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spk03: first quarter 2024 conference 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.
spk08: Thank you and good morning. Welcome to Reignier's Investor Teleconference, covering first quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at Reignier.com. I would like to remind you that in these presentations, we include forward-looking statements made pursuant to the safe hardware provisions of federal securities laws. Our earnings release and forms 10-K and 10-Q, followed by the SEC, list 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 2 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 Mark McHugh, our President and CEO. Mark? Thanks,
spk10: Colin. Good morning, everyone. First, I'll make some high-level comments before turning it over to April Teis, Senior Vice 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, April will discuss our real estate results and our outlook for the balance of the year. As this is my first earnings call since officially stepping into the CEO role, I want to reiterate how honored I feel that our board has entrusted me to lead Reignier at this exciting time for our company. I'm fortunate to be partnering with an experienced dedicated team of senior leaders, all of whom are incredibly energized by the refreshed vision that we've laid out for Reignier and eager to execute on our future growth opportunities. On that note, I'd like to also formally welcome April to our earnings call this quarter in her new role as CFO. April's held multiple positions of increasing responsibility within the Finance and Accounting Department since she joined Reignier in 2010, most recently serving as our Chief Accounting Officer for the last three years before she assumed the CFO role last month. April has been instrumental in building out our Finance and Accounting Department as well as implementing a transparent financial reporting framework for the company. I'm confident that her transition into the CFO role will continue to be seamless. Now we'll switch gears and discuss our first quarter results, which were modestly improved relative to the prior year quarter and in line with our expectations at the start of the year. Specifically, we generated adjusted EBITDA of $56 million and pro forma net income of $7 million or five cents per share. The 3% increase in adjusted EBITDA versus the prior year period was driven by stronger results from our southern timber and New Zealand timber segments, partially offset by lower results in our Pacific Northwest timber and real estate segments. Drilling down further on our operating segment results, our southern timber segment generated first quarter adjusted EBITDA of $45 million, up $2 million from the prior year period as a 6% increase in harvest volumes, more than offset a 4% decline in net stumpage realizations. In our Pacific Northwest timber segment, first quarter adjusted EBITDA of $5 million was down $2 million from the prior year quarter, driven by a 17% reduction in harvest volumes due to the Oregon sale completed late last year as well as an 11% decline in weighted average log prices. Turning to our New Zealand timber segment, first quarter adjusted EBITDA of $11 million increased $5 million versus the prior year quarter. The increase in adjusted EBITDA was driven by higher carbon credit sales and favorable foreign exchange impacts, partially offset by a 4% decrease in export saw timber prices. In our real estate segment, we generated first quarter adjusted EBITDA of $5 million, down $2 million from the prior year period. Consistent with our prior guidance, real estate closings were relatively light to start the year. However, our full year real estate pipeline remains strong and we expect a significant increase in closing activity during the second quarter. As April will discuss in greater detail later in the call, we are on track to deliver on our full year 2024 adjusted EBITDA guidance of $290 to $325 million. As we indicated at the beginning of the year, our full year 2024 financial guidance excludes the potential impact of any additional asset sales as part of our $1 billion disposition target that we announced in November. As it relates to the disposition target, we are continuing to make progress and are actively evaluating several large scale transactions. Specifically, we are currently marketing approximately 115,000 acres in Washington State and we have further identified approximately 100,000 acres in the US South that may be suitable for disposition. In addition to these opportunities in the US, we are evaluating strategic alternatives for our New Zealand joint venture interest and have engaged a financial advisor to assist us with this process. We look forward to sharing additional progress on our disposition program in the coming quarters as we continue to advance our efforts to reduce leverage in a higher interest rate environment and capitalize on the continued disconnect between public and private values for Timberland asset. With that, let me turn it over to April for more details on our first quarter financial results.
