Earnings call transcript: PotlatchDeltic Q3 2025 beats earnings expectations

PotlatchDeltic Corp reported stronger-than-expected earnings for the third quarter of 2025, with an earnings per share (EPS) of $0.36, surpassing the forecast of $0.27. The revenue also exceeded expectations, reaching $314.2 million against a projected $303.36 million. Despite these positive results, the company’s stock fell by 1.15% in premarket trading, indicating a mixed investor reaction.

Key Takeaways

• PotlatchDeltic’s Q3 EPS beat forecasts by 33.33%.
• Revenue came in 3.57% above expectations.
• Stock price declined 1.15% in premarket trading.
• Timberlands and Real Estate segments showed strong performance.
• Merger with Rayonier is expected to create significant synergies.

Company Performance

PotlatchDeltic demonstrated robust performance in Q3 2025, with a significant increase in adjusted EBITDA to $89 million from $52 million in the previous quarter. The Timberlands and Real Estate segments were key contributors, with EBITDA of $41 million and $63 million, respectively. However, the Wood Products segment faced challenges, posting a negative EBITDA of $2 million. The company continues to leverage its diversified portfolio, including natural climate solutions, to drive growth.

Financial Highlights

• Revenue: $314.2 million, up from the forecasted $303.36 million.
• Earnings per share: $0.36, exceeding the $0.27 forecast.
• Total Adjusted EBITDA: $89 million, a notable increase from Q2’s $52 million.
• Liquidity: Ended the quarter with $388 million, including $89 million in cash.

Earnings vs. Forecast

PotlatchDeltic’s Q3 earnings per share exceeded forecasts by 33.33%, while revenue surpassed expectations by 3.57%. This marks a strong performance, particularly in comparison to previous quarters, where the company faced more significant market challenges.

Market Reaction

Despite the earnings beat, PotlatchDeltic’s stock price fell by 1.15% in premarket trading, closing at $38.6. This movement contrasts with the broader market trend and suggests investor concerns, possibly related to future guidance or broader market conditions affecting the lumber industry.

Outlook & Guidance

Looking ahead, PotlatchDeltic anticipates a lower adjusted EBITDA in Q4 compared to Q3, with expectations for lumber price stabilization. The company projects 2026 lumber prices to be $30-$40 higher than 2025 levels. Additionally, Q4 plans include rural land sales of 5,000 acres and residential lot sales of 46 lots.

Executive Commentary

CEO Eric Cremers expressed optimism about the future, stating, "We believe lumber prices have reached their low point for the year," and added, "We do think next year is going to be better." This positive outlook is supported by the company’s strategic initiatives and merger plans.

Risks and Challenges

• Lumber market volatility due to weak demand and oversupply.
• Potential impacts from ongoing merger activities with Rayonier.
• Uncertain outcomes from lithium lease developments.
• Market conditions affecting the pulpwood segment.
• Economic factors influencing housing and remodeling markets.

Q&A

During the earnings call, analysts raised questions about the pulpwood market challenges and the potential for strong real estate sales, particularly in conservation transactions. The uncertainty surrounding lithium lease developments was also discussed, alongside details of the pending merger with Rayonier.

Full transcript - PotlatchDeltic Corp (PCH) Q3 2025:

Rob, Conference Operator: Good morning. My name is Rob, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the PotlatchDeltic Third Quarter 2025 conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press Star, then the number one on your telephone keypad. If you would like to withdraw your question, again press Star and the number one. Thank you. I’d now like to turn the call over to Mr. Wayne Wasechek, Vice President and Chief Financial Officer for opening remarks. Sir, you may proceed.

Wayne Wasechek, Vice President and Chief Financial Officer, PotlatchDeltic: Good morning, and welcome to PotlatchDeltic’s Third Quarter 2025 earnings conference call.

Eric Cremers, President and Chief Executive Officer, PotlatchDeltic: Joining me on the call is Eric Cremers, PotlatchDeltic’s President and Chief Executive Officer.

