FEDERAL WAY - Weyerhaeuser Co., one of the world's largest lumber and paper producers, said Friday its second-quarter profit dropped sharply because of hefty charges and weakness in the housing construction markets.
But its earnings, excluding one-time items, beat Wall Street expectations.
Net income fell to $32 million, or 15 cents per share, in the three months that ended June 30 compared with $298 million, or $1.19 per share, a year ago.
Excluding several charges and gains, the company earned $104 million, or 48 cents per share, in the latest quarter, compared with $273 million, or $1.09 per share, in the year-earlier period.
Revenue fell to $4.33 billion from $4.87 billion a year ago.
The results still topped consensus estimates of analysts surveyed by Thomson Financial, who were expecting earnings of 39 cents per share on revenue of $4.24 billion.
Weyerhaeuser shares rose $2.02, or 2.9 percent, to $70.75 in early trading, then slipped to $68.29.
Weak demand in housing hurt results, with a drop in single-family home sales and lower housing prices dragging down profit margins. The company said it expects third-quarter earnings in its real estate and related assets segment to come in lower than in the second quarter.
"From a national perspective, the single-family housing market continues to be challenging," Steve Rogel, Weyerhaeuser's chairman, president and chief executive, said in a conference call with analysts. "However, we have long anticipated these challenges and have been proactive in positioning our wood products and home building businesses."
Average prices realized for lumber, plywood, and oriented strand board increased slightly from the first quarter, partially offset by decreased prices for engineered wood products.
Sales volumes for lumber and engineered wood products increased, but plywood and oriented strand board volumes declined. The strengthening Canadian dollar hurt the contributions from products manufactured in Canada.
The company said continued weakness in the housing market is expected to lower volumes and prices in its timberland segment in the third quarter.
Second-quarter pulp shipments were down because of the combination of Weyerhaueser's fine paper business with Canadian paper maker Domtar Inc. was completed in the first quarter. But Weyerhaeuser said market conditions were improving and that it expects higher prices to boost third-quarter results in its cellulose fibers business.
Rogel said the company remains focused on cutting costs across all its business units. "In the coming quarter, we will look for ways to further reduce costs and improve performance as we face challenges produced by the continuing sluggish housing market," he said in a prepared statement. "Meeting these challenges will require tough decisions and the focus of every employee."