spk01: Thanks, Mark. Before covering the financial highlights from the quarter, I would first like to express that I'm very honored to be leading such a talented accounting and finance organization and look forward to building an already strong foundation. I'm intently focused on maintaining Rainier's position as an industry leader in transparency as well as further enhancing our finance platforms to support data-driven decisions across our organization. Our balance sheet and liquidity position is strong and as Mark highlighted earlier, we are actively taking steps to achieve the new leverage targets we communicated in November. Moving on to the financial highlights on page five of the supplement, sales for the first quarter totaled $168 million while operating income was $16 million and net income attributable to Rainier was $1 million or one cent per share. On a pro forma basis, net income was $7 million or five cents per share. Pro forma items in the first quarter included a $4.5 million pension settlement charge and $1.3 million of net costs associated with the legal settlement. Adjusted EBITDA was $56 million in the first quarter up slightly from $55 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 first quarter was $37 million versus $30 million in the prior year period. The increase was driven primarily by higher adjusted EBITDA and cash interest received during the quarter. A reconciliation of CAD to cash provided by operating activities and other gap measures is provided on page seven of the financial supplement. We closed the first quarter with $160 million of cash and roughly $1.4 billion of debt implying net debt to trailing 12-month adjusted EBITDA of approximately 4.1 times. At quarter end, our weighted average cost of debt was approximately .8% and the weighted average maturity on our debt portfolio was approximately five years with no significant debt maturities until 2026. We expect to use our cash on hand to pay $150 million of debt that becomes unhedged in August, which will keep our debt 100% fixed rate. Our net debt to enterprise value based on our closing stock price at the end of the quarter was 19%. I'll turn the call over to Doug to provide a more detailed review of our timber results.
spk02: Thanks April. Let's start on page eight with our harvest. Our first quarter of $45 million was $2 million or 5% above the prior quarter driven by higher volumes and lower costs, partially offset by lower pricing and a decline in non-diverent income. Total harvest volumes rose 6% versus the prior quarter, primarily driven by healthy demand from customers due to wet weather related constraints on competing log supply. Our continued investment in road infrastructure and dry ground optionality proved to once again be competitive advantages amid wet weather conditions that limited the ability of other timberland owners to bring volume to the market. Meanwhile, non-diverent income declined 3% from the prior year period as continued growth in our land-based solutions revenue was more than offset by lower pipeline easement revenue. Average saw log stumpage pricing was $31 per ton, a 3% decrease compared to the prior year period. Meanwhile, pulpwood net stumpage pricing fell 2% versus the prior quarter to roughly $17 per ton. The moderation and pricing for both saw logs and pulpwood was largely driven by a shift in geographic mix toward lower priced operating areas versus the prior year period. Overall, weighted average stumpage prices in the first quarter fell 4% versus the prior quarter to roughly $23 per ton. Improved in-market demand coupled with wet weather conditions translated into fairly stable pulpwood pricing to start the year across most of our markets in the U.S. South. Encouragingly, we believe the inventory de-stocking cycle that weighed on container board demand in 2022 and 2023 has largely run its course. Mill offering rates are generally improving, giving us reason for optimism as we move through the next quarter. Market conditions were generally stable throughout the first quarter despite some softness in sudden-yellow pine lumber prices as the El Nino climate pattern resulted in wet weather conditions that limited the supply of competing logs. However, saw log pricing has been under some pressure in recent weeks as demand from lumber mills has softened amid the continued pullback in sudden-yellow pine lumber prices and drier weather conditions. Looking ahead, we believe the pine lumber currently trades at compared to other species will likely narrow, which should translate to improved demand and pricing for saw timber. Moving to our Pacific Northwest timber segment on page 9, adjusted EBITDA of $5 million was $2 million below the prior year quarter. The -over-year decrease was driven by lower harvest volumes and lower net stumpage realizations. Volumes decreased 17% in the first quarter as compared to the prior year period, reflecting the largest decision we completed in Oregon during late 2023. At $84 per ton, average delivered domestic saw log pricing in the first quarter fell 9% from the prior year period due to a combination of weaker demand from domestic lumber mills, reduced export market tension, and an unfavorable species mix as a lower proportion of Douglas firr saw timber was harvested in the current year period. Meanwhile, at $29 per ton, pulpwood pricing appears to stabilize, but was down 39% versus a prior year comp that benefited from exceptionally favorable supply-demand dynamics for pulpwood in the region. The Pacific Northwest log market has faced headwinds in the form of both soft domestic lumber markets and limited demand for log exports to start the year. However, we're optimistic that demand has bottomed and is poised to improve over the course of 2024 as we have seen milled inventories normalize in recent weeks. 