Wayne Wasechek, Vice President and Chief Financial Officer, PotlatchDeltic: This call will contain forward-looking statements. Please review the cautionary statements in our press release, on the presentation slides, and in our filings with the SEC regarding the risks associated with these forward-looking statements. Also, please note that a reconciliation of non-GAAP measures can be found in the appendix to the presentation slides and on our website at potlatchdeltic.com. I’ll turn the call over to Eric for some comments, and then we’ll review our third quarter results and our outlook.

Eric Cremers, President and Chief Executive Officer, PotlatchDeltic: Thank you, Wayne. Good morning, everyone. Thanks for joining us. Yesterday, we announced third quarter total adjusted EBITDA of $89 million. Our overall results were driven by a strong performance in our real estate business from both the rural and the development part of the business. Additionally, I’m pleased with the strong operational performance delivered across all segments this quarter, especially given the challenging market backdrop we continue to navigate through. Before I discuss each of our business segments, I wanted to briefly comment on our recent joint announcement with Rayonier on our proposed merger of equals transaction. As we highlighted on the call a couple of weeks ago announcing the transaction, we believe that the merger between our two companies will result in significant strategic and financial benefits beyond what either of us could achieve independently.

PotlatchDeltic and Rayonier share complementary business models, similar cultures, and capital allocation philosophies, and a long-standing commitment to sustainability. This merger will significantly increase the scale of both companies as a combined company will own nearly 4.2 million acres of timberlands across 11 states. The combined company will also continue to operate our efficient and scalable wood products manufacturing business with 1.2 billion board feet of lumber capacity and 150 million sq ft of plywood capacity. In addition, the combination will result in a diverse real estate portfolio, including three active real estate development projects and robust opportunities to provide land-based and natural climate solutions. From a financial perspective, the combined company will have a strong pro forma balance sheet as well as an enhanced capital markets presence. Through this combination, there’s also a significant opportunity to create value through synergies, operational efficiencies, and the sharing of best practices.

We estimate synergies of $40 million, which will be primarily driven by corporate and operational cost optimization. We expect to close the transaction in late in the first quarter or early in the second quarter of 2026, subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals and the approval of PotlatchDeltic’s and Rayonier’s shareholders. Now, shifting to our third quarter operations, starting with timberlands. The division delivered on its Q3 planned harvest volume of 1.9 million tons, with Idaho producing its highest quarterly volume so far this year, which follows typical seasonal patterns. Indexed sawlogs prices in Idaho softened in line with broader lumber price declines, while cedar sawlogs prices remained elevated, supported by strong regional demand.

Across the south, underlying sawlogs and pulpwood prices held relatively stable during the quarter, despite the seasonal increase in log supply and elevated mill log inventories throughout the region. Moving on to our wood products business, the segment reported an EBITDA loss of $2 million in the third quarter. This decline was driven by historically weak lumber prices, as muted demand and persistent oversupply continued to plague lumber markets. From an operational standpoint, however, our performance was quite strong. The division delivered 333 million board feet in shipments and produced its lowest average manufacturing cost per thousand board feet since Q2 of 2021, which was prior to the onset of inflationary cost pressures we have experienced over the last few years. We believe these operational results position us well to capture upside when market conditions eventually improve.

The downward lumber pricing trend during Q3 ran counter to our expectations, especially given the significant increase in Canadian anti-dumping and countervailing duties implemented during the quarter. Beyond relatively soft lumber demand, we believe several other factors contributed to the price decline, including Canadian mills accelerating shipments into the U.S. ahead of the higher duties, along with the financial support pledged by the Canadian government to its lumber industry. Despite scattered mill curtailments and production cutbacks across the industry and the recent implementation of 10% Section 232 tariffs for lumber imports from all regions, these measures have yet to generate any meaningful upward momentum in lumber prices. Unfortunately, we are also in a seasonally weak period for lumber demand.

