Timberland Investment
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Duke Takes Timberland Investments Course to London

Duke Takes Timberland Investments Course to London | Timberland Investment | Scoop.it

May 2-3, 2017 in London, England

 

Day 1 – Timberland Investment Fundamentals

 

  • Participants, Opportunity Sets, and Trends: Global Timberland Investment Opportunities – Chris Zinkhan, Chief Executive Officer, The Forestland Group LLC
  • Investment Fund Structuring – Tom Johnson, Managing Director, Timberland Investment Resources LLC
  • Why Include Timberland in an Investment Portfolio? Criteria for Assessing Alternatives – Thomas Bentzen, Due Diligence Manager, The International Woodland Company
  • Undertaking Due Diligence on the Prospective Timberland-investment Opportunity – Blake Stansell, Sr Vice Present, The Forestland Group LLC; and Victor Haley, Partner, Eversheds Sutherland
  • Timberland Valuation: Issues and Trends – Bret P. Vicary, Vice President, James W. Sewall Co. 

 

Day 2 – Assessing individual properties and timberland portfolios

 

  • Income Tax Considerations of Timberland Investments – Daniel R. McKeithen, Partner, Eversheds Sutherland
  • Timberland Financial Reporting – Corey Ficke, Ernst & Young
  • Mergers and Acquisitions in the Global Timberland Sector – Willem Enthoven, Managing Director, FBR & Co.; Tom Blake, Managing Director, Pöyry Capital Limited; Celedonio Moncayo, Pöyry Capital Limited
  • Assessing International Opportunities – Tony Cascio, Director, Client Account Management, Hancock Timber Resource Group
  • Income Opportunities Beyond Timber Sales – Ricardo Bayon, Encourage Capital
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What Effect Do Health Insurance Costs Have On Logging Businesses?

What Effect Do Health Insurance Costs Have On Logging Businesses? | Timberland Investment | Scoop.it

Nationally, only 37% of logging businesses provide access to health insurance for their employees. On average, they cover 73% of a single enrollee’s premium. As you can see in the table above, the level of benefits actually varies quite a bit by region, with West Coast operations reporting greater access to health insurance (though with fewer survey respondents out west). If we combine the national average access and contributions with Kaiser Family Foundation’s estimates of insurance premiums by year for small businesses, we can see the estimated impact of health insurance costs per employee on logging businesses.

With only one-third of businesses affected, it doesn’t look like a big part of the story, though costs have been trending upwards. With two-thirds of logging employees not covered by their employer, you could also argue just the opposite. Access to health insurance for those without coverage from their employer who earn over 138% of the poverty line (roughly $16,000) are participants on the exchanges created by the Affordable Care Act or are uninsured. As has been widely reported, premiums in the open markets are on the rise. This puts pressure on the industry as a whole. If employees are feeling the pinch in their pockets over the cost of their health care, they may look elsewhere for employment. The level of benefits become a competitive advantage when seeking to recruit and retain quality employees. In a business like logging, which is increasing employment to match growing demand, being competitive matters.

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Timberland Investment Management Organizations: Business Strategies in Forest Plantations in Brazil

Timberland Investment Management Organizations: Business Strategies in Forest Plantations in Brazil | Timberland Investment | Scoop.it
US-based timberland investment management organizations (TIMOs) have led a group of institutional investors that manage timberland assets in Brazil. This research investigates US-based TIMO strategies and preferences in investments in Brazil. We performed a statistical cluster analysis to identify similarities between TIMOs according to forest, institutional, and macroeconomic preferences. Four TIMOs had similar strategies and ranked macroeconomic indicators as more important than forest and institutional elements for making investments. Return and risks were listed as the most crucial variables in investment strategies. Market size, political risk, tax systems, and timber markets were also cited as important indicators of a business environment. Brazil and other emerging countries should focus on political stability, granting complete land tenure rights, and simplification of the tax system to attract new investors to timberland.
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Deltic Timber In The Crosshairs?

Deltic Timber In The Crosshairs? | Timberland Investment | Scoop.it
On February 22, 2017, Southeastern Asset Management, which owns a 15% stake in Deltic Timber Corporation (NYSE:DEL), filed a 13D with the Securities and Exchange Commission. In it, Southeastern stated that it, and Deltic, had been approached by multiple parties interested in merging or acquiring Deltic. It also stated that Deltic had hired a financial adviser but refuses to enter into substantive negotiations with these parties. They go on to state that the interested parties are willing to pay a price for the company in excess of current trading levels.

On February 22, DEL closed at $77.68, and the very next day, it went to $82.28. It has recently fallen back to $75.29. The stock's 52-week high and low are $85.42 and $53.21, respectively. Deltic pays a dividend of $.40, about 0.53%, well below what other timber RIETs and MLPs pay.

