the visible hand

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Weyerhaeuser earning drop – weak demand

Posted by ecoshift on August 4, 2007

Earnings: Weyerhaeuser drops on weak demand
Profit plunges 89% on decreased need for lumber, stronger Canadian dollar
August 3, 2007
P-I NEWS SERVICES seattlepi.com

Weyerhaeuser Co., the world’s largest lumber company, said Friday that second-quarter profit plunged 89 percent after the U.S. housing slump cut demand for wood and the Canadian dollar’s gain against the U.S. currency boosted costs.

Net income declined to $32 million, or 15 cents a share, from $298 million, or $1.19, Federal Way-based Weyerhaeuser said in a statement. Sales fell 11 percent to $4.33 billion from $4.87 billion. Profit excluding items topped analysts’ estimates.

“The quality of earnings was not high,” partly because of a $42 million gain from the sale of a California apartment building, Richard Schneider, an analyst at UBS Investment Research in New York, said in a report. He said profits from lumber and land sales were below his estimates.

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-related segment to come in lower than in the second quarter.

The housing recession may lead to more idled mills and job cuts, Chief Executive Officer Steve Rogel said on a conference call with analysts. The company has closed, sold or announced planned shutdowns of 40 forest-product plants in the past three years, another executive said.

“From a national perspective, the single-family housing market continues to be challenging,” Rogel said. “However, we have long anticipated these challenges and have been proactive in positioning our wood products and home building businesses.”

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