While that said, we believe prices have now stabilized as we head through the remainder of the year, supported by a more balanced supply-demand dynamic and a more normalized level of inventories across the industry. Moving to real estate, the division delivered another robust quarter, driven by strong contributions from both rural and development sales activity. For rural real estate, highlights include two larger transactions in Georgia totaling $39 million in revenue, each at attractive multiples to timberland value. We also experienced solid take-up on our residential lot offerings and completed a commercial land sale to a local church in Chenal Valley. Demand for rural real estate remains strong, supported by its appeal as a stable long-term investment. Buyers have been also motivated by additional factors, including conservation, recreation, home sites, and adding property that is adjacent to their land ownership.

Looking at our natural climate solutions opportunities, we continue to make progress across our various initiatives. Starting with solar, developers are actively evaluating recent adjustments to green energy incentives within the tax bill and assessing how to navigate under the current regulatory environment. While these factors present some potential headwinds, interest from well-established solar developers remains solid. We currently maintain 34,000 acres under solar option agreements and expect this to grow to 40,000-45,000 acres by year-end, reinforcing our confidence in the long-term opportunity. Additionally, the Smackover formation in southwest Arkansas continues to attract significant interest from major lithium developers. Since last quarter, we signed a new mineral lease agreement with Saltworks LLC, a subsidiary of ExxonMobil Corporation, covering approximately 4,200 surface acres for lithium development in the region.

With this agreement, our total surface acres under mineral leases in the Smackover formation now stands at over 5,000 acres, underscoring the growing strategic value of our holdings in the emerging market for lithium. We remain excited about the unique optionality that timberland ownership provides and are committed to expanding our natural climate solutions portfolio. This includes opportunities in forest carbon offsets, carbon capture and storage, and other emerging initiatives that position us to create long-term value. Shifting to capital allocation, in the first half of the year, we repurchased $60 million of common stock through our 10b5-1 program. Due to our pending merger with Rayonier, our ability to repurchase shares has been and will be limited prior to closing.

That said, we continue to maintain a solid financial position, providing flexibility to navigate the current macroeconomic environment while staying focused on executing on our strategic plan, including our 2025 CapEx program. Now, moving to the U.S. housing market, overall demand remains constrained by weaker consumer confidence and affordability challenges, with many prospective homebuyers waiting for mortgage rates to move lower. Encouragingly, rates, in fact, are trending lower. The 30-year fixed-rate mortgage fell to 6.1% in October, and home affordability reached its best level in two and a half years. Combined with the anticipated further easing of interest rates by the Fed, these developments could point to a more favorable housing environment ahead. Furthermore, the long-term fundamentals of housing demand remain intact, including a persistent housing shortage and demographic tailwinds from millennial household formation. As affordability improves, these structural drivers should reassert themselves, supporting future growth in housing activity.

Shifting to the repair and remodel market, activity has been muted as economic uncertainty and elevated borrowing costs weigh on discretionary spending, particularly for large-scale remodeling projects. However, leading indicators, including the Joint Center for Housing Studies and the National Association of Home Builders, suggest that demand for home improvement will remain stable in the near term, followed by more modest but positive growth in 2026. Looking at our own business, demand from our home center customers started the quarter seasonally slower but strengthened as the quarter progressed. This momentum has continued as we move toward the end of the year. The long-term fundamentals of this segment remain compelling, driven by an aging housing stock, historically high home equity levels, and the persistence of hybrid and remote work, which continues to fuel demand for functional improvement and aesthetic home upgrades.