Deltic Timber Corporation is a C corporation based in El Dorado, Arkansas. It owns 530,000 acres of timberland in Arkansas and Louisiana. It also owns two sawmills and an MDF mill. Last year, Deltic produced 274 MMBF of lumber and 104 MMSF of MDF. Total sales for the company in 2016 were $219.4 million. About 16% of sales came from Woodlands, 74% from Manufacturing, and about 10% from Real Estate. Operating income for the three segments in 2016 was $44.6 million: 40% from Woodlands, 43% from Manufacturing, and 17% from Real Estate. G&A is a whopping $22.9 million. Net Income, a meaningless figure for a timber company, was $9,245 million. Cash from operations, a much better number, was $43,593 million.

Who could be interested in acquiring Deltic? My best guess is Weyerhaeuser (NYSE:WY) and/or Potlatch Corp. (NASDAQ:PCH). Both REITs have operations intermingled with Deltic's, and they also own large manufacturing operations. It could also be one of the many TIMOs; however, because of Deltic's manufacturing assets, my bet is one of the REITs.

Lets take a quick and dirty look at a valuation of Deltic's assets:

503,500 acres of Timberland at $2,000/acre - $1,007,000,000

26,500 acres of HBU at $7,500/acre - $132,500,000

3 mills at $75 million each - $225,000000

-------------------------------

Total - $1,139,500,000

Debt - ($240,839,000)

-------------------------------

Net - $1,123,661,000

$92.43 per share
Sam Radcliffe's insight:

This is the opinion of Tom Kametz who writes about the timber industry for Seeking Alpha.

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Canada's first biomass torrefaction plant fully operational

Canada's first biomass torrefaction plant fully operational | Timberland Investment | Scoop.it

A Quebec biofuel developer is replacing dirty coal with environmentally-friendly combustible pellets.
On Feb. 24, Airex Energy officially inaugurated its biomass torrefaction plant, in Bécancour, Que.—which required around $10 million in public and private investments for its design, construction and start-up.

The company has been conducting gradual commissioning of the plant’s equipment and performing tests to optimize the torrefaction process since 2015.

The Bécancour facility is the first plant of its kind in Canada.

Torrefaction is a process by which biomass is transformed by a thermochemical decomposition into a fuel with more efficient combustion or gasification qualities.

In the case of Airex Energy’s torrefacation process, recycled wood is turned into organic combustible pellets, called biocoal, through drying and heating.

What makes Airex Energy’s process unique is that it is performed in three seconds, as opposed to half an hour for similar torrefaction technologies. The final product typically contains 70 per cent of the mass and 90 per cent of the energy content of the pre-treated material.

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Deltic Timber Shares Spike as Filing Reports Buyout Interest

Deltic Timber Shares Spike as Filing Reports Buyout Interest | Timberland Investment | Scoop.it
Shares of Deltic Timber Corp. of El Dorado hit a new 52-week high Wednesday after a filing said the timber and real estate firm had been "approached by multiple parties interested in merging with or acquiring" the company.

In a Schedule 13D filing with the U.S. Securities and Exchange Commission, Southeastern Asset Management Inc. of Memphis said potential suitors had approached it and Deltic about a deal, and that it believes Deltic has hired a financial adviser.

Deltic shares (NYSE: DEL) rose on the news, hitting a new peak of $85.49 on Wednesday before closing at $82.51, up 5.5 percent from the previous day.
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Forest Stewardship Council cuts ties with Austrian timber giant over illegal wood, EIA comments

Forest Stewardship Council cuts ties with Austrian timber giant over illegal wood, EIA comments | Timberland Investment | Scoop.it

The Forest Stewardship Council (FSC) today announced its decision to immediately disassociate from the Austrian timber giant Holzindustrie Schweighofer (Schweighofer), one of its largest members, due to the company’s persistent and indiscriminate sourcing of illegal timber in Romania. The decision follows a year-long investigation by an FSC Expert Panel, which concluded that Schweighofer had created a business “culture” favoring cheap wood over legal wood in its Romanian sourcing.

The decision by the FSC’s Board of Directors reverses the Board’s decision in December to let Schweighofer continue using the FSC’s logo during a period of probation. Following that decision, EIA published results of a follow-up investigation that showed Schweighofer continuing to receive illegal wood. A broad spectrum of NGOs, including EIA, WWF, Greenpeace, and Friends of the Earth protested FSC’s decision to only put the company on probation. An online petition, calling for the FSC to disassociate from Schweighofer, garnered 250,000 signatories in Romania, Germany, and Austria. The Romanian group De-clic delivered the petitions to FSC’s headquarters in Bonn and urged the Board “to take the right decision and stop endorsing corruption in Romania and stop endorsing illegal logging.”

The FSC Panel’s year-long investigation produced a 110-page report in December 2016, concluding that Schweighofer had purchased illegal timber, sourced logs cut on land stolen from local communities, developed a bonus system that encourages illegal logging, and had an inadequate due diligence system to avoid illegal timber purchases. The Panel recommended that the FSC disassociate itself from Schweighofer until the company can meet a long list of conditions. Chief among these being that the company can trace all its log purchases back to the forest stand.

