Rayonier Reports Second Quarter 2024 Results

Second quarter net income attributable to Rayonier of $1.9 million ($0.01 per share) on revenues of $173.6 million

Second quarter pro forma net income of $3.7 million ($0.02 per share)

Second quarter operating income of $12.4 million, pro forma operating income of $13.1 million, and Adjusted EBITDA of $55.7 million

Year-to-date cash provided by operations of $107.6 million and cash available for distribution (CAD) of $59.6 million

Rayonier Inc. reported second quarter net income attributable to Rayonier of $1.9 million, or $0.01 per share, on revenues of $173.6 million. This compares to net income attributable to Rayonier of $19.0 million, or $0.13 per share, on revenues of $208.9 million in the prior year quarter.

The second quarter results included $1.1 million of net costs associated with legal settlements¹ and $0.7 million of costs related to disposition initiatives.² Excluding these items and adjusting for pro forma net income adjustments attributable to noncontrolling interests,³ second quarter pro forma net income⁴ was $3.7 million, or $0.02 per share. This compares to pro forma net income⁴ of $7.8 million, or $0.05 per share, in the prior year period.

Year-to-date cash provided by operating activities was $107.6 million versus $126.3 million in the prior year period. Year-to-date cash available for distribution (CAD)⁴ was $59.6 million, which decreased $3.8 million versus the prior year period due to lower Adjusted EBITDA⁴ ($12.1 million), higher cash taxes paid ($0.2 million), and higher capital expenditures ($0.1 million), partially offset by lower cash interest paid (net) ($8.6 million).

“Market conditions remained challenging during the second quarter, translating to a 20% decline in Adjusted EBITDA versus the prior year quarter,” said Mark McHugh, President and CEO. “Much of this decline was attributable to lower harvest volumes in our Timber segments, reflecting generally softer demand and the deferral of some harvest activity. We expect to recoup much of this volume over the balance of the year, which should translate to stronger second half versus first half results for our Timber segments, collectively.”

“Second quarter Adjusted EBITDA in our Real Estate segment declined by 7% versus the prior year period, which was below our expectations entering the quarter due to the timing of closings in our Improved Development business. However, our full-year transaction pipeline remains strong, and we expect that second half results in our Real Estate segment will be significantly higher than first half results.”

“Overall, we are on track to achieve full-year Adjusted EBITDA towards the lower end of our prior guidance range, as further detailed later in this release.”

“During the second quarter, we also made significant progress on our $1 billion disposition plan. Specifically, we have several large transactions that are in various stages of evaluation or negotiation, and we expect to be in a position to provide additional details regarding these transactions over the next few months.”

Southern Timber

Second quarter sales of $59.3 million decreased $9.0 million, or 13%, versus the prior year period. Harvest volumes decreased 17% to 1.67 million tons versus 2.01 million tons in the prior year period, primarily driven by wet ground conditions that constrained production and softer demand from lumber mills. Average pine sawtimber stumpage realizations increased 1% to $29.28 per ton versus $29.07 per ton in the prior year period, primarily due to improved chip-n-saw pricing in most of our markets. Average pine pulpwood stumpage realizations increased 10% to $17.38 per ton versus $15.78 per ton in the prior year period, primarily driven by markedly improved demand from pulp mills and a favorable geographic mix. Overall, weighted-average net stumpage realizations (including hardwood) increased 2% to $22.21 per ton versus $21.85 per ton in the prior year period. Non-timber sales of $9.4 million decreased 5% versus the prior year period, as lower pipeline easement revenues were partially offset by growth in our land-based solutions business. Operating income of $17.1 million decreased $4.6 million versus the prior year period due to lower volumes ($3.6 million) and higher costs ($3.1 million), partially offset by lower depletion rates ($1.5 million) and higher net stumpage realizations ($0.6 million).

Second quarter Adjusted EBITDA⁴of $33.9 million was 22%, or $9.7 million, below the prior year period.

