Rayonier Reports Fourth Quarter 2023 Results

Rayonier Inc. reported fourth quarter net income attributable to Rayonier of $126.9 million, or $0.85 per share, on revenues of $467.4 million. This compares to net income attributable to Rayonier of $33.1 million, or $0.22 per share, on revenues of $245.4 million in the prior year quarter.

• Fourth quarter net income attributable to Rayonier of $126.9 million ($0.85 per share) on revenues of $467.4 million
• Fourth quarter pro forma net income of $25.4 million ($0.17 per share) on pro forma revenues of $225.2 million
• Fourth quarter operating income of $145.2 million, pro forma operating income of $40.1 million, and Adjusted EBITDA of $93.7 million
• Full-year net income attributable to Rayonier of $173.5 million ($1.17 per share) on revenues of $1.1 billion
• Full-year pro forma net income of $53.5 million ($0.36 per share) on pro forma revenues of $814.7 million
• Full-year operating income of $211.3 million, pro forma operating income of $108.5 million, and Adjusted EBITDA of $296.5 million
• Full-year cash provided by operations of $298.4 million and cash available for distribution (CAD) of $163.9 million

The fourth quarter results included $105.1 million of income from Large Dispositions, a $2.0 million non-cash pension settlement charge, and a $0.2 million net recovery associated with legal settlements. Excluding these items and adjusting for pro forma net income adjustments attributable to noncontrolling interests, fourth quarter pro forma net income was $25.4 million, or $0.17 per share, on pro forma revenues of $225.2 million. This compares to pro forma net income of $16.5 million, or $0.11 per share, on pro forma revenues of $214.9 million in the prior year period.

Fourth quarter operating income was $145.2 million versus $44.1 million in the prior year period. Fourth quarter operating income included $105.1 million of income from Large Dispositions. Excluding this item, pro forma operating income was $40.1 million. This compares to pro forma operating income of $27.2 million in the prior year period. Fourth quarter Adjusted EBITDA was $93.7 million versus $68.4 million in the prior year period.

Overview of Full-Year Results

Full-year 2023 net income attributable to Rayonier was $173.5 million, or $1.17 per share, on revenues of $1.1 billion. This compares to net income attributable to Rayonier of $107.1 million, or $0.73 per share, on revenues of $909.1 million in the prior year.

Full-year results included $105.1 million of income from Large Dispositions,1 $20.7 million of net recoveries on legal settlements, $2.3 million of timber write-offs resulting from a casualty event, and a $2.0 million non-cash pension settlement charge. Excluding these items and adjusting for pro forma net income adjustments attributable to noncontrolling interests, full-year pro forma net income was $53.5 million, or $0.36 per share, on pro forma revenues of $814.7 million. This compares to pro forma net income of $91.5 million, or $0.62 per share, on pro forma revenues of $878.6 million in the prior year period.

Full-year operating income was $211.3 million versus $165.8 million in the prior year. Full-year operating income included $105.1 million of income from Large Dispositions and a $2.3 million timber write-off resulting from a casualty event. Excluding these items, full-year pro forma operating income was $108.5 million. This compares to pro forma operating income of $138.5 million in the prior year. Full-year Adjusted EBITDA was $296.5 million versus $314.2 million in the prior year

Full-year cash provided by operating activities was $298.4 million versus $269.2 million in the prior year. Full-year cash available for distribution (CAD) was $163.9 million, which decreased $27.6 million versus the prior year due to lower Adjusted EBITDA ($17.7 million), higher cash interest paid (net) ($13.6 million), and higher capital expenditures ($6.6 million), partially offset by lower cash taxes paid ($10.3 million).

“We are pleased with our overall financial performance for the full-year 2023, particularly in light of the challenging and uncertain market conditions that we faced throughout the year,” said David Nunes, CEO. “Full-year 2023 Adjusted EBITDA of $296.5 million declined 6% versus the prior year, as lower results in our Timber segments were largely offset by a significantly higher contribution from our Real Estate segment. Our Southern Timber segment Adjusted EBITDA was relatively flat, as the segment benefited from recent acquisitions, which contributed to increased volumes as well as the operational flexibility to target more resilient sawlog markets. Additionally, non-timber income generated by the Southern Timber segment increased $9.0 million, or 35%, relative to the prior year, driven in part by increased revenue from our burgeoning land-based solutions business. In our Pacific Northwest Timber segment, we chose to defer roughly 150,000 tons of planned harvests in response to soft market conditions, which contributed to the significant decrease in Adjusted EBITDA versus the prior year. In our New Zealand Timber segment, Adjusted EBITDA declined modestly versus the prior year, as reduced volumes and lower log prices were largely offset by higher carbon credit sales and significantly lower export shipping costs. Finally, in our Real Estate segment, we capitalized on strong demand in both the rural HBU market and our improved development projects, generating Adjusted EBITDA well above our initial expectations entering the year. Overall, I’m proud of how our team was able to navigate an ever-evolving market environment to deliver solid full-year financial performance.”

