Good morning. I'm Anthony Pettinari with Citi. We're very pleased to welcome Devin Stockfish, CEO of Weyerhaeuser, and David M. Wold , CFO, to kick off the morning session here. I think Devin is going to start off with some introductory comments, and then we're going to jump right into the Q&A.
Yep.
Thank you.
All right. Thanks, Anthony. Thanks everyone for being here. Always appreciate the opportunity to talk about some of the exciting things that Weyerhaeuser Company is doing. I'm going to keep my remarks fairly brief so that we have lots of time for Q&A. I will just note, we do have a more fulsome deck and set of materials that are available on the REIT week app, also on our website. I'm going to cover just three basic topics here today. First, brief introduction on Weyerhaeuser for those that aren't as familiar with our story. I'll touch on some results from Investor Days, both the one we did back in 2021, update you on our performance against those, and more importantly, to recap some of the new growth targets that we set out at our December Investor Day just a few months ago.
I'll conclude with a few thoughts on our capital allocation approach. Just starting off with the investment thesis. We're really focused on four key levers to drive value for our shareholders. Three of those have been core tenets of our philosophy for a number of years, and it starts with an unmatched portfolio of assets, its focused industry-leading performance, and a disciplined approach to capital allocation. The fourth lever, which we outlined at our Investor Day, is accelerated growth. This is all underpinned by our high-performance culture, a strong track record of operational excellence and innovation, portfolio management, as well as sustainability. It really just separates Weyerhaeuser from our competition, and ultimately it's what drives superior returns for our shareholders over time.
For those that aren't as familiar with Weyerhaeuser, we are the only large-cap integrated forest products company that operates throughout North America, with a foundation that's really world-class. Core to the company is our timberlands business. We have over 10 million acres of high-quality, high-performance timberlands across the U.S. Additionally, we manage another 13 million acres in Canada under long-term license agreements. We're also one of the largest producers of wood products in North America, as we have 33 facilities where we produce lumber, oriented strand board, a variety of engineered wood products. We also have 22 distribution facilities across key markets in the U.S. Lastly, our strategic land solutions business is really focused on capturing the maximum value across all of those acres we own. We do that through our climate solutions business, our real estate business, and our natural resources business.
All of these businesses have significant scale, industry-leading margins, and they're managed within a tax-efficient REIT structure. In fact, we are one of the largest REITs in the U.S. Just a quick recap on the goals and targets that we set out back at our Investor Day in 2021. We set some ambitious growth targets, and we updated the Street in December. The good news is, as always, we delivered on those. That includes the billion-dollar timberland acquisition program that we were able to complete last year. Importantly, we did pay for a lot of those new timberlands through the sales of non-strategic timberlands, effectively recycling a lot of that capital.
We were able to exceed our goal of $100 million of EBITDA in our new climate solutions business last year, and that really set us up with a strong pipeline that will lead into our next growth target, which I'll touch on here momentarily. We continue to invest in our wood products facilities. We continue to focus on cost management and operational excellence. We delivered on our multi-year OpEx targets, which really was quite an achievement given the inflationary pressures that we experienced over that time period. Finally, in terms of our commitment to returning cash to shareholders from 2021 to 2025, we returned over $6 billion of cash back to shareholders. That included four increases to our quarterly dividend each year over that period, as well as closing out a billion-dollar share repurchase program and putting a new billion-dollar program in place.
Just really incredibly proud of all of the accomplishments in a time that was not without its challenges across COVID and inflation and supply chain challenges. Having achieved those targets back that we set out in 2021, we laid out a new growth program in December that was really focused on driving growth across the entirety of our platform. What we laid out in December was our plan to grow our EBITDA by $1.5 Billion through the end of 2030. That really includes ambitious targets across each of our businesses and the enterprise as a whole. The good news is the vast majority of those initiatives are already underway. Most of those are under our control, and so we're really excited about some of the opportunities out there. I'm sure we'll touch on some of those during the Q&A.
That really just sets us up to really deliver for our stakeholders, we're excited about that. Lastly, I'll just wrap up with some comments on capital allocation. We continue to view that as a critical lever for driving value for our shareholders. We have three key priorities which remain unchanged, returning cash to our shareholders through a combination of dividends, both quarterly and supplemental, as well as share repurchase. It includes investing in our businesses, that's one of the things that's driving our growth program, all while maintaining an appropriate capital structure, which is essentially making sure that we retain our investment-grade debt profile.
