Forest products giant Weyerhaeuser Co. said Wednesday its third-quarter profit fell 26 percent as the downturn in the housing market drove wood product prices and demand down sharply.
Net income fell to $211 million, or 85 cents per share, from $285 million, or $1.16 per share, a year ago. Revenue slipped 2 percent to $5.33 billion from $5.43 billion last year.
Analysts polled by Thomson Financial had expected a profit of 87 cents per share on $5.57 million in revenue.
“While anticipated, the housing market decline was more abrupt and drove wood products prices and demand into a deeper plunge than expected,” Steven R. Rogel, chairman, president and chief executive officer, said in a statement. “We are taking the necessary actions to match our production to demand and over the long-term, remain confident about the residential housing market.”
Weaker prices for lumber, plywood and other wood products caused earnings in Weyerhaeuser’s wood products segment to tumble to $11 million, a 91 percent decline from $124 million in third quarter 2005. The company also said it expects that unit to run an operating loss in the fourth quarter.
Weyerhaeuser, based in suburban Federal Way, posted a $135 million profit in its real estate and related assets segment, down almost 7 percent from $145 million last year.
Dan Fulton, the division’s president and CEO, said an oversupply of new and existing homes is behind the housing slump, unlike historical downturns that have been fueled by high interest rates, weak economies or job losses.
While housing markets in Seattle and Houston have remained relatively healthy, Fulton said Southern California, Las Vegas and Phoenix have had serious slowdowns. Suburban Washington, D.C., has also been limping, but Fulton said that market is showing signs of improvement.
The company said it expects an increase in fourth-quarter earnings from real estate and related assets, citing a backlog of homes that have been sold but not closed.
“We’re confident that the housing markets will return to firm footing when the current oversupply of homes is absorbed and when buyers become confident that home praises have stabilized,” Fulton said in a conference call with analysts.
Shares of Weyerhaeuser fell 3 cents, or 0.05 percent, to close at $63.70 Wednesday on the New York Stock Exchange. The stock has traded between $54.25 and $75.50 over the last year.
“There are obviously a lot of moving parts,” said Steven Chercover, an analyst with investment firm D.A. Davidson & Co. “You have a real headwind with everything that’s associated with residential construction, their home building division, and wood products and timberlands,” yet the company posted stronger results in containerboard packaging, recycling, fiber and paper, he said.
Earnings in Weyerhaeuser’s timberlands unit slipped to $178 million, down nearly 7 percent from $191 million last year. The company blamed falling lumber prices and seasonally reduced harvest levels, and warned that it expects fourth-quarter earnings for the segment to be lower than in the third quarter because of decreased demand for lumber.
Higher prices and lower manufacturing costs boosted profits in the company’s cellulose fiber and white papers unit to $115 million, up from a $2 million loss last year. The containerboard, packaging and recycling segment posted earnings of $96 million, up from $36 million last year.
Jim Keller, senior vice president of containerboard packaging and recycling, said the company expects better results in future quarters because of a restructuring plan that has included job cuts and plant closures.
The latest quarter included after-tax charges of $58 million, or 23 cents per share, related to the closure of a Canadian plant and asset impairments and costs related to facility closures or curtailments.
The charges were partially offset by a gain of $31 million, or 13 cents per share, from the sale of its North American composites business, and a gain of $15 million, or 6 cents per share, due to a reduction of the reserve for hardboard siding claims.
Last year’s earnings included a gain of $75 million, or 31 cents per share, for the sale of MAS Capital Management Partners, a joint venture; a charge for closing facilities of $19 million, or 8 cents per share. and a loss of $14 million, or 6 cents per share, for the early repayment of debt.
For the nine-month period ending Sept. 24, Weyerhaeuser posted a net loss of $55 million, or 22 cents a share, compared with a $944 million profit, or $3.85 cents a share, for the nine months ended Sept. 25., 2005. Revenue in the first three quarters was $16.2 billion, down slightly from $16.3 billion a year earlier.