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Online timber brokerage finds ways to make its mark

Online timber brokerage finds ways to make its mark | Timberland Investment | Scoop.it

Mahone Bay-based startup WoodsCamp Technologies is leveraging open data to reinvent — and reveal fresh insight into — Nova Scotia’s forestry industry.

WoodsCamp Technologies is an online timber brokerage that uses free ‘open’ provincial government data to connect woodlot owners, loggers and sawmills in a way that increases both efficiency and sustainability. In other words, WoodsCamp gets timber to the right place at the right time, and at a price that works for everyone.

The company had a great 2016, says Alastair Jarvis, who — along with Will Martin — launched WoodsCamp officially in May of that year.
***
The main WoodsCamp product for landowners uses ‘open’ data to quickly tell woodlot owners what’s growing on their property. This data, gained by remote sensors, represent a digital catalogue of what trees grow across the province. WoodsCamp ascribes a score to each lot, to assess the value of its contents. That means owners selling their timber have an idea of the value, even if they live thousands of miles from the woodlot. If they sell timber through WoodsCamp, the company gets a cut. And for the loggers and the pulp and timber mills who buy the wood? WoodsCamp offers the prospect of a more stable, sustainable and efficient supply chain.

But perhaps most importantly, says Jarvis, December saw WoodsCamp dispatch its 1,000th WoodsCamp report on privately held Nova Scotia land — a milestone representing, he says, approximately three per cent of the province’s 30,000 private landowners, in his well-researched estimate.
***
Meanwhile, says Jarvis, the data showed also that while Nova Scotia landowners are definitely motivated by money, financial gain is often not their primary goal.

“Most often, landowners say they want to make their forest healthier over time,” he says.
***
Going into the rest of 2017, both men remain focused on proving their idea can work here in Nova Scotia — before eventually taking it into eastern North America and Europe.

Says Jarvis, “We’re looking to scale globally in regions where a distributed and fragmented forestry supply chain persists, and where the network of human relationships that made the market work for a generation is now disintegrating.”

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Residues Becoming a Problem for Northeastern Mills

Residues Becoming a Problem for Northeastern Mills | Timberland Investment | Scoop.it

Every mill is unique, but a decent rule of thumb is for every thousand board feet of lumber produced, two tons of residues are produced—one ton of clean chips, and another ton of bark and sawdust. Precise statistics are hard to come by, but New England sawmills produce somewhere on the high side of 1.3 billion board feet of lumber annually. Region-wide, about two-thirds of the production is softwood—spruce, fir, white pine and hemlock. Maine is responsible for the lion’s share of this production, but New Hampshire and Vermont check in with respectable production, and all states in the region have sawmills.

***

Since the beginning of 2014, Maine has lost over 4 million tons of low grade market—most of which were pulps mills (which use mill chips), with some biomass market loss as well. While pulp mills in the state still use somewhere around 7 million tons of wood annually (pulpwood and mill chips), softwood has taken a huge hit. Over 1.5 million tons of softwood market have vanished in the past few years. Shuttered pulp and paper mills in Bucksport, East Millinocket, Lincoln, and Madison were all softwood consumers, and are now gone. Other pulp mills have cut back production levels.

 

Forest2Market benchmark data confirms this trend. As evidenced in the two charts below, product categories that make up the residuals market have all decreased in price since Q12015 despite a few temporary spikes along the way. Hardwood total fiber has dropped 13 percent, softwood total fiber is down 10 percent and fuelwood has been hit the hardest with a 23 decrease in price.

 

In addition to pulp mill markets lost, many of the remaining markets aren’t exactly on firm footing. Biomass power plants in the region are struggling with (relatively) low wholesale electricity prices, as well as renewable energy certificate (REC) prices that have lost half their value since 2015. Two biomass plants reopened and two more were given a lifeline with $13 million in funding from Maine, but that provides only a temporary reprieve. The region’s pellet mills—which in this region sell to homeowners and businesses for heating—are competing against lower heating oil prices and still recovering from a very warm winter last year and sluggish sales this winter. 
***
Sawmills are critical to the success of the entire forest products industry in the Northeast (and every other region as well). In Maine, which has long been thought of as a “pulpwood state,” the most recent figures from the state’s Forest Service suggest that sawlogs represent about a quarter of the volume harvested, but two-thirds of the stumpage paid to landowners.

***

Today, sawmills (and the entire forest products industry) in the Northeast need to pay careful attention to moving residues as efficiently as possible in order to assure their continued operations and profitability.

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Don’t sell state forest to timber company, Oregon governor says

Don’t sell state forest to timber company, Oregon governor says | Timberland Investment | Scoop.it

Oregon Gov. Kate Brown said Friday she was against the proposed sale of a state forest filled with old-growth timber to a logging concern and an Indian tribe, an issue that has galvanized environmentalists across the state.