I will just remind everyone, our cash return framework is really based on a foundation of returning 75% to 80% of our funds available for distribution back to our shareholders every year, again, through a combination of dividends and share repurchase. When we think about our balance sheet, it's strong. We've been spending a lot of time and effort over the years really to strengthen the balance sheet. We've paid down debt. We've materially reduced our annual interest payments. We've got a lot of flexibility with our liquidity, and so really well-positioned as we move forward to deliver on some of the opportunities that are out in front of us. Just in closing, I just reiterate, Weyerhaeuser really does stand apart from anyone else in our industry in terms of our ability to deliver on our Accelerated Growth Program.
Our scale is unmatched in the industry with our timberlands, our wood products assets, the quality, the diversity, the focus on operational excellence and innovation. We have a proven track record of delivering across all of these, and we're really excited about what comes next. I think with that, Anthony, why don't we just go ahead and open it up for Q&A?
Great. Thank you. Very helpful overview. Maybe just going through some of those in a little bit more detail and starting off with timberlands. Can you talk about your southern footprint versus your western footprint in terms of how those are differentiated? Maybe what differentiates your holdings versus other timberland owners? Then just maybe touch on current log price trends and market trends.
Sure. Well, when you think about our timberlands portfolio as a whole, the thing that really differentiates us from everyone else is the scale and the quality and the diversity. Each individual wood basket is going to have its own supply-demand dynamics, and so you may have periods of time where you have one area that's a little stronger than the other. When you look across the totality of our holdings, really just no one else has the scale. We are, as I said, over 10 million acres in the U.S. Our next largest competitor has about half of that. It's not just about the number of acres, it's about the quality of those acres, and we've really been focused over the last several years on selling off the lower-performing assets and redeploying that capital into higher-performing assets.
We've got some materials in our investor deck that really kind of highlight how that's benefited us, but really to the tune of just buying and selling in terms of dollars, comparable amounts, but driving an incremental $60 million of EBITDA from just constantly upgrading that portfolio. When we look at the West, one of the key attributes that we've seen there for a very long time is the access that we have to export markets. About a third of the logs that we send to the market every year in the Northwest go offshore, primarily to Japan, but also to China and Korea. That's provided an extra tensioning in that market that's really put a floor on log prices and made that a very tensioned wood basket. It's a very profitable place to own timberlands. We are recreating that in the South.
We are one of the only, if not the only, timberlands owner that is actively shipping logs out of the U.S. South via break bulk. When you think about shipping via break bulk versus container, there are substantial cost improvements that you can get in doing that. When we think about just some of the opportunities in the South, we really think growing that export business, we doubled it from 2024 to 2025. We're looking at doubling that again from 2025 to 2026. That creates a tensioning in those wood basket and provides us with additional opportunities for those logs. We're excited about that. In terms of log prices, the U.S. South has been pretty stable for a long period of time, and that remains the case today.
In the Pacific Northwest, you see log prices and lumber prices tracking a little bit more closely. As we've seen Western lumber prices improve recently, we've seen Western log prices doing that as well.
Great. Maybe moving to wood products. You have a number of businesses there, lumber, OSB, engineered wood products, distribution. Can you talk about those businesses in a little bit more detail? Can you also touch on the TimberStrand investment?
Yeah. Maybe I'll start with TimberStrand.
Okay.
That's one of the more exciting things that we're working on at the company. We announced a little while ago, we're building a new EWP facility, engineered wood products facility in Monticello, Arkansas, that will produce TimberStrand. That is a very unique product. It is a proprietary product that takes low-grade timber and turns it into a high-performance, high-value beam product. It's a product that is the highest margin product that we currently produce across our wood products business. Currently, we have one facility in Canada that manufactures that. It's a $500 million investment. When that mill comes online, we expect that to generate over $100 million annually of EBITDA. That's making good progress. The construction is going well. We expect that to come online in 2027 and ramp up from there.
