Deltic Timber’s Q1 Earnings Slide 60% On Weather Problems, Fiberboard Plant Fire

Deltic Timber Corp.’s saw its earnings plummet more than 60% in the first quarter as the El-Dorado based timber harvester and real estate company struggled during the first three months of fiscal 2015 because of harsh winter weather conditions and manufacturing production issues.

For the period ended March 31, Deltic reported net income of $1.9 million, or 15 cents per share, compared to net income of $4.9 million, or 39 cents per share, a year ago. Sales for the quarter were down 12.7% to $48.3 million, compared to $55.3 million in the first quarter of fiscal 2014.

Company president and CEO Ray Dillon explained that the lower profits for the quarter were due to the negative impact on the lumber market caused by winter weather conditions hampering housing construction and a fire that occurred at the company’s fiberboard plant near El Dorado.

“Harsh winter weather conditions existed for much of the United States during the first quarter,” Dillon said in a statement. “The negative impact on the lumber market was reflected in reduced demand for lumber and decreased lumber sales prices.”

Dillon added that the fire that occurred in the press at the company’s Del-Tin medium density fiberboard (MDF) plant in Southern Arkansas also negatively impacted its first quarter bottom line.

Dillon said the plant, which manufactures and markets fiberboard primarily in the furniture, flooring and molding industries, halted production for just over a month. In connection with the fire, Deltic recognized the expense associated with the insurance policy deductibles for its property damage and business interruption insurance policies, company officials said.

On a positive note, Dillon noted now that the weather is better and spring has arrived, ground conditions are improving rapidly, and logging activity is increasing. Also, the damage at the MDF plant has been repaired and production is back up again.

“In our Real Estate operations, we are actively developing additional lots to be offered for sale soon,” Dillon said.

Here are other highlights of Deltic’s first quarter.

• The Woodlands segment had operating income of $6.5 million for the first quarter of 2015, compared to $5.3 million for the same period of 2014, a 22% increase. The company harvested 231,534 tons of pine sawtimber during the current period of 2015, a 10% increase from the 209,548 tons harvested in the corresponding quarter of 2014.

• Deltic’s Manufacturing segment reported operating income of $3.5 million for the first quarter of 2015, compared to $8.3 million in 2014’s first quarter. During the first quarter of 2015, the company sold 61.3 million board feet, a decrease of 3 million board feet when compared to sales of 64.3 million board feet in 2014’s first quarter, as the company decreased lumber production to match market demand, which was impacted by winter weather conditions. The average lumber sales price was $358 per thousand board feet in the first quarter of 2015, a 5% decrease from the $378 per thousand board feet realized for the first quarter of 2014.

• The company’s Real Estate segment reported an operating loss of $.8 million for the first quarter of 2015, which compares to operating income of $.2 million for the same period of 2014. Residential lot sales totaled two lots in 2015’s first quarter versus 23 lot sales in the first quarter of 2014. The decrease in residential lot sales was largely impacted by the timing of new neighborhood lot offerings at the end of 2014.

• Corporate operating expense was $4.6 million in the first quarter of 2015, which compares to $4.8 million for the corresponding quarter of 2014. Capital expenditures were $5.7 million in 2015’s first quarter, compared to $3.1 million for the corresponding period of 2014.

Going forward, Dillon said actual sales volumes for both finished lumber and MDF for the second quarter and remainder of 2015 “are dependent upon market conditions.” Concerning the real estate division, he said residential lot sales are estimated at 10 to 20 lots and 75 to 100 lots for the second quarter and year of 2015, respectively.

“Even though commercial acreage in Chenal Valley has received interest from potential buyers, it is difficult to anticipate future closings due to the volatile nature of commercial real estate transactions and the significant number of factors related to any sale,” Dillon said.

On Friday (April 17), Dillon spoke at a press conference to announce the widening to four lanes of Rahling Road, a major thoroughfare in the company’s upscale Chenal Valley development. The expansion, expected to take 9 months to complete, will allow for increased traffic in the growing corridor. It will also lead to more development along Rahling Road. Currently, a project to develop more residential, multi-family, and commercial/office space is underway.

At the close of business Monday, Deltic shares were 15 cents at $65.26. The company has traded in the range of $58.05 to $69.79 over the past year.