 

In a jammed public meeting in December, speaker after speaker who had arrived from cities, towns and farms beseeched the State Land Board to reject the sale of the 82,500-acre Elliott State Forest to Lone Rock Timber Co. and its tribal partners.

 

Brown, one of three members of the State Land Board, said Friday she believes the forest in the Coastal Range should “remain in public ownership, with either the state or tribes owning the land.” She said, though, that the state should change the way it owns and manages the forest, whose timber sales help fund Oregon schools and which has been losing money in recent years.
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Rayonier's (RYN) CEO Dave Nunes on Q4 2016 Results - Earnings Call Transcript

Rayonier's (RYN) CEO Dave Nunes on Q4 2016 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Executives

Mark McHugh – Senior Vice President and Chief Financial Officer

Dave Nunes – President, Chief Executive Officer and Director

Doug Long – Senior Vice President-U.S. Operations

Chris Corr – Senior Vice President, Real Estate and Public Affairs

Analysts

Collin Mings – Raymond James & Associates, Inc.

Ketan Mamtora – BMO Capital Markets (United States)

Mark Weintraub – The Buckingham Research Group, Inc.

Mandeep – RBC Capital Markets

 

Mark Weintraub

Okay. And then lastly sort of shifting gears. A fair bit of timberland that might be coming to the market in the next year, year and a half via the TIMOs. How important – is what's going on in interest rates to how these lands are likely to – or how you would view, how you would value these properties?

Dave Nunes

Well, it’s dynamic. I mean, I think that in some level as you see a rising interest rate environment that rising interest rate environment is predicated on an inflationary environment, which is in turn predicated on higher production – product pricing. So as we see more inflation impacting the price of the products, we expect that that's going to play into the rise in interest rates. We certainly look at it more from – we factor that in as we think about hurdle rates, but we're also looking at it from the perspective our alternative uses of capital and we’re always - when we look at acquisitions understanding how our own timber is trading at the time on an imputed discount rate and we compare that to what we think the market clearing discount rate is on any particular transaction. I don’t know Mark if you want to add anything to that.

 

***

Mark Weintraub

Well, and maybe just add one more. Would look that like particularly in the U.S. South that buyers already incorporate substantial appreciation in expected sawtimber pricing et cetera. Now do these same models in your judgment certainly can use your own thought process, do they incorporate meaningful increases in interest rates as well? Or is it that you've actually, the models are getting benefit to price appreciation and not necessarily so much for the interest rates. Of course prices could go up more than what’s imputed, but any thoughts on that?

Dave Nunes

Yeah, I mean, it probably depends on who you're talking to, I mean everybody – it’s a little bit differently and recognize too that you know a big impact. This really kind of boils down to how you think about discount rates and hurdle rate and it's not only you know, reflective of your cost of capital and alternative uses of capital, but it's also reflective of the flows of capital. What we've seen is that there's been continued interest in the timber asset class from a capital flow standpoint and that has tended to have a dampening effect on cap rates in the sector as people have pushed money into this sector from a flight to quality and just a general conservative investment perspective. So you’ve got some offsetting things at play there.

 

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Second lawsuit filed over Forest Service’s PolyMet land swap

Second lawsuit filed over Forest Service’s PolyMet land swap | Timberland Investment | Scoop.it

Minnesota-based WaterLegacy on Monday filed suit in U.S. District Court against the U.S. Forest Service seeking to overturn the agency’s approval of a 6,650-acre land swap for the PolyMet copper mine site.

The environmental group says the approval earlier this month “violated the Federal Land Policy and Management Act because it failed to consider the highest and most profitable use of the lands for mining related uses, significantly undervalued the federal lands, and would result in a windfall for the PolyMet foreign corporation at the expense of Minnesota taxpayers and public lands.”

The 20-page lawsuit filed in Minnesota claims, “The Forest Service’s failure to appraise the market value of the federal lands … as a whole property, failure to value the lands according to their most profitable, feasible, probable and intended use for mining related purposes, and failure to value the lands based on the most comparable Northeastern Minnesota transactions by mining companies in the private market reflected a willful blindness of the Forest Service to the intended use of the federal property; was neither reasonable nor credible.”


PolyMet needs the Forest Service land between Hoyt Lakes and Babbitt because it sits on top of the deposit of copper, nickel and other valuable metals the company wants to dig — the first copper mine ever in Minnesota. In exchange for the mine site, PolyMet purchased and is trading to the federal government an equal amount of undeveloped land within the border of the Superior National Forest.

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Rising Fiber Costs Threaten Russian Pulp & Paper Industry

The Russian Pulp & Paper (P&P) sector is export-oriented, and Russian producers compete with other long-fiber pulp and paper product producers in global markets. Due to the recent depreciation of the local currency (ruble), Russian producers have a reprieve; among the lowest cost producers in the world, they are currently enjoying high margins. This situation is temporary, however. As the ruble strengthens, fiber prices will increase and when this happens, knowledge of real-world market wood fiber costs will be crucial for Russian P&P products to retain a competitive edge on the global market.