We're really excited about the product, the diversity of end markets that we can serve. It's also really a platform technology that we're looking to use to drive innovation with new product development. Really excited about that. On the lumber side, we have continued to invest in that business really to have the low-cost mill set across the industry. You can see that over the last five years, on average, we have the highest EBITDA margins in the industry. We're continuing to focus on that, improving efficiency, driving productivity, reliability, taking costs out of the system. That's something we've been doing year after year for a very long time and will continue to do that. We really do have a very strong platform. We've seen lumber prices picking up.
Last year just was a very difficult year with what was going on with housing. We have seen improvements both in Q1 and now quarter to date in Q2 with lumber prices. That's a big driver of cash flow for us. That's a nice little tailwind. On the OSB side, the market has been a little bit more challenged here recently. Again, the U.S. housing, particularly single-family housing, is a big driver for OSB demand. That's been, I would say, lackluster of late in terms of single-family housing. That's put some pressure on that. On the EWP side, that is an area where you just don't see as much volatility in pricing. It's come down a little bit. We're actively working on pushing price to offset some of the increases in fuel costs. I think that's to date going well.
Overall, we've been investing in what I think is the premier wood products manufacturing business in the industry. We've got a lot of additional opportunities that we laid out in our growth program to continue to drive earnings growth and cash flow growth across that business.
Of lumber OSB, EWP, what is most exposed to new housing construction versus repair and remodel?
Yeah, I would say OSB is the most directly exposed. About 25% across the industry of OSB demand comes from single family housing. You see that most directly aligned. Now, I would say EWP too is very focused on single family, although there are some opportunities in industrial, multifamily, et cetera there. Lumber has about 40% of demand is repair and remodel, so that's probably a little bit more of the demand coming from repair and remodel versus 30%-35% from single family.
All right. Great. Maybe just finally, can you touch on the distribution business? The smaller business.
Yeah. Our distribution business, we've been growing that business. We've added three new distribution facilities here over the last couple of years. The primary purpose originally for our distribution business was really as a channel for our engineered wood products business. About 50% of our EWP sales go through our internal distribution, and that's an opportunity, I think, for us to continue to penetrate in some markets where we don't have as much uptake with our EWP product. Over and above that, we think there's additional growth opportunities just in terms of some of the things that we can do from a distribution standpoint. We've got good relationships with some of the other specialty manufacturers, so think Trex, think AZEK, think some of the siding products, et cetera. We're excited about that.
It's a relatively low capital growth opportunity for us, we're looking to continue to build out our footprint across our distribution business. It's going well so far.
Great. You talked about lumber and price improvement that you've seen year to date. There's obviously a dynamic there with import duties on Canadian lumber, Section 232. Can you just talk about that dynamic from a tariff and import duty perspective and sort of what that does to the market?
Sure. I'll give maybe just a really brief recap so everybody's grounded. This is all going back over 50 years. There's been a long-running dispute between the U.S. and Canada on softwood lumber. The way that land is owned in Canada, the government owns it. You pay crown duties for the wood that you get off of the provincial lands. The way that mechanism works, the U.S. industry has long said that's essentially a subsidy for manufacturing lumber in Canada. There's been a long-standing dispute, what that typically results in is duties on softwood lumber coming from Canada into the U.S. For most of 2026, those duties were at about 35%, there's a 35% duty on every stick of lumber that comes into the U.S. On top of that, under the Trump administration, they added an additional 10% for essentially national security reasons.
That all-in duty tariff right now is 45%. Now, as you can imagine, adding 45% to the cost in making lumber in Canada coming into the U.S., which is the primary market for lumber that's manufactured in Canada, really has put some pressure on Canadian manufacturers. It has taken a significant amount of lumber supply coming from Canada into the U.S. off of the market, which has had the effect of pushing lumber prices up somewhat here in the recent past. That duty is going to go down from 45% to 35% later this year. It's an annual mechanism that looks at a variety of variables.
Nevertheless, even with 35% all-in duty tariff, that still puts a lot of pressure on the Canadian producers, and it's one of the reasons I think you've seen a lot of Canadian mills that have been shut down over the last three years. When you look across North America as a whole, so Canada as well as the U.S., there have been probably 55 mills that have been closed over the last three years to the tune of about seven billion board feet. A pretty significant amount of supply has come out of the market here, just given some of the challenges the industry's seen lately. That's had the effect of essentially balancing out supply-demand, which is why you've seen lumber prices, even in a stagnant housing environment, move up quite a bit this year relative to last year.
