Deltic Timber’s profits quadruple on strong timber sales, improved real estate market

As Arkansas’ housing market continues to improve, Deltic Timber Corp.’s profits quadrupled in the second quarter as the company’s manufacturing and real estate segments benefitted from a stronger lumber market and a spike in residential lot sales.

Deltic’s second quarter performance is also a quick turnaround from weak first quarter results, which saw the El Dorado-based company report earnings of only three cents per share.

“The company’s financial performance for the second quarter is indicative of the potential income and cash flow that Deltic’s excellent group of operating assets can produce, even when markets are only marginally favorable,” said Ray Dillon, Deltic’s longtime president and CEO.

For the period ended June 30, the timberland and real estate operator reported second quarter net income of $4.2 million, or 35 cents per share, compared to year ago results of $800,000 and seven cents per share. Net sales for the quarter rose 24.3% to $56.7 million, compared to $45.6 million in the same period of 2015.

Deltic’s Woodlands segment reported operating income of $4.4 million for the second quarter of 2016, compared to $4.9 million in 2015’s second quarter, primarily due to decreased oil and gas-related income. The pine sawtimber harvest in the second quarter of 2016 was 203,773 tons, an 8% increase from the 189,480 tons harvested during the second quarter of 2015. The average per-ton sales price for pine sawtimber was $27 per ton for the second quarter of both 2016 and 2015.

The company’s manufacturing segment reported operating income of $7 million for the second quarter of 2016, compared to $3.5 million in 2015’s second quarter. The increase was mainly due to an increased sales volume and a higher average sales price for lumber, as market conditions in 2016’s second quarter were improved from the prior year’s second quarter. During the second quarter of 2016, Deltic’s sawmill operations sold 69.9 million board feet, a 13% increase when compared to sales in the second quarter of 2015 of 61.9 million board feet.

The average lumber sales price was $371 per thousand board feet in the second quarter of 2016, a 7% increase from the $347 per thousand board feet reported in the second quarter of 2015. For the second quarter of 2016, the company sold 27.7 million square feet of MDF (medium density fiberboard), a 35% increase when compared to 2015’s second quarter MDF sales of 20.5 million square feet.

In the company’s Little Rock-based real estate division, Deltic reported operating income of $1.8 million in the second quarter of 2016, compared to an operating loss of $300,000 for the same period of 2015. During 2016’s second quarter, Deltic sold a 10.8-acre commercial real estate site for $1,647,000, or $152,500 per acre, while there were no sales of commercial real estate in the corresponding period of 2015.

During the second quarter of 2016, there were sales of 22 residential lots for an average sales price of $90,100 per lot. This compares to sales of 12 residential lots for an average sales price of $69,500 per lot during the second quarter of 2015. The average sales price of residential lots sold increased $20,600 per lot in 2016’s second quarter when compared to the same period in 2015, due to the mix of residential lots sold.

“(We) closed the sale of several of the lots that were offered during the first quarter of 2016 in a neighborhood in our Chenal Valley development, resulting in sales of 22 lots during the second quarter at an attractive average sales price per lot,” Dillon said. “We also closed on the sale of a 10.8-acre commercial real estate site during the quarter, indicating the increased interest in our mix of properties in Chenal Valley that are zoned for commercial development.”

Finished lumber production and sales volume are estimated at 60 to 70 million board feet for the third quarter and 265 to 285 million board feet for the year. MDF sales volumes for the third quarter and year of 2016 are forecast to be 25 to 35 million square feet and 100 to 120 million square feet, respectively.

On the real estate front, Deltic said commercial acreage within West Little Rock’s Chenal Valley continues to receive interest from potential buyers. However, Dillon said it is still 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’s shares (NYSE: DEL) ended flat at $69.50. Over the past 52 weeks, the company’s stock has traded at a low of $50.84 to a high of $70 per share.