Deltic Timber 1Q earnings slide 79% from a year ago, ekes out three cents per share profit

Deltic Timber Corp.’s first quarter earnings were down 79% from a year ago as weak markets for wood products, a decrease in oil and gas-related income and higher operational and administrative expenses cut into the company’s bottom line, the company reported on Monday after the close of market.

For the period ended March 31, Deltic reported earnings of $400,000, or three cents per share, compared to net income of $1.9 million, or 15 cents per share, compared to a year ago. Total revenues rose slightly to $50.6 million, compared to $48.3 million in the same period of 2015.

“While the weak markets for wood products that existed in 2015 continued throughout the first quarter of 2016, Deltic’s operations generated positive financial results for the period,” said Deltic President and CEO Ray Dillon.

Overall, Deltic’s Woodlands segment generated operating income of $5.3 million in the first quarter compared to $6.5 million for the same period of 2015. The El Dorado timberland harvester brought in 205,608 tons of pine sawtimber during the current period of 2016, an 11% decrease from the 231,534 tons harvested in the corresponding quarter of 2015.

Deltic’s Manufacturing division produced operating income of $3.3 million for the first quarter of 2016, compared to $3.5 million in 2015’s first quarter. Included in the financial results for the first quarter of 2015 was a $1.7 million deductible cost incurred by the company related to both property insurance and business interruption insurance claims as a result of a fire at the medium density fiberboard (MDF) facility on March 10, 2015, company officials said. For the three-month period, Deltic sold 71.5 million board feet of lumber, an increase of 17% when compared to sales of 61.3 million board feet in 2015’s first quarter, as the company increased lumber production to match market consumption.

Deltic’s Little Rock-based real estate segment reported an operating loss of $600,000 for the first quarter of 2016, compared to an operating loss of $800,000 for the same period of 2015. Residential lot sales totaled 6 lots in 2016’s first quarter versus 2 lots in the first quarter of 2015. Due to the mix of lots sold, the current quarter’s average per-lot sales price was $85,200, an increase of $34,000 per lot when compared to first quarter 2015’s average per-lot sales price of $51,200. There were no commercial real estate acreage sales in the first quarter of either year.

Regarding the outlook for the second quarter and rest of the year, Dillon said the Arkansas timber, sawmill and real estate company anticipates the pine sawtimber harvest to be 200,000 to 225,000 tons and 725,000 to 765,000 tons, respectively. Finished lumber sales volumes are anticipated to be 65 to 75 million board feet for the second quarter and 265 to 285 million board feet for the year.

MDF sales volumes for the second quarter and year of 2016 are estimated to be 25 to 35 million square feet and 110 to 130 million square feet, respectively.  Actual sales volumes for both finished lumber and MDF are dependent upon market conditions, Dillon said. Residential lot sales are estimated at 5 to 10 lots and 90 to 120 lots for the second quarter and year of 2016, respectively.

“Due to the volatile nature of commercial real estate transactions and the significant number of factors related to any sale it is difficult to anticipate future closings,” Dillon cautioned. “The company continues to receive interest from potential buyers for its commercial acreage in Chenal Valley.”

Dillon said Deltic’s 2016 financial results will also benefit from the passage of the federal omnibus spending bill, which enacted a favorable capital gains treatment for income from timber harvesting activity. “In addition, we repurchased an additional 277,430 shares of Deltic stock during the first quarter, as we continued to increase the number of timberland acres owned by shareholders per outstanding share,” he said.

Deltic shares (NYSE: DEL) closed down 2.3%, or $1.46 at $62.09 in trading Monday. The company’s stock has traded between $50.84 and $70.29 per share during the last 52 weeks.