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 $11 million was $5 million above the prior year quarter. The increase in adjusted EBITDA compared to the prior year period was primarily driven by higher carbon credit sales and favorable foreign exchange impacts, partially offset by lower net stumpage realizations. Average delivered export saw timber prices of $109 per ton declined 4% compared to the prior year quarter as demand continues to be constrained by ongoing challenges in China's property sector. While improving seasonally following the Lunar New Year, offtake from Chinese ports has remained relatively subdued at approximately 70,000 cubic meters per day. However, softwood log inventories at Chinese ports are currently 9% below year-go levels at roughly 3.9 million cubic meters. In response to the ongoing weakness in construction activity, we have seen many exporters reduce log shipments into China. In turn, we anticipate log inventories are poised to decline over the course of the second quarter, which we expect will lead to more favorable pricing conditions in the second half of the year. Shifting to the New Zealand domestic market, first quarter average delivered solid prices about 5% from the prior year period or 3% when excluding foreign exchange impacts. The decline in pricing reflects continued challenges facing the local construction market amid a higher interest rate environment as well as reduced competition from the export market. First quarter non-timber income in New Zealand of $4 million increased $3 million relative to the prior year period. The -over-year increase reflects higher carbon credit sales in the current year period as we temporarily suspended our sales program in early 2023 amid significant market volatility. We anticipate that we will remain active in the New Zealand carbon market over the course of 2024 as pricing remains healthy from a historical standpoint, albeit down in recent weeks as compared to the beginning of the year. Lastly, in our trading segment, we registered a breakeven result 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 April to cover our real estate results.
spk01: Thanks, Doug. As detailed on page 11, the contribution from our real estate segment during the first quarter was relatively light, consistent with our expectations entering the year. Real estate revenue totaled $16 million, including roughly 1,900 acres sold at an average price of $5,800 per acre. Real estate segment adjusted EBITDA in the first quarter with $5 million. Drilling down, sales in the improved development category totaled $2 million and were driven by two transactions in our Heartwood development project south of Savannah, Georgia. The Heartwood sales consisted of a 3.1 acre multi-tenant retail parcel for $1 million or $321,000 per acre, as well as 18 residential lots for $800,000, reflecting an average base price of approximately $46,000 per lot. While the first quarter was relatively light in terms of closing activity, we continue to see favorable momentum at both of our development projects. In February, the St. Joseph's Candler Healthcare System opened the initial phase of its health and wellness campus at Heartwood. This was an important milestone, and as we move forward, we expect that Heartwood's diverse mix of residential, commercial, and industrial end uses will serve to further catalyze demand. In wildlife, home builder interest in the next phase of development has continued to increase. We expect initial sales over the next year within the 15,000 acre area that we received entitlement improvement for in November. Overall, we continue to see a tremendous runway for both our wildlife and Heartwood development projects going forward. Turning to the rural category, first quarter sales totaled $9 million, consisting of approximately 1,500 acres at an average price of roughly $5,800 per acre. Key transactions during the quarter included the sale of 409 acres in Texas for $2.3 million or over $5,500 per acre, as well as the sale of two properties totaling 364 acres in South Carolina for a total of $1.4 million or nearly $3,800 per acre. Overall, demand from prospective buyers on rural lands remains healthy, and we expect a larger contribution from these sales as we move through the balance of the year. While interest in smaller tracts has moderated somewhat amid a current interest rate environment, demand for the larger tracts remains strong. In addition, we have recently seen growing interest among conservation and impact-oriented buyers looking to place capital. Lastly, during the quarter, we also closed on a 430 acre non-strategic timberland sale in Louisiana for roughly $600,000 or $1,400 per acre. Now moving on to the outlook for the balance of the year, we are on track to achieve our prior full-year adjusted EBITDA guidance of $290 to $325 million. As a reminder, our guidance excludes the potential impact of any additional asset sales as part of our previously announced $1 billion disposition target. With respect to our individual segments, in our southern