PotlatchDeltic's Q3 2025: Contradictions Emerge on Lumber Pricing, Capacity Closures, Pulpwood Market Conditions, and Conservation Sales

Guidance:

• Q4 Timberlands harvest expected 1.7–1.8M tons, ~80% from the South; Idaho sawlog prices expected to decline ~13%.
• Plan to ship 290–300M board feet of lumber in Q4; average lumber price to date ~$397/MBF.
• Expect ~5,000 rural acres sold in Q4 at ~$3,200/acre and ~46 Chenal Valley residential lots at ~$95,000/lot.
• Total adjusted EBITDA expected to be lower in Q4 due to fewer rural real estate acres, lower development activity and seasonally lower harvests.
• Full‑year CapEx anticipated $60–65M (excludes timberland acquisitions); Q3 CapEx $16M.
• Merger with Rayonier expected late Q1/early Q2 2026 with estimated synergies of $40M.

Business Commentary:

• Strong Real Estate Performance:
• PotlatchDeltic's real estate business generated adjusted EBITDA of $63 million in the third quarter, a significant increase from $23 million in the second quarter.

• This growth was driven by strong contributions from both rural and development sales activity, particularly highlighted by large transactions in Georgia and Chenal Valley.

• Timberland Harvest and Pricing Dynamics:

• The Timberlands segment reported an increase in sawlog harvest in Idaho, rising from 360,000 tons in Q2 to 411,000 tons in Q3.

• Despite this increase, sawlog prices in Idaho declined by 5% per ton, attributed to lower indexed sawlog prices, partially offset by seasonally lighter sawlogs.

  

• Wood Products Segment Challenges:

• The Wood Products business reported an EBITDA loss of $2 million in the third quarter, down from $2 million in the second quarter.

• The decline was primarily due to historically weak lumber prices, despite strong operational execution that resulted in lower average manufacturing costs.

• Proposed Merger with Rayonier:

• PotlatchDeltic and Rayonier announced a proposed merger, which is anticipated to close in late Q1 or early Q2 of 2026.
• The merger aims to create significant synergies, with estimated synergies of $40 million, primarily driven by corporate and operational cost optimization.

Sentiment Analysis:

Overall Tone: Positive

• Management reported "Total adjusted EBITDA of $89 million," highlighted that "real estate delivered another robust quarter," and stated "we believe lumber prices have reached their low point and have generally stabilized." They noted optimism around tariffs/duties and curtailments supporting future lumber pricing and emphasized the strategic benefits and $40 million synergy estimate from the Rayonier merger.

Q&A:

• Question from Ketan Mamtora (BMO Capital Markets Equity Research): Maybe to start with, Eric, can you talk a little bit about what you are seeing on the -- in the pulpwood markets in the U.S. South. We've seen a pretty big erosion here in prices over the last few years. We've also seen a lot of pulp and paper mill closures here recently. So even if we assume that sort of overall demand picks up, that's a lot of lost tonnage. Can you sort of talk about what you're seeing in the pulpwood market?
  Response: Mill closures have pressured pulpwood prices, but PotlatchDeltic's scale, customer relationships and diversification have kept log takeaways steady; the Rayonier merger would further mitigate exposure.

• Question from George Staphos (BofA Securities, Research Division): The question I had, I think at one point in time, when you were guiding for the quarter, you're guiding maybe for about 310 million to 320 million board feet of lumber. You obviously ran better. Obviously, in a market that was somewhat depressed. So I was just curious, help us understand sort of the commercial strategy as you're running more of that capacity in what was a tough market. And Wayne and Eric, as we look out to fourth quarter, holding price aside, should we expect a relatively consistent level of cash margin out of the Wood Products business versus 3Q? And I had a quick follow-up.
  Response: They run mills hard to lower per‑unit costs and absorb overhead; expect roughly flat cash margins Q4 vs Q3 excluding price, with modest price upside (management suggested 2–4%).

