Total Adjusted EBITDA: $63 million for Q1 2025, up from $53 million in Q4 2024. Timberlands Segment EBITDA: Increased from $34 million in Q4 2024 to $42 million in Q1 2025. Harvest Volume: 368,000 tons in Idaho and 1.6 million tons in the South for Q1 2025. Sawlog Prices in Idaho: Increased by 9% per ton compared to Q4 2024. Wood Products Segment EBITDA: Increased from $9 million in Q4 2024 to $12 million in Q1 2025. Average Lumber Price Realization: $454 per 1,000 board feet in Q1 2025, up from $445 in Q4 2024. Lumber Shipments: 290 million board feet in Q1 2025, up from 283 million board feet in Q4 2024. Real Estate Segment EBITDA: $23 million in Q1 2025, up from $19 million in Q4 2024. Rural Real Estate Sales: Over 7,000 acres sold at an average of $3,300 per acre in Q1 2025. Liquidity: $447 million at the end of Q1 2025, including $147 million in cash. Share Repurchases: $8 million spent on repurchasing 188,000 shares at an average price of $42 per share in Q1 2025. Capital Expenditures: $23 million in Q1 2025, with full-year Capex expected to be $60 to $65 million.

Warning! GuruFocus has detected 7 Warning Signs with PCH.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

PotlatchDeltic Corp (NASDAQ:PCH) reported a total adjusted EBITDDA of $63 million for the first quarter, showing improvement across all business segments. The company's strategic investment in the Waldo, Arkansas sawmill has been successful, achieving its targeted production metrics ahead of schedule. The timberlands segment benefited from higher than planned harvest volumes and increased sawlog prices, particularly in Idaho. The real estate segment experienced strong demand, selling over 7,000 acres at notable premiums to Timberland value. PotlatchDeltic Corp (NASDAQ:PCH) is actively pursuing natural climate solution initiatives, including solar and lithium development, which have the potential to generate significant future revenue.

Negative Points

Lumber markets faced tepid demand from end markets, with uncertainty surrounding Canadian tariffs impacting pricing dynamics. The multi-family home building segment remains challenging due to restrictive construction financing and an oversupply of units. The company's southern sawlog prices decreased by over 2.5% due to a shift in product mix. The US housing market is constrained by macroeconomic conditions, leading to low buyer urgency and affordability challenges. PotlatchDeltic Corp (NASDAQ:PCH) anticipates lower adjusted EBITDDA in the second quarter due to seasonally lower harvest volumes and higher forest management costs.

Story Continues

Q & A Highlights

Q: Can you talk about the demand trends in the new and R&R channels as we move through April? A: Eric Cremers, President and CEO, explained that the current market environment for lumber is decent, with the South on firmer footing than the North. Prices in the South are higher than the latest random lengths print, while the North is selling below it. The South has been on an upward trajectory since the start of the year, with solid treater activity. The North is digesting inventory bought in anticipation of tariffs that didn't happen. Home center takeaway remains good, with year-to-date volumes running 4% above the prior year. The expectation of higher duties may compel inventory building later in the year, with price risk to the upside.

Q: How would you characterize channel inventories currently? A: Eric Cremers noted that the industry operates at relatively low inventory levels due to high interest rates and carrying costs. The exception may be some northern species, where there might be an inventory hangover from tariff concerns.

Q: What impact did the announcement of tariffs on Liberation Day have on demand? A: Eric Cremers stated that the announcement didn't significantly change end consumer demand. Some advance ordering occurred in anticipation of Canadian tariffs, but the effect was not huge.

Q: What happens to Canadian lumber volumes when duties increase to 34-35%? A: Eric Cremers expects a mix of absorption and impact. Larger companies with mills in both Canada and the South may absorb some costs, while smaller operators may face closures or curtailments due to the onerous duty.

Q: How did Waldo's contribution to EBITDA in the wood product segment compare year-on-year? A: Eric Cremers mentioned that Waldo's contribution isn't where they want it to be due to pricing issues, not operational performance. The mill runs well, but wider dimensions didn't see the expected price run-up. Higher prices are expected as the year progresses.

Q: Can you provide insights into the real estate market, particularly in the South? A: Wayne Wasechek, CFO, noted strong demand for smaller transactions, with a forecast of 26,000 acres for the year. Larger transactions see healthy demand and pricing, though fewer acres are coming to market.

Q: What is the potential timeline for solar and lithium opportunities to convert to meaningful financial contributions? A: Wayne Wasechek indicated that no deals are expected to close this year, but one or two may start next year. Option periods are 3-5 years, with regulatory agency backlogs stretching the process.

Q: Are home builders showing increased interest in using more yellow pine due to potential duties on Canadian species? A: Eric Cremers confirmed that substitution has been ongoing, with more chatter about it recently. Southern yellow pine production has grown, and interest from builders is expected to continue.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

View Comments