To wrap up my comments, while near-term headwinds persist, we maintain a positive view of the long-term fundamentals that drive demand in our industry. Looking forward, we believe lumber prices have reached their low point for the year and have generally stabilized. We are optimistic that the combined impact of higher Canadian softwood lumber duties, the 10% Section 232 tariffs, and supply reductions from an increasing number of mill curtailments will gain traction to support improved domestic lumber pricing as we move through the remainder of the year. Finally, we remain focused and disciplined in operating our businesses efficiently and effectively while advancing the key work streams necessary to complete our proposed merger with Rayonier, a transformative transaction that positions the combined company for growth and delivering long-term shareholder value. I will now turn it over to Wayne to discuss our third quarter results and our outlook. Thank you, Eric.

Starting from page four of the slides, total Adjusted EBITDA was $89 million in the third quarter, compared to $52 million in the second quarter. This sequential quarter-over-quarter increase in Adjusted EBITDA is mainly attributed to strong real estate activity in both our rural and development real estate businesses. I will now review each of our operating segments and provide more color on our third quarter results. Starting with our timberland segment, which is presented on slides five through seven. The segment’s Adjusted EBITDA increased from $40 million in the second quarter to $41 million in the third quarter. Our sawlog harvest in Idaho increased from 360,000 tons in the second quarter to 411,000 tons in the third quarter. Our quarterly harvest volume is typically the highest in the third quarter as dry weather results in more favorable logging conditions.

Sawlog prices in Idaho declined by 5% per ton compared to the second quarter. This decrease was driven by lower index sawlog prices, partially offset by seasonally lighter sawlogs. Log and haul costs were higher compared to the second quarter due to a greater seasonal mix of steep terrain logging operations in Idaho, along with longer haul distances. In the south, we harvested 1.5 million tons in the third quarter, consistent with harvest volumes in the second quarter. Average southern sawlog prices were up by just over 1% from the second quarter. This increase in price primarily reflects a higher mix of larger diameter pine sawlogs and a seasonal increase in hardwood volumes both within our Gulf South region. Turning to wood products, shown on slides eight and nine.

Adjusted EBITDA was a loss of $2 million in the third quarter compared to a positive $2 million in the second quarter. This decline was primarily driven by lower lumber prices, despite strong operational execution demonstrated by lower average cash processing costs and higher shipment volume. Our average lumber price realization decreased $54 per thousand board feet for 12%, from $450 per thousand board feet in the second quarter to $396 per thousand board feet in the third quarter. Comparatively, the Random Lengths Framing Lumber Composite average price was approximately 10% lower in the third quarter compared to the second quarter. Note that our regional mix and product mix differs from the composite, and there’s also a timing difference between our sales and the composite.

Lumber shipments increased by 30 million board feet, rising from 303 million board feet in the second quarter to 333 million board feet in the third quarter. Transitioning to real estate on slides 10 and 11, the segment generated Adjusted EBITDA of $63 million in the third quarter compared to $23 million in the second quarter. During the third quarter, our rural real estate business sold approximately 15,600 acres at an average price of nearly $3,300 per acre. Notably, sales included two large transactions in Georgia, a conservation land sale generating over $21 million in proceeds and a nearly $18 million recreation sale to a landowner with adjacent property. In the Chenal Valley development side of our real estate business, 55 residential lots were sold at an average price of $139,000 per lot in the third quarter.

Sales reflected a balanced mix of premium and more affordable lots, supporting diverse buyer demand. The division also completed the nearly $7 million commercial land sale in the quarter for $533,000 per acre. Turning to our capital structure summarized on slide 12. We finished the quarter with $388 million in liquidity, including $89 million of cash on our balance sheet, as well as availability on our undrawn revolver. Additionally, we successfully refinanced $100 million of debt that matured in August and utilized our final forward-starting interest rate swap. This refinancing approach resulted in only a $50,000 annual increase in our cash interest costs and maintains our weighted average cost of debt at approximately 2.3%. Capital expenditures were $16 million in the third quarter. This amount includes real estate development expenditures, which are included in cash from operations in our cash flow statement, and it excludes timberland acquisitions.

