Weyerhaeuser Company

Greetings and welcome to the Weyerhaeuser Third 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, you'll 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, Mr. 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 third 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 today. Yesterday, Weyerhaeuser reported third quarter gap earnings of $80 million, or 11 cents per diluted share, on net sales of $1.7 billion. Excluding special items, we earned $40 million, or 6 cents per diluted share. Adjusted EBITDA totaled $217 million for the quarter. Our third quarter performance reflects solid execution by our teams against a very challenging market backdrop. Notwithstanding recent headwinds, we remain well positioned to navigate the current environment given our deeply embedded OpEx culture and competitive cost structure. We've done considerable work over the last several years to align our strategy with the cyclicality of our businesses. As a result, Weyerhaeuser is a much stronger company today than at any point in recent history, and we continue to demonstrate the durability of our portfolio, the strength of our balance sheet, and the flexibility of our capital allocation framework across market cycles. Looking forward, we remain constructive on the longer-term demand fundamentals that support growth for our businesses, and we're ready to capitalize on opportunities as market conditions improve. Before getting into the businesses, I'd like to provide an update on recent actions to further optimize, improve, and grow our Timberlands portfolio. Our recent Timberlands transactions are summarized on page 18 of our earnings slide. In the third quarter, we completed two high-quality acquisitions totaling $459 million. This includes our previously announced transaction for Timberlands in North Carolina and Virginia, and another acquisition of exceptional timberlands in Washington State. Additionally, in the third quarter, we advanced three divestiture packages of non-core timberlands, one of which closed earlier this month, and the other is under contract and scheduled to close later in the fourth quarter. These two transactions will result in $410 million of expected cash proceeds by year end. We anticipate closing the third divestiture in early 2026, and expect total proceeds from all divestitures to exceed the cash outlay required for our recently completed acquisitions. These transactions represent strategic opportunities to improve the quality and value of our portfolio. As we've demonstrated over the last several years, we're committed to active portfolio management across our timber holdings, and have remained disciplined and nimble in our approach to growing the value of our timberlands. Through this process, we've achieved the multi-year timberlands growth target we announced in September of 2021. Over a similar period, we've also returned a substantial amount of cash back to shareholders through dividends and share repurchase and announced a compelling engineered wood products growth opportunity, all while maintaining a strong balance sheet. Moving forward, we will continue to evaluate capital-efficient opportunities that enhance the return profile of our timberlands while also balancing other levers across our capital allocation framework to drive long-term value for our shareholders. Additionally, in the third quarter, we completed the sale of our Princeton Mill in British Columbia for $85 million. In September, we received $61 million of the proceeds in conjunction with the closing of the sawmill portion of the deal. We expect to receive the remainder of the transaction proceeds over the coming months, following the transfer of associated timber licenses in the province. It's worth noting that our other lumber operations in Canada are not affected by this transaction, and we continue to serve our customers from our two sawmills in Alberta. Turning now to our third quarter business results. I'll begin with Timberlands on pages six through nine. Timberlands contributed $80 million to second quarter earnings. Adjusted EBITDA was $148 million. a $4 million decrease compared to the second quarter. In the west, adjusted EBITDA decreased by $9 million. Log pricing in the domestic market faced downward pressure in the third quarter as supply remained ample and mills continued to carry elevated log inventories and navigate a very challenging lumber market. As a result, our average domestic sales realizations decreased moderately compared to the second quarter. Per unit log and haul costs increased in response to higher elevation harvest activity that's typical this time of year. And forestry and road costs were slightly lower than the prior quarter. Our fee harvest volumes were moderately higher and exceeded our initial plan for the quarter, largely driven by fewer operational restrictions given a relatively light wildfire season. Moving on to our export business to Japan. Log markets in Japan softened somewhat in the third quarter in response to ongoing consumption headwinds in the Japanese housing market. As a result, our customers' finished goods inventories increased and log prices decreased. Despite this dynamic, our customers remained well-positioned relative to imported European lumber, which continues to face headwinds in the Japanese market. For the quarter, our average sales realizations for export logs to Japan were moderately lower and our sales volumes were moderately higher, largely due to the timing of vessels. Turning to the south, adjusted EBITDA for southern Timberlands was $74 million, a $5 million increase compared to the second quarter. Southern saw log markets moderated slightly in the third quarter as log supply increased with drier weather conditions and as mills further adjusted to weaker lumber markets. In contrast, southern fiber markets were relatively stable outside of a few localized regions impacted by recent mill closures. On balance, takeaway for our logs remained steady, given our delivered programs across the region. That said, our average sales realizations decreased slightly in response to a higher mix of fiber logs from increased thinning activity. Given favorable weather conditions, our fee harvest volumes increased slightly compared to the prior quarter. Per unit log and haul costs were lower, and