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Chinese demand for logs keeps Weyerhaeuser in the black despite weak U.S. housing

Post by John Gillie / The News Tribune on July 29, 2011 at 3:16 pm with No Comments »
July 29, 2011 3:18 pm

Federal Way’s Weyerhaeuser Co. stayed barely in the black in the second quarter thanks in large measure to a healthy demand for logs and paper in the Chinese market, the company said today.

The company earned $10 million or 2 cents a share on revenues of $1.8 billion in the second quarter. That compares with earnings of $14 million or 7 cents a share in the second quarter of 2010. The number of common shares outstanding last year at the end of the quarter was roughly 39 percent of the shares outstanding at the end of June this year.

The company’s wood products business lost $52 million in the quarter on price declines and still weak demand. A slow housing market deflated lumber prices by 5 percent and oriented strand board prices by 7 percent, the company said.

The company’s timber and cellulose divisions saw stronger prices in part because of demand from Asian markets, particularly China. Weyerhaeuser’s timberlands operations contributed $112 million to pre-tax profits. Prices rose 9 percent in the West, driven by Chinese demand for logs.

In the cellulose business, the division contributed $80 million to pre-tax earnings. Prices jumped 5 percent per ton, but volume was down slightly.

Chinese demand has begun to flatten, however, said Weyerhaeuser CEO Dan Fulton in a conference call with analysts and reporters.

“Demand from China continued to be an important force in the markets early in the second quarter,” he said. “But late in the quarter, there was a noticeable reduction in both price and volume. Some of this change shows up in our second quarter results and will affect our outlook for the third quarter.”

The company said it expects slightly weaker demand in the third quarter, but will realize some greater efficiencies in the pulp business because maintenance updates have been performed.

The results of the sale of two company divisions, Hardwoods and Westwood Shipping Lines, will be realized in the third quarter. The company expects proceeds of the sale of its Hardwoods Division to be $108 million. The shipping business is expected to yield a gain of $45 million.

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