PotlatchDeltic Announces Waldo, Arkansas Sawmill Construction Completed

Rhea-AI Summary

PotlatchDeltic (Nasdaq: PCH) has completed construction of its modernization and expansion project at the Waldo, Arkansas sawmill. The $131 million strategic investment is expected to increase annual capacity by 85 million board feet, reaching a total of 275 million board feet per year. The project aims to improve recovery by 6% and reduce cash processing costs by approximately 30%.

The mill is now entering a 6 to 12-month ramp-up phase. Once fully operational, it is projected to generate an additional $25 million in Adjusted EBITDDA annually under mid-cycle conditions, with an expected internal rate of return of 22%. The modernization includes a new saw line, planer upgrade, continuous kiln, and a Fulghum Industries 170' 45-ton log crane.

Positive

• Completion of $131 million modernization and expansion project
• Expected increase in annual capacity by 85 million board feet to 275 million board feet
• Anticipated 6% improvement in recovery
• Projected 30% reduction in cash processing costs
• Estimated $25 million incremental annual Adjusted EBITDDA in mid-cycle conditions
• Expected 22% internal rate of return

Negative

• 6 to 12-month ramp-up phase required before reaching full capacity

Insights

Financial Analyst

The completion of PotlatchDeltic's $131 million Waldo sawmill modernization project is a significant development for the company. This strategic investment is expected to yield substantial benefits, including a 30% reduction in cash processing costs and a 6% improvement in recovery. The projected $25 million incremental annual Adjusted EBITDDA in a mid-cycle sales environment, coupled with an expected 22% internal rate of return, indicates strong potential for enhanced profitability.

However, investors should note the 6-12 month ramp-up period before the mill reaches its new capacity of 275 million board feet per year. This delay in realizing full benefits may impact short-term financial results. The 45% increase in annual capacity (85 million board feet) positions PotlatchDeltic to capitalize on potential upswings in lumber demand, but also exposes them to increased risk if market conditions deteriorate.

Industrial Engineer

The modernization of the Waldo sawmill represents a significant leap in operational efficiency. The installation of a new saw line, planer upgrade and continuous kiln, along with the 170' 45-ton log crane, showcases a comprehensive approach to improving the entire production process. The projected 6% improvement in recovery is particularly noteworthy, as it directly translates to better utilization of raw materials and reduced waste.

The 30% reduction in cash processing costs is a game-changer for PotlatchDeltic's competitiveness in the lumber market. This cost advantage could provide a buffer against market volatility and potentially allow for more aggressive pricing strategies. However, the success of this project will heavily depend on the execution of the ramp-up phase. Achieving and maintaining the projected efficiencies will be important for realizing the full potential of this investment.

Market Research Analyst

PotlatchDeltic's investment in the Waldo sawmill comes at a critical time for the lumber industry. With the housing market facing challenges due to rising interest rates, the company's focus on efficiency and cost reduction is strategically sound. The increased capacity of 85 million board feet per year positions PotlatchDeltic to capture a larger market share as demand fluctuates.

The collaboration with BID Group for this turnkey project suggests a focus on implementing best-in-class technology and processes. This could give PotlatchDeltic a competitive edge in product quality and consistency. However, the success of this investment will ultimately depend on broader market conditions in the construction and housing sectors. Investors should monitor housing starts and lumber prices closely to gauge the potential return on this significant capital expenditure.

SPOKANE, Wash.--(BUSINESS WIRE)-- PotlatchDeltic Corporation (Nasdaq: PCH) PotlatchDeltic has completed the planned downtime at the Waldo, Arkansas sawmill to tie-in equipment for the modernization and expansion project. The modernization project construction has been completed and the facility is beginning its ramp-up phase, and it is anticipated that it will take 6 to 12 months to reach the mill’s new dimensional lumber capacity of 275 million board feet per year. The Waldo modernization and expansion project is a $131 million strategic investment that is expected to increase the mill’s annual capacity by 85 million board feet, improve recovery by 6%, and reduce cash processing costs by approximately 30%. Once the ramp-up phase is completed, the mill is expected to generate approximately $25 million incremental Adjusted EBITDDA annually under a mid-cycle sales environment and an internal rate of return of approximately 22% in our base case.

PotlatchDeltic has collaborated with BID Group for this turnkey project. The project includes a new saw line, planer upgrade, and a new continuous kiln. In addition, a Fulghum Industries, Inc. 170’ 45-ton log crane was installed and commissioned as part of the modernization. “I am very appreciative of the PotlatchDeltic and BID Group team members for their relentless efforts and focus on safety during this project. The productive working relationship with BID Group and the contributions by the suppliers and contractors on this project were an essential part of the on-time start-up,” said Ashlee Cribb, Vice President of Wood Products at PotlatchDeltic.

