Rayonier Q2 2026 Earnings Call Transcript

Rayonier (NYSE: RYN ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This content is powered APIs. For comprehensive financial data and transcripts, visit The full earnings call is available at Summary Rayonier Inc.

10 per share, reflecting strong contributions from the PotlatchDeltic merger. The company completed two timberland transactions involving a tax-efficient like-kind exchange with Resource Management Service, enhancing its portfolio by selling 36,000 acres in Washington and acquiring 57,000 acres in Texas and Alabama. Rayonier saw significant improvements in adjusted EBITDA across its segments, with Southern Timber and Northwest Timber segments reporting notable year-over-year increases due to higher harvest volumes and improved lumber prices.

Real Estate segment revenues increased significantly, driven by higher acres sold and strong performance in development projects like Wildlight and Heartwood, with continued interest from solar developers. 5 million shares in Q2, maintaining a conservative leverage profile and significant liquidity with $412 million in cash, emphasizing prudent capital allocation and share buybacks as a strategic focus. Looking ahead, Rayonier expects stable pricing in Southern Timber and improved sawtimber prices in the Northwest, with a full-year adjusted EBITDA forecast of $180 to $200 million for the Real Estate segment.

Management expressed confidence in long-term growth prospects and the benefits of the PotlatchDeltic merger, while also addressing operational challenges like wildfires and transportation constraints. Full Transcript OPERATOR Hello everyone. Thank you for joining us and welcome to the Q2 2026 Rayonier Inc. earnings conference call.

After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference call over to Colin Mings, Vice President of Capital Markets and Strategic Planning.

Colin, please go ahead. Colin Mings, Vice President of Capital Markets and Strategic Planning Thank you and good morning. Welcome to Rayonier's investor teleconference covering second quarter earnings. com.

I would like to remind you that in these presentations we include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release and Forms 10-K and 10-Q filed with the SEC list some of the factors that may cause actual results to differ materially from the forward-looking statements we may make. They're also referenced on page two of our financial supplement. Throughout these presentations we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measures in our earnings release and supplemental materials.

With that, let's start our teleconference with opening comments from Mark McHugh, our President and CEO. Mark. Mark McHugh, Chief Executive Officer Thanks, Colin. Good morning everyone.

Before turning to our second quarter results, I'd like to provide a brief update on our merger with PotlatchDeltic as well as the two timberland transactions we announced yesterday which further advance our portfolio optimization strategy. Since closing the merger in late January, our team has moved quickly to optimize our organizational structure, capture operational efficiencies, and integrate the two companies' cultures into a shared foundation. We also signed a lease on our new corporate headquarters in Atlanta, which we expect to open in early 2027. I'm proud of our team's execution.

Over the past six months we've made significant progress on integration initiatives and we remain on track to achieve our run-rate synergies targets. Moving to the transactions we announced yesterday, last week we closed two timberland transactions with Resource Management Service, or RMS. The transactions comprise the sale of approximately 36,000 acres in Southwest Washington for $145 million and the concurrent acquisition of approximately 57,000 acres in Texas and Alabama for $146 million.

Subject to customary closing adjustments, the transactions were structured as a tax-efficient like-kind exchange and are expected to be accretive to cash flow on a timber-only basis with further upside potential from HBU real estate sales and land-based solutions opportunities. These transactions reflect our continued focus on portfolio optimization as we look to concentrate our capital in markets with the strongest cash flow attributes and the most favorable long-term growth prospects. Notably, we're able to advance these objectives through a land exchange transaction rather than an outright acquisition, thereby preserving our future capital allocation flexibility.

Now let's move on to our second quarter results. I'll start with a review of our overall financial results as well as our segment-level performance, after which Wayne will review key liquidity and balance sheet metrics as well as our outlook for the balance of the year. 06 per share. 10 per share.

Adjusted EBITDA in the second quarter was $124 million, which was well above the prior-year period, primarily due to the contributions from the PotlatchDeltic operations along with solid operational performance across our segments. Moving on to our segment results, let's start on page 9 with our Southern Timber segment. Adjusted EBITDA in the second quarter of $53 million was 85% above the prior-year quarter as increased harvest volumes more than offset lower pricing. 5 million tons of volume from the PotlatchDeltic timberland.

