Housing slump nails Weyerhaeuser's profit

Forest-products company Weyerhaeuser said Wednesday its third-quarter profit fell 26 percent as the downturn in the housing market drove wood-product prices and demand down sharply.

Profit fell to $211 million, or 85 cents a share, from $285 million, or $1.16 a share, a year ago.

Revenue slipped nearly 2 percent to $5.33 billion.

Analysts polled by Thomson Financial on average had expected a profit of 87 cents a share on $5.57 million in revenue.

"While anticipated, the housing-market decline was more abrupt and drove wood-products prices and demand into a deeper plunge than expected," Chairman and Chief Executive Steven Rogel said in a statement.

"We are taking the necessary actions to match our production to demand, and over the long-term remain confident about the residential-housing market."

Weaker prices for lumber, plywood and other wood products caused earnings in Weyerhaeuser's wood-products segment to tumble to $11 million, a 91 percent decline from $124 million in the third quarter 2005.

The company said it expects that unit to run an operating loss in the fourth quarter.

Federal Way-based Weyerhaeuser posted a $135 million profit in its real-estate and related-assets segment, down almost 7 percent from $145 million last year.

Dan Fulton, the division's president and CEO, said an oversupply of new and existing homes is behind the housing slump, unlike historical downturns fueled by high interest rates, weak economies or job losses.

While housing markets in Seattle and Houston have remained relatively healthy, Fulton said, Southern California, Las Vegas and Phoenix have had serious slowdowns.

Suburban Washington, D.C., has also been limping, but Fulton said that housing market is showing some improvement.

The company said it expects earnings from real estate and related assets to be higher in the fourth quarter than the third because of seasonally higher closings in the housing market, but substantially lower than in last year's fourth quarter.

"We're confident that the housing markets will return to firm footing when the current oversupply of homes is absorbed and when buyers become confident that home praises have stabilized," Fulton said in a conference call with analysts.

Shares of Weyerhaeuser slipped 3 cents to close at $63.70 Wednesday.

The stock has been trading between $54.25 and $75.50 over the last year.

The latest quarter included after-tax charges of $58 million, or 23 cents a share, related to the closure of a Canadian plant and asset impairments and costs related to facility closures or curtailments.

The charges were partially offset by a gain of $31 million, or 13 cents a share, from the sale of the company's North American composites business, and a gain of $15 million, or 6 cents a share, due to a reduction of the reserve for hardboard-siding claims.