Weyerhaeuser Company

Greetings and welcome to the Warehouse of Second Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andy Taylor, Vice President of Investor Relations. Thank you, Mr. Taylor. You may begin.

Thank you, Rob. Good morning, everyone. Thank you for joining us today to discuss Weyerhaeuser's second quarter 2025 earnings. This call is being webcast at www.weyerhaeuser.com. Our earnings release and presentation materials can also be found on our website. Please review the warning statements in our earnings release and on the presentation slides concerning the risks associated with forward-looking statements, as forward-looking statements will be made during this conference call. We will discuss non-GAAP financial measures, and a reconciliation of GAAP can be found in the earnings materials on our website. On the call this morning are Devin Stockfish, Chief Executive Officer, and Davey Wold, Chief Financial Officer. I will now turn the call over to Devin Stockfish.

Thanks, Andy. Good morning, everyone, and thank you for joining us. Yesterday, Weyerhaeuser reported second quarter gap earnings of $87 million, or 12 cents per diluted share, on net sales of $1.9 billion. Adjusted EBITDA totaled $336 million, a slight increase over the first quarter of 2025. These are solid results in light of the current challenging market backdrop, and I'm pleased with the operational performance delivered by our teams. Before getting into the businesses, I'd like to comment briefly on an exciting growth opportunity within our Southern Timberlands portfolio. As we announced in May, we're acquiring 117,000 acres of high-quality timberlands in North Carolina and Virginia for $375 million. This acquisition represents a unique off-market opportunity to enhance our footprint in a strong and growing saw log and fiber market in the U.S. South. These Timberlands are strategically located proximate to existing Weyerhaeuser Timberlands and mill operations in the region and are expected to deliver immediate and sustained portfolio-leading cash flows within our southern Timberlands business. With an average annual free cash flow yield of 5.1% over the first five years, and that's a timber-only number. In addition, we see significant optionality to capture upside from alternative value opportunities over time. The acquisition is expected to close in the third quarter, and the cash outlay for the transaction is expected to be predominantly sourced from divestitures of non-core timberlands. And we anticipate completing these transactions in a tax-efficient manner. As we've demonstrated over the last several years, we are committed to active portfolio management across our timber holdings and have remained disciplined in our approach to growing the value of our timberlands, including through targeted acquisitions as well as divesting of non-strategic acreage. Upon closing of our latest North Carolina and Virginia acquisition, we will have achieved the multi-year target to grow our Timberlands portfolio through $1 billion of investments by the end of 2025. We've also grown our lumber capacity and are moving forward with a compelling engineered wood products growth opportunity in Arkansas, all while maintaining a strong balance sheet. And importantly, we've returned a significant amount of cash back to shareholders through dividends and share repurchase over this period. Looking forward, we will continue to evaluate strategic opportunities that enhance the return profile for our Timberlands and provide upside potential through our real estate and E&R business. And we'll balance these activities with other levers across our capital allocation framework to drive superior long-term value for shareholders. Turning now to our second quarter business results. I'll begin with Timberlands on pages five through eight of our earnings slides. Timberlands contributed $88 million to second quarter earnings. Adjusted EBITDA was $152 million, a $15 million decrease compared to the first quarter, largely driven by higher costs in our Western operations, which are typical in the spring and summer months. Turning to the Western domestic market, log demand was healthy at the outset of the second quarter, given seasonally lower log supply and steady takeaway of lumber. As the quarter progressed, log supply improved seasonally, but demand waned as mills responded to a softening lumber market and elevated log inventories. As a result, log prices were strongest in April and trended lower for the balance of the quarter. Given these dynamics, our average domestic sales realizations decreased slightly relative to the first quarter, and fee harvest volumes were comparable. Our per-unit log and haul costs increased as we made the seasonal transition to higher elevation sites, and forestry and road costs were seasonally higher. Moving on to our export business to Japan. Log markets in Japan were stable in the second quarter. Demand for our logs continued to benefit from lower shipments and inventories of imported European lumber in the Japanese market, which has allowed our customers to take market share. As a result, our average sales realizations for export logs to Japan increased moderately compared to the first quarter. However, our sales volumes were moderately lower due to the timing of vessels. Turning to the south, adjusted EBITDA for southern Timberlands was $69 million, a slight decrease compared to the prior quarter. Despite a reduction in log supply resulting from wet weather conditions, southern saw log demand was muted in the second quarter. as mills continued to align production with lower pricing and takeaway of lumber. In contrast, demand for our fiber logs improved as mills transitioned from spring maintenance outages. In general, takeaway for our logs remained steady given our delivered programs across the region, and our average sales realizations increased slightly