May 5, 2009 / 12:52 PM / in 8 years

UPDATE 3-Weyerhaeuser has narrower-than-expected loss

* Q1 adj. loss 68 cents/shr vs. estimate of 79 cents/shr

* Sees Q2 Wood Products segment loss to narrow

* Real Estate, Timberlands Q2 results to be similar to Q1

* Applies to qualify as alternative fuel mixer

* Shares up 2.4 pct on NYSE (Adds analyst comments, CFO from conference call; updates share movement)

By Hezron Selvi

NEW YORK, May 5 (Reuters) - Forest products company Weyerhaeuser Co WY.N posted a narrower-than-expected quarterly loss helped by lower costs, although demand and prices for its products remained depressed.

“The recession hit us hard and affected the results we announced this morning,” Chief Executive Dan Fulton said in a statement.

He said the company has curtailed production capacity and reduced timber harvest levels in response.

Shares of Weyerhaeuser were up 2.4 percent in Tuesday afternoon trading after rising as much as 4.4 percent earlier in the session.

Weyerhaeuser’s first-quarter net loss widened to $264 million, or $1.25 a share, compared with a loss of $148 million, or 70 cents a share, in the same quarter last year.

However, excluding items such as charges for closures and impairments for real estate assets, the company posted a loss of 68 cents a share. Analysts on average had forecast a loss of 79 cents a share, according to Reuters Estimates.

“Wood products came in better than expected, and I will attribute that to cost reduction and lower raw material cost,” analyst Joshua Zaret of Longbow Research told Reuters.

Weyerhaeuser, like many of its peers, has closed many plants, reduced operations at virtually all its sites and has been aggressively reducing its workforce.

“Conditions in the first quarter were awful, but Weyerhaeuser did a fairly good job minimizing the inevitable damage, paring production when necessary and extracting efficiencies where possible. Mitigated input cost pressures helped too,” analyst Daniel Rohr of Morningstar said.

DIFFICULT CONDITIONS

The company expects the challenging market conditions to persist in the second quarter, but anticipates its cost-cutting measures will continue to help the Wood Products segment, its largest business.

Weyerhaeuser expects Wood Products to post a smaller operating loss in the second quarter, helped by lower raw material costs and slightly higher sales volumes.

Second-quarter home sale closings are expected to increase slightly from first-quarter levels, but at lower average sale prices, the company said.

As such, the loss from the Real Estate segment is expected to approximate the first quarter.

Second-quarter earnings from the Timberlands segment are also expected to be comparable to first quarter, while the Cellulose Fibers segment is expected to post a loss in the second quarter due to planned maintenance outages and lower pulp prices.

“Operating conditions in the second quarter are going to remain very difficult, across the board. It’s still going to be a very difficult operating environment for them for the next three months,” Zaret said.

LATE TO THE PARTY

Weyerhaeuser said it was joining other wood products makers and paper manufacturers in using a manufacturing byproduct to take advantage of biofuel tax credits.

“Weyerhaeuser has applied for registration with the IRS to become qualified as an alternative fuel mixer and began blending alternative fuel at five facilities during the first week of April,” the company’s Chief Financial Officer Patricia Bedient told a conference call with analysts.

The company has used about 77 million gallons of fuel from the first week of April through the last that it believes could qualify for the credit, Bedient added.

Wood products makers and paper manufacturers have been adding small quantities of diesel to a biofuel called “black liquor”, that they have been burning for decades to power their mills, to gain the tax credits.

It is not clear if the U.S. Congress will continue the credit. [ID:nN24434222]

“It looks like Weyerhaeuser was late to the alternative fuel party that has boosted results of pulp and paper producers like Domtar and International Paper, having only recently submitted its application to the IRS. Unfortunately, I doubt the party will last much longer,” Morningstar’s Rohr said.

Weyerhaeuser shares were up 85 cents, or 2.4 percent, to $36.87 on the New York Stock Exchange on Tuesday afternoon, off an earlier high of $37.61. (Reporting by Hezron Selvi, editing by Dave Zimmerman, Matthew Lewis, Tim Dobbyn)

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