Potlatch Corporation (NASDAQ:PCH) Q2 2015 Earnings Conference Call - Final Transcript
Jul 28, 2015 • 12:00 pm ET
Good morning. My name is Karen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Potlatch second quarter 2015 earnings conference call.
I would now like to turn the call over to Mr. Jerry Richards, Vice President and Chief Financial Officer, for opening remarks. Sir, you may proceed.
Thank you, Karen, and good morning. Welcome to Potlatch's investor call and webcast covering our second quarter 2015 earnings. With me in the room are Mike Covey, Chairman and Chief Executive Officer, and Eric Cremers, President and Chief Operating Officer. This call will contain forward-looking statements.
Please review the warning statements in our press release, on the presentation slides and in our filings with the SEC, concerning the risks associated with these forward-looking statements. Also, please note that segment information, as well as a reconciliation of non-GAAP measures, can be found on our website at www.potlatchcorp.com. I'll now turn the call over to Mike for some comments, and then I'll cover our second quarter results and outlook.
Thanks, Jerry, and good morning. Between January and the middle of May of this year, the random length lumber composite index lost $75, the steepest slide in almost 20 years. That, coupled with seasonally low harvest volumes in our northern region, resulted in a very weak operating results in April and May. In June, Western lumber prices began to improve, and the earnings in our wood products business improved by $3 million in June compared to May. We also completed two significant capital projects at each of our Great Lakes stud mills, resulting in nearly a month of nearly total downtime. Both projects went well, and we are already seeing the benefits of higher volumes and improved recovery.
Our recently acquired timberlands in Alabama and Mississippi continue to perform as expected, and we are on track for the acquisition to be accretive to FAD per share this year. Given seasonality, earnings contributed by these properties will be higher in the second half of the year.
We are in the peak production period for Idaho timberlands and expect a very strong third quarter, with log prices increasing sequentially due to the improvement in lumber prices late in Q2. While we are experiencing unusually dry forest conditions in Idaho, we expect to harvest and deliver all of our planned volume in the quarter.
We are already operating under restricted harvesting hours, and don't expect that to change until September. Having said that, the risk of widespread fires and logging-related curtailments remains a higher risk this year. We are pleased that the real estate segment exceeded our forecast this quarter. This was due to the sale of two commercial sites, and a strong Minnesota rural recreational real estate market, which led to a record number of transactions for us in a quarter.
Looking ahead to the balance of the year, we expect very strong results in the third quarter, on the strength in northern log prices, peak