Pacific Northwest Timber

Second quarter sales of $24.3 million decreased $8.0 million, or 25%, versus the prior year period. Harvest volumes decreased 12% to 293,000 tons versus 332,000 tons in the prior year period, primarily due to the Large Disposition we completed in Oregon in late 2023. Average delivered prices for domestic sawtimber decreased 7% to $90.70 per ton versus $97.37 per ton in the prior year period due to a combination of weaker demand from domestic lumber mills, reduced export market tension, and an unfavorable species mix, as a lower proportion of Douglas-fir sawtimber was harvested in the current year period. Average delivered pulpwood prices decreased 17% to $30.20 per ton versus $36.21 per ton in the prior year period, primarily due to softer mill demand in the region. Despite lower delivered pricing, net stumpage realizations increased 10% due to favorable pricing on stumpage sales and lower per-ton cut and haul costs on delivered volume. An operating loss of $1.5 million versus an operating loss of $2.4 million in the prior year period was driven by improved net stumpage realizations ($1.4 million) and lower depletion rates ($0.8 million), partially offset by lower non-timber income ($0.9 million), higher costs ($0.3 million), and lower volumes ($0.1 million).

Second quarter Adjusted EBITDA⁴ of $5.9 million was 14%, or $0.9 million, below the prior year period.

New Zealand Timber

Second quarter sales of $53.8 million decreased $7.1 million, or 12%, versus the prior year period. Sales volumes decreased 12% to 592,000 tons versus 673,000 tons in the prior year period, primarily due to softer export sawtimber demand. Average delivered prices for export sawtimber decreased 2% to $101.86 per ton versus $103.81 per ton in the prior year period, driven by weaker construction activity in China. Average delivered prices for domestic sawtimber declined 6% to $65.23 per ton versus $69.29 per ton in the prior year period. The decrease in domestic sawtimber prices was primarily driven by weaker domestic demand and decreased competition from export markets, coupled with the decline in the NZ$/US$ exchange rate (US$0.60 per NZ$1.00 versus US$0.62 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices decreased 4% versus the prior year period. Second quarter non-timber / carbon credit sales totaled $4.6 million versus $0.7 million in the prior year period. Operating income of $2.9 million increased $0.5 million versus the prior year period due to higher carbon credit income ($4.0 million), favorable foreign exchange impacts ($1.2 million), lower costs ($0.5 million), and lower depletion rates ($0.3 million), partially offset by lower net stumpage realizations ($4.2 million) and lower volumes ($1.3 million).

Second quarter Adjusted EBITDA⁴ of $7.7 million was 7%, or $0.6 million, below the prior year period.

Real Estate

Second quarter sales of $31.0 million decreased $1.1 million versus the prior year period, while operating income of $5.8 million decreased $2.9 million versus the prior year period. Sales and operating income decreased versus the prior year period due to lower weighted-average prices ($1,750 per acre versus $7,489 per acre in the prior year period), partially offset by significantly higher acres sold (14,600 acres sold versus 3,754 acres sold in the prior year period) and favorable deferred revenue adjustments.

Improved Development sales of $2.6 million included $1.6 million from the Heartwood development project south of Savannah, Georgia and $1.0 million from the Wildlight development project north of Jacksonville, Florida. Sales in Heartwood consisted of two residential pod sales totaling 47 acres for $1.6 million ($34,000 per acre). Sales in Wildlight consisted of an 8-acre commercial parcel for $1.0 million ($125,000 per acre). This compares to Improved Development sales of $12.2 million in the prior year period.

Rural sales of $7.5 million consisted of 1,439 acres at an average price of $5,189 per acre. This compares to prior year period sales of $15.6 million, which consisted of 3,411 acres at an average price of $4,582 per acre.

Timberland & Non-Strategic sales of $15.5 million consisted of a 13,106-acre transaction in New Zealand for $1,183 per acre. This transaction included several geographically-isolated parcels with low plantability (~50%), a relatively young age-class distribution, and above-average operating costs. Prior year period Timberland & Non-Strategic sales were $0.3 million, which consisted of a 76-acre transaction for $3,344 per acre.

