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Rayonier (RYN) Tops Q2 EPS by 7c, Revenues Beat; Offers FY20 EPS Guidance Above Consensus

August 5, 2020 4:56 PM EDT

Rayonier (NYSE: RYN) reported Q2 EPS of $0.11, $0.07 better than the analyst estimate of $0.04. Revenue for the quarter came in at $189.8 million versus the consensus estimate of $145.74 million.

“We successfully closed the acquisition of Pope Resources on May 8th, and as such, are reporting our financial results on a combined basis for the first time this quarter,” said David Nunes, President and CEO. “I am extremely proud of the collaboration, focus and dedication that our team demonstrated in successfully integrating Pope Resources into Rayonier amid very challenging market conditions. The vast majority of our integration efforts had to be conducted remotely due to travel restrictions, government-mandated stay-at-home orders and company-mandated work-from-home arrangements resulting from the COVID-19 pandemic. Nevertheless, our employees leaned heavily on technology to mitigate the physical distance created by these circumstances and were able to successfully work together towards closing the transaction and integrating our organizations in a seamless manner. The relative ease with which Pope Resources employees have transitioned to Rayonier is a true testament to the similarities in culture that we identified at the outset of the transaction.”

“The U.S. forest products industry has continued to operate as an essential critical infrastructure industry throughout the COVID-19 pandemic, while the New Zealand forest products industry was shut down for approximately one month from late-March to late-April,” continued Nunes. “We remain focused on optimizing production while implementing enhanced safety protocols to protect our employees, contractors and all other parties with whom they interact. Overall, I’m very pleased with how our team navigated the myriad of challenges associated with the pandemic to deliver strong operating results across our segments during the second quarter. Southern Timber Adjusted EBITDA declined 4% relative to a strong second quarter 2019, primarily due to substantial pipeline easement revenue in the prior year quarter. In Pacific Northwest Timber, Adjusted EBITDA improved 76% versus the prior year quarter as the acquisition of Pope Resources contributed an additional 55,000 tons of harvest volume in the current quarter. New Zealand Timber Adjusted EBITDA declined by 50% relative to the prior year quarter as the N.Z. government instituted strict lockdown measures during the quarter, resulting in a 23% reduction in harvest volumes. Real Estate delivered an exceptionally strong quarter with a significant increase in Adjusted EBITDA relative to the prior year quarter driven by several large transactions.”

GUIDANCE:

Rayonier sees FY2020 EPS of $0.17-$0.21, versus the consensus of $0.16.

“As we continue to adapt to the impacts of the COVID-19 pandemic, our highest priority remains the health and safety of our employees and contractors, as well as their families and communities,” stated Nunes. “Overall, I am very pleased with the level of productivity and engagement that our employees have sustained over the last several months as we’ve operated under a work-from-home model for office employees and under enhanced safety protocols for field employees. This allowed us to remain nimble and respond to ever evolving market conditions as the economy emerged from the shutdown. In the midst of the pandemic, we also had to focus our efforts on the critical task of closing the Pope Resources acquisition as well as integrating Pope Resources’ assets and people into Rayonier. I want to commend and thank our entire team for their tireless efforts on both operating our business and successfully integrating Pope Resources during these extraordinarily challenging times.”

“Overall, we have been encouraged by the resiliency of our business and industry amid this pandemic. Housing construction and repair and remodeling activity have rebounded sharply, driving record highs for wood products prices throughout the U.S. Longer-term, we expect that this will translate to improved log prices, which tend to lag wood products pricing trends. Based on our current outlook for the balance of the year, we now anticipate full-year net income attributable to Rayonier of $38 to $43 million, EPS of $0.27 to $0.31, pro forma EPS of $0.17 to $0.21, and Adjusted EBITDA of $240 to $260 million. Our revised outlook for full-year Adjusted EBITDA reflects an anticipated partial-year contribution of $17 to $20 million from the acquired Pope Resources assets.”

“In our Southern Timber segment, we expect Adjusted EBITDA above our prior guidance and higher full-year harvest volumes of 6.0 to 6.2 million tons, primarily due to anticipated increases in export volume and strong sawtimber demand. We further expect that average pricing in Southern Timber will be relatively flat, as improved sawtimber demand driven by strong lumber pricing is generally expected to offset lower pulpwood pricing due to anticipated mill downtime, an increased supply of wood chip residuals and geographic mix. In our Pacific Northwest Timber segment, we expect Adjusted EBITDA above our prior guidance and higher full-year harvest volumes of 1.6 to 1.7 million tons due to incremental volume from the acquired Pope Resources timberlands. We further expect that Pacific Northwest sawtimber pricing will improve due to strengthening end markets and a higher-value species mix; however, we anticipate pulpwood pricing will be relatively flat and dependent on the duration of domestic mill curtailments. In our New Zealand Timber segment, we expect Adjusted EBITDA above our prior guidance and higher full-year harvest volumes of 2.3 to 2.5 million tons, primarily due to the shorter-than-anticipated shutdown of economic activity in New Zealand. We expect New Zealand pricing to remain relatively flat with higher seasonal demand offset by continued competition from alternative supply sources. In our Real Estate segment, we expect Adjusted EBITDA above our prior guidance due to continued strong demand for rural properties as well as an improved demand outlook for development properties.”

For earnings history and earnings-related data on Rayonier (RYN) click here.



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