Rayonier Q2 Earnings Call Highlights

Rayonier’s Q2 results improved significantly following the PotlatchDeltic merger, with adjusted EBITDA reaching $124 million and adjusted net income totaling $32 million. Management said integration remains on track to meet its synergy targets. The company completed a tax-efficient timberland exchange, selling 36,000 acres in Washington for $145 million and acquiring 57,000 acres in Texas and Alabama for $146 million. The deal is expected to increase timber-only cash flow and create additional real-estate opportunities. Timber, wood products and real estate all showed stronger performance, while Rayonier repurchased $72 million of shares in Q2. Management maintained its full-year real estate EBITDA outlook of $180 million to $200 million and expects stable Southern timber prices with modestly higher Northwest pricing.

Rayonier reported second-quarter GAAP earnings of $19 million, or $0.06 per share, as contributions from the recently completed merger with PotlatchDeltic and stronger operating results across its businesses lifted adjusted EBITDA to $124 million. Adjusted net income was $32 million, or $0.10 per share, after excluding pro forma items that were primarily related to the merger. President and CEO Mark McHugh said the company has made progress integrating PotlatchDeltic since the merger closed in late January and remains on track to achieve its run-rate synergy targets.

The company also announced two timberland transactions with Resource Management Service, or RMS, intended to further its portfolio optimization strategy. Rayonier sold about 36,000 acres in southwest Washington for $145 million and concurrently acquired about 57,000 acres in Texas and Alabama for $146 million, subject to customary closing adjustments. McHugh said the transactions were structured as a tax-efficient like-kind exchange and are expected to be accretive to timber-only cash flow, with additional potential from higher-and-better-use real estate sales and land-based solutions opportunities. The Washington sale will be treated as a large disposition and will not affect adjusted EBITDA, according to Chief Financial Officer Wayne Wasechek.

Southern Timber adjusted EBITDA increased 85% from the prior-year quarter to $53 million. Harvest volumes more than doubled, largely reflecting approximately 1.5 million tons of volume added through the PotlatchDeltic timberlands. Increased harvest activity more than offset lower pricing. McHugh said sawlog demand was steady as lumber prices rose during the quarter. The company expects U.S. South sawmills to gain share from Canadian producers and gradually increase production, which it believes should support sawlog demand in its southern markets. Pulpwood conditions remained challenging, however, as subdued demand, dry weather and salvage harvesting related to fires in Florida and Georgia added to supply. McHugh said pulpwood pricing has generally stabilized in Rayonier’s main markets, while improved containerboard pricing and mill operating rates have provided what he described as “green shoots” for possible pricing improvement in coming quarters. About 9,300 acres of Rayonier timberlands in Georgia were affected by fires. The company recorded a roughly $2 million casualty loss during the second quarter and harvested about 50,000 tons through salvage operations. McHugh said those efforts are largely complete and that Rayonier does not expect material future business effects from the fires. Northwest Timber...