Arkansas Timber Owner Potlatch Sees 3Q Earnings Slide 34% On Weaker Lumber Prices

Potlatch Corp. on Tuesday (Oct. 27) reported that third quarter profits were down 34% from a year ago as lower lumber prices for the timberland owner cut in the company’s bottom line.

For the period ended Sept. 30, Potlatch reported net income of $21.8 million, or 53 cents per share, on revenues of $174.5 million. Net income was $33.2 million, or 81 cents per share, on revenues of $177.2 million in the third quarter of 2014. Wall Street had expected the Washington State real estate investment trust (REIT) to report third quarter earnings of 52 cents on revenue of $180 million, according to analysts surveyed by Thomson Reuters.

Although based in Spokane, Wash., the company is one of the largest timberland owners in Arkansas with nearly 410,000 acres of forestland in Arkansas. Timber harvested in Arkansas is sold to the Potlatch mill in Warren, and to other area lumber and paper manufacturers, company officials said.

“While our consolidated results were up significantly in the third quarter relative to the second quarter due to seasonally higher harvest volumes, sequentially lower lumber prices provided a headwind,” said Potlatch CEO Mike Covey. “We are encouraged by increases in lumber prices the last few weeks and continued improvement in the U.S. housing market.”

Following are other highlights of Potlatch’s third quarter financial results.
• Potlatch’s Resource’s operating income was $36.4 million on revenues of $102.3 million in the third quarter, compared to operating income of $8.8 million on revenues of $44.1 million in the second quarter of 2015. Earnings increased due to seasonally higher harvest volumes.

• Wood Products lost $5.4 million on revenues of $82.9 million in the third quarter, compared to a loss of $2.0 million on revenues of $84.2 million in the second quarter of 2015. Average lumber prices were down 5% in the third quarter compared to the second quarter. Slightly higher lumber shipments partially offset the effect of lower lumber prices.

• Real Estate’s operating income was $4.2 million on revenues of $7.8 million in the third quarter, compared to operating income of $8.5 million on revenues of $10.7 million in the second quarter of 2015. Second quarter results included the sale of two commercial sites.

At the end of Tuesday’s trading session, Potlatch shares (NASDAQ: PCH) were down 22 cents at $29.09. The timberland REIT’s stock has traded in the range of $28 and $44.20 over the past 52 weeks.