compared to the first quarter. Given the wetter-than-normal conditions, our forestry and road costs and fee harvest volumes were lower than our initial expectations. That said, our harvest volumes increased slightly compared to the prior quarter. Per-unit log and haul costs increased moderately. In the north, adjusted EBITDA decreased slightly due to lower sales volumes associated with seasonal spring breakup conditions. Turning now to our real estate, energy, and natural resources business on pages 9 and 10. Real estate and E&R contributed $106 million to second quarter earnings, and $143 million to adjusted EBITDA. Second quarter EBITDA was $61 million higher than the prior quarter, largely driven by the timing and mix of real estate sales. We continue to benefit from healthy demand for real estate properties, resulting in high-value transactions with significant premiums to timber value. Turning briefly to our natural climate solutions business. During the second quarter, we received approval on our third forest carbon project, and currently have six additional projects in progress. We continue to see solid demand for our credits, given our commitment to delivering and developing projects that meet high standards for quality and integrity. For 2025, we still expect a significant increase in credit generation and sales relative to the last couple of years, and we remain on track to reach $100 million of adjusted EBITDA from our natural climate solutions business by year end. Now, moving to wood products on pages 11 through 13. Wood products contributed $46 million to second quarter earnings and $101 million to adjusted EBITDA, starting with lumber. After a steady increase in the first quarter, the framing lumber composite peaked in early April and trended lower through late June. This was driven by cautious buyer sentiment in response to elevated macroeconomic uncertainty and a softer-than-expected spring building season. Across the North American regions, pricing for western SPF lumber has steadily increased since mid-May, largely as a result of concerns around the upcoming increase in duties on Canadian shipments to the U.S. Over the same period, pricing for southern yellow pine lumber decreased significantly as supply outpaced demand. This dynamic was compounded by adverse weather conditions in certain southern geographies, which impacted building activity in the second quarter. That said, southern lumber prices have shown signs of stabilization in recent weeks. For our lumber business, second quarter adjusted EBITDA was $11 million, a $29 million decrease compared to the first quarter, primarily driven by lower product pricing and slightly higher log costs. Our average sales realizations decreased by 2% in the second quarter, which was largely in line with the framing lumber composite. Our sales volumes increased and unit manufacturing costs were comparable. Finally on lumber, I'll make a few comments on the recent announcement to sell our Princeton mill in British Columbia. While these decisions are never easy to make, we think this is the best outcome for our Princeton operations. The buyer is local, with deep roots in the region, and we expect a seamless transition that will position the facility for future success in a challenging operating environment. The purchase price is approximately $120 million Canadian and includes the mill, all associated timber license assets in British Columbia, and the value of working capital, which will be subject to customary purchase price adjustments at closing. We expect the mill portion of the transaction to close in the third quarter and the forest 10 years to follow over the ensuing months. Upon closing, we expect to recognize a gain on the sale and incur a tax liability of approximately $15 million Canadian. I do want to express my deep appreciation to our dedicated employees who contributed to the success of our Princeton operation over the years, and to the local community, who has been incredibly supportive of our operations and people. It's worth noting that our other operations in Canada will not be affected by this transaction, and we will continue to serve customers from our two lumber mills in Alberta. So now, turning to OSB. Benchmark pricing for OSB decreased significantly in the second quarter, largely driven by softening demand from new home construction activity and ample supply. Pricing did stabilize by quarter end and has remained steady through July. For our OSB business, adjusted EBITDA was $30 million, a $29 million decrease compared to the first quarter, primarily due to lower product pricing. Our average sales realizations decreased by 12%, which was favorable to the OSB composite. This is largely due to the length of our order files, which results in a lag effect for OSB realizations. Our sales volumes and fiber costs were slightly higher compared to the prior quarter, and unit manufacturing costs increased due to additional downtime for planned annual maintenance. Engineered wood products adjusted EBITDA was $57 million, a slight increase compared to the first quarter. This was driven by a seasonal increase in sales volumes across all products and lower raw material and unit manufacturing costs. Notably, our second quarter EWP results reflect an improvement in operating posture at our MDF facility in Montana, which experienced a multi-week outage in the first quarter. These favorable drivers were partially offset by lower average sales realizations across most EWP products, as new home construction activity was softer than our initial expectations coming into the second quarter. In distribution, adjusted EBITDA decreased slightly compared to the first quarter, as seasonally higher sales volumes were offset by lower pricing for commodity and EWP products. With that, I'll turn the call over to Davey to discuss some financial items and our third quarter outlook.