For the full year, we continue to anticipate CapEx spend of $60-$65 million, which excludes the final closeout payment of $6 million for the Waldo sawmill project that we made in Q1 and any additional potential timberland acquisitions. I will now provide some high-level outlook comments. The details are presented on slide 13. Within our timberland segment, we anticipate harvesting between 1.7 and 1.8 million tons in the fourth quarter, with approximately 80% of this volume sourced from the south. In Idaho, harvest volumes are anticipated to be just above Q1 and Q2 levels. Additionally, sawlog prices in Idaho are expected to decline approximately 13% in the fourth quarter, driven mainly by lower prices on index volume. As a reminder, our index volume reflects a one-month lag. Consequently, Q4 index pricing is based on September through November lumber prices, with both September and October experiencing relatively low lumber prices.

In the southern region, we anticipate harvesting approximately 1.3-1.4 million tons during the fourth quarter, and we expect that our average sawlog prices will decline slightly based on sawlog mix and mills wanting to maintain log inventory levels that are in balance with current lumber market demand. We plan to ship 290-300 million board feet of lumber in the fourth quarter. Our average lumber price thus far in the fourth quarter is $397 per thousand board feet, which is near our average lumber price for the third quarter. This is based on shipments of approximately 120 million board feet of lumber. Turning to our real estate segment, we expect to sell approximately 5,000 acres of rural land at an average price of $3,200 per acre in Q4. For our Chenal Valley development, we expect to close on approximately 46 residential lots at an average of $95,000 per lot.

Further details regarding real estate can be found on slide 13. We expect total Adjusted EBITDA in the fourth quarter to be lower than third quarter results. The anticipated decline is mainly driven by fewer rural real estate acres sold, reduced residential and commercial development activity, and within timberlands, seasonally lower harvest volumes combined with softer index pricing on Idaho sawlogs. That concludes our prepared remarks. Rob, I would now like to open the call to questions. Thank you. We will now begin the question and answer session. If you’d like to ask a question, please press star one in your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question today comes from the line of Ketan Mamtora from BMO. Your line is open. Good morning or good afternoon. Thanks for taking my question.

Maybe to start with, Eric, can you talk a little bit about what you are seeing in the pulpwood markets in the U.S. South? We’ve seen a pretty big erosion here in prices over the last few years. We’ve also seen a lot of pulp and paper mill closures here recently. So even if we assume that sort of overall demand picks up, that’s a lot of lost tonnage. Can you sort of talk about what you’re seeing in the pulpwood market? Yeah. Keeping this in mind, I’ll take that. Yeah, you’re right. Unfortunately, we have seen mill closures and capacity coming out of the market. This has been a trend. I mean, even recently, we’ve seen some various mill closures. But I would say for us, nonetheless, given our size, our scale, and the relationships that we have with customers, we find home for our volume.

And I think we tend to have more options than others may have. So our log takeaway has really been pretty steady. Our team does a great job of navigating these markets. And I think the advantage we have is just the scale and diversification. So for us, I think that’s what it really comes down to. But certainly. Where the mills are, that does put pressure on pricing for pulpwood. But I think the other thing that I would highlight is just when Eric made some comments on. The pending merger with Rayonier, and we look at from that, we look at many strategic and financial benefits of the merger. And this is just one area where the combined company, we have greater scale and diversification, which mitigates the exposure to any one market that we can have. Yeah. And don’t forget, Ketan, this is Eric.

You’ve got every market is different. And I think Rayonier can talk about this on their call. But you think about where. The hurricane went through some of their. Properties, I don’t know, a year ago, maybe a little bit more, knocked down a bunch of trees that really depressed prices for a period of time. But now those trees are, by and large, those salvage logs are gone. And there’s, if you will, a shortage of green logs to feed the mills. So. Different regions are going to react differently to different events. And you can’t say that everything is the same in the south because it varies dramatically from wood basket to wood basket. Got it. No, that’s helpful perspective. I’ll jump back in the queue. Good luck. Thanks. Thanks. Sure. Apologies. Your next question comes from a line of George Staphos from Bank of America.