Turning to pricing in the Southern Timber segment, as we noted beginning last quarter, our reported pricing reflects delivered log prices rather than net stumpage realizations, consistent with the prevalent mode of sale across the combined portfolio. In sawlog markets, demand was steady as lumber prices climbed throughout the second quarter. S. South will continue to gain market share from Canada and gradually increase production in response to a more favorable lumber pricing environment, which should support stronger sawlog demand within our southern footprint.

In pulpwood markets, challenging conditions persisted during the quarter. S. South, coupled with salvage harvesting associated with the fires in Florida and Georgia, further added to supply. That said, we believe that pulpwood pricing has generally stabilized in our primary market areas, and we're encouraged by recent gains in containerboard pricing as well as improved mill operating rates for our customers.

S. South, approximately 9,300 acres of our timberlands in Georgia were affected. Following our assessment of the damage, we recorded a casualty loss of approximately $2 million in the second quarter, which was reflected as a pro forma item. Our team moved quickly to initiate salvage operations on the affected tracts, harvesting approximately 50,000 tons during the quarter.

These efforts are now largely complete and we do not expect any material impacts to our business moving forward. Moving on to our Northwest Timber segment on page 10, second quarter adjusted EBITDA of $26 million was significantly above the $7 million reported in the prior-year quarter. Harvest volumes more than doubled in the second quarter as compared to the prior-year period, primarily due to the contribution of 360,000 tons of incremental harvest volume from PotlatchDeltic's Idaho timberlands. Notably, harvest activity in Idaho was strong during the second quarter due to drier-than-normal weather conditions.

Improving lumber prices also helped propel sawlog prices higher in Idaho in the quarter, as a significant portion of our sawlog sales in the state are indexed to lumber prices. Turning to Wood Products on page 11, this segment generated $25 million of adjusted EBITDA in the second quarter, which was above our expectations entering the quarter. Notably, this was the strongest quarterly adjusted EBITDA result that this segment has registered since PotlatchDeltic's third quarter of 2022. Our average lumber price realization was $505 per MBF and shipments totaled 314 million board feet.

In line with our prior guidance, our average lumber price realization increased by roughly 18% from $427 per MBF in the first quarter to $505 per MBF, including the pre-merger period. The improvement in lumber markets during the second quarter was driven primarily by supply-side factors, as mill curtailments coupled with higher tariffs on Canadian imports have limited supply. In addition, industry-wide transportation challenges, especially the limited availability of flatbed trucking, have constrained the flow of lumber into certain markets.

Our team has been very proactive in navigating these transportation challenges by further leveraging rail transportation alongside our established trucking network. We maintained a reliable product flow to customers throughout the quarter. In addition, the increased transportation costs that we've incurred have largely been passed through to customers. Against this backdrop, overall demand was relatively stable, and the seasonal price weakness following the spring building season that we saw in each of the past two years did not materialize this year.

In fact, buyers generally encountered less available supply than anticipated during the quarter, which supported pricing. Our home center business also remained healthy through the quarter, which was encouraging as demand from this channel typically tapers off heading into the summer months. Channel inventories remain at normal levels and pricing has remained fairly stable into the early part of the third quarter, with supply and demand generally in balance. Moving to our Real Estate segment on page 12, in the second quarter, real estate revenue totaled $54 million on approximately 7,500 acres sold at an average price of $6,300 per acre.

Sales increased significantly from the prior-year quarter due to a higher number of acres sold, partially offset by a slightly lower average price per acre due to the sales mix. Real estate segment adjusted EBITDA in the second quarter was $38 million, up $20 million from the prior-year period. Within improved development, sales totaled $6 million. We continue to see broad-based demand at our Wildlight and Heartwood development projects, and activity remains on a favorable trajectory, reflecting the benefit of the investments we've made over the past several years in entitlements, infrastructure, and market development.

Meanwhile, the Chenal Valley project in Little Rock, which is relatively more mature, remains well positioned to provide a steady stream of cash flow moving forward. Moving to the rural category, second quarter sales totaled $41 million, consisting of nearly 7,500 acres sold at an average price of roughly $5,400 per acre. 6 million, or roughly $10,000 per acre. This sale underscores the continued interest we are seeing from solar developers across our southern land portfolio.