About PotlatchDeltic

PotlatchDeltic (Nasdaq: PCH) is a leading Real Estate Investment Trust (REIT) that owns over 2.1 million acres of timberlands in Alabama, Arkansas, Georgia, Idaho, Louisiana, Mississippi, and South Carolina. Through its taxable REIT subsidiary, the company also operates six sawmills, an industrial-grade plywood mill, a residential and commercial real estate development business, and a rural timberland sales program. PotlatchDeltic, a leader in sustainable forest practices, is committed to environmental and social responsibility and to responsible governance. More information can be found at www.potlatchdeltic.com.

Cautionary Statement Regarding Forward-Looking Information

This press release contains certain forward-looking statements within the meaning of the federal securities laws including, without limitation, our expectations regarding the Waldo, Arkansas sawmill modernization project, its expected completion of the ramp-up phase, corresponding impacts to production capacity, recovery, cash processing costs, operating cost reductions, Adjusted EBITDDA, and anticipated return on investment. Words such as “anticipated,” “expected,” “will,” and similar expressions are intended to identify such forward-looking statements. You should carefully read forward-looking statements, including statements that contain these words, because they discuss the future expectations or state other “forward-looking” information about PotlatchDeltic. A number of important factors could impact our ability and our contractors’ ability to complete the ramp-up phase of the Waldo modernization plan on time and to achieve the expected benefits, such as the factors described in PotlatchDeltic’s Annual Report on Form 10-K and in the company’s other filings with the SEC. PotlatchDeltic assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, all of which speak only as of the date hereof.

Non-GAAP Measures

This press release references forward-looking estimates of Adjusted EBITDDA, which is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted EBITDDA, as we define it, is calculated as net income (loss) before interest expense, net, income taxes, basis of real estate sold, depreciation, depletion and amortization and certain special items. Adjusted EBITDDA should not be considered in isolation from, and is not intended to represent an alternative to, our GAAP results. We have not provided a reconciliation of this forward-looking non-GAAP financial measure to the most comparable GAAP measure of net income (loss) because Adjusted EBITDDA, as we define it, excludes the impact of certain items listed above in our definition of Adjusted EBITDDA, and management cannot estimate these items or the impact they will have on Adjusted EBITDDA on a forward-looking basis without unreasonable effort. As a result, investors may be unable to accurately compare the expected impact of the Waldo sawmill modernization and expansion project to our historical results or the results or expected results of other companies that may have treated such matters differently. Nonetheless, management believes that providing this forward-looking non-GAAP information about the Waldo sawmill modernization and expansion project is useful to investors, and given the uncertain nature of forward-looking statements, we believe investors are able to take into account the inherent limitations of this forward-looking non-GAAP information. We cannot predict the occurrence, timing or amount of any of the items that we exclude from our Adjusted EBITDA estimate. Accordingly, the actual effect of these items, when determined, could potentially be significant to the calculation of Adjusted EBITDDA and actual results may differ materially from our estimate.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240829949418/en/

(Investors)

Wayne Wasechek

509-835-1521



(Media)

Anna Torma

509-835-1558

Source: PotlatchDeltic Corporation

FAQ

What is the new annual capacity of PotlatchDeltic's Waldo, Arkansas sawmill after the expansion?

The new annual dimensional lumber capacity of PotlatchDeltic's Waldo, Arkansas sawmill after the expansion is 275 million board feet per year.

How much did PotlatchDeltic invest in the Waldo sawmill modernization project?

PotlatchDeltic invested $131 million in the Waldo, Arkansas sawmill modernization and expansion project.

What is the expected improvement in recovery for the Waldo sawmill after the modernization?

The modernization project is expected to improve recovery at the Waldo sawmill by 6%.

How long will it take for PotlatchDeltic's Waldo sawmill to reach full capacity after the expansion?

PotlatchDeltic anticipates it will take 6 to 12 months for the Waldo sawmill to reach its new full capacity during the ramp-up phase.

What is the projected increase in Adjusted EBITDDA for PotlatchDeltic's Waldo sawmill after the expansion?

Once the ramp-up phase is completed, the Waldo sawmill is expected to generate approximately $25 million incremental Adjusted EBITDDA annually under a mid-cycle sales environment.