Great. Just to be clear, you have operations in Canada. You lease timberlands. You had a mill there. You sold it. Net-net, this is positive for-
Net-net, it's positive for us. We did sell one mill in British Columbia. We still have two lumber mills in Alberta. We also have OSB and EWP mills in Canada, those are not subject to this. It's a difficult place to do business. If you are going to operate profitably in Canada, you have to be very good with very low costs, which fortunately for us, we are. Our Alberta mills are still profitable even with all of the headwinds. It is a challenging place to do business right now.
Yeah. Great. If there's any questions from the floor, there's a mic there. Maybe just Yeah?
Quick. Is Canada still harvesting, or are they just deferring harvest?
No, they're still harvesting. Yeah, they're still harvesting. Although, the backdrop in Canada, in addition to the duty dynamic, they've also had years of beetle infestation and forest fires that have really taken a lot of the timber supply out of production, and that's not going to come back during our lifetime. They're still harvesting, there's still harvesting activity going on, but there's overall, when you look across most of the provinces, less available timber for manufacturers. Timber availability, regulatory challenges, the duty structure just makes it some tough sledding right now.
Just pivoting to Strategic Land Solutions. It's becoming kind of increasingly important business. Can you talk about what's covered in that segment and kind of the broader strategy for land?
Yeah. This is an area I think we really differentiate ourselves. If you're going to own 10 million acres of land, I think it's incumbent upon you to make sure that you are maximizing the value of every acre you own. What that looks like is across most of our acres, we're going to continue to manage those for timber outcomes. We're very good at that. It's the core of the company. When you look across the portfolio, there is a lot of optionality that is embedded into a land holding like that, and that can include things like natural resources. We have call it 40 some agreements with construction materials companies like Vulcan, like Martin Marietta, that can generate steady revenue. The beauty about that business is prices go up every year.
It can include things like climate solutions, that's everything from solar and wind and forest carbon, our newest business, biocarbon. There's just a significant amount of climate solutions opportunity across that. Real estate, that runs the gamut from Peter or Jan wants to buy 200 acres to build a new cabin out in the woods at 3X, 4X what it's worth to us to manage it for timber, all the way up through selling land to a data center or to a Walmart, where they're going to pay a substantial premium over what it's worth to us to manage timber. Between those three businesses, we've developed a significant set of internal capabilities to go out and execute on that program.
It's one of the reasons that you've seen our Strategic Land Solutions business, which was up until recently named our Real Estate Energy and Natural Resources business, just continue to grow year after year. We expect that to continue. That's a big part of our 2030 Growth Program is some of the growth in the Strategic Land Solutions business.
Can you talk a little bit more about what's included in climate solutions?
Sure. Yeah. We've got things like the renewables, and I will just say there has been a significant amount of interest. The amount of activity in solar and even wind. There's not a lot of support at the administration level for wind, but we've just signed up two new wind agreements here recently. The demand for power is overwhelming. That's primarily for us focused on solar. We now have two operating solar facilities, three more under construction. We expect three or four to come online every year, really for the foreseeable future. That's a substantial premium to what we can generate in terms of cash flow and earnings from managing timber. You got the renewables, we've got the forest carbon, which is for someone that owns a lot of timber there's a significant amount of opportunity there.
I think we've really developed a leadership position in forest carbon for all of these companies that have net zero goals. Forest carbon is by far, by a wide margin, the least expensive option to tackle some of those climate commitments that they've made. We're seeing good interest there. It includes things like carbon capture and storage. The biggest carbon capture storage project that's going on, I believe, in all of North America is our project in Louisiana with Occidental Petroleum. They've signed up with Enbridge to start building the pipeline, so we're excited about that. It also includes things like mitigation banking. Anytime you're going to do construction that impacts wetlands, you need mitigation banking credits. With our landholding position, we're the third largest mitigation banking organization in the U.S., and we're continuing to look to grow that. It covers a wide swath of activities, but again, all of those are just optionality that's built into the land base, and we built out the expertise to execute on those opportunities.
Great. If we think about that list in terms of renewables, forest carbon, CCS, mitigation banking, what's contributing the most today, and if you think to 2030 or maybe beyond, what do you think has the most upside long term?
