Worst wild fire season on record threatens Weyerhaeuser’s massive 2.7M acres of timberland

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WSFCbizjournals.com – As wild fires rage throughout Washington and Oregon, Washington’s largest forest products company is struggling to maintain production.

Federal Way-based Weyerhaeuser Co. (NYSE: WY) is one of the world’s largest private owners of timberlands, owning or controlling nearly 7 million acres. Nearly 2.7 million of those acres are in Washington and Oregon. And they’re under siege.

Some of its tall timber is burning as part of the Chiwaukum Creek Fire near the Okanogan/Wenatchee National Forest. Other areas, because of high fire dangers, are off limits for logging.

During Weyerhaeuser’s July earnings call, company executives said that most of the company’s acreage is under some level of fire restriction and said that the outlook for the company’s third quarter earnings from its timberlands segment would suffer due to lower harvest volumes as a result of the prolonged fire season.

The company last month reported earnings of $133 million on sales of $1.8 billion for the quarter. The sale of wood and wood products from West Coast timberlands makes up a significant portion of those sales.

For example, the sale of logs from its West Coast timberlands operations to third parties accounted for $231 million of the sales. Weyerhaeuser also mills its own logs to turn into home building materials, such as joists and plywood and realizes sales from those segments.

Weyerhaeuser is the state’s seventh-largest public company and employs 13,700 people. The company is in the process of moving its headquarters from its Federal Way campus to downtown Seattle.

The company already had to cut jobs as a result of the port slowdown late last year. It’s unclear whether the fires will affect Weyerhaeuser’s employment numbers.

Weyerhaeuser CFO Patty Bedient said during the conference call that the fire conditions forced forest product companies to tap into their inventories of logs to keep lumber mills humming, but that could change.

“We haven’t seen closures of mills at this point because of log down time because they still have some inventory of logs. But I think as we get into August…we’ll see more of that concern,” she said at the time.

Bedient and other Weyerhaeuser officials didn’t return requests for comment.

The fire restrictions mean in some cases work in the forests must cease by a certain time in the early afternoon. In other places, entry into the forest is banned, what’s called a Level 4 restriction.

In Oregon, that’s exactly what happened in early July.

“There’s not been a Level 4 restriction in place since 1988, just to put it in context,” Weyerhaeuser CEO Doyle Simons said during a July 31 conference call. “And that restriction impacts about 15 percent of our western timberlands… We do anticipate lower harvest in the third quarter versus the second as a result of these fire restrictions, and we’ll continue to monitor them and see how they play out going forward.”

Since that earnings call, the fires have increased in intensity. Officials now say 2015 has become Washington’s worst fire year on record. There are 19 wild fires greater than 1,000 acres raging in Washington and 14 greater than 1,000 acres active in Oregon, according to the National Interagency Fire Center.

Source:www.bizjournals.com