Your line is open. Hey, thanks very much. Appreciate you taking my question. Thanks for the details, gentlemen. The question I had, I think at one point in time when you were guiding for the quarter, you’re guiding maybe for about 310-320 million board feet of lumber. You obviously ran better. Obviously, in a market that was somewhat depressed. So I was just curious. Help us understand sort of the commercial strategy as you’re running more of that capacity. What was a tough market? And Wayne and Eric, as we look out the fourth quarter, holding price aside, should we expect a relatively consistent level of cash margin out of the wood products business. Versus 3Q? And I had a quick follow-on. Yeah. So George. To answer the first question, we’re always trying to lower our per unit costs in our mills.

And it is true of most first quartile mills that. That last stick of lumber coming out the door, coming out the manufacturing process, is going to be your lowest cost stick of lumber. So yeah, we lost a little bit of money in wood products in the quarter. But don’t forget there’s overhead associated with running the mills. And so it might look as though that last stick of lumber was negative and had negative margin. But the reality is it probably had positive margin. We have got principally a set of first quartile mills. And while the mills may be profitable because of overhead, it might flip them to negative. So I think you got to keep that in mind.

If you think about how we run our mills, how we operate our mills, we generally run them as hard as we can to leverage and absorb overhead costs in each stick of lumber. Yeah. So that’s the. I just wanted to hear that. Go ahead. I’m sorry. Yeah. Yeah. So that’s the first one. The second one, yeah, I do think prices are going to move a little bit higher as we move through the fourth quarter here. And when we talked, I think our supplemental slides showed pricing being flat. I think they could be up 2%, 3%, 4%, something like that. So I don’t expect a lot of movement. I think if you look across the different waterfall, the waterfall chart for wood products going from Q3 to Q4, I think you might see log costs could be a little bit negative.

If we have higher lumber prices, that’s going to hurt our St. Mary’s mill, for example. We might have log costs get a little bit more. Processing costs a little bit more expensive because we’re getting into a slower production period with colder weather. But I think generally you would expect flat performance, excluding price. But I do expect prices to move up a little bit in the quarter. Okay. I appreciate that. And then just give us a bit more detail in terms of some of the very good performance in real estate in the quarter. It was a bit ahead of our expectations. It was, I think, ahead of your initial guidance. Kind of I recognize these are episodic, right? It’s hard to predict timing at times.

But was there anything else that drove the better-than-expected performance in real estate and why some of those sales occurred in the third quarter? Yeah, George. Again, like you said, it can be sales are rather lumpy, and we’re always looking at the pipeline that we’ve developed. And based on timing, it can shift from quarter to quarter. I think for this quarter, for us, though, we had a couple of larger sales, as we noted. I think the bigger one is on conservation. That one, we had a large conservation sale come through. So that really showed the outperformance in the quarter relative to guidance. But overall, what we’ve seen throughout this year is there’s been strong demand for rural real estate, for recreation, to adjacent landowners. We’ve seen it all come through. But I think the real difference for us has been on the conservation side.

And this year, we’ve had, I would say, about 10,000 acres sold under conservation transactions. And we’re guiding to 35,000 acres for the full year. Well, those conservations are kind of more one-time type transactions. So you take that out of the mix, that gets us to about 25,000 acres, which really is in line with what we’ve talked about. Generally, market demand for us is, say, around 1% of our portfolio, which would put us at around 20,000-25,000 acres. And excluding these conservation sales, I think really that lines up with our full year expectation. Appreciate it, Wayne. Last one for me, Eric, if you could talk. Are there any sort of green shoots, if you will? No pun intended in terms of what’s happening on the supply side relative to tariffs, relative to duties. I mean, we’ve talked about in our research.