Yeah, today it's conservation, mitigation banking, and renewables that make up the majority of our climate solutions business. As we get out over the next five years, forest carbon is going to become a bigger portion of that. We haven't really spent a lot of time talking about biocarbon. We think that's one of the biggest opportunities in our industry, maybe in a generation. Essentially what that is, we're working with a company called Aymium. They have a proprietary process that converts low-value wood, whether that's residuals from a sawmill or pulpwood chips. They run that through a process and turn it into a very dense carbon, what we call biocarbon material, that can be used as a drop-in replacement for metallurgical coal. This is, we think, a really significant opportunity.
It's part of our 2030 growth program to build out up to 7 million tons of production, or 7 million tons of fiber usage, which would convert into 1.5 million tons of biocarbon to sell to steel, silicon manufacturers. There's a lot going on globally, particularly in Europe and Japan, where they're putting new taxes on carbon-intensive industries. That is going to become increasingly expensive for manufacturers, and this is an opportunity to play in that space. We think that's a really big opportunity. Ultimately, when you get to 2030 and beyond, that could be by far the biggest opportunity for us. We're excited about that. CCS, it's taken a lot longer than we expected, but ultimately, those projects, as they do eventually come online, will be very lucrative for us.
Right. Everyone's trying to build data centers. They take a lot of land. I don't know if you have any direct exposure to data centers. Do you just see it through maybe energy projects or other-
It's a combination. I'd say two things. On the data center front, we have a team that is specifically focused, as you would imagine, on selling land projects to developers of data centers. There are a few things that are really important when you're developing a data center. Power, obviously, that is one of the key drivers. You need the land. Depending on the impacts on wetlands, you may need mitigation credits. One of the key issues that today is becoming really a prohibiting factor for a lot of data centers is the relationship with the local community. You're starting to see a lot of local pushback on some of these data centers, and that's an area where I think we can bring something interesting to the table. In most of these rural communities, we've been there for a very long time.
It's not unusual for one of our employees to be the mayor of one of these small communities. We have a team that's actively looking to really grow our sales into that channel. There's really nothing that is more lucrative than selling land to data centers. We're very focused on it, and we've got a pipeline of different properties that we're out actively marketing today to that space. On the energy side, I think there's an opportunity there working with some of our long-term partners like NextEra, those types of folks, to really work together. We've got the land position. We maybe can work with them on some renewables, maybe do some behind-the-meter power to get speed to execution on some of these data centers. We've got a team of folks looking at that as well.
Right. We're coming close to time, but I'm just curious. If you take a step back and look at market values for timberlands in public and private transactions, and then when we look at your portfolio, it seems like the discount to NAV has really sort of gapped out. I'm curious what you think is driving that and if there are catalysts to kind of close that gap. Some maybe you can control, others maybe you can't.
Yeah, look, obviously we're aware of the views on the disconnect there. I think it's pretty clear that we're trading at a pretty good disconnect to our NAV. When we think about the ranges at which timberland packages are trading, even some average quality timberland packages, and compare that to the buildup of our NAV, it's pretty clear there's a disconnect. I think right now we're operating in an environment where the reality of the commodity prices have put us in a place where we're trading in cyclical lows given that environment. I think as you see the housing environment improve, we'll see some improvement in where we trade. That's kind of the reality of where we have traded historically is that the valuation tends to be driven by the projections of the next 12 months' cash flows.
Really going back to what we can do to close that gap, our whole 2030 growth strategy was designed around the fact that, hey, we like commodity businesses. We're in those businesses. We're going to make a lot of money in those commodity businesses when pricing is strong. We also have a lot of other things that we can do, whether it be the TimberStrand facility, whether it be expanding all the alternate uses across our timberland space, whether it be thinking about export growth, whether it be thinking about new product development that may not be as sensitive to some of those commodity price swings.
With the ability to add $1 billion of EBITDA ex price, excluding any sort of improvement in price, ultimately that's going to be something that really raises the floor on the cash flow and we think will drive meaningful value creation over time.
Share repurchase. We bought back a fair bit of stock here over the last several years as well, and so that's part of the equation also.
Great. Well, Devin, Davey, thank you for your time.
All right.
Thank you.
Appreciate it.