Deltic Timber Profits Slide On Wet Weather, Weaker Sales

Deltic Timber Corp. reported lower second quarter financial results as weakened demand for wood and lumber products in the company’s primary markets eroded sales and operating income, the Arkansas timberland and real estate concern announced Wednesday after the close of market.

For the period ended June 30, Deltic reported net income of seven cents per share, or $831,000, down 53% from net income of 42 cents per share, or $5.3 million, a year ago. Net sales for the three month period fell 22% to $45.6 million, compared to $58.6 million in the same quarter of 2014.

Deltic officials said the declining operating results were primarily due to lower operating income from Deltic’s Manufacturing segment mainly as a result of soft markets for both lumber and medium density fiberboard (”MDF”) during the second quarter of 2015.

The weakened demand for these wood products was primarily caused by wet weather conditions in the company’s primary market areas that resulted in reduced demand for building products and thus, reduced sales volumes and lower average sales prices for lumber and MDF, company officials said.

“Deltic’s financial performance for the quarter was also significantly affected by the negative impact of both a slower-than-expected recovery of the single-family residential housing market in the United States and wet weather conditions that slowed construction activity and resulted in weak demand for wood products,” said Chairman and CEO Ray Dillon. “At Del-Tin Fiber, we completed the repair of the damage caused by the fire that occurred there in March and restarted MDF production.”

On a more positive note, Dillon said the El Dorado-based lumber and wood products manufacturer accomplished the settlement of the insurance claims under both the property damage and business interruption policies maintained by the MDF plant and recorded the positive financial impact of these settlements during the quarter.

“In the company’s real estate development operations, we had a successful offering of the second phase in our Wildwood Place development with 28 of 43 lots offered for sale either closed or under contract and scheduled to close by the end of the third quarter,” the Deltic CEO said. “We are also currently developing additional lots in our Chenal Valley development to be offered later this year.”

Here are other highlights of Deltic’s first quarter.

• The Woodlands segment reported operating income of $4.9 million for the second quarter of 2015, a decrease from $5.3 million in 2014’s second quarter, primarily as the result of decreased oil and gas related income. The pine sawtimber harvest in the second quarter of 2015 was 189,480 tons, an 11 percent increase from the 170,737 tons harvested during the second quarter of 2014.

• The Manufacturing segment reported operating income of $3.5 million for the second quarter of 2015, which compares to $8.7 million in 2014’s second quarter. The decrease was due to a combination of lower sales volumes and lower average sales prices for both lumber and MDF, increased cost for the logs used as raw material in Deltic’s sawmills resulting from the increased pine sawtimber prices, and higher planned and unplanned maintenance expenses at the Company’s MDF plant.

• The Real estate segment reported an operating loss of $.3 million in the second quarter of 2015, compared to operating income of $.2 million for the same period of 2014. There were 12 residential lots sold in the second quarter of 2015 versus 7 lots sold in 2014’s second quarter. Due to the mix of residential lots sold, the current quarter’s average per-lot sales price was $69,500 compared to an average sales price of $92,300 per lot in the second quarter of 2014.

• Corporate operating expense was $5.1 million in the second quarter of 2015 compared to $4.5 million for the second quarter of 2014. Capital expenditures were $8.3 million in 2015’s second quarter and $14 million for the first six months of 2015

Going forward, Dillon was cautious optimistic concerning the outlook for the third quarter and remainder of the year.

“Actual sales volumes for both finished lumber and MDF are dependent upon market conditions. Residential lot sales are projected to be 25 to 35 lots and 75 to 100 lots for the third quarter and year of 2015, respectively,” Dillon forecasted. “Commercial acreage within Chenal Valley continues to receive interest from potential buyers; however, it is difficult for the company to predict the timing of closings of any commercial real estate transactions due to their highly uncertain nature, volatility, and the significant number of factors related to any sale.”

At the close of business Wednesday, Deltic shares were trending downward at $65.26, falling 44 cents as only 21,000 shares traded hands. For the year, the Arkansas company has traded in the range of $$59.80 to $70.29.