Weyerhaeuser considering more cuts
Weyerhaeuser’s first-quarter 2009 results, filed with the Securities and Exchange Commission on May 8, showed how much damage the housing market can do to one company. The Federal Way, Wash., firm reported a net loss of $264 million for the quarter, which ended March 31. These losses were primarily incurred by the building materials (wood products) division ($266 million) and the real estate division ($96 million).
The net loss last year, in the first quarter of 2008, was $148 million. Net sales for the company were $1.3 billion, compared with $2 billion in the same quarter of 2008.
Reflecting back on his first year as Weyerhaeuser’s president and CEO, Dan Fulton told investors during a May 5 conference call that he expected “a tough year” in both the real estate and wood products businesses. “[But> no one expected the housing market to plummet to levels we haven't seen for decades and become mired in a downturn that continues today,” he added.
Sales of lumber, oriented strand board and other wood products in the United States were down 44% during the first quarter of 2009 from a year ago and down 25% from the previous quarter.
Asian markets have also been affected by the slowing global economy, particularly Japanese, Chinese and Korean log exports. Pricing is also starting to experience downward pressure.
In Weyerhaeuser’s real estate division, the wave of foreclosures continues to affect pricing, according to Larry Burrows, president and CEO of Weyerhaeuser’s real estate company. “All of our markets struggled,” Burrows said. “Sales in Washington, D.C., the Pacific Northwest and in [the> Houston markets continued to decline. Phoenix, Las Vegas and California's Inland Empire remain our most challenging markets.”
In response to the dismal pace of single-family housing starts -- 358,000 units on a seasonally adjusted annual rate during the last quarter -- the company closed or indefinitely curtailed 10 operating facilities and five distribution centers. These actions resulted in the elimination of 1,300 positions. Although significant changes have already been made at Weyerhaeuser to reduce overhead costs, more are in the pipeline, according to its chief executive.
“Efforts are underway on a continuous basis to right size our support structure, our overhead, so that we can be best-in-class in each of [our> businesses,” Fulton told analysts on May 5. He promised to provide more details at the end of the month.
In response to an investor’s question on iLevel’s future, Weyerhaeuser announced it closed six of the engineered wood product facilities in March. Tom Gideon, the company’s executive VP forest products, said the company is evaluating all elements of its portfolio. "We have changed our distribution model over the last several years, moving from a broad-based [model> utilizing third-party products into a [model> more focused on internal product distribution on a channel to the marketplace," he said. "It’s a component of our business that we're going to continue to evaluate to ensure that we're getting optimum return from it.”