timber segment, we expect to achieve our full-year volume guidance, but following strong harvest activity to the start of the year, we anticipate lower quarterly volumes for the remainder of the year. Further, we anticipate that pine stumpage realizations will decrease modestly over the remainder of the year due to a less favorable geographic mix and a relatively higher proportion of thinning volume. Lastly, we remain encouraged by the momentum in our land-based solutions business, and we continue to expect higher non-timber income for the full year 2024 relative to the full year 2023. In our Pacific Northwest timber segment, we remain on track to achieve our full-year volume guidance as we expect harvest volumes to increase during the second half of the year. We believe that market conditions have stabilized and anticipate that end market demand will improve modestly over the course of the year given the continued favorable dynamics in the single-family construction activity. We further expect weighted average delivered log prices will increase modestly into the second half of the year as log inventories at mills continue to normalize. In our New Zealand timber segment, we are on track to achieve our full-year volume guidance as we anticipate higher quarterly harvest volumes for the remainder of the year. We expect weighted average log prices to decline modestly in the near term before rebounding in the second half of the year as the inventory to demand ratio normalizes. Following the recent pullback in carbon credit pricing, we now anticipate the full-year contribution from carbon credit sales to be comparable with the prior year. In our real estate segment, we remain on track to achieve our prior adjusted EBITDA guidance following a relatively light first quarter as our full-year pipeline of transactions remains strong. Consistent with our prior guidance, we expect a significant uptake in the transaction volume and operating results in the second quarter. I'll now turn the call back to Mark for closing comments.
spk10: Thanks April. As we wrap up today's call, I'd like to recognize the extraordinary efforts of our team during what has been an incredibly busy period of time for our entire organization. Amid challenging end market conditions, our team has worked diligently to make value-optimizing decisions throughout our operations while also advancing several important strategic initiatives. As we move through the remainder of the year, we're optimistic that continued favorable dynamics for single-family housing, higher operating rates for many of our pulpwood customers, and lower log inventories in China will translate to improving fundamentals in our timber segments. On the real estate front, we've been pleased by the continued strong demand for our rural land and development properties despite the higher interest rate environment. We are especially excited to start executing on new opportunities in wildlife, stemming from the entitlements that our team secured last November. We've also continued to make progress in our land-based solutions business. Specifically, we've increased the number of acres we have under lease for carbon capture and storage to 70,000 acres as of today, up from 59,000 acres at the time of our investor day. In addition, we now have 33,000 acres under option for solar development, up from 27,000 acres at the end of 2023. As we've expanded our pipeline of opportunities and land-based solutions, we've continued to focus on working with high-caliber counterparties that we believe will ultimately see a stronger conversion rate to operational facilities. All said, I'm very proud of how we work together to effectively manage through some difficult market conditions while also advancing these important strategic initiatives. In closing, I'd further like to thank our board, as well as our recently retired CEO, Dave Nunes, for guiding us through a smooth leadership transition process over the past two years. Their collective efforts helped ensure that the organization didn't skip a beat amid a very dynamic market environment. Lastly, I also want to take a moment to recognize the significant contributions of our board chair, Dodd Frazier, who will be retiring from our board in May. Dodd has served in the board of Rainier since the 2014 spinoff of the performance fibers business, including as chair for the past four years, as well as audit chair for the prior six years. Throughout this time, he's demonstrated impeccable leadership, dedication, and judgment. On behalf of the board and the entire company, I want to thank Dodd for his invaluable contributions to the governance of Rainier and wish him well in his future endeavors. That concludes our prepared remarks, and I'll now turn the call back to the operator for questions.
spk03: Thank you, sir. At this time, if you do have any questions or comments, you may press star one. You may also press star two to withdraw your questions. One moment, please, for the first question. Keaton Mantora with BMO Capital Markets. You may go ahead.
spk04: Thank you, and good morning. Perhaps to start with, Mark, can you talk a little more about the progress on the land-based solution side? As you look at, you talked about Polar, you talked about CCS. As you think about next two, three, five years, where do you think from your standpoint you see the most opportunity? How should we think about when this starts to have an impact on EBITDA?