Second quarter Adjusted EBITDA⁴ of $18.9 million decreased $1.4 million versus the prior year period.

Trading

Second quarter sales of $5.3 million decreased $10.1 million versus the prior year period, primarily due to lower volumes and prices. Sales volumes of 55,000 tons decreased 59% versus the prior year period. The Trading segment generated operating income of $0.1 million, which was consistent with the prior year period.

Other Items

Second quarter corporate and other operating expenses of $12.0 million increased $1.7 million versus the prior year period, primarily due to $0.7 million of costs related to disposition initiatives,² higher compensation and benefits expenses, and higher professional services fees.

Second quarter interest expense of $9.8 million decreased $2.6 million versus the prior year period, primarily due to lower average outstanding debt.

Second quarter income tax expense of $0.5 million increased $0.3 million versus the prior year period. The New Zealand subsidiary is the primary driver of income tax expense.

Update on Initiatives to Enhance Shareholder Value

We are pleased with the progress we have made on our previously announced $1 billion disposition plan. Although no transactions were completed during the quarter, we have been encouraged by the interest received from prospective buyers and continue to advance a variety of options to achieve our target. To this end, we are actively engaged on several significant transactions and expect to be in a position to provide additional information regarding such transactions concurrent with or prior to our third quarter earnings release.

Outlook

“Based on our first half results and expectations for the remainder of the year, we now expect that full-year Adjusted EBITDA will be toward the lower end of our prior guidance range and full-year pro forma EPS will be modestly below the low end of prior guidance,” added McHugh. “As indicated at the beginning of the year, our full-year 2024 financial guidance excludes the potential impact of any additional asset sales as part of the $1 billion disposition target that we announced in November 2023.”

“In our Southern Timber segment, we expect full-year harvest volumes toward the lower end of prior guidance as we look to opportunistically flex our volume in response to market conditions. We expect that pine stumpage realizations will be lower in the second half of the year as compared to the first half due to a less favorable geographic mix, lower sawlog prices, and a relatively higher proportion of thinning volume. Further, we continue to expect higher non-timber income for full-year 2024 relative to full-year 2023 driven by growth in our land-based solutions business. Overall, we anticipate full-year Adjusted EBITDA toward the lower end of our prior guidance range.”

“In our Pacific Northwest Timber segment, we expect to achieve full-year volumes slightly below our prior guidance. While pricing conditions have been relatively stable thus far in 2024, our ability to increase delivered log prices has been constrained by challenging domestic and export market conditions. Overall, we expect full-year Adjusted EBITDA toward the lower end of our prior guidance range.”

“In our New Zealand Timber segment, we remain on track to achieve our full-year volume guidance as we expect relatively higher production during the second half of the year as compared to the first half. Further, we continue to expect that full-year domestic and export sawtimber pricing will improve modestly relative to the full-year pricing achieved in 2023. Despite improved pricing conditions, we expect full-year Adjusted EBITDA to fall slightly below our prior guidance range due to lower carbon credit sales, softer export markets, and elevated shipping costs.”

“In our Real Estate segment, we continue to see healthy interest in our development projects and rural properties. We continue to anticipate full-year Adjusted EBITDA within our prior guidance range, with transaction closing activity heavily concentrated in the fourth quarter.”

For full results click here.

About Rayonier

Rayonier is a leading timberland real estate investment trust with assets located in some of the most productive softwood timber growing regions in the United States and New Zealand. As of December 31, 2023, Rayonier owned or leased under long-term agreements approximately 2.7 million acres of timberlands located in the U.S. South (1.85 million acres), U.S. Pacific Northwest (418,000 acres) and New Zealand (421,000 acres). More information is available at www.rayonier.com.

Contact:

Collin Mings – Vice President, Capital Markets & Strategic Planning – investorrelations@rayonier.com – (904) 357-9100

Source: Rayonier, Inc.