Plum Creek Timber Co. Inc.
), a real estate investment trust (REIT) owning and managing
timberlands in the U.S., reported fiscal 2011 fourth quarter
earnings of $61 million or 38 cents per share, compared with $59
million or 37 cents in the year-earlier quarter. The fourth quarter
2011 earnings marginally missed the Zacks Consensus Estimate by a
For full year 2011, Plum Creek reported earnings of $193 million
or $1.19 per share, compared with $213 million or $1.31 in the
previous year. The fiscal 2011 earnings also marginally missed the
Zacks Consensus Estimate by a penny.
Total revenues for the quarter were $315 million compared with
$356 million in the year-ago quarter. Total quarterly revenues were
above the Zacks Consensus Estimate of $305 million. For full year
2011, total revenues were $1.17 billion compared with $1.19 billion
The year-over-year decrease in total revenues for the reported
quarter was primarily due to higher revenues in the Real Estate
segment in fourth quarter 2010 from the final phase of the Montana
conservation sale. In addition, both sawlog and timber prices
declined in the South, resulting in lower revenues for the reported
quarter. With a considerable geographic diversity, Plum Creek was
able to adjust its harvest plans during the quarter to capitalize
on stronger markets and protect value in the weaker ones.
By segment, the Northern Resources division reported an
operating profit of $7 million during the quarter, compared to an
operating profit of $1 million in the previous year. During fourth
quarter 2011, sawlog prices were over $5 per ton higher and
pulpwood prices were $2 per ton higher on a year-over-year basis
due to continued strong demand from pulpwood customers in the
region and increased export demand for sawlog from China. Total
sawlog harvest volumes were 195,000 tons higher during the quarter
compared to the year-ago period.
In the Southern Resources segment, operating profit was $19
million compared with $28 million in the year-ago quarter. The
year-over-year decline in profit was attributable to unusually dry
weather pattern that temporarily increased supply. This was in
stark contrast to the wet weather and poor logging conditions in
the year-earlier period that resulted in temporary log shortages.
Consequently, pulpwood and sawlog prices decreased $1 per ton and
$2 per ton, respectively, on a year-over-year basis. As a result,
the company reduced its sawlog harvest volumes by about 10%
compared to that of the prior-year levels.
Operating Income in the Real Estate segment was $61 million
during the quarter on revenues of $93 million, compared with an
operating income of $73 million in the year-earlier quarter on
revenues of $155 million. The Manufacturing segment reported an
operating profit of $3 million during the quarter - unchanged from
the year-ago quarter.
Plum Creek continued to sell large tracts of rural lands
including non-strategic timberlands to raise cash. During the
reported quarter, the company sold 18,000 acres of large,
non-strategic timberlands in western Oregonfor $60 million and
8,700 acres of recreational land at an average price of
approximately $2,100 per acre. The company also sold 7,300 acres of
conservation lands for approximately $1,000 per acre and 5,400
acres of lower productivity, non-strategic land at $1,345 per
Subsequent to the quarter-end, Plum Creek completed the
acquisition of 4.7 million tons of mature southern yellow pine
timber in a negotiated timber deed transaction valued at $103
million. The acquisition is expected to be accretive to earnings,
producing between 700,000 tons and 800,000 tons of annual harvest
over the next eight years with sawlog accounting for approximately
80% of the harvest volume.
During the reported quarter, Plum Creek generated $80 million of
operating cash flow compared with $137 million in the year-ago
period. At year-end 2011, the company had cash and cash equivalents
of $254 million and total long-term debt of $1.3 billion, compared
with cash and cash equivalents of $252 million and total long-term
debt of $1.6 billion at year-end 2010.
Management observed that the business environment continued to
be challenging as the pace of recovery remained slow and erratic.
However, with a diverse timberland portfolio, conservative balance
sheet and easy access to capital, the company has the operational
and financial flexibility to tide over the storm and provide
long-term value to its shareholders.
The company expects to harvest between 16.5 and 17.0 million
tons of timber in 2012, up from 15.8 million ton in 2011. Plum
Creek further expects fiscal 2012 earnings in the range of
$1.00-$1.25 per share. First quarter 2012 earnings are expected to
be in the range of 20 cents to 25 cents.
We maintain our long-term 'Neutral' recommendation for Plum
Creek, which currently has a Zacks #3 Rank that translates into a
short-term 'Hold' rating. We also have a 'Neutral' recommendation
and a Zacks #4 Rank (short-term 'Sell') for
), a competitor of Plum Creek.
PLUM CREEK TMBR (
): Free Stock Analysis Report
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