PotlatchDeltic Corp. on Monday (July 29) reported that second quarter profits were down 63% from a year ago, even though the Spokane, Wash.-based real estate investment trust (REIT) benefitted from the sale of more than 1,800 acres of Arkansas timberland that netted the company about $20 million.
For the period ended June 30, PotlatchDeltic reported net income of $17.1 million, or 25 cents per share, compared to $46.1 million, or 73 cents per share, in the same period a year ago. Revenue for the three-month period fell nearly 20% to $215.6 million compared to $268.2 million in the same quarter of 2018.
Wall Street had expected the West Coast timberland REIT to post second quarter earnings of 18 cents per share on revenue of $214 million, according to Thomson Reuters. Following the release of PotlatchDeltic’s results after the close of market Monday, company Chairman and CEO Mike Covey said earnings were down due to “difficult operating conditions,” along with depressed lumber prices that have been mired in a yearlong slump.
“Our Timberlands and Real Estate businesses continued to perform well during the quarter despite extremely wet weather and difficult operating conditions in the South while our Wood Products results declined significantly due to a 35% drop in lumber prices compared to one year ago,” said Covey. “Our Real Estate business closed two large transactions in the quarter, including the sale of rural land in Arkansas for $11,000 per acre.”
Covey also said PotlatchDeltic returned $79 million to shareholders during the first half of the year in the form of dividends and share repurchases totaling $25 million. “We continue to invest capital in our mills and are on pace to complete $40 million of improvements to expand capacity and increase grade recovery,” he said.
Last year, Potlatch Corp. closed out its $3.3 billion deal to acquire El Dorado-based Deltic Timber 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. Today, PotlatchDeltic still retains a satellite office in El Dorado and has more than 1,500 employees and 200 customers through operations across its extensive timberland and lumber manufacturing portfolio.
Nationwide, PotlatchDeltic 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 is the second large private landowner in the state. Through its taxable REIT subsidiary, PotlatchDeltic also operates six sawmills and an industrial-grade plywood mill.
Operationally, PotlatchDeltic’s Timberlands business earnings were mostly flat at $26.1 million, compared to $26.9 million in the same period of 2018. Revenues were down 1.9% to $66.9 million, compared to $68.2 million a year ago. Company officials said northern sawlog prices increased 8% due to higher index price. Southern sawlog and pulp prices also rose due to continued wet weather and constrained log supplies.
In the company’s Wood Products division, the lumber mill operator reported a $2 million loss compared to earnings of $7.2 million a year ago. Revenues for the division rose 4% to $138 million compared to $132.3 million a year ago. Company officials said earnings and revenues were down slightly from the first quarter, while wood products shipments increased by 14% to catch up to transportation and weather challenges in the first quarter. Three mills experienced downtime for planned maintenance and capital improvements, they said.
In PotlatchDeltic’s real estate operations, earnings spiked by a whopping 1,059% to $31.3 million, compared to only $2.7 million a year ago. Second quarter sales rose by a comparable measure to $36.4 million, up from $6.2 million in the same period of 2018. PotlatchDeltic still operates a 4,800-acre master-plan community in West Little rock that is about half complete, officials said.
Company officials said the timberland REIT sold 12,375 acres of rural real estate at an average price of $2,450 per acre, including the sale of a former Deltic tract for $19.6 million. The West Coast REIT also sold 44 residential lots at an average price of $85,000.
At the close of business Monday, PotlatchDeltic shares rose by four cents to $38.50 on the Nasdaq stock exchange. The company’s shares have traded in the range of $28.07 as a low and $44.92 as a high over the past 52 weeks.