forestry and road costs were comparable. In the north, adjusted EBITDA increased slightly due to the higher sales volumes, resulting from the seasonal increase in harvest activity that's typical in the third quarter. Turning now to real estate energy and natural resources on pages 10 and 11. Real estate and ENR contributed $69 million to third quarter earnings and $91 million to adjusted EBITDA. Third quarter EBITDA was $52 million lower than the prior quarter, but $28 million higher than our initial outlook for the segment, largely driven by the timing and mix of real estate sales. It's worth noting the real estate markets have remained healthy year to date, and we continue to benefit from strong demand and pricing for HBU properties, resulting in high-value transactions with significant premiums to timber value. Notably, our average price per acre has steadily increased in 2025, and reached its highest quarterly level since late 2022. I'll now turn to our natural climate solutions business. First, on our carbon capture and sequestration project with Occidental Petroleum, which is expected to reach first injection in 2029, in the third quarter, Occidental announced the formation of a joint venture for the construction and operation of pipeline infrastructure between regional customers in the CO2 storage facility in Livingston Parish, Louisiana. This represents another important milestone associated with our CCS project. It underscores the importance of selecting sophisticated counterparties with strong technical, commercial, and project development expertise. Turning quickly to forest carbon, we have now received approval on our fourth project and currently have five additional projects under development. We continue to see solid demand for our credits, given our commitment to developing projects that meet a high standard 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 overall, we remain on track to reach $100 million adjusted EBITDA from our natural climate solutions by year end. I'll note here that we are excited to go into much more detail on our natural climate solutions business, including multi-year growth targets at our upcoming investor day in December. Now, moving to wood products on pages 12 through 14. Excluding a special item associated with the sale of our Princeton mill, earnings for wood products was a $48 million loss in the third quarter. Adjusted EBITDA was $8 million, a $93 million decrease compared to the second quarter. These results reflect extremely challenging lumber and OSB prices in the quarter, which reached historically low levels on an inflation-adjusted basis. Starting with lumber, third quarter adjusted EBITDA was a $48 million loss as several ongoing headwinds persisted across the North American market. The framing lumber composite began the third quarter on a slight upward trajectory largely supported by improving Western SPF pricing and broader concerns around the pending increase in duties on Canadian lumber. As the quarter progressed, demand softened seasonally and buyer sentiment turned much more cautious. In addition, the supply-demand imbalance worsened in response to elevated shipments of Canadian lumber into the U.S. market ahead of the increasing duties. Collectively, these dynamics drove composite pricing significantly lower through the balance of the quarter. It's worth noting that we have seen pricing stabilize and move slightly higher for certain species over the last several weeks. At this point, the industry has largely worked through the excess lumber volume that entered the U.S. prior to Canadian duties moving higher. Although we do expect the typical seasonal softening of demand as we enter the colder winter months, leaner inventories combined with elevated duties and the new 232 tariff should support product pricing and bridge the market until we see start ramping up for next year's building season. For our lumber business, production volumes decreased by approximately 3% compared to the second quarter. This reflects our election in September to slightly moderate production across our mill set in response to the softer demand environment, as well as the volume impacts associated with the closing of our sale of our Princeton mill late in the quarter. As a result, our sales volumes were slightly lower compared to the second quarter, and unit manufacturing costs were higher. Our average sales realizations decreased by 11% in the third quarter, and were generally in line with the framing lumber composite. Log costs were moderately lower. Now, turning to OSB. Third quarter adjusted EBITDA was a $3 million loss, primarily driven by weaker product pricing in response to subdued residential construction activity. Following a steady decline for most of the year, the OSB composite stabilized in August and was generally range-bound for the balance of the quarter, albeit at a much lower level than the prior quarter average. For our OSB business, average sales realizations decreased by 18% compared to the second quarter. Our sales volumes were comparable to the second quarter. Unit manufacturing costs and fiber costs were moderately lower. I'll note that pricing has remained stable through October, and similar to lumber, we do expect demand to improve early next year as we approach the spring building season. Engineered wood products adjusted EBITDA was $56 million, which was comparable to the second quarter. It's worth noting that third quarter results included a one-time $7 million benefit from insurance proceeds associated with the fire at our MDF facility in Montana earlier this year. As for the performance of our EWP business, we continue to align our production with customer demand and single-family homebuilding activity, both of which softened somewhat in the third quarter. As a result, our sales volumes decreased for most products compared to the second quarter, and unit manufacturing costs increased. Notably, our average sales realizations for SolidSection and iJoyce products were comparable to the prior quarter. and raw material costs decreased, primarily for OSB web stock. In distribution, adjusted EBITDA decreased by $4 million compared to the second quarter, largely due to a decrease in sales volumes. With that, I'll turn the call over to Davey to discuss some financial items and our fourth quarter outlook.