A binge of lending fed a housing boom that has, unsurprisingly, gone
bust. A binge of logging also fed that same boom.
Now the bust has affected the lending industry. It should be little
surprise that the logging industry is also taking hits from its own
Many in the business and financial community have said, obviously
enough, that the exercise of restraint by the lending industry could
have prevented the current economic crisis. Because the lenders were
unable or unwilling to restrain themselves, many now say that
government has to do it for them.
While none seem to have seen it (yet), similar restraint by the
logging industry would have done the same thing, because houses can’t
be built with money, but require an equally important input from
wood. In the final analysis, the forests may as well have fallen on
the banks. The speed of their felling certainly brought the logging
industry into trouble, but the story going untold is that lending and
logging are players united on a common stream of money, and can’t
realistically be treated as if they were separate and independent.
Wall Street Journal
May 2, 2008 9:12 a.m. EDT
Weyerhaeuser Posts Loss Amid Weak Housing Demand
By MIKE BARRIS and ADAM MANZOR
Weyerhaeuser Co., hurt by rising energy and raw-materials costs,
swung to a first-quarter loss as the company said its prices are at
inflation-adjusted record lows because of weak new-home demand.
The forest-products company recorded a net loss of $148 million, or
70 cents a share, compared with year-earlier net income of $720
million, or $3.09 a share. Excluding restructuring charges and
write-downs, as well as a $3.09 a share gain from selling its
fine-paper business last year, Weyerhaeuser had a loss of 24 cents a
share in the latest quarter and a 20-cent profit a year earlier.
Revenue fell 24% to $3.39 billion, while the drop from continuing
operations was 21% to $2.67 billion.
“Business conditions are extremely challenging,” President and Chief
Executive Daniel S. Fulton said, noting that single-family housing
starts are below the lows of 1979-82. “Since many of our products are
dependent upon single-family housing starts, we’ve experienced
record-low product prices when adjusted for inflation.”
Weyerhaeuser, which is based in South Federal Way, Wash., agreed to
sell its containerboard packaging and recycling business to
International Paper Co. for $6 billion in mid-March, 10 months after
starting a review on the segment’s future. Weyerhaeuser said it will
use a substantial portion of the proceeds to pay down debt. The
company has shed several units as it seeks to focus on its logging
and residential units.
The soon-to-be-divested segment and cellulose fibers, were the only
ones to post higher pretax profits, nearly tripling at the latter.
The wood-products business reported a higher loss as the weakening
housing market continues to reduce demand. Weyerhaeuser is one of the
nation’s largest providers of lumber products to the housing market.
The real-estate business, which includes the company’s homebuilding
operations, swung to a loss as margins fell. The backlog of homes
sold, but not closed, was about four months as the number of closings
slumped 32% from the fourth quarter.
URL for this article:
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved