Weyerhaeuser Company

Greetings and welcome to the Weyerhaeuser fourth 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 that time, 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 fourth 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 Wohl, Chief Financial Officer. I'll now turn the call over to Devin Stockfish.

Thanks, Andy. Good morning, everyone, and thank you for joining us. Yesterday, Weyerhaeuser reported full-year GAAP earnings $324 million, or 45 cents per diluted share, on net sales of $6.9 billion. Excluding special items, full-year 2025 earnings totaled $143 million, or 20 cents per diluted share, and adjusted EBITDA totaled $1 billion for the year. For the fourth quarter, we reported gap earnings of $74 million, or 10 cents per diluted share, on net sales of $1.5 billion. Excluding special items, we reported a loss of $67 million, or nine cents per diluted share for the quarter. Adjusted EBITDA was $140 million. I'll start this morning by thanking our employees for their solid execution and resilience in 2025. Notwithstanding extremely challenging market conditions, We delivered on the multi-year targets we established back in 2021 and launched an ambitious company-wide growth strategy through 2030. Specific to 2025, we further optimized our Timberlands portfolio, expanded our climate solutions offerings, broke ground on our new timber strand facility in Arkansas, and captured additional operational excellence improvements. We also increased our base dividend by 5%. and returned $766 million of cash to shareholders, including $160 million of share repurchase. These are notable accomplishments given the headwinds our industry faced in 2025, and they demonstrate the power of our integrated portfolio, deeply embedded OpEx culture, and flexible capital allocation framework. Looking forward, we remain constructive on the longer-term fundamentals that support our businesses. And as we outlined at our investor day in December, we're uniquely positioned to accelerate growth and drive significant value creation for shareholders through the balance of the decade. Before getting into the business segments, I'll provide a brief update on recent actions to further optimize our Timberlands portfolio, all of which were previously announced. During the fourth quarter, we completed two divestiture transactions covering non-core Timberlands in Oregon, Georgia, and Alabama. for total proceeds of $406 million. In addition, we entered into an agreement to divest approximately 108,000 acres in Virginia for $193 million. And we expect this transaction to close next month. Moving forward, we will continue to evaluate capital efficient opportunities that enhance the return profile of our Timberlands while balancing other growth initiatives and levers across our capital allocation framework to drive long-term value for our shareholders. Turning now to our fourth quarter business results, I'll begin with Timberlands on pages 7 through 10 of our earnings slides. Excluding special items, Timberlands contributed $50 million to fourth quarter earnings. Adjusted EBITDA was $114 million, a $34 million decrease compared to the third quarter, largely driven by lower sales volumes and realizations in the West, starting with the Western domestic market. Log demand and pricing softened in the fourth 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 prior quarter. Our fee harvest volumes were lower, largely due to fewer working days in the fourth quarter and the pull forward of volume over the summer months given a relatively light wildfire season per unit log and haul cost decreased and forestry and road costs were seasonally lower despite a challenging fourth quarter it's worth noting that a regional that regional log markets are trending towards a more balanced state as supply moderates into the winter months and mills work through elevated log decks as a result we expect stable domestic log pricing in the first quarter with upside potential if lumber prices further improve from current levels. Moving to our western export business. In Japan, finished good inventories remained elevated in response to ongoing consumption headwinds. As a result, demand for our logs softened in the fourth quarter, and our sales volumes decreased compared to the prior quarter. That said, our average sales realizations for export logs to Japan were moderately higher, largely driven by freight-related benefits. Looking forward, we expect demand for our logs to improve over time as inventories normalize in the Japanese market and as our customers continue to take market share from competing imports of European lumber. Turning briefly to China. In November, the ban on log imports from the U.S. was lifted. As a result, we're in the early stages of reestablishing our log export program to strategic customers in the region. However, we expect limited shipments in the near term, given the weakness in the Chinese real estate sector and the seasonal slowing of construction activity around the Lunar New Year holiday. For the fourth quarter, we delivered one vessel to China and expect to send a second vessel in the first quarter. Turning to the south, adjusted EBITDA for southern Timberlands was $69 million, a $5 million decrease compared to the third quarter. Southern saw log markets remained muted in the fourth quarter as dry weather conditions kept log supply ample and mills continued to align capacity with lower takeaway of finished goods. 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 regions. And our average sales realizations increased slightly compared to the third quarter, largely due to a higher mix of grade logs and export volumes to India. Our fee harvest volumes were moderately lower compared to the prior quarter, primarily driven by fewer working days. Per unit log and haul costs increased, and forestry and road costs were seasonally lower. In the north, adjusted EBITDA was comparable to the third quarter. Turning now to real estate, energy, and natural resources. on pages 11 and 12. In the fourth quarter, real estate and E&R contributed $84 million to earnings, adjusted EBITDA with $95 million, a slight increase compared to the prior quarter, and approximately $19 million higher than our fourth quarter guidance. This outperformance was largely driven by the timing of transactions, including the completion of a conservation easement in May. Notably, our average price for real estate sales reached a record high in the forward quarter at over $8,200 per acre. This was mostly attributable to some high-value development transactions in South Carolina. For the full year, real estate and ENR generated $411 million of adjusted EBITDA, moderately higher than our revised full-year guidance, and $61 million higher than our initial outlook. These results were largely driven by strong demand and pricing for HBU properties in our real estate business, resulting in high-value transactions with significant premiums to timber value. They also reflect a significant year-over-year increase in contributions from our climate solutions business. As shown on page 19, full year adjusted EBITDA for climate solutions was $119 million, a 42% increase compared to 2024 primarily driven by strong contributions from our conservation, mitigation banking, and renewables businesses. Importantly, we exceeded our multi-year target to reach $100 million of annual adjusted EBITDA by year-end 2025. And at our investor day this past December, we announced a new target to grow the business to $250 million of annual EBITDA by 2030. I'll briefly discuss some recent highlights today and would refer you to our investor day materials for a comprehensive overview of each climate solutions business, including growth projections through the balance of the decade. In the fourth quarter, we received approval for our fifth forest carbon project and have four additional projects in the development pipeline. In 2025, we generated approximately 630,000 credits, a significant increase relative to the prior year. and we sold 120,000 credits in the voluntary market. We continue to see growing demand and solid pricing credits given our commitment to developing projects that meet high standards for quality and integrity. And finally, on climate solutions, we announced an exciting new business opportunity at our investor day in December. We're partnering with Amium, a global leader in biocarbon technology, to produce and sell up to 1.5 million tons of biocarbon annually by 2030. We're advancing the first facility adjacent to our lumber mill in Macomb, Mississippi. And the companies are working to identify additional sites to construct new facilities across Weyerhaeuser's footprint over the next five years. At full scale, the platform of biocarbon facilities will have the potential to convert over 7 million tons of wood fiber on an annual basis. to be provided primarily by warehousers. This is an excellent example of how we can leverage our scale and expertise to go on offense and create new pathways for growth across our integrated portfolio. Now moving on to wood products on pages 13 through 15. Earnings for wood products was a $78 million loss in the fourth quarter, and adjusted EBITDA was a $20 million loss. These results reflect extremely challenging lumber and OSB markets in the quarter, with pricing hovering near historically low levels on an inflation-adjusted basis. Starting with lumber, the framing lumber composite began the fourth quarter on a slight upward trajectory, largely supported by improving Western SPF pricing and broader concerns around the Section 232 tariff, which took effect in October. As the quarter progressed, ample product supply and seasonally softer demand drove composite pricing lower through early December. By quarter end, the market improved slightly as buyers replenished lean inventories and lumber volumes from Canadian producers declined noticeably. Collectively, these dynamics supported increased pricing recently, albeit from a low starting point. In particular, southern yellow pine prices have steadily improved over the past two months. For our lumber business, fourth quarter adjusted EBITDA was a $57 million loss. Production volumes decreased 14% compared to the third quarter. And this reflects our election to moderate production across our mill set in response to the softer demand environment, as well as the volume impact associated with our Princeton sawmill, which we sold late in the third quarter. As a result, our sales volumes were lower in the fourth quarter and unit manufacturing costs were slightly higher. Our average sales realizations decreased 3% compared to the third quarter, which was favorable to the framing lumber composite. And our log costs were moderately lower. Looking forward, we are encouraged by the recent increase in lumber pricing and expect demand to improve into the spring building season. As a result, we anticipate stronger performance from our lumber business in the first quarter. Now turning to OSB. Fourth quarter adjusted EBITDA was a $10 million loss, primarily driven by weaker product pricing in response to the seasonal reduction in residential construction activity. I'll note that composite pricing stabilized in December after decreasing for most of the fourth quarter. And we've seen pricing move slightly higher here over the last several weeks. For our OSB business, average sales realizations decreased by 6% compared to the third quarter. largely in line with the composite. Our production and sales volumes were slightly higher, and unit manufacturing costs were comparable. Fiber costs were slightly lower in the fourth quarter. Engineered wood products adjusted EBITDA was $49 million, a $7 million decrease compared to the third quarter. This was driven by a seasonal decline in sales volumes across products and slightly higher unit manufacturing costs. We continue to align our production with customer demand and single family home building activity, both of which moderated into the winter months. Notably, our average sales realizations were comparable to the third quarter. Raw material costs were also comparable. It's worth pointing out that both third and fourth quarter results included a small benefit from insurance proceeds associated with the early 2025 fire at our MDF facility in Montana. In distribution, adjusted EBITDA decreased by $2 million compared to the prior quarter, largely driven by lower sales volumes for most products. With that, I'll turn the call over to Davey to discuss some financial items and our first quarter and full year 2026 outlook.