PotlatchDeltic Corp.’s second quarter earnings rose nearly 90% as the Spokane, Wash.-based timberland owner benefitted from its near-record lumber prices after reporting its first consolidated financial results following its merger with former rival Deltic Timber Corp. of El Dorado.
For the period ended June 30, PotlatchDeltic reported net income of $46.1 million or 73 cents per share, up 89.7% compared to net income of $24.3 million, or 59 cents per share in the same period a year ago. Revenue for the three-month period jumped 64.3% to $268.2 million, compared with $163.2 million in the same period of 2017.
Wall Street had expected the West Coast timberland REIT to post first quarter earnings of 72 cents per share on revenue of $277.34 million, according to Thomson Reuters. Following the release of PotlatchDeltic’s results after the close of market on Monday, company Chairman and CEO Mike Covey lauded the significant increase in company earnings follow the Deltic Timber acquisition.
“Our merger with Deltic Timber was perfectly timed as the combined set of assets benefitted from the historic run in lumber prices in the second quarter,” said Covey. “Lumber prices are pulling back from an all-time peak but are still robust. This is shaping up to be an extremely strong year for PotlatchDeltic by many measures.”
Potlatch Corp. closed out its $3.3 billion deal to acquire Deltic on Feb. 20 in an all-stock agreement that gave Potlatch shareholders 65% of the combined company, which also changed its name to reflect both companies’ past. After the deal closed, company officials said the combined company is expected to have a market capitalization of $3.3 billion and a total enterprise value of more than $4 billion, including approximately $700 million in net debt.
PotlatchDeltic, which retained a satellite headquarters in El Dorado, now has more than 1,500 employees and more than 200 customers through operations across its extensive timberland and lumber manufacturing portfolio. Together, PotlatchDeltic now oversees a timberland portfolio of nearly 2 million acres, with approximately 1.1 million acres in the U.S. South, including Alabama, Arkansas, Louisiana, and Mississippi.
In Arkansas, the company owns 933,000 acres of forestland, and operates lumber and paper mills in Warren, Waldo and Ola. Companywide, PotlatchDeltic operates eight wood products manufacturing facilities, including six lumber manufacturing facilities, one medium density fiberboard (MDF) facility in Arkansas and one industrial plywood mill. The February merger also combined Potlatch and Deltic’s two real estate business under one banner.
In total, the combined company will have lumber capacity of 1.2 billion board feet, which is heavily weighted toward high-margin southern yellow pine lumber that is produced at its three southern mills. The transaction also combined the two companies’ complementary and successful real estate businesses.
Highlighted in the quarterly results, PotlatchDeltic reported segment revenues of $92.5 million for its Resource business, up 21% from $76.5 million in the previous quarter. The second quarter sales growth was aided by a 19% spike in Northern sawlog prices as indexed volumes benefitted from higher lumber prices and seasonally lighter logs, company officials.
In the company’s Wood Products segment, revenue came in at $193.6 million, compared with $139.8 million in the first quarter. Company officials said lumber pricing rose 11% with strong markets supported by improving housing demand and the ongoing effect of transportation disruptions. Lumber shipments increased nearly 27% due to solid demand and a full quarter of Deltic operation.
In the company’s combined real estate business, revenue jumped to $16.4 million, compared to $10.6 million in the previous quarter. There were 11,571 acres of rural real estate sold during the quarter with average pricing at $1,095 per acre. In the company’s Chenal Valley office in west Little Rock, 13 residential lots were sold at average pricing of $74,000 per lot.
In early trading on Tuesday, PotlatchDeltic’s shares (NASDAQ: PCH) were up 10 cents at $45.75 on the Nasdaq stock exchange.