Timber, Paper Companies Have Rough First Quarter

A foursome of earnings reports from wood products companies shows the continuing problems in Arkansas’ largest industry.

Only home-grown Deltic Timber Co. of El Dorado bucked the trend.

Three of the four national companies — Georgia-Pacific Group, Potlatch Corp. and International Paper Co., all of which have a large presence in the state — rang up sizable losses. Weyerhaeuser Co.’s income declined dramatically, but at least escaped red ink territory.

Deltic reported an increase in earnings over the previous year. And it pulled it off while sales were down.

Here’s a quick rundown of the reports:

• Georgia-Pacific Group of Atlanta reported a net loss of $137 million, or a loss of 61 cents per diluted share, for the first quarter of 2001.

That includes a one-time, pretax charge of $82 million ($52 million after tax) related to closing the Bellingham, Wash., pulp and lignin operation. A year ago, first-quarter net income was $194 million, or $1.11 per diluted share.

First-quarter 2001 results were affected by continuing weak market conditions for wood products and higher energy costs, the company said.

The company’s consumer products segment, which includes former Fort James Corp. assets, was one bright spot, recording first-quarter 2001 operating profits of $183 million, excluding the one-time charge for the Bellingham closure, versus $52 million a year ago.

The bleached pulp and paperboard segment recorded operating profits of $57 million compared with $114 million during the same quarter last year due to lower demand and higher operating costs. Weak demand and lower prices resulted in an operating loss of $24 million in the first quarter for the building products segment compared with an operating profit of $206 million in the first quarter 2000.

Georgia-Pacific Corp.’s consolidated results for the first quarter, which includes Georgia-Pacific Group and The Timber Co., recorded a consolidated net loss of $115 million for the three months ended March 31, compared with consolidated net income of $234 million for the first quarter of last year.

G-P has nearly 5,000 workers in Arkansas, and its land-holding company, The Timber Co., owns 785,000 acres of timberland.

• Potlatch Corp. of Spokane, Wash., which struggled with continuing high energy costs and poor market conditions for most of its products, reported a net loss of $28.8 million, or $1.02 per diluted common share, for the first quarter of 2001.

Including an after-tax charge of $2.6 million — or 9 cents a diluted common share — related to a workforce reduction plan at its pulp, paperboard and consumer products operations in Idaho, the loss was $31.4 million or $1.11 per diluted common share.

Net earnings for the first quarter of 2000 were $2.4 million or 8 cents a diluted common share. Net sales for the first quarter of 2001 were $444.0 million, compared to $474.6 million recorded a year ago.

The wood products segment reported an operating loss of $20.7 million for the first quarter of 2001, versus earnings of $15.7 million recorded in 2000’s first quarter.

The pulp and paper segment reported an operating loss for 2001’s first quarter of $15.1 million, compared to earnings of $3.3 million in 2000’s first quarter.

Potlatch, which has about 500,000 acres of forest land in Arkansas, employs about 1,000 in the state.

• International Paper Co. of Purchase, N.Y., reported first-quarter 2001 earnings of $24 million, or 5 cents a share, before special and extraordinary items. Earnings for the same period a year earlier were $249 million, or 60 cents a share, before special and extraordinary items. First-quarter 2001 net sales were $6.9 billion, compared to $6.4 billion in the first-quarter 2000.

After special and extraordinary items, IP reported a net loss of $44 million, or 9 cents a share, in the first quarter, compared with net earnings of $378 million, 91 cents a share, in 2000’s first quarter after special and extraordinary items.

IP’s wood products businesses continued to be impacted by depressed prices in lumber and panels. Oversupply in the market has prices running near 10-year lows.

IP, the world’s largest paper company, is Arkansas’ largest corporate landowner, with around 1 million acres, and it employs about 3,900 in the state.

• Weyerhaeuser Co. of Federal Way, Wash., reported first-quarter net earnings of $107 million, or 49 cents a share, that include a nonrecurring after-tax charge of $26 million associated with the decision to outsource certain information technology services. Excluding the charge, first-quarter 2001 earnings were $133 million, or 61 cents a common share. This compares with $244 million, or $1.04 per share, for the first quarter of 2000.

Net sales for the first quarter of 2001 were $3.6 billion, compared with $3.9 billion for the same period last year.

Weyerhaeuser’s wood products division reported a loss of $33 million, compared with earnings of $138 million for the same period last year, as lumber and oriented strand board prices reached 10-year lows.

In Arkansas, Weyerhaeuser has some 1,900 employees and owns or leases 714,000 acres of timberland.

• Deltic Timber said net income for the first quarter of 2001 was $9.2 million, or 72 cents a share, compared with $2.2 million, or 13 cents a share, a year ago.

However, income from discontinued agriculture operations, net of income taxes, was $8.2 million, 69 cents a share, for 2001’s first quarter. Results of discontinued operations included a $13.4 million pretax gain on completed sales of approximately 18,400 net acres of farmland.

Deltic’s sales totaled $22.5 million, compared with $29.7 million in the previous year.

President and CEO Ron L. Pearce said, “The mills are not yet profitable; however, we did see an improvement over the fourth quarter of 2000 as average realizations for finished lumber sales increased by 9 percent to $287 per thousand board feet and our operating loss was reduced by $1.4 million. Also, prices were down 21 percent from the first quarter of 2000, the last quarter in which the mills were profitable.”

Deltic’s mills segment loss of $2.4 million in the current quarter compares to earnings of $0.8 million during the first quarter of 2000. The real estate segment, Chenal Valley in west Little Rock, earned $0.6 million in the current quarter, compared with $0.3 million last year. Twenty-four residential lots were sold.

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