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Weyerhauser sees steady housing growth

The largest timberland owner in the US highlighted its recent merger and signals of improvement in the country's housing markets on its earnings call.

Continued strengthening in US housing markets and increased log exports to Japan and China are expected to drive growth in the year ahead, timberland REIT Weyerhauser said Friday.

Speaking on the company’s fourth-quarter earnings call, Weyerhauser president and chief executive officer Doyle Simmons highlighted increases in both single-family and overall US housing starts as well as rising wages and consumer confidence as positive factors for the company’s domestic markets.

“Although builders are managing through some constraints, such as the availability of skilled labor, stringent permitting requirements and land and construction cost inflation, our customers echo the optimism seen in builders’ surveys and feel that the housing market will maintain solid upward momentum,” Simmons said.

The company reported net earnings of $551 million for Q4, a substantial increase from the $59 million in earnings reported in the same period last year, which was attributed largely to proceeds from the $2.5 billion sale of its cellulose fibers business to International Paper. For 2016 as a whole, Weyerhauser reported net earnings of over $1 billion, an increase over 2015’s $462 million in net earnings, which was also attributed to the cellulose fibers sale.

Regarding Japan, the biggest export market for the Seattle-based company, Simmons said that construction had returned to normal levels following a tax increase that had slowed construction and that wooden housing starts were up 8 percent last year.

Simmons also said that while seasonal factors suppressed export volumes to China coming into the Q1 2016, prices had gone up and the company anticipates exports to grow as the result of demand and the timing of shipments.

Last year’s merger with Plum Creek, a transaction executives labeled as “transformational,” led to a near doubling of the company’s timberland holdings.

“As we continue to work through [the merger] and as I like to say, earn the right to continue to grow, we will be looking at timberland acquisitions to potentially grow our company,” Simmons said. “With the scale we have and diversity of geography we have, we don’t have to grow so we can be very disciplined as we move forward.”

After the merger, Weyerhauser’s portfolio consists of 2.5 million acres in the northern US, 3 million acres in the western US and 7.4 million acres in the southern US, according to a December presentation.