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 The employee parking lot at the Weyerhaeuser Co. headquarters in Federal Way, Wash., on Tuesday sits mostly empty after Weyerhaeuser said it would cut about 1,500 employees. Peter Haley / The News Tribune
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Analysts expect Weyerhaeuser cuts will have minimal effect on local operations
Tuesday, August 5, 2008 11:33 PM PDT
By Erik Olson
Printable version
E-mail this articleWeyerhaeuser Co. announced plans Tuesday to shed 1,500 jobs, with two-thirds coming at its Federal Way headquarters, as slumping nationwide home starts led to a $96 million second quarter loss in 2008.
Tuesday’s developments, coupled with Monday’s $6 billion sale of its containerboard and packaging business, is further evidence of a trend analysis have noted recently: The 108-year-old company is slowly getting out of the paper products to focus on its historic roots of growing and harvesting timber and manufacturing timber.
“In some level, it is like taking a step back in time,” said Paul Latta, a timber industry analyst with the Seattle-based McAdams Wright Ragen.
Steve Chercover, senior timber industry analyst with D.A. Davidson in Portland, said Weyerhaeuser’s new direction should have little impact for its Longview operations, a 700-acre complex that exports logs, produces paper used in milk cartons and newspapers, and manufactures lumber and wood chips. No local Weyerhaeuser papermaking facilities are involved in Monday’s sale.
The June opening of the 230-worker sawmill just off Industrial Way indicates Weyerhaeuser is making a big investment in its Longview operation, Chercover said.
“That’s a vote of confidence in your local facility,” Chercover said.
Norpac, is a “keeper” for the company because it’s a high-quality facility and jointly owned with Japan-based Nippon Paper Industries, Chercover said.
Weyerhaeuser employs about 1,800 people in Cowlitz County.
Weyerhaeuser will cut 1,000 jobs from its Federal Way headquarters and 500 more jobs from other facilities nationwide by the end of 2009, company spokesman Anthony Chavez said. The company was not specific about where the 500 job cuts would take place.
The company’s $96 million second quarter loss amounts to 45 cents per share. It contrasts with a $32 million profit in the second quarter of 2007. Revenues fell from $1.66 billion a year earlier to $1.07 billion in 2008.
Single-family housing starts dropped to a seasonally adjusted annual rate of 670,000, which led to heavy losses in Weyerhaeuser’s wood products division, which sells lumber and plywood, according to the company.
“Unprecedented conditions in the housing market are reflected in the second quarter results of our real estate, wood products and timberlands businesses,” said Daniel S. Fulton, Weyerhaeuser chief executive, in a statement.
The news was better in the pulp and liquid packaging division, which earned $42 million in the quarter, though that was down from $56 million from a year earlier.
Monday’s announcement that Weyerhaeuser is selling its containerboard and packaging businesses to Atlanta-based International Paper Co. is expected to generate between $4 billion and $4.5 billion in revenue after taxes, which will better position Weyerhaeuser to pay off its more than $7 billion in debt, Chercover said.
“I would be shocked and dismayed if they weren’t trying to cut costs everywhere,” Chercover said.
In Cowlitz County, Weyerhaeuser shut down its Green Mountain sawmill outside Toutle at the end of April to consolidate its lumber operations in Longview. The move eliminated 130 jobs.
With the announced layoffs and sale to International Paper, Weyerhaeuser is likely taking steps toward converting to a real estate investment trust, or REIT, Latta said.
Longview Fibre underwent a REIT conversion in 2006, which helped separate its valuable timberlands from its struggling pulp and paper operations.
Weyerhaeuser “is under pressure from shareholders to take steps required to seek value for the timber operations,” Latta said.
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Kem Cho wrote on Aug 6, 2008 9:13 AM:
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