***
The Russian P&P sector has expanded in the last 10 years, and its importance for the Russian economy has been growing. From 2006 to 2015, the growth has been significant for production of market pulp (15 percent) and especially for packaging materials, where production volumes have more than doubled. Export sales also account for a considerable share. For instance, exports amount to 30 percent of all wood pulp sales, 70 percent of all printing & writing paper sales and 25 percent of all packaging material sales. Increasing export revenues (a result of the weak local currency) have made Russian producers the most profitable in the world during the last two years.

The pulp and paper raw material base in Russia is heavily dependent on wood, as the amount of recycled fiber is low. Traditionally, the share of virgin fiber has been very high— around 80 percent.  As demonstrated in Figure 2, Russia currently enjoys the lowest pulpwood costs among the main supplier regions, which is less than $20 per cubic meter. For example, pulpwood for Russian mills currently costs one third of what competitors in Scandinavia pay. Differences from North American producers are also significant, partly due to the strong depreciation of the Ruble in 2014-2016 (Figure 3).

Between 2010 and 2015, raw material prices in Russia rose sharply in terms of local currency, but the favorable exchange rate has halted the growth of euro-based prices (Figure 4). Due to limited infrastructure and depletion of nearby resources, pulpwood is usually hauled long distances, sometimes longer than 1,000 km (more than 600 miles). Increasing oil prices and the accompanying revaluation of the ruble may be lurking around the corner. If no action is taken now to improve wood supply operations, Russian pulp and paper producers risk losing the competitive advantage they currently have.

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Human-started wildfires expand the fire niche across the United States

Human-started wildfires expand the fire niche across the United States | Timberland Investment | Scoop.it
The economic and ecological costs of wildfire in the United States have risen substantially in recent decades. Although climate change has likely enabled a portion of the increase in wildfire activity, the direct role of people in increasing wildfire activity has been largely overlooked. We evaluate over 1.5 million government records of wildfires that had to be extinguished or managed by state or federal agencies from 1992 to 2012, and examined geographic and seasonal extents of human-ignited wildfires relative to lightning-ignited wildfires. Humans have vastly expanded the spatial and seasonal “fire niche” in the coterminous United States, accounting for 84% of all wildfires and 44% of total area burned. During the 21-y time period, the human-caused fire season was three times longer than the lightning-caused fire season and added an average of 40,000 wildfires per year across the United States. Human-started wildfires disproportionally occurred where fuel moisture was higher than lightning-started fires, thereby helping expand the geographic and seasonal niche of wildfire. Human-started wildfires were dominant (>80% of ignitions) in over 5.1 million km2, the vast majority of the United States, whereas lightning-started fires were dominant in only 0.7 million km2, primarily in sparsely populated areas of the mountainous western United States. Ignitions caused by human activities are a substantial driver of overall fire risk to ecosystems and economies. Actions to raise awareness and increase management in regions prone to human-started wildfires should be a focus of United States policy to reduce fire risk and associated hazards.
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China turns to western NC trees for wood flooring and furniture

China turns to western NC trees for wood flooring and furniture | Timberland Investment | Scoop.it
The rumor in the timbering parts of the mountains began a few years back: The Chinese are buying up the lumber mills.

But those "Chinese" buyers in Western North Carolina are one charismatic man, Jimmy Lee, whose 11 mills include the old Stanley Furniture plant, once the largest employer in Graham County.

Much of the lumber Lee processes there and at other facilities in both Carolinas, Virginia and Tennessee is destined for Asian markets, particularly China, where a hunger for hardwood is fueled by consumers with recently acquired wealth and a taste for quality products.

The shifting world market helps provide jobs for local timber workers, be they loggers, mill workers or exporters. When timber value remains strong, it encourages area landowners to grow and manage timber tracts as a long-term financial investment rather than turning the land over to more traditional crops, advocates say.

North Carolina's timber exports to China have skyrocketed in recent years. It's a trend reflected nationwide as more timber harvested in the United States is shipped to the world's most populous country, where it is milled into furniture, flooring and other high-value products for buyers there.

For each of the last five years, the average value of Tar Heel wood and wood products exported to China has averaged $165 million, a number nearly 30 times what the state saw in 2000. That year, wood valued at $5.7 million was shipped to China, according to the U.S. Census Bureau.
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Pine beetles could devastate Alabama's $11B forest industry this year

Pine beetles could devastate Alabama's $11B forest industry this year | Timberland Investment | Scoop.it

A full-grown Southern pine beetle is still about half the length of a grain of rice, but state and federal forestry officials worry this tiny bug could have a monster impact this year on the state of Alabama's $11 billion wood products industry. 