At the end of the second quarter, our pipeline of land under option for lease or sale to solar developers stood at approximately 77,000 acres. More broadly, overall sentiment in the rural land market remains positive, and we continue to achieve strong premiums above timberland value in our rural HBU business. I'll now turn the call over to Wayne to cover key liquidity and balance sheet metrics as well as our outlook for the balance of the year. Wayne Wasechek, Executive Vice President & CFO Thanks, Mark.

Moving to our capital resources and liquidity, our cash available for distribution, or CAD, was $177 million through the first six months of 2026 versus $47 million in the prior-year period. The significant increase in CAD was primarily driven by the contribution from the Potlatch Deltic businesses coupled with significantly improved real estate results. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on page 8 of the supplement. 95 per share, or $72 million in total.

9 million shares for a total of $103 million. As of the end of the second quarter, we had $126 million remaining on our current share repurchase authorization. We continue to believe that our stock price is trading at a significant discount to net asset value. As such, we remain active under our share repurchase program, as we believe buybacks represent a compelling use of capital and one of the most attractive opportunities to create value for our shareholders in the near term.

Turning to our balance sheet, we continue to maintain a conservative leverage profile and significant capital allocation flexibility. In April, we repaid a $200 million term loan at maturity using cash on hand, which we viewed as a more favorable capital allocation option than refinancing in the current higher interest rate environment. 9 billion of debt. Our net debt to enterprise value, based on our closing stock price at the end of the quarter, was 18%.

Moving to our outlook, consistent with the initial 2026 financial guidance we provided in February, full-year metrics reflect a pro rata contribution from the Potlatch Deltic operations starting on January 31st. 3 million tons in the third quarter. We expect regional sawtimber and pulpwood prices to remain relatively stable for the third quarter compared to the second quarter. However, as previously discussed, full-year and quarterly average pine prices for the combined company's Southern Timber segment are expected to be lower than the standalone prices for Rayonier in the prior year based on the geographic mix of the combined company.

2 million tons, with anticipated harvest volumes of approximately 600,000 tons in the third quarter. We expect overall sawtimber prices to be modestly higher in the third quarter compared to the second quarter, primarily due to higher index sawlog prices on a portion of the volume coming from our Idaho timberlands. We continue to expect that full-year 2026 average log pricing for the combined company's Northwest Timber segment will be higher than the standalone pricing for Rayonier in the prior year. 1 billion board feet for the 11 months of contribution in 2026.

We further expect lumber shipments in the third quarter of approximately 320 to 330 million board feet. We continue to be encouraged by the improvement in lumber prices, which has been driven largely by more favorable supply-demand dynamics in addition to broader transportation constraints. As of July month-end, our average quarter-to-date lumber price realization was modestly higher than our average price realization in the second quarter. In our Real Estate segment, we are pleased by the continued momentum in our sales activity and maintain a healthy pipeline of rural and improved development land sale opportunities as we move forward.

Based on our current transaction pipeline and sales closed quarter to date, we expect an adjusted EBITDA contribution in 3Q26 of $35 million. For the full year, we continue to expect an adjusted EBITDA contribution from our Real Estate segment of $180 to $200 million. As it relates to the land exchange with RMS that Mark discussed earlier, I'd note that our timber harvest guidance includes the impact of these transactions. In addition, the Washington sale will be treated as a large disposition and will have no impact on adjusted EBITDA.

I'll now turn the call back to Mark for closing comments. Mark McHugh, Chief Executive Officer Thanks, Wayne. As I reflect on the first half of the year, I want to commend our employees for their focus and dedication during a period of significant change. Our team has navigated challenging market conditions while advancing key integration initiatives, and I remain confident that our merger with Potlatch Deltic will create significant long-term value for our shareholders.

While the macroeconomic backdrop remains uncertain, we believe the long-term fundamentals of our industry are promising, and we remain focused on optimizing the value of our land base. In addition, we are continuing to build long-term value per share through disciplined capital allocation and active portfolio management, as reflected in our recent share repurchase activity as well as the land exchange transaction with RMS.