“During the fourth quarter, we achieved total Adjusted EBITDA of $93.7 million, an increase of 37% versus the prior year, as exceptionally strong results in our Real Estate segment more than offset weaker results across our Timber segments. Specifically, Real Estate segment Adjusted EBITDA was $39.3 million above the prior year period, as we closed on significant transaction volume in the quarter. In our Southern Timber segment, Adjusted EBITDA declined 4% versus the prior year quarter, as a 12% decrease in weighted-average net stumpage realizations was largely offset by a 17% increase in harvest volumes driven by our late-2022 acquisitions. In our Pacific Northwest Timber segment, Adjusted EBITDA declined 60% versus the prior year quarter, driven by a 12% decrease in weighted-average log prices and 25% lower harvest volumes, as we deferred harvest in response to soft market conditions. In New Zealand, Adjusted EBITDA declined 11% versus the prior year quarter due to lower carbon credit sales, a 9% decrease in export sawtimber prices and 8% lower sales volumes, partially offset by a significant reduction in port and freight costs.”

“As previously disclosed, during the fourth quarter we completed a $242 million disposition of 55,000 acres of timberland in Oregon. We used $150 million of the proceeds to pay down our only floating rate debt and $30 million for a special dividend paid on January 12, 2024. The successful closing of this asset sale is an important step toward completing the asset disposition and capital structure realignment plan that we announced on November 1st, targeting $1 billion of select asset sales over 18 months. We are pleased with our progress to date in identifying and bringing additional timberland assets to market as we execute on our plan to capture the disparity between public and private timberland values and reduce leverage in a higher interest rate environment.”

“As we move into 2024, we are cautiously optimistic that timber market conditions have generally stabilized across our portfolio, and our team is energized around our growing pipeline of land-based solutions opportunities and the continued strong demand for both rural and development HBU properties. We continue to believe that our improved development projects are uniquely well positioned to benefit from favorable migration trends and healthy regional demand for both residential and commercial properties. Notably, we recently received entitlement approval for the next 15,000-acre phase of Wildlight, which will provide the project with a substantial runway for future growth and value creation.”

Southern Timber

Fourth quarter sales of $60.0 million increased $3.4 million, or 6%, versus the prior year period. Harvest volumes increased 17% to 1.60 million tons versus 1.37 million tons in the prior year period, primarily driven by incremental volume from acquisitions completed in the fourth quarter of 2022. Average pine sawtimber stumpage realizations decreased 15% to $28.84 per ton versus $34.00 per ton in the prior year period, primarily due to softer sawmill demand and decreased competition from pulp mills for chip-n-saw volume. Average pine pulpwood stumpage realizations decreased 16% to $17.68 per ton versus $20.95 per ton in the prior year period due to weaker end-market demand. Non-timber sales of $8.4 million increased 21% versus the prior year period, driven primarily by growth in our land-based solutions business and increased revenue from hunting and recreational licenses. Overall, weighted-average stumpage realizations (including hardwood) decreased 12% to $22.63 per ton versus $25.74 per ton in the prior year period. Operating income of $13.7 million decreased $6.0 million versus the prior year period due to lower net stumpage realizations ($5.0 million), costs associated with long-term timber lease expirations ($3.0 million), higher overhead and other costs ($0.6 million), and higher depletion rates ($2.6 million), partially offset by higher volumes ($3.8 million) and higher non-timber income ($1.4 million).

Fourth quarter Adjusted EBITDA5 of $32.0 million was 4%, or $1.2 million, below the prior year period.

Pacific Northwest Timber

Fourth quarter sales of $28.1 million decreased $14.3 million, or 34%, versus the prior year period. Harvest volumes decreased 25% to 298,000 tons versus 397,000 tons in the prior year period, as some planned harvests were deferred in response to soft market conditions. Average delivered prices for domestic sawtimber decreased 10% to $93.91 per ton versus $104.44 per ton in the prior year period due to weaker domestic and export market demand. Average delivered pulpwood prices decreased 56% to $28.91 per ton versus $66.26 per ton in the prior year period, as supply constraints and strong end-market demand significantly benefited the prior year period. An operating loss of $2.5 million versus operating income of $3.5 million in the prior year period was driven by lower net stumpage realizations ($2.5 million), higher costs ($2.4 million), lower volumes ($1.5 million), and the prior year period adjustment to a timber write-off resulting from a casualty event ($0.4 million), partially offset by lower depletion rates ($0.7 million) and higher non-timber income ($0.1 million).

Fourth quarter Adjusted EBITDA of $6.2 million was 60%, or $9.4 million, below the prior year period.

