: Thank you. This is Colin Mings. I'd like to thank everybody for joining us. Please contact us with any follow-up questions.
spk00: Thank you for your participation. Participants, you may disconnect at this time.

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