In some ways, it’s been kind of a two-way of a supply-demand environment for any of these sort of constraints, tariffs, and duties to have an effect on pricing. Are you seeing anything on the ground now where you are finally starting to see some supply constraint and maybe building well for kind of a spring building season? What are your customers saying in terms of the building season, recognizing it’s not the springtime, it’s November? Thanks, guys. Good luck in the quarter. Yeah, George, I am hearing mildly favorable things about the outlook for next year. I mean, you’re right. This year is kind of a we’re riding the rest of the year off. We’re entering a slow period. It gets cold outside, construction activity slows.

So I don’t have much in the way of hope for higher logging prices as we move through the fourth quarter, although I do expect them to move up a little bit. And why do I expect them to move up a little bit? It’s because we are seeing more and more curtailments. It almost seems like every other day there’s a new announcement. Certainly, you saw Weyerhaeuser’s results are taking down production, I think, 10% in Q4. We’ve had Arbec, Western Forest Products, Interfor, Domtar. Company after company has been announcing curtailments. So I do think it has been coming, and it will continue to come, these curtailments, given the duties and the tariffs that are now in place.

And I do think if you had to ask me, "Gee, what do you think’s going to happen to lumber prices in 2026 versus 2025?" We’re just now getting into the budgeting cycle. But I’d guess prices could be up $30-$40 full year over full year. It’s still not where I think they ought to be longer term for the industry to be healthy. But I do think it is positive. And it’s moving in the right direction. And these curtailments, somebody announces them today, but they don’t take full effect for, who knows, two, three months as they work down their log decks. So it just takes a while for it to really have an impact. So I do think next year is going to be better. I do think we have bottomed here in the fourth quarter. I do feel like prices are moving in the right direction.

But again, it’s a slow time of year. So I don’t think we’re going to see a lot of price action before the end of the year. Understood. Thanks for the commentary. Good luck in the quarter, Eric. Thanks. Your next question comes from a line of Mark Weintraub from Seaport Research Partners. Your line is open. Thank you. First, just a little bit on the real estate side. So how much in total. Revenue from the conservation sales and maybe what were the type of price per acre. In the quarter or in the year, have contributed? I think for the forecast, we’re looking at maybe about 25% of our total rural revenues associated with those 10,000 acres. Gotcha. What type of pricing is that relative to sort of the other?

I guess the heart of the question is I’m trying to get a sense as to are you seeing any changes in what you might consider apples-to-apples pricing in your real estate sales? Has there been upward bias, or has it been pretty flat? No, I think demand is strong. Because of that, we’ve been able to increase prices, I think, fairly significantly. I mean, if you look on a kind of a consistent mix basis, year over year, I think we would say maybe prices are up about 10%. That’s helpful. Shifting gears. On the lumber side, it’s kind of interesting. One of your large competitors had talked about its pricing being down. I think it’s like $20 or something quarter to date, and you are flat. Any thoughts? If you look at Random Lengths, I think it probably is down somewhat.

So is there some mix, or what might be kind of any thoughts as to why your pricing’s better quarter to date? Yeah. Mark, there could be a number of factors at play. I suspect it’s more mix than anything else. We’ve got a great stud program with some home centers. That could be part of it. It could be that we produce a lot of wides in the south. We’re not heavy to two-by-fours in the south. Wides have been weak all year long in the south. They’ve finally started to improve. I suspect that’s having a part of the explanation here. But it’s going to be mix at the end of the day. Great. Just for our edification, wides, that would primarily go into what end use? Well, it’ll be home construction, but it’s like 2x12s, 2x10s, things like that.

We normally, in the spring, wides tend to take a nice run in price because it’s wet weather and bigger trees are hard to get to. They tend to be underwater. That didn’t happen this year. This year, it was pretty dry. Access to the larger trees was there. Prices never really ran. I think we’re now getting back to a more normal kind of a price environment where we do get a better premium for wides versus two-by-fours. Okay. Great. Last, maybe, on the lithium, the lease over 5,000 acres now, can you kind of help us understand potential economics on that part of the business? Yeah. From a P&L standpoint, there’s really kind of a wide range of potential outcomes due to various factors. I think at this time, we’re not providing any sort of guidance related to that.