"With Southern pine beetles, the Latin name (Dendroctonus frontalis) actually means tree killer, and it is," said Edward Loewenstein, associate professor of silviculture at Auburn University's School of Forestry and Wildlife Sciences. "It is well-suited to take trees out."

How the tiny Southern pine beetle can wipe out a whole forest
An illustrated guide to Southern pine beetle infestations and what you can do about them.

This year's concerns are rooted in the large number of trees left stressed or already dying from last year's record-setting drought. Drought-stressed trees don't make sap as well as healthy ones, and that sticky sap is the tree's primary defense against beetles. 

"We're in crisis right now because any organism that's under stress is less able to deal with stress, and all of our pine beetles, bark beetles are stressors to trees," Loewenstein said. "When you've got this extraordinary drought like we had this past year, that is a huge stressor put on not only individual trees but entire stands and entire landscapes."

The results can be devastating to forest industries. The U.S. Department of Agriculture estimates a widespread outbreak that begin in 1999 in east Tennessee caused more than $1 billion in timber losses. 

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Rayonier Press Release on Southern Acquisition

Rayonier Press Release on Southern Acquisition | Timberland Investment | Scoop.it

Rayonier Inc. (NYSE:RYN) today announced that the company has entered into three transactions with separate sellers to acquire approximately 95,100 acres of high-quality industrial timberlands located in Florida, Georgia and South Carolina for an aggregate purchase price of approximately $217 million, or $2,280 per acre (the “Acquisitions”). The Acquisitions are comprised of highly productive timberlands located in some of the strongest timber markets in the U.S. South, primarily along the I-95 coastal corridor near Savannah, GA.
Key attributes of the Acquisitions include the following:

  • Strong timber markets – located in the top three U.S. South timber markets based on average composite stumpage price by region (1)
  • Diverse customer base – very competitive wood market with multiple pulpwood, grade and export customers
  • Highly productive timberlands – 78’ site index; 73% plantable; sustainable yield* of approximately 450,000 tons (or 4.7 tons per acre per year on the acquired lands)
  • Well-stocked timber inventory – 4.3 million tons of merchantable timber inventory* (or 45 tons per acre); average plantation age of 14 years
  • Complementary to existing Rayonier landholdings – increases Rayonier’s ownership in U.S. South Coastal Atlantic markets by approximately 15%
  • Primarily fee simple ownership – 89% fee simple ownership and 11% leased lands
  • Accretive to cash flow – targeting an annual increase in Adjusted EBITDA** and Cash Available for Distribution (CAD)** of approximately $13 million and $10 million, respectively, over the medium-term

Rayonier expects to finance the Acquisitions with cash on hand and the proceeds of a follow-on offering of Rayonier common shares, which the company also announced today. 

***
(1) Based on Timber Mart-South weighted average composite stumpage price by region assuming product mix of 50% pulpwood, 30% chip-n-saw and 20% sawtimber.

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Drax to buy two distressed US pellet plants as it expands operations

Drax to buy two distressed US pellet plants as it expands operations | Timberland Investment | Scoop.it
Drax Group PLC (LON:DRX) is looking to buy two pellet plants in the US that have filed for bankruptcy.

The owner of the UK’s largest power plant said it has submitted initial cash offers for the operating assets of Texas Pellets and Louisiana Pellets as part of auction processes to be held on 1 and 2 March.

“Whilst these are binding bids, and could be accepted by the sellers, it is expected that the successful buyer will be determined through auctions,” Drax said.

Drax said buying the assets would help it achieve plans to expand its self-supply compressed wood pellet operations to support 20-30% of its generation requirement.

The news follows a report last week that revealed the burning of wood for biomass power and heat could be more harmful than traditional energy sources. The Woody Biomass for Power and Heat Impacts on Global Climate report said while some instances of biomass energy use may result in lower life-cycle emissions than fossil fuels, in most circumstances this was not the case.
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Hancock Timber Resource Group Acquires 25,000 Acres of Timberlands in Alabama

Hancock Timber Resource Group Acquires 25,000 Acres of Timberlands in Alabama | Timberland Investment | Scoop.it

The Hancock Timber Resource Group has completed the acquisition of approximately 25,000 acres of timberlands in Alabama from Rayonier Inc.

 

This transaction is a follow-on to another transaction completed in late 2016 where Hancock Timber acquired approximately 37,000 acres of timberlands in Mississippi and Alabama from Rayonier.

"We are very pleased to secure additional high quality timberlands for our clients," said Hancock Timber Resource Group President Brent Keefer. "These properties are located in an area of the US South with deep and diverse markets for forest products. We will be able to supply solid wood and fiber to a variety of facilities in southern Alabama, western Georgia, and northern Florida. We look forward to managing them to their highest potential."

