Plum Creek Timber Management Discusses Q2 2012 Results - Earnings Call Transcript
July 30, 2012 9:10 PM ET
Plum Creek Timber (PCL)
Q2 2012 Earnings Call
July 30, 2012 5:00 pm ET
John B. Hobbs - Vice President of Investor Relations
Rick R. Holley - Chief Executive Officer, President and Director
David W. Lambert - Chief Financial Officer and Senior Vice President
Mark Wilde - Deutsche Bank AG, Research Division
Chip A. Dillon - Vertical Research Partners Inc.
Anthony Pettinari - Citigroup Inc, Research Division
Gail S. Glazerman - UBS Investment Bank, Research Division
George L. Staphos - BofA Merrill Lynch, Research Division
Mark A. Weintraub - The Buckingham Research Group Incorporated
Joshua A. Barber - Stifel, Nicolaus & Co., Inc., Research Division
John Charles Tumazos - John Tumazos Very Independent Research, LLC
Good afternoon. My name is Jamaria, and I will be your conference operator today. At this time, I would like to welcome everyone to the Plum Creek Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Mr. John Hobbs, Vice President of Investor Relations for Plum Creek. Please go ahead, sir.
John B. Hobbs
Thank you, Jamaria. Good afternoon, ladies and gentlemen, and welcome to the second quarter conference call for Plum Creek. I'm John Hobbs, Vice President of Investor Relations for the company. Of course, we have on the line today, Rick Holley, President and CEO; and David Lambert, Senior Vice President and CFO. This call is open to all investors and members of the media. However, the Q&A portion of the call is intended for the professional investment community only. We ask that other participants, please follow up with any questions by calling me at 1 (800) 858-5347. I encourage you to visit our website, plumcreek.com. There you will find our press release and supplemental financial statements for the second quarter of 2012.
Before we begin, I'd like to take this time to remind everyone that certain of our statements today will be forward looking, involving known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ from those expressed or implied. These risks and factors are routinely detailed in our filings with the Securities and Exchange Commission. Following today's prepared remarks, we'll open up the call for your questions.
Now, I'll turn the call over to Rick.
Rick R. Holley
Good afternoon. Second quarter came in a bit better than we expected. Our Manufacturing segment continued to perform well with good demand and improving prices. Our Real Estate segment posted revenues just above the high-end of our initial expectations, and strong domestic demand translated into better-than-expected pricing for both sawlogs and pulpwood in our Northern timber operations.
In the South, markets were much as we expected. The Southern log price is just slightly higher than the first quarter.
Our outlook for the year hasn't changed much. At the margin, we're expecting a bit more from our Manufacturing segment, while we may not see at as much upside from Southern sawlogs as we had anticipated, so earning guidance for the year is unchanged.
Now, I'll turn the call over to David for a review of the quarter and our outlook for the rest of the year. David?
David W. Lambert
Our second quarter results of $0.22 were a couple of pennies above our guidance range. As Rick mentioned, business conditions were better than we initially projected for nearly all of our segments. Northern Resources' $4 million operating profit was $2 million lower than the $6 million reported in the first quarter due to the seasonal decline in harvest volume. The harvest decline about 160,000 tons, the harvest mix of roughly 2/3 sawlogs, 1/3 pulpwood was as planned. Overall, log prices were better than we initially expected. Northern sawlog prices increased $4 per ton to $71, while pulpwood prices held steady at $42 per ton.
In the Northwest, sawlog prices peaked at $73 per ton in April, driven by strengthening domestic demand. As spring progress, logging conditions improved, and the log supply expanded, and log prices retreated to $68 per ton. Log customers in the region were able to end the quarter with healthy log decks.
As expected, export demand was lower than in the second quarter of last year and did not command a significant price premium to domestic markets. We directed the vast majority of our harvest volume to domestic customers, exporting 26,000 tons of sawlogs during the quarter. We expect good logging conditions to prevail during the third quarter, so despite modestly strengthening export demand, we expect Northern sawlog prices to return to first quarter levels of about $67 per ton.
In the Northeast and the Lake States, pulpwood enjoyed solid demand, and prices held at attractive levels. As a result, pulpwood prices averaged $42 per ton during the quarter. We expect stable pricing and seasonally higher pulpwood harvest during the third quarter.
Overall, we expect Northern harvest volume to seasonally recover, a level similar to the first quarter, about 700,000 tons of sawlogs and 450,000 tons of pulpwood.
In the Southern Resources, Southern Resources' $22 million operating profit was $1 million higher than the first quarter's $21 million profit. Prices for both pulpwood and sawlogs were marginally higher compared to the first quarter, while our harvest volumes for both sawlogs and pulpwood increased. Our sawlog harvest increased 213,000 tons, but was about 100,000 tons less than we initially planned because sawlog pricing remained unattractive in some markets.
Pulpwood markets continue to present an opportunity with attractive pricing in many Southern wood baskets. Our Southern quarter harvest was nearly 100,000 tons higher than in the first quarter. We had initially expected a pretty flat quarter-over-quarter pulpwood harvest. However, our pulpwood yields from first thinning harvest are running higher than our expectations, and that has pushed up our pulpwood harvest.
Copyright 2012 Seeking Alpha
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.