Devin W. Stockfish
President and Chief Executive Officer at Weyerhaeuser
Thanks, Andy. Good morning, everyone, and thank you for joining us. Yesterday, Weyerhaeuser reported first quarter GAAP earnings of $114 million or $0.16 per diluted share on net sales of $1.8 billion. Adjusted EBITDA was $352 million, a 10% increase over the fourth quarter of 2023. These are solid results and I'm pleased with the operational and financial performance delivered by our teams.
Turning now to our first quarter business results. I'll begin with timberlands on pages six through nine of our earnings slides. Timberlands contributed $80 million to first quarter earnings. Adjusted EBITDA was $144 million, which was comparable to the fourth quarter. In the west, adjusted EBITDA increased by $3 million compared to the prior quarter. Starting with the western domestic market, adverse weather conditions in January temporarily impacted log supply and demand across the region. As the quarter progressed, log supply in the system increased as whether conditions improved. Several recent mill curtailments primarily in Oregon also added to log availability in the region.
Despite this dynamic, the market remained fairly balanced due to healthy log demand and improvements in lumber pricing. As a result, pricing for our logs was comparable to the fourth quarter. That said, our average domestic sales realizations decreased slightly, largely driven by a lower percentage of grade logs in our mix. For the quarter, our domestic sales volumes were significantly higher as we strategically shifted logs to domestic customers. The harvest volumes were moderately higher and per unit log and haul costs were significantly lower as we made the seasonal transition to lower elevation and lower cost harvest operations. Forestry and road costs were seasonally lower.
Moving to our western export business. Log markets in Japan were stable in the first quarter. Despite ongoing consumption headwinds, demand for our logs remained steady as our customers benefited from lower volumes of competing European lumber imports. As a result, our average sales realizations for export volumes to Japan were comparable to the fourth quarter. Our sales volumes were moderately lower due to the timing of vessels. In China, log inventories at the ports grew in the first quarter as a result of reduced consumption during the Lunar New Year holiday and increased log imports from New Zealand. However, log takeaway improved as the quarter progressed. Despite steady demand for our logs, our sales volumes into China were significantly lower in the first quarter as we intentionally flexed log sales to the domestic market. Our average sales realizations were slightly higher compared to the fourth quarter.
Turning to the south. Adjusted EBITDA for southern timberlands decreased by $4 million compared to the fourth quarter. Southern sawlog markets moderated somewhat in the first quarter largely in response to elevated mill inventories and ample log supply. In contrast, southern fiber markets were stable in the first quarter as supply and demand trended to a more balanced state. Given these dynamics, our average sales realizations were comparable to the fourth quarter. Per unit log and haul costs were also comparable and forestry and road costs were seasonally lower. Our fee harvest volumes decreased slightly in the first quarter. In the north, adjusted EBITDA increased by $1 million compared to the fourth quarter as sales realizations increased moderately. Fee harvest volumes were moderately lower in the first quarter largely driven by the early onset of spring breakup conditions.
Turning to our real estate, energy and natural resources on pages 10 and 11. Real estate and ENR contributed $60 million to first quarter earnings and $94 million to adjusted EBITDA. First quarter EBITDA was $27 million higher than the fourth quarter, primarily attributable to an increase in real estate acres sold. Average price per acre decreased compared to the fourth quarter due to the mix of properties sold, but remained elevated compared to historical levels. We continue to benefit from solid demand for HBU properties resulting in high value transactions with significant premiums to timber value.
Now for some comments on our natural climate solutions business. In February, we announced an exploratory agreement with Lapis Energy to pursue carbon capture and sequestration projects across five potential sites in the U.S. south. The agreement represents a unique opportunity to scale our CCS offerings. To date, we've entered into three CCS agreements covering up to seven sites across our southern timber holdings and we remain focused on developing new projects and intend to enter into additional agreements over the next few years.
Turning to forest carbon. On the heels of our first approved project in Maine, we're advancing two projects in the U.S. south that are expected to be completed later this year. Combined, these three projects are expected to generate over 100,000 credits in 2024 and we intend to sell these credits into the voluntary market. Looking forward, we have several additional projects in the development pipeline and continue to see strong demand for high quality credits.
Lastly, I'll make a few comments on the progress we're making on our renewable energy business with a specific focus on solar. Given our unmatched portfolio in the U.S. south, we are uniquely positioned to drive meaningful value across our land base as demand for large scale solar development increases. In total, we've signed over 60 agreements for potential solar projects covering more than 100,000 acres across 11 states. Notably, we recently signed sizable agreements in Georgia and Mississippi and currently have several projects in late stages of development with one expected to be operational later this year. We've been very selective in choosing the counterparties to these agreements and have built an outstanding portfolio of projects with experienced and successful developers and utilities. Looking forward, we continue to see strong demand as this market continues to develop and we expect to sign additional agreements over the next several years.
Moving to wood products on pages 12 through 14. Wood products contributed $128 million to first quarter earnings. Adjusted EBITDA was $184 million, a 16% increase from the fourth quarter. Starting with lumber, first quarter adjusted EBITDA was a $5 million loss, but improved by $29 million compared to the fourth quarter, largely driven by a slight increase in sales realizations. Adverse weather conditions in January and cautious buyer sentiment weighed on the lumber market at the outset of the first quarter. As the quarter progressed, demand signals improved slightly, particularly for western SPF and Douglas fur species. This drove modest pricing improvements through mid March.
In contrast, southern lumber markets faced persistent headwinds during the quarter given weather-related challenges, a moderation in demand and ample supply of finished products. For the quarter, our average sales realizations increased by 4% compared to the fourth quarter, largely in line with the framing lumber composite. Our sales volumes decreased slightly, partially driven by winter weather disruptions early in the quarter. Unit manufacturing costs increased slightly and log costs were slightly lower.
OSB adjusted EBITDA increased by $14 million compared to the fourth quarter, primarily due to an increase in product pricing. Benchmark pricing for OSB was relatively stable through February, but increased significantly in March. This improvement was largely driven by lean inventories, supply limitations and resilient demand from new home construction activity. As a result, our average sales realizations increased by 4% compared to the fourth quarter, while the average OSB composite pricing increased by 13%. This relative difference was largely due to our extended order files, which result in a lag effect for OSB realizations.
Our production and sales volumes were slightly higher in the first quarter and unit manufacturing costs improved. Fiber costs were slightly higher. Adjusted EBITDA for engineered wood products decreased by $18 million compared to the fourth quarter, primarily due to a decrease in average sales realizations as previously determined price adjustments took effect in certain markets. Our sales volumes for solid section products were comparable to the fourth quarter, while -joists volumes were lower. Both unit manufacturing and raw material costs increase for most products in the first quarter.
A couple of things worth noting for context regarding our engineered wood products in Q1. First, we did ship somewhat higher EWP volumes to customers in the fourth quarter of last year after having been on allocation for most of 2023. And consequently, customer inventories were slightly elevated entering the new year. Also, while single-family construction activity remained resilient, we experienced the typical seasonal pattern in EWP demand in the first quarter. That all being said, we expect healthy demand from the single-family segment as we get further into the spring building season. As a result, we anticipate higher sales volumes and stable sales realizations from our EWP business in the second quarter.
In distribution, adjusted EBITDA increased by $4 million compared to the fourth quarter, largely driven by an improvement in commodity realizations and margins.
With that, I'll turn the call over to Davie to discuss some financial items and our second quarter outlook.
