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 manages more than 20 million acres of forest in the US and Canada. Its Weyerhaeuser Real Estate unit develops housing and master-planned communities nationwide. Weyerhaeuser was incorporated in 1900 and is a real estate investment trust (REIT). It operates offices in about a dozen countries and serves customers worldwide.
As part of its business, Weyerhaeuser operates through four segments: Wood Products, Cellulose Fibers, Timberlands, and Real Estate. Wood Products is its largest segment with 44% of sales, followed by Cellulose Fibers (26%) and Timberlands and Real Estate, which each generate 15%.
Weyerhaeuser's Wood Products segment manages 6.6 million acres of timberlands mostly in the US. It manages 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'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.
As part of its operations, the company develops real estate, primarily as a builder of single-family homes. This business is concentrated in metropolitan areas in Arizona, California, Maryland, Nevada, Texas, Virginia, and Washington.
Following the economic downturn, Weyerhaeuser's revenue has recovered after three years.
Weyerhaeuser logged a 14% revenue increase in 2012 vs. 2011, thanks to the Wood Products segment's sales increase of $782 million. Higher sales volumes across all major product lines and improved selling prices for structural lumber, OSB, and plywood contributed to the gains. The company's Real Estate segment boosted sales some $232 million, primarily due to the sale of a 3,200-acre master planned community in Houston, Texas, as well as the sale of commercial acreage and multi-family lots in Southern California and increased home closings. Weyerhaeuser's Timberland segment contributed a 3% increase in revenue in 2012 that was partially offset by a $204 million decrease in the Cellulose Fibers segment sales attributable to lower pulp price realizations. Demand for logs from its Timberlands segment is affected by the production of wood-based building products, as well as export demand. Cellulose Fibers is primarily affected by global demand and the relative strength of the US dollar.
The company’s net income rose 16% during the same reporting period, thanks to gross margin increases from the Wood Products segment from higher price realizations for lumber, OSB, and plywood. The pretax gain recognized in 2012 related to a postretirement plan amendment and increase in gross margin from the company's Real Estate segment.
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.
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.
Weyerhaeuser is relying more on sales outside of the US. In 2012 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 and Acquisitions
In 2013 the company boosted its US acreage. Midyear, Weyerhaeuser acquired 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.
Since 2009 Weyerhaeuser has sold a bunch of businesses, using the proceeds to pay down debt. These include its 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.