If a tree falls in a Weyerhaeuser forest, someone is there to hear it -- and he has a chainsaw. The forest products company produces a variety of softwood lumber and other building materials in North America. It also offers cellulose fibers products used to make paper, packaging, and textiles. The company harvests trees for its products through its timberlands division, which owns or controls nearly 7 million acres of forest in the US and Canada. Exports account for more than 30% of the company's sales. Incorporated in 1900 as Weyerhaeuser Timber Co., the company is classified as a real estate investment trust (REIT).
Weyerhaeuser operates through three business segments: Wood Products, Cellulose Fibers, and Timberlands. (In mid-2014, Weyerhaeuser sold its homebuilding and real estate development business, Weyerhaeuser Real Estate Company, which is now owned by TRI Pointe Homes, Inc.
Weyerhaeuser's Wood Products segment generates nearly 55% of total sales, and manages nearly 7 million acres of timberlands mostly in the US. It manages about another 14 million acres in Canada under long-term licenses. It has principal manufacturing locations for structural lumber, engineered lumber, and oriented strand board in both the US and Canada. The company sources softwood plywood in the US, only, in Arkansas and Louisiana.
Its Cellulose Fibers business, which brings in more than 25% of sales, manufactures pulp in the US in Georgia, Mississippi, and North Carolina, as well as in Alberta, Canada. It has a US pulp converting operation in Mississippi that's supplemented by an international site in Poland, which became operational in 2013. The company also has a 50% interest in North Pacific Paper Corp. (NORPAC), a joint venture with Nippon Paper Industries that produces newsprint and high-brightness publication papers.
The company's Timberland segment makes up the remainder of sales, and operates in the US across the West and South, in Uruguay, and in Canada under license in Alberta, British Columbia, Ontario, and Saskatchewan.
Washington-based Weyerhaeuser operates offices in about a dozen countries and serves customers worldwide. The REIT rings up nearly 70% of its sales in the US, while Japan brings in nearly 10%. Canada, Europe, and China each contribute around 5%.
Sales and Marketing
Weyerhaeuser sells its products and services through its own sales organizations and distribution facilities. It also peddles building materials that the company purchases from other manufacturers. Through the wood preserving and home-improvement warehouse channels, the company sells certain items into the new residential building, repair and remodel market.
Following two years of top-line growth, Weyerhaeuser's sales in 2014 fell by 13% to $7.40 billion, mostly resulting from the divestiture of its Weyerhaeuser Real Estate Company (WRECO) which had contributed around 15% of total revenue in recent years. Beyond this, sales from the Timberland division grew by double digits thanks to higher log prices and sales volumes, while its Cellulose Fibers division grew by 2% thanks to higher sales realizations for pulp. In 2013, sales had jumped by 21% thanks to a 31% increase in wood products sales (across all lines), a 25% gain in sales from its Timberlands segment (thanks in part to the purchase of Longview Timber in 2013), and growth in the Real Estate business thanks to more home sales at higher average selling prices. While sales in 2014 were significantly up from the lows in 2009, they were around half as much as the company generated in 2007.
Despite lower revenue, the company enjoyed a third-straight year of profit growth, with net income skyrocketing by 224% to $1.83 billion. This was mostly thanks to added income from the sale of its WRECO business, but also thanks to lower impairment charges related to a large master-planned community that WRECO retained after its divestiture.
Cash levels continued rising, with operations providing $1.09 billion, mostly thanks to higher cash earnings, but also because the company received income tax refunds totaling $52, and paid $43 million less toward interest expenses as it refinanced its debt in 2013.
Much of Weyerhaeuser's sales performance, particularly when it comes to its Wood Products and Timberland segments, is strongly tied to the US housing market, including the new residential building and repair and remodel markets, which have all been strengthening in recent years. Weyerhaeuser is banking on long-term growth as the housing market recovers and demand for lumber increases.
While focusing on cost-reducing measures for streamlining operations, Weyerhaeuser has a long-term plan to develop customer relationships and expand its customer base, geographic reach, and product portfolio. The timber REIT is also concentrating on growing its business by maintaining its diverse income streams.
Weyerhaeuser is also relying more on sales outside of the US. In 2014, roughly 34% of its total sales came from international customers, up from just 30% in 2012. The company's Timberlands business has been growing its log export sales to China, where a there is an emerging demand. Longtime customer Japan also had a growing demand for lumber as the country recovered from a devastating earthquake and tsunami.
Since 2009, Weyerhaeuser has sold a number of businesses -- using the proceeds to pay down debt. These included its homebuilding and real estate operations (in mid-2014), fine paper operations, containerboard, packaging and recycling segment, its Trus Joist subsidiary, and dozens of distribution centers in Canada and the US.
Mergers and Acquisitions
In July 2013, the company boosted its US acreage with the purchase of Longview Timber from Brookfield Asset Management affiliates. The move, which increased the total amount of US timberlands owned or controlled by the company to some 6.6 million acres, allows Weyerhaeuser to leverage Longview Timber's expertise in silviculture, infrastructure, logistics, and marketing.
Weyerhaeuser also sold its short line freight railroad holdings, which boasted 160 miles in four states, to Patriot Rail in 2011. The company shed noncore timberland, including some 82,000 acres in Washington, for approximately $200 million in 2011, as well as its hardwoods business, which manufactured lumber and plywood used for furniture and cabinetry, to American Industrial Properties for some $108 million.
After announcing in mid-2013 that it was exploring strategic alternatives for its homebuilding and real estate development business, Weyerhaeuser Real Estate Company, in July 2014 the unit was sold to TRI Pointe Homes, Inc. The transaction focuses the company on its forest products business.