spk02: Sure, this is Doug. I'll start off with that. As we laid out at our investor day, we talked about a process here with respect to getting the pipeline built out in our land-based solutions, particularly on the CCS side of things as well as the solar. Then there's that, depending on what it is, a multi-year project to get it permitted and get it into the grid if it's solar and then to get it built. We are building that out as we talked about and very happy we're at on those. I'll talk about kind of progress in each of those in a second. When it comes to delivering on those things, as we mentioned at investor day, there's kind of these incremental steps, which is why we put out kind of interim targets to share with that. We see that building, but there is going to be a slight delay as we get these in the pipeline, which we do recognize option values and lease payments at that point in time. It's really the point in time when these start to produce either power or we sequester carbon where we'll see the real benefit that was hit in. We see that still kind of in that three to five-year time horizon.
spk10: Kato, we did lay out our targets at our investor day back in February, $75 million of adjusted EBITDA by 2030. That interim target that Doug referenced of $30 million by 2027. We've also started to break out our land-based solutions contribution in our southern timber segment detail in our supplement just so investors can start to track our progress against those targets. What
spk02: I would say is that we're seeing really strong interest in both those areas. On the carbon capture storage, that market just continues to grow for us and we're seeing just a lot of interest from other people. We start off in the oil and gas industry. We're really starting more interest broader from utilities, pulp and paper industries. We have our pipeline of projects is really strong and we're advancing multiple large-scale opportunities across the US South that we think will mainly contribute towards our goals in 2024. Mark mentioned that we've increased our actual lease acres up to 70,000 acres in his comments and we're actively in exploration discussions on additional 200,000 acres with several other companies. We feel good about the progress we're making in our carbon capture storage. On the solar side of things, also really happy with the progress we're seeing there. Our pipeline project again is really strong and growing. We now have over 33,000 acres under option for solar development which is up from 27,000 at the end of 2023. We're on track to achieve our year-end objective of having 50,000 acres under options. We're advancing quite a few multiple large-scale solar relationships across the South and we think those will contribute meaningfully over the next few years as we go forward. What we're really excited to see is that some of the ISOs, those independent system operators for the regional transmissions, they've started to implement interconnection queue reforms with the goal of ensuring that projects that are going to basically have a high level of success get brought up in the queue. In the past we talked about we've seen where there's been a lot of projects clogging the queue and some of those had low probability of success and we're seeing reforms that help with that and we believe that our focus on working with high quality counterparties who are in a lot of cases the utility companies themselves that will help speed that process up and move it up the queue. We do believe that that will bring some of these forward and we've seen one of those projects kind of moving forward and we believe will be under construction this year.
spk04: Got it that's very helpful and just on solar that are you looking at mostly to lease land or are you also looking at outright sale and this is just specific to solar?
spk02: Yes, civic solar. We're particularly looking at the leasing opportunity. We believe that's the best option for us from financial standpoint as well as we're finding a lot of our customers also find that favorable knife with that high capital up front so it's worked out to be a good solution for most of our customers.