 

As with the previous acquisition, the timberlands are stocked with well-managed southern pine plantations and hardwoods. The timberlands will be managed by Hancock Forest Management, the organization's integrated property management group. Hancock Timber has approximately 280,000 acres of timberland under management in Mississippi and Alabama, 1.8 million acres in the US South and almost six million acres globally.

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Timber Companies Sue Over Expansion of Oregon Monument

Timber Companies Sue Over Expansion of Oregon Monument | Timberland Investment | Scoop.it
Two Oregon lumber companies are challenging the legality of former President Barack Obama's expansion of the Cascade-Siskiyou National Monument.

Murphy Co. and Murphy Timber Investments LLC sued in federal court in Medford Friday naming President Donald Trump and federal agencies.

The Mail-Tribune says (https://goo.gl/8w5LUO) the Trump administration could choose not to defend the lawsuit.

Before leaving office, Obama added about 48,000 acres to the monument in southwestern Oregon days to protect its biodiversity.

Murphy Co. President John Murphy says more than 80 percent of the federal land in the expansion area is dedicated to timber production under the O&C Lands Act.

He says removing those acres from the timberland base managed by BLM will reduce the supply of timber sold and jeopardizes the company's log supply.

Murphy Timber Investments argues the expansion will reduce the value of about 2,100 acres of timberland it owns within the boundary as well as land outside it.
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TFS Set to Harvest Growth In China and India

TFS Set to Harvest Growth In China and India | Timberland Investment | Scoop.it
There are not many companies - if any - that could capture an 80% market share of their industry. But that’s the reward that Australian sandalwood grower TFS (TFC.AU) is eying as its investment in new supplies of the fragrant timber and oil are set to pay off as production ramps up to meet strongly growing Chinese demand.

CEO Frank Wilson, who owns a 12% stake in TFS, laughs off suggestions he’s running the OPEC of sandalwood when he sat down with Barron’s Asia, but he’s acknowledges the company is in a strong position as its transitions from being a forestry investment play to a provider of products hotly demanded for use in incense, perfumes and traditional Chinese medicine. The company has around 30% market share now, but as its plantations mature - trees take 15 years to grow - it could emerge with an 80% market share by 2030. The stock has done well over the past 12 months, with a 37% increase bringing its advance over the past five year to 140%.

TFS is the lone survivor of the shakeout of the Australian timber industry, one that saw a large number of forestry managed investment schemes (MIS) collapse under the weight of too much debt, leaving thousands of investors nursing heavy losses. For Wilson, the ability of TFS to survive the travails of the MIS debacle reflects a focus on a niche part of the industry, rather than more commodity type plantations favored by those forestry plays that hit the wall. “The reason I went into it is that it has big barriers to entry and it had a good end market that wasn’t aimed at one particular manufacturer, industry or country, and that should eliminate the boom-bust cycle you have in agriculture,” Wilson says. “That’s proved to be true.”
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Hundreds of ancient earthworks resembling Stonehenge found in Amazon rainforest

Hundreds of ancient earthworks resembling Stonehenge found in Amazon rainforest | Timberland Investment | Scoop.it

Hundreds of ancient earthworks resembling those at Stonehenge were built in the Amazon rainforest, scientists have discovered after flying drones over the area.

 

The findings prove for the first time that prehistoric settlers in Brazil cleared large wooded areas to create huge enclosures meaning that the 'pristine' rainforest celebrated by ecologists is actually relatively new.

 

The ditched enclosures, in Acre state in the western Brazilian Amazon, have been concealed for centuries by trees, but modern deforestation has allowed 450 to emerge from the undergrowth. They were discovered after scientists from the UK and Brazil flew drones over last year.
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Their discovery also reverses assumptions that the rainforest ecosystem has been untouched by humans. “The fact that these sites lay hidden for centuries beneath mature rainforest really challenges the idea that Amazonian forests are ‘pristine ecosystems,'" added Dr Watling.

 

“Our evidence that Amazonian forests have been managed by indigenous peoples long before European contact should not be cited as justification for the destructive, unsustainable land-use practiced today.

 

"It should instead serve to highlight the ingenuity of past subsistence regimes that did not lead to forest degradation, and the importance of indigenous knowledge for finding more sustainable land-use alternatives”.

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Maitland looks into stopping wood-frame construction

Maitland looks into stopping wood-frame construction | Timberland Investment | Scoop.it
The city of Maitland is working on hammering out a way to prohibit wood-frame construction for new buildings, and looking for cities statewide to get on board to make it happen.