New Zealand Timber

Fourth quarter sales of $60.0 million decreased $11.3 million, or 16%, versus the prior year period. Sales volumes decreased 8% to 632,000 tons versus 686,000 tons in the prior year period, due in part to the timing of export shipments. Average delivered prices for export sawtimber decreased 9% to $100.73 per ton versus $111.30 per ton in the prior year period, primarily due to weaker construction demand in China. The decline in export sawtimber prices was partially offset by significantly lower port and freight costs, resulting in relatively flat net stumpage realizations versus the prior year period. Average delivered prices for domestic sawtimber declined 3% to $63.03 per ton versus $64.79 per ton in the prior year period. The decrease in domestic sawtimber prices was primarily driven by weaker domestic demand and decreased competition from export markets, partially offset by the increase in the NZ$/US$ exchange rate (US$0.60 per NZ$1.00 versus US$0.58 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices decreased 5% versus the prior year period. Despite the decline in delivered prices for domestic sawtimber, weighted-average net stumpage realizations on domestic volume (including pulpwood) improved versus the prior year period due to a favorable grade mix. Fourth quarter non-timber / carbon credit sales totaled $7.7 million versus $9.1 million in the prior year period. Operating income of $6.8 million decreased $1.2 million versus the prior year period primarily due to lower carbon credit income ($1.9 million), higher costs ($1.2 million), and lower volumes ($0.8 million), partially offset by favorable foreign exchange impacts ($1.7 million) and higher overall net stumpage realizations ($1.0 million).

Fourth quarter Adjusted EBITDA of $12.1 million was 11%, or $1.5 million, below the prior year period.

Real Estate

Fourth quarter sales of $310.5 million increased $253.5 million versus the prior year period, while operating income of $137.9 million increased $116.3 million versus the prior year period. Fourth quarter sales and operating income included $242.2 million and $105.1 million, respectively, from Large Dispositions. Excluding Large Dispositions, pro forma sales were $68.3 million and pro forma operating income was $32.8 million. Pro forma sales and pro forma operating income increased versus the prior year period due to significantly higher acres sold (20,488 acres sold versus 2,090 acres sold in the prior year period), partially offset by lower weighted-average prices ($3,320 per acre versus $13,747 per acre in the prior year period), driven by a higher mix of Improved Development activity in the prior year period.

Improved Development sales of $10.6 million included $9.0 million from the Wildlight development project north of Jacksonville, Florida and $1.6 million from the Heartwood development project south of Savannah, Georgia. Sales in Wildlight consisted of a 58-acre industrial-use parcel for $5.8 million ($101,000 per acre) and an 11-acre parcel for a church site for $3.1 million ($299,000 per acre). Sales in Heartwood consisted of 21 finished residential lots for $0.9 million (a base price before true-up of $44,000 per lot or $280,000 per acre) and a 1.8-acre parcel for a daycare facility for $0.6 million ($363,000 per acre). This compares to Improved Development sales of $16.6 million in the prior year period.

Rural sales of $57.1 million consisted of 20,215 acres at an average price of $2,824 per acre, including a 16,123-acre transaction consisting of scattered parcels with a relatively high ratio of non-plantable lands (i.e., 48%) in Alabama and Georgia for $36.8 million ($2,280 per acre). This compares to prior year period sales of $12.2 million, which consisted of 1,961 acres at an average price of $6,196 per acre.

Timberland & Non-Strategic sales of $0.4 million consisted of a 200-acre transaction for $2,000 per acre. There were no Timberland & Non-Strategic sales in the prior year period.

Fourth quarter Adjusted EBITDA of $53.5 million increased $39.3 million versus the prior year period.

Trading

Fourth quarter sales of $8.9 million decreased $9.3 million versus the prior year period due to lower volumes and prices. Sales volumes decreased 46% to 77,000 tons versus 143,000 tons in the prior year period. The Trading segment generated operating income of $0.1 million versus $0.3 million in the prior year period.

Other Items

Fourth quarter corporate and other operating expenses of $10.8 million increased $1.9 million versus the prior year period, primarily due to higher stock compensation and benefits expenses and professional services fees. Compensation and benefits expenses were elevated versus the prior year quarter primarily due to the acceleration of equity compensation expense for retirement-eligible employees.

Fourth quarter interest expense of $11.6 million increased $1.9 million versus the prior year period, primarily due to higher average outstanding debt and a higher weighted-average interest rate.

Fourth quarter income tax expense of $3.4 million increased $2.0 million versus the prior year period, primarily due to a higher percentage of full-year income generated in the fourth quarter as compared to the prior year period. The New Zealand subsidiary is the primary driver of income tax expense.

For full Fourth Quarter results click here.

About Rayonier

Rayonier is a leading timberland real estate investment trust with assets located in some of the most productive softwood timber growing regions in the United States and New Zealand. As of December 31, 2023, Rayonier owned or leased under long-term agreements approximately 2.7 million acres of timberlands located in the U.S. South (1.85 million acres), U.S. Pacific Northwest (418,000 acres) and New Zealand (421,000 acres). More information is available at www.rayonier.com.

Contact:

Collin Mings – Vice President, Capital Markets & Strategic Planning – investorrelations@rayonier.com – (904) 357-9100

Source: Rayonier, Inc.