• Question from George Staphos (BofA Securities, Research Division): Okay. I appreciate that. And then just give us a bit more detail in terms of some of the very good performance in real estate in the quarter. It was a bit ahead of our expectations. It was, I think, ahead of your initial guidance. Kind of I recognize these are episodic, right? It's hard to predict timing at times, but was there anything else that drove the better-than-expected performance in real estate and why some of those sales occurred in the third quarter?
  Response: Outperformance was lumpy and driven by a couple of large conservation transactions (~10,000 acres YTD); excluding conservation, rural sales align with prior expectations (~20–25k acres annually).

• Question from George Staphos (BofA Securities, Research Division): Appreciate it, Wayne. Last one for me, Eric, if you could talk, are there any sort of green shoots, if you will, no pun intended in terms of what's happening on the supply side relative to tariffs, relative to duties. I mean it's -- we've talked about in our research it's been kind of a weak -- too weak of a supply-demand environment for any of these sort of constraints, tariffs and do to have an effect on pricing. Are you seeing anything on the ground now where you are finally starting to see some supply constraint and boding well for kind of a spring building season? What are your customers saying in terms of the building season, recognizing it's not the spring time, it's November?
  Response: Increasing mill curtailments plus duties/tariffs are beginning to constrain supply; management expects a gradual recovery with potential full‑year price improvement in 2026 (~$30–$40 higher vs 2025).

• Question from Mark Weintraub (Seaport Research Partners): First, just a little bit on the real estate side. So how much in total revenue with the conservation sales? And maybe what were the type of price per acre in the quarter or in the year have contributed?
  Response: Conservation sales accounted for roughly 25% of rural revenue from the cited 10,000 acres; on a consistent mix basis, rural prices are up about ~10% year‑over‑year.

• Question from Mark Weintraub (Seaport Research Partners): And shifting gears on the lumber side, it's kind of interesting one of your large competitor had talked about its pricing being down, I think it's like $20 or something quarter-to-date and you are flat. Is there -- any thoughts -- and if you look at random lengths, I think it probably is down somewhat. So is there some mix? Or what might be kind of any thoughts as to why your pricing is better? -- quarter-to-date?
  Response: Management attributed the relative pricing strength mainly to product and customer mix (wides, home‑center/stub programs) rather than a broad market divergence.

• Question from Mark Weintraub (Seaport Research Partners): And last, maybe on the lithium that's back over 5,000 acres now, can you kind of help us understand potential economics on that part of the business?
  Response: Too early to quantify economics; outcomes depend on lithium prices, resource concentration and extraction volumes, and timeline hinges on third‑party processing build‑out (multi‑year).

• Question from Michael Roxland (Truist Securities, Inc., Research Division): Congrats again on the deal and all the progress. I just wanted to confirm if I heard correctly, lumber inventories in the channel, it sounds like -- one question is where do they stand? Because I think I heard you said they're lean right now or certainly down from where they were, but I just want to confirm that.
  Response: Yes — channel inventories are lean; dealers can secure just‑in‑time deliveries.

• Question from Michael Roxland (Truist Securities, Inc., Research Division): And then on Natural Climate Solutions, any -- it sounds like things are pretty good in terms of your pipeline, maybe a couple of issues potentially in solar, but it doesn't really sound like it looks like your order book is going to be pretty full by the end of the year. But just wondering if you have any concerns regarding government funding cuts. Obviously, the government is pretty aggressive with wind from the outset. They become more aggressive with solar recently. So I'm wondering if that's giving you any pause in terms of the growth potential near term for some of those NCS initiatives.
  Response: Not materially concerned — developer interest remains solid, projects can be viable without incentives, and acres under solar option are expected to grow to ~40–45k by year‑end.