spk04: Understood and then just switching to you know just China you talked about sort of off take a little bit slower you know curious kind of to see you know in terms of just activity level have you seen sort of things pick up at all is it you know sort of
spk02: on that one also so yeah the economy's come out of the lunar new year is growing relatively strong now that hasn't really spread in the property sector yet but we have seen with that GDP running over five percent we're seeing strength in areas like the infrastructure and manufacturing and exports are recovering also which is really positive for the packaging industry as well as the furniture exports we've seen those increase by you know over 25 percent year over year in the first quarter so we're seeing growth in a lot of areas and these trends tend to favor radiata particularly from New Zealand due to the wood quality there so it's a very versatile product and while we saw relatively strong pricing at the start of the year that was due to low port stocks that came into there and so we're pleased with that but then Chinese New York came along and we saw that kind of build back up so going into the year we were at an inventory to man ratio below 1.5 months which historically yields them strong pricing and we saw that but through the lunar new year it built up to over four million cubic meters at the ports and we're happy to say though that at the end of April it's dropped down below 3.9 million cubic meters and where we're seeing off takes in the the 40 to you know 60 000 cubic meters per day kind of over the first quarter year we're now seeing that off take up from 70 to 80 000 recently in the past couple weeks and so that inventory demand ratio has fallen back below two months which again historically has led to that upward pressure on prices and we're seeing a lot of increase in shipping costs from arrest from the rest of the world you know don't talk about that too much probably most people understand that particularly from Europe and so we think that so that's why our comments we believe that we've kind of seen the build up but that's drawing down and we're seeing increased off take and with less input coming in so we have seen that inventory ratio drop below two so we believe that will lead to some improved pricing and demand going forward particularly for radia pond
spk04: got it no that's very helpful i'll jump back in the queue good luck
spk03: thank you our next caller is Matthew McKellar with RBC capital markets you may go ahead there hi
spk05: good morning thanks for taking my questions uh first this week seven yellow pine lumber pricing represent a potential risk throughout look for harvest volumes in the us south this year
spk02: this is doug again i'll i'll cover that yeah you know it's always hard to predict exactly how things are going to work out with respect to that but what we've seen is that operating rates for public customers have really picked up over the over the year too so we have that ability to flex between as we did last year we we flex more towards um towards lumber and saw logs and this year we're seeing a lot of a lot of demand basically on the pulp side as well as still continue demand on our log side so we're pleased to see that the operating rates for pulp customers you know have moved from the mid 70s up into low 90s now so we're really seeing an increased demand there it seems like most that the closures and economic downtime that followed that post-covid inventory stocking cycle are over and that we've seen these increases in pricing so we're still seeing strong demand on the pulp side and while we have seen some weakness in the lumber side overall we're still the mills are still running you know still running and we see that demand so it's it's it's hard to say exactly how that would look we have the ability to flex between those two so we still believe we're comfortable as we put in our outlook on our removals
spk10: and matthew i think we also believe that that you know price divergence that we've seen is likely going to tight i mean we just haven't it's pretty unprecedented that disconnect that we're seeing right now between syp and spf lumber prices and so our expectations that will start to converge as the the year progresses
spk02: yeah absolutely you know one one things we've seen is that um particularly in the repair remodel there's been some weakness for this higher grade saw logs they're destined usually for treating facilities and so that's where we've seen some of the weakness to date but overall we still seem you know reasonable demand
spk05: great that's helpful thanks very much next i wonder if you could just provide a bit more color on how you're thinking about your valuation of strategic options for the new zealand business at this point i think you talked about that process potentially taking a little while due to the jv governance structure so my question would be is how you proceed with that process or evaluate your options they're contingent on the outcomes of the washington state sale and any potential sales processes you might run on 100 000 plus acres you've identified as suitable for this position in the u.s south
spk10: yeah i guess the way that we're approaching that matthew is that we're really looking at you know structuring a number of different options that would ultimately get us to that one billion dollar disposition target we haven't sort of laid out one specific path that gets us there but but really assessing a number of different options various combinations of which could ultimately get us to that one billion dollar target as it relates to new zealand specifically you know as we noted in our in the release you know we've engaged a financial advisor to assist with an evaluation of strategic alternatives there as part of that process one of the alternatives that we will consider is exiting our position in new zealand i can't really comment beyond that at this point but uh you know again we are we have entered in that process in earnest and we expect that we'll have further updates in the in the next couple quarters
spk05: okay thanks for that and then last one for me just on carbon credit prices in new zealand it sounds like you've tempered your expectations there slightly with the prices trending lower the past couple of months could you talk about what you think is driven prices lower and what your expectations would be for prices for the balance of the year
