In what the company’s top executive described as “challenging operating conditions,” West Coast timberland trust PotlatchDeltic Corp. reported Monday (April 29) that first quarter profits were down nearly 55% just over one year after the company completed its $3.3 billion acquisition of El Dorado-based Deltic Timber.
For the period ended March 31, PotlatchDeltic reported net income of $6.6 million or 10 cents per share, compared to net income of $14.6 million, or 29 cents per share in the same period a year ago. Revenue for the three-month period also slid 9.2% to $181.7 million, compared with nearly $200 million in the same period of 2018.
During the quarter, the Spokane, Wash.-based Real Estate Investment Trust (REIT) completed the $93 million sale of Deltic Timber’s former medium density fiberboard plant in El Dorado, which was run by the company’s subsidiary Del-Tin Fiber LLC. The Arkansas mill was sold to Roseburg Forest Products, a privately-owned company headquartered in Springfield, Ore., that produces particleboard, medium density fiberboard and owns 600,000 acres of timberland in Oregon, North Carolina and Virginia.
“We believe this deal is a win for all parties. The El Dorado MDF employees are a dedicated group and Roseburg is a world-class MDF producer,” said PotlatchDeltic Chairman and CEO Mike Covey “(We) will give full focus to the two sawmills and half a million acres of excellent timberland acquired in the 2018 merger of Potlatch and Deltic.”
PotlatchDeltic officials said the first quarter results included after-tax special items, including $43 million cash from the sale of the legacy Deltic MDF facility in El Dorado and a loss on the extinguishment of debt. Excluding those one-time items, the company reported first quarter earnings of eight cents per share, just ahead of Wall Street’s forecasts of three cents per share on revenue of $183.6 million, according to Thomson Reuters.
“Our first quarter results reflect seasonally lower activity and challenging operating conditions,” said Covey. “We continue to expect improvement in lumber prices as the building season gets underway in earnest. Meanwhile, our balance sheet remains strong and provides the flexibility to drive shareholder value.”
PotlatchDeltic, which maintains a satellite headquarters in El Dorado, has more than 1,500 employees and more than 200 customers from operations across its timberland and lumber manufacturing portfolio. Together, PotlatchDeltic now oversees a timberland portfolio of nearly 1.9 million acres, with approximately 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 six sawmills, an industrial-grade plywood mill, a residential and commercial real estate development business and a rural timberland sales program.
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 produced at its three southern mills. The transaction also combined the two companies’ complementary and successful real estate businesses.
Company officials said lumber price realizations increased nearly 4% to $380 per MBF in the first quarter, while lumber shipments also declined 10% due to operational and transportation issues.
In the company’s combined real estate business, revenue fell 62.2% to only $6.2 million, compared to $16.4 million in the previous year. There were 2,343 acres of rural real estate sold during the quarter with average pricing at $1,801 per acre. In the company’s Chenal Valley office in west Little Rock, seven residential lots were sold at average pricing of $96,124 per lot. Last year’s first quarter results included a real estate sale and 67 residential lots, officials said.
PotlatchDeltic’s shares (NASDAQ: PCH) on Monday fell 97 cents at $38.94, down nearly 2.5%. In the past 52 weeks, the timberland owner has traded in the range of $28.07 as a low and $52.90 as a high.