The Maitland City Council got behind the idea after the city’s Planning & Zoning Commission started researching it last fall. Last month the Commission requested that the City Council have the city’s lobbyist work to gain support across the state for the Florida Legislature to change Florida building code to allow cities to have more control over building materials used in its borders. The Commission’s proposal applied to all construction except detached single-family homes.
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Potlatch Corporation's (PCH) CEO Michael Covey on Q4 2016 Results - Earnings Call Transcript

Potlatch Corporation's (PCH) CEO Michael Covey on Q4 2016 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Executives
Jerald Richards - VP and CFO
Michael Covey - Chairman and CEO
Eric Cremers - President and COO

Analysts
Collin Mings - Raymond James
Chip Dillon - Vertical Research
Ketan Mamtora - BMO
Mark Weintraub - Buckingham Research
Paul Quinn - RBC Capital Markets
George Staphos - Bank of America
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Ketan Mamtora

First question, can you talk a little bit about what you’re seeing on the M&A side? And how willing will you guys be to take up leverage for the right kind of opportunity?

Michael Covey

Well, the timberland M&A market was pretty active in 2016. They were setting aside the Weyerhaeuser, plum creek transaction, there were dozens of kind of smaller deals in that kind of $50 million to $500 million range. We are evaluated several of those and elected not to purchase any of them in 2016. So, I think the market has been pretty robust. We expect to continue with the kind of the maturing of some of the TIMO funds and need to for some of their investors to liquidate, and we expect to be more property on the market. Our debt enterprise level today is in the low 20% range. We feel like with we've got an untapped revolver of $250 million, which actually has an accordion on it we could expand, if needed. So, I think for the right opportunity, we'd certainly look for to continue to grow the Company.
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Mark Weintraub

Thank you. With interest rates having crept up some of late and as you mentioned the TIMOs having property that's going to be coming to market the next year or so, are you sensing at all any change in the opportunities that might present themselves this year or next 12, 18 months? Or does it feel like the market in terms of the valuations is probably going to remain at the types of levels which up until now you've been very circumspect to get too aggressive on? Clearly you have found some, but in general you've been circumspect.

Jerald Richards

I think these timberland valuations continue to be quite strong regardless of the region of the country look at. It's very hard to create shareholder value at these kind of full prices that you have to pay for timberland to win. These auctions we've seen no softening of that. Timberland prices vary, but that's largely to do with the stocking and the quality of the timberland. But for well stock, good quality southern timberland I think deal metrics that are out there still very strong.
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Paul Quinn

All right. And then just flipping over to softwood lumber because it's topical, what's the current status in negotiations right now? We've got a new U.S. government in. I guess there's not formal discussions between Canadian and U.S. governments at this point, but is the industry still talking? Are you hopeful for some kind of agreement in 2017?

Michael Covey

I think it’s a foregone conclusion that tariffs are going to be implemented later this spring. We view those as interims step to a negotiated agreement that establishes a quota on Canadian lumbers. And I think the industry is united in that and it's really important because it's one that allows the U.S. producers to invest and grow our lumber business here where is plenty of logs available, their housing starts to improving, there is a good demand for the product.

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Interior lumber supply falling, mills threatened

Interior lumber supply falling, mills threatened | Timberland Investment | Scoop.it

A decade after billions of mountain pine beetles chewed their way through British Columbia's lodgepole pine forest, the Interior timber supply has begun a dramatic drop.

"These cut reductions are starting to happen, and they are going to be real," Albert Nussbaum, director of forest analysis and inventory for the B.C. Ministry of Forests, Lands and Natural Resource Operations, told a Jan. 19 forestry conference in Vancouver, Washington.
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Nussbaum's talk to the American and Canadian delegates laid out the severity of the mountain pine beetle infestation in hard numbers that can be expected to translate into mill closures and community disruptions. He said the beetle killed 54 per cent of the merchantable pine that was to be harvested. But in some areas, specifically the central Interior, 80 to 90 per cent of the merchantable pine was killed.
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The beetle infestation peaked in 2004, and Nussbaum said the good news is that beetle populations are now down to near-normal levels. Forest companies have been salvaging that dead timber, but he said the pace of salvage operations is beginning to slow down. With the decline in the availability of dead timber, the province's chief forester is now dropping the sustainable harvest rate, called the allowable annual cut (AAC), to reflect this new reality of the Interior forest. Base-case numbers for one of the hardest-hit timber supply areas, Quesnel, show annual AAC dropping to 1.6 million cubic metres from four million cubic metres. It will be up to the chief forester to determine how that happens and over what time period.
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During the beetle infestation, B.C. increased its annual timber harvest to encourage forest companies to salvage dead pine, but the temporary harvest uplifts are now ending. The provincial AAC is hovering around 72.5 million cubic metres a year, roughly where it was before the salvage uplifts. Nussbaum expects 2017 to be the year when it moves below that level.

The decline in the B.C. timber supply was one of only two major clouds on an otherwise sunny forecast for the forest products sector in 2017. The sunny side is that U.S. housing starts are steadily climbing and the Chinese lumber market remains reasonably sound, which is positive for Canadian exporters.

The second cloud in the forecast, however, is the softwood lumber dispute, which is causing uncertainty on both sides of the border.
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Nussbaum said the lumber dispute worsens the economic impact of the timber supply forecasts, because duties or quotas could devalue the remaining salvage wood.

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