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, controls, or manages about 21 million acres of forest in the US and Canada. It recently sold its single-family homebuilding business, Weyerhaeuser Real Estate. Exports account for about 30% of the company's sales. Weyerhaeuser was incorporated in 1900 as Weyerhaeuser Timber Co. and is a real estate investment trust (REIT).
Washington-based Weyerhaeuser operates offices in about a dozen countries and serves customers worldwide. The REIT rings up about 70% of its sales in the US. Japan is its second-largest market, accounting for nearly 10% of revenue. Canada and China each contribute about 5%.
As part of its business, Weyerhaeuser operates through three segments: Wood Products, Cellulose Fibers, and Timberlands. Wood Products is its largest segment with 47% of 2013 sales, followed by Cellulose Fibers (22%), and Timberlands and Real Estate, which each generated 15%. (In mid-2014 Weyerhaeuser sold its homebuilding and real estate development business, which was concentrated in metropolitan areas in Arizona, California, Maryland, Nevada, Texas, Virginia, and Washington.)
Weyerhaeuser's Wood Products segment 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 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 operates in the US across the West and South, in Uruguay, and in Canada under license in Alberta, British Columbia, Ontario, and Saskatchewan.
Weyerhaeuser's revenue has staged a strong recovery since 2009. Nevertheless, despite an increase of 54% over the past four years, revenue has declined dramatically since the mid-2000s. Weyerhaeuser's 2013 sales increased 21% versus 2012, to $8.5 billion, while net income rose 46% over the same period to $563 million. Driving the double-digit gain was a 31% increase in wood products sales due to higher prices and volumes across all major product lines. The company's timberlands segment posted a 25% gain in sales on higher export and domestic log prices, increased sales volumes and the purchase of Longview Timber in 2013. The REIT's real estate sales rose by $205 million primarily due to the sale of more homes at higher average selling prices.
Exports contributed $2.5 billion (29%) of Weyerhaeuser's $8.5 billion in total consolidated sales from continuing operations in 2013. Sales outside the US increased $209 million, or 12%, primarily due to higher log export prices and volumes in its Timberlands segment and higher pulp sales volumes in the Cellulose Fibers segment.
The 46% rise in net income was primarily due to increased profits from the wood products, timberlands, and real estate businesses, and a $184 million income tax benefit. Cash flow from operations continued its steep two-year rise, totaling $1 billion in 2013.
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 repair and remodel market.
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. 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.
While focusing on cost-reducing measures, 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 diversity. Weyerhaeuser is banking on long-term growth as the housing market recovers and demand for lumber increases.
Also, Weyerhaeuser is relying more on sales outside of the US. In 2013 nearly 30% of sales came from international customers. 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.
Mergers, Acquisitions, and Divestments
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.
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.