And there are a couple of large variables that will drive the opportunity ultimately. One, it depends on what is the price of lithium. And then two, the ultimate concentration and the amount of lithium that is extracted. So those factors really drive what our kind of lease and royalty rates will be from the opportunity. So at this time, it’s too early to provide any detailed insight into P&L opportunity. We kind of need Exxon to build that processing plant first, Mark. And that’s going to take a few years, you can imagine. Sure. I mean, do you have a perspective on what the timing of that plant might be? Yeah, we don’t at this time. Okay. Okay. Fair enough.

And then lastly, probably also something you can’t really answer, but is there any more color you can share with us on the process that led to the merger transaction with Rayonier at this point? Yeah. I think you’re going to have to wait until the proxy is filed on that one, Mark. And there’ll be a lot of detail in there. Fair enough. Thank you, guys. Thanks. Thanks, Mark. Your next question comes from a line of Mike Roxland from Truist Securities. Your line is open. Thank you, Eric. Wayne’s taking my questions. Congrats again on the deal and all the progress. Thanks. Just wanted to confirm if I heard correctly, lumber inventories in the channel, it sounds like one of the questions is where do they stand?

Because I think I heard you say they’re lean right now, or it’s only down from where they were, but I just want to confirm that. Yeah. I think they are lean, Michael. If you’re a dealer out there somewhere, you don’t need to speculate. You can get just-in-time deliveries. There’s plenty of capacity out there. So I think they’re pretty lean. Got it. Okay. And then on natural climate solutions. It sounds like things are pretty good in terms of your pipeline. Maybe a couple of issues potentially in solar, but it doesn’t really sound like it. It looks like your order book is going to be pretty full by the end of the year. But just wondering if you have any concerns regarding government funding cuts. Obviously, the government’s been pretty aggressive with wind from the outset. They’ve become more aggressive with solar recently.

So I’m wondering if that’s giving you any pause in terms of the growth potential near-term for some of those NCS initiatives. Yeah. We don’t think so, Mark. I think some of the concerns may be overstated. I mean, I think where we get that is just from what we’re hearing from solar developers. We’re continuing to have active discussions and interest. And like we’ve said, we expect to grow acres under solar option by the end of the year. So those factors point us in the direction that, yeah, we’re still very bullish on solar. And we’re also dealing with. More sophisticated solar developers. They know how to build a successful project. They’ve done this before. They’ve been through various cycles. And they also have the financial wherewithal to execute these projects. I mean, we’ve done a couple of solar deals, even. Pre-IRA funding.

And that just proves that deals can be done. Without these incentives. And you just look at the overall energy environment. I mean, the issue remains there’s still a need to keep pace with energy demand. And we certainly believe that this is part of the solution, so. Got it, Wayne. Thank you. And one final question. Just wanted to follow up with respect to real estate sales. I mean, is there anything in your pipeline that has a potential to maybe close earlier this year than, let’s say, in 2026? So maybe you’re working on something that have a January or an early February type closing anticipated closing date, but could potentially. Is there anything that maybe has a type of time frame that could be accelerated into this year to afford you some additional upside as you had in 2023? Yeah. At this time.

We’re just sticking with the guidance that we’ve given, the 5,000 acres for Q4. That’s what we have insight to and we believe. But again, yeah, there can be. Timing, both. Good and bad. Good and bad. So I think we kind of play it where we think it’ll come through. Understood. Good luck in the quarter. Thanks. Thanks. At this time, I’m showing there are no more questions. I’ll now turn the call back over to Wayne Wasechek. Thank you, everyone, for joining us this morning. Just please contact me with any follow-up questions. This concludes today’s conference call. Thank you for your participation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.