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 13 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). Nearly 70% of its sales come from the US. The company agreed to sell its cellulose fibers business to International Paper in May 2016 for $2.2 billion.
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, to TRI Pointe.
Weyerhaeuser's Wood Products segment generated 55% of the company's total sales during 2015, and manages nearly 13 million acres of timberlands mostly in the US but some 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 (26% of total sales), which it agreed to sell to International Paper in May 2016 for $2.2 billion, 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. 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 rang up 68% of its sales in the US during 2015, while another 9% of its sales came from Japan. Canada, Europe, and China each contributed around 5% to its sales.
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.
Weyerhaeuser has struggled to grow its annual sales or profits over the past several years as volatile timber prices and weak demand overseas have hurt its growth prospects.
The company's revenue tumbled 4% to $7.08 billion during 2015 with sales down across all three of its businesses. Most of the decline was driven by its Timberlands business, which suffered from lower average log sales and export sales volumes in the West, as well as lower log sales volumes in the South.
Weyerhaeuser's net income dove more than 70% to $506 million for the year primarily because it sold off its profit-generating Weyerhaeuser Real Estate Company (WRECO) subsidiary the year before. The company's operating cash levels slipped 2% to $1.06 billion mainly due to a decline in cash earnings offset by favorable working capital changes.
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.
Since 2009, Weyerhaeuser has sold a number of businesses -- using the proceeds to pay down debt. These included its homebuilding and real estate operations WRECO subsidiary (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 February 2016, Weyerhaeuser purchased Plum Creek Timber Company, the largest private owner of timberland in the US, for $8.4 billion. The deal nearly doubled its US timberland acreage to 13 million across 19 states and made Weyerhaeuser the sixth-largest publicly traded company based in Washington state.
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. The transaction focuses the company on its forest products business.