spk10: yeah as we detailed our supplement we sold about 3.4 million dollars worth of carbon credits in new zealand in the first quarter and and that's relative to uh to zero in in q1 2023 recall that we elected to defer and zeal sales in early 2023 due to the significant volatility we're seeing in the carbon market and that we ultimately ended up resuming sales later in the year as the market recovered so we've continued to be opportunistic as it relates to how we've approached carbon credit sales in new zealand overall the regulatory backdrop i would say has stabilized relative to last year you know the government's indicated that they're not contemplating any significant changes to the ets in the near term which was really you know driving some of that volatility last year you know that said that the most recent nzu auction failed to reach full subscription so the pricing has backed up some from where it was at the start of the year overall though you know pricing which has recently been in the range of 50 to 60 new zealand dollars per unit still relatively strong from an historical perspective so so we've continued to be to be active in that market
spk05: thank you very much it's all for me i'll turn it back
spk03: thank you our next caller is mark weintraub with seaport research partners you may go ahead sir
spk09: thank you so i guess there's sort of two related questions one is to the extent that you can provide an update on where you are in the process on the 115 000 acres pacific northwest and the 100 000 acres in the u.s south and then also though in conjunction with that if one of the alternatives for new zealand that is being considered as the potential exit of the the position i would imagine to get to the billion dollars you that would take you a pretty far away given you've already done the 55 000 acres sale and so i'm just sort of trying to understand would you potentially end is there a scenario where you might end up selling more than the billion or more than the billion dollars or are there ways you're juggling that so that wouldn't happen or how should we just think that all through
spk10: yeah you know like i said earlier mark you know we've really laid out a number of different options any you know number of combinations of which could ultimately get us to that one billion dollar target our objectives we sit here today is not to you know deliberately exceed that that target certainly not as it relates to our capital allocation objectives in terms of the de-leveraging return of capital to shareholders but recognize that if we do find you know compelling values in in the market for you know some of these different assets that we're exploring sale alternatives around we certainly have the ability to redeploy that capital into acquisitions through through like-kind exchanges and so you know the top priority is to achieve the new leverage targets return capital to shareholders and then we'll evaluate you know how much further beyond that that we wish to go you know look as a general matter we we don't comment on on m&a until there's a closed transaction or at least a signed contract you know that said we recognize that there's going to be an elevated level of interest around our disposition plans given the one billion dollar target that we announced last november you know we also recognize that there's invariably going to be chatter in the industry regarding assets that we've taken to market or considering taking to market so you know given these factors we we try to be more transparent and specific around some of the efforts that we currently have underway but just given that you're still in the evaluation phase on a number of these different potential transactions again we don't want to comment much more beyond that
spk09: fair enough but if i heard you right i mean there's a scenario though where you are not prevented from moving forward on doing something in the u.s. until you've sort of decided what you're doing with new zealand though you could do something in the u.s. and then ultimately if you were to do something in new zealand you may then just reposition some of those monies to to acquire is that so again there's no reason to be thinking you're going to delay making decisions in the u.s. is that fair
spk10: yeah i think that's fair i mean look when we laid out at the outset of this plan you know we laid out two objectives and it was really a concentrate capital in the markets we think that have the most favorable long-term growth prospects and the most favorable cash flow attributes and so you know we don't we don't have a billion dollars of assets that i would characterize as non-strategic but we have a billion dollars worth of assets that we could characterize as less strategic and potentially able to recycle that capital into kind of higher returning areas or areas in which we feel as though we have a unique ability or opportunity to add value and so you know again we've identified those properties that we believe are less strategic and help us to achieve our one billion dollar target within the parameters that we've laid out in terms of you know the the features under which we're kind of evaluating different transactions as we proceed through that as we see you know transaction outcomes we'll recalibrate our plans and expectations thereafter okay
spk09: appreciate it
spk10: thanks mark
spk03: thank you our next cover is Anthony Petroneri from Citi you may go ahead
spk07: good morning this is uh Gregory I'm for Anthony this morning um oh it's been covered already in the prepared remarks in Q&A but I did want to just bring something up that was said in the prepared remarks um I think what was mentioned about southern yellow pine um was there's a significant discount right now between you know southern yellow pine and other species um so I just was wondering if you could provide a little bit more context on you know what other species you're comping southern yellow pine to when you say that and then you know timeline for that discount to narrowing like key drivers um and then I have I'd want to follow on after that
