Rayonier Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Sale of New Zealand Business: Closed the sale of New Zealand joint venture interest to The Rohatyn Group for $710 million, completing dispositions totaling $1.45 billion. Anticipate using at least 50% of proceeds to reduce leverage and return capital to shareholders.
• Second Quarter Financial Results: Excluding New Zealand, adjusted EBITDA was $45 million, pro forma net income was $10 million or $0.06 per share. Completed $35 million of share buybacks during the quarter.
• Timber Segments: Southern Timber faced challenges from lower harvest volumes and pricing, but market conditions are normalizing. Pacific Northwest Timber saw improved adjusted EBITDA due to lower costs and higher log prices.
• Real Estate: Strong demand led to adjusted EBITDA above expectations, with robust sales in improved and rural development categories. Encouraged by interest in master planned communities.
• Land-Based Solutions: Positive outlook for solar, with growing utility-scale solar demand; progress in carbon capture and storage with 154,000 acres under lease; participation in voluntary carbon market.

Segment Performance

• Southern Timber Segment: Second quarter adjusted EBITDA was $28 million, 16% below the prior year quarter due to lower harvest volumes and net stumpage realizations. Total harvest volumes decreased 5% versus the prior year quarter. Average sawlog stumpage pricing was $27 per ton (9% decrease), pulpwood net stumpage pricing was 25% lower at roughly $13 per ton. Weighted average stumpage prices fell 14% versus the prior year quarter to roughly $19 per ton.
• Pacific Northwest Timber Segment: Second quarter adjusted EBITDA of $7 million increased 17% versus the prior year quarter. Total harvest volumes decreased 15% as compared to the prior year period. Average delivered domestic sawlog pricing in the second quarter increased 6% from the prior year period to $96 per ton, while pulpwood pricing was up 4% versus the prior year quarter to $32 per ton.
• Real Estate Segment: Second quarter adjusted EBITDA was $19 million, well above prior guidance. Real estate revenue totaled $29 million on roughly 3,300 acres sold at an average price of $8,300 per acre. Improved development sales totaled $8 million (Heartwood $5M, Wildlight $3M), unimproved development sales included a 311-acre transaction in Florida for $3 million, and rural sales totaled $16 million.

Guidance

• Full year adjusted EBITDA guidance: $215 million to $235 million, pro forma EPS: $0.34 to $0.41.
• Third quarter expectations: Net income attributable to Rayonier $29 million to $44 million, EPS $0.18 to $0.28, adjusted EBITDA $80 million to $100 million.
• Anticipate significantly stronger second half of the year for Southern Timber and Real Estate segments.

Risks

• Hurricane Season: Potential impact on timber in the U.S. South, with above-average hurricane season forecasted.
• Tariff Uncertainty: Affects lumber markets, with uncertainty around duties on Canadian lumber and Section 232 investigation on wood products.
• Housing Market Softness: Continued softness in national housing market, though demand remains robust for certain real estate segments.

Question and Answer

• Q: Mike Roxland with Truist Securities asked about timber prices in the Pacific Northwest and Canadian duties: A: Douglas M. Long noted anticipation of impact but steady pricing currently, with expectation of response as Canadian lumber supply declines.
• Q: Buck Horne with Raymond James asked about hurricane season and real estate demand: A: Douglas M. Long discussed adaptation to climate change and real estate demand driven by significant transactions in third quarter.
• Q: Anthony Pettinari with Citi Research asked about One Big Beautiful Bill impact on solar: A: Douglas M. Long mentioned continued activity in solar development pipeline despite bill uncertainty.
• Q: Mark Weintraub with Seaport Research Partners asked about distribution and development business: A: Mark D. McHugh discussed special distribution to be announced later, and development business trajectory remains in line with Investor Day plans.
• Q: Ketan Mamtora with BMO Capital Markets asked about Southern Timber's demand: A: Douglas M. Long noted early hints of improvement in Southern Timber with increased sawtimber procurement and production talk.