If a tree falls in a Weyerhaeuser forest, someone is there to hear it -- and he has a chainsaw. The forest products company produces a variety of softwood lumber and other building materials in North America. It also offers cellulose fibers products used to make paper, packaging, and textiles. The company harvests trees for its products through its timberlands division, which manages more than 20 million acres of forest in the US and Canada. Its Weyerhaeuser Real Estate unit develops housing and master-planned communities around the country. Weyerhaeuser was incorporated in 1900 and is a real estate investment trust (REIT). It operates offices in about a dozen countries and serves customers worldwide.
Weyerhaeuser was quick to adapt to the economic downturn, which put a damper on the US housing market and construction industry beginning in 2008. A great deal of the company's business is strongly dependent on the housing market and when it crashed, Weyerhaeuser was forced to drastically reduce costs, retool some of its operations, and sell noncore assets.
Since the beginning of the recession Weyerhaeuser has sold a slew of businesses including its fine paper operations, containerboard, packaging and recycling segment, its Trus Joist subsidiary, and dozens of distribution centers in Canada and the US. In early 2011, Weyerhaeuser sold its short line freight railroad holdings to Patriot Rail. The deal included 160 miles of track in four states.
The company also has sold noncore timberland including some 82,000 acres in Washington for approximately $200 million in 2011. Also that year Weyerhaeuser sold its hardwoods business, which manufactured lumber and plywood used for furniture and cabinetry, to American Industrial Properties for some $108 million. Weyerhaeuser has used the proceeds from the sale of its businesses to pay down debt.
All of the changes (in addition to shutting down some of its wood products plants) have helped Weyerhaeuser recover. Net sales and revenues increased by more than 15% in 2010. The increase was due in part to improved pulp sales, revenues from shipping operations, and better sales volumes for building products and logs.
However, the pace of economic recovery slowed in 2011. The European debt crisis, political turmoil, US deficit, and continued high unemployment rates, mortgage default rates, and foreclosures continued to drag down the US economy that year. Net sales and revenues was up only slightly (4%) in 2011.
Weyerhaeuser is relying more on sales outside of the US. In 2011 36% of sales came from international customers. That year Weyerhaeuser's timberlands business increased business by growing its log export sales to China, where a there is an emerging demand. Long-time customer Japan also had a growing demand for lumber as the country recovered from a devastating earthquake and tsunami.
The company's wood products segment continued to struggle in the US due to the slowly recovering housing market. However, pricing adjustments and lower costs helped boost that division's performance in 2011.
The cellulose fibers (pulp) division reported record results in 2011 thanks to strong demand and cost reductions. Pulp prices also increased due to lower inventories around the world.
Weyerhaeuser's home building arm continued to be hurt by a decrease in building in 2011. Sales in the real estate division were down (9%) as a result of fewer home closings. But the real estate division remained profitable despite the challenging conditions.
The timber REIT is planting the seed for growth by maintaining its diversity. The company also is looking to long-term growth as the housing market recovers and demand for lumber increases.
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