spk02: sure this is Doug I'll I'll talk to that so um yeah as mark mentioned we do believe this historically unprecedented discount that southern yellow pine numbers trading at compared to you know SPF and other western grades will eventually correct and there are a few factors there at play you know um as you mentioned there are different species preferences for different end uses but in the long run we think we'll see increasing substitution for southern yellow pine for SPF as the market adapts to those in the near term as I mentioned there's some weakness in repair and model activity and that particularly plays out in our higher grade logs and those are going to be used in outdoor and DIY projects where southern yellow pine is favored for treating an outdoor use and on top of that kind of some weaker multi-family construction also plays a role in this so southern yellow pine is increasingly being utilized in prefabricating trusses and wall panels as well as engineered wood products which make up a larger share of the lumber consumption for multi-family or commercial construction compared to single-family construction but we believe that you know it's very much can be used in that process and so the market's just going to going to fill that gap as we think as we see things you know work its way out and then Canadian tariffs are set to increase from 8 to 14 percent as we go into the summer so voters who prefer those western grades have been more active buying ahead basically and that's particularly in that in the single family home construction but as we said before eventually we believe that builders and other consumers will continue to move towards the the value that's presented by southern yellow pine and these markets will normalize that we've seen in the past
spk07: that's helpful thank you and you know just thinking about southern salt or like returning to southern solid pricing in the first quarter you know you called out the over year decline but you know I was just looking pricing looks like it was up about six percent or so from the fourth quarter so I'm wondering if you can just kind of comment on what drove that increase whether it was mixed or the fact that competitors couldn't bring logs to market and then you know how you think that kind of dynamic plays out over the second quarter and then into the second half if lumber operates are a little bit stronger than you you're anticipating sure
spk02: yeah so um yeah you're right on the quarter of quarter basis we did see improvement in that pricing and um you know there was some of that was due to wet weather we saw but also I think going in the year there was you know some encouraging you know encouragement in the mills so we saw we saw relative strength basically in the saw mills and going into that and that has tempered a little bit as we're going through the through the rest of the rest of the quarter basically as we see that when we talked about that you know some of our pricing that we're seeing and going from q1 kind of q2 and thinking going and outlook really is a shift in geography basically so we we're going to have a a shift in our harvest moving a little bit from the atlantic over more towards the gulf states which typically have just slightly lower pricing as well as we're going to have an increase in in um our thinning harvests throughout the rest of the year and that typically produces either more um more pulpwood but as well as lower grade saw logs so um and smaller ones
spk07: thank you very much i'll turn it over
spk03: thank you once again if you would like to ask a question you may press star one and our last color is michael roxlund with truest securities you may go ahead sir
spk06: hi guys thanks for taking my questions this is nico pachinian from my crossland just on the uh on the one billion dollar disposition disposition plan can you comment maybe on where you're seeing the most interest uh is it public companies tmo's things like that and then on the washington parcel the non-strategic qualities that make it attractive for disposition is that similar to the organ parcel and that it may be geographically dislocated from the rest of your holdings in the area
spk10: yeah i mean in terms of the first question i'd say that we're seeing um you know pretty wide range of interest across the board i mean the tmo's uh continue to have you know fair amount of capital to place by our estimates about four billion dollars that's actively looking for timberland acquisitions i think there's also a fair amount of capital that's flowing into the space we're looking to get into space just around you know carbon related or impact related investments and so again we continue to see you know pretty strong bid in the timberland market and and just pretty you know pretty robust m&a market overall you know as it relates to the the washington properties you know again we're not commenting you know specifically on on the nature of those properties at this juncture you know spiced it to say um as we've looked at uh properties for for disposition we have really looked at you know trying to maintain strategic scale within within each of our regions and so you know again we've generally focused on properties that we think will allow us to maintain that across our three different operating areas
spk06: yeah thank you very much and then i guess just switching gears you talked about some of the demand for your your development projects what are you hearing from some of your customers and home builders on a take up on interest demand even any update on that
spk10: please yeah again you know single family dynamics continue to be pretty strong and favorable and then we've certainly seen that in our development projects you know recognize that a lot of the activity that we are focused on right now is around you know single family residential you know including age restricted and so we've continued to see pretty robust demand in both our major development projects
spk06: got it thank you very much uh that's all for me
spk03: and thank you there are no further questions at this time i'll turn the call over to colin mings
spk08: thank you this is colin mings i'd like to thank everybody for joining us please contact us with any follow-up questions
spk03: thank you this concludes today's conference call you may go ahead and disconnect at this time
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