• Question from Michael Roxland (Truist Securities, Inc., Research Division): One final question. Just I wanted to follow up on with respect to real estate sales. Is there anything in your pipeline that has the potential to maybe close earlier this year than, let's say, in 2026? So maybe you're working on some things that have a January or early February type -- anticipated closing date, but could potentially -- is there anything that maybe has the type of time frame that could be accelerated into this year before you some additional upside as you had in 3Q?
  Response: No change to current guidance — they expect ~5,000 rural acres in Q4 and will stick with that outlook; timing can vary but they will not assume acceleration.

Contradiction Point 1

Lumber Pricing Outlook

It involves differing perspectives on lumber pricing expectations, which is crucial for understanding the company's financial performance and strategic planning.

Can you clarify the commercial strategy for increasing lumber capacity in a challenging market? Will the Wood Products business maintain a consistent cash margin compared to Q3? - George Staphos(BofA Securities, Research Division)

2025Q3: Pricing is expected to move up slightly, perhaps 2% to 4%, in Q4. - Eric Cremers(CEO)

Lumber prices have declined 9% year-to-date but you're forecasting flat pricing for the quarter. Can you explain this? - Ketan Mamtora (BMO)

2025Q2: We think July is the low point, and prices could rise by September based on current market dynamics. - Eric J. Cremers(CEO)

Contradiction Point 2

Capacity Closures Due to Tariffs and Duties

It relates to expectations regarding the impact of tariffs and duties on lumber capacity, which could affect supply and demand dynamics.

What is your commercial strategy for managing increased lumber capacity in a challenging market, and should we expect consistent cash margins from the Wood Products business compared to Q3? - George Staphos(BofA Securities, Research Division)

2025Q3: I am hearing mildly favorable things about next year. More curtailments are expected, which should support higher prices in '26 versus '25. - Eric Cremers(CEO)

How do duties and tariffs impact capacity closures? - Michael Andrew Roxland (Truist Securities)

2025Q2: Capacity closures may take time, but we expect a significant reduction, potentially 1 billion board feet, driven by higher duties and tariffs. - Eric J. Cremers(CEO)

Contradiction Point 3

Pulpwood Market Conditions

It involves differing assessments of the pulpwood market conditions, which could impact the company's operational strategy and financial performance.

What are your observations on U.S. South pulpwood markets? - Ketan Mamtora(BMO Capital Markets Equity Research)

2025Q3: Despite this, we find a home for our volume due to our size, scale, and relationships with customers. - Wayne Wasechek(CFO)

What is your assessment of channel inventory levels? - Ketan Mamtora(BMO)

2025Q1: I think we're relatively low levels. The industry has learned to operate at relatively low levels over the years. - Eric Cremers(CEO)

Contradiction Point 4

Conservation Sales and Revenue Impact

It involves differing explanations for the impact of conservation sales on revenue, which could affect financial expectations.

What are your observations on the pulpwood markets in the U.S. South? - Ketan Mamtora (BMO Capital Markets Equity Research)

2025Q3: Sales are lumpy and can shift quarter-to-quarter. The better performance was driven by a large conservation sale. - Wayne Wasechek(CFO)

Are pulp market dynamics affecting softwood pulpwood demand? - George Staphos (Bank of America)

2024Q4: Trees harvested year-to-date were 7.4 million tons, 2% below the target range of 7.5 to 7.7 million tons, due to a large conservation sale. - Wayne Wasechek(CFO)

Contradiction Point 5

Lumber Pricing and Market Conditions

It concerns differing views on lumber pricing and market conditions, which could impact the company's financial performance and strategic decision-making.

How is your commercial strategy adapting to increased lumber capacity in a challenging market? - George Staphos(BofA Securities, Research Division)

2025Q3: Pricing is expected to move up slightly, perhaps 2% to 4%, in Q4. - Eric Cremers(CEO)

Can you discuss demand trends in the new resi and R&R channels in April? - Ketan Mamtora(BMO)

2025Q1: The way I would describe the current market environment for lumber is that things are decent. - Eric Cremers(CEO)