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PotlatchDeltic (PCH) $131M Waldo Investment to Reduce Costs

Zacks Equity Research
·3-min read

In the current economic situation, where all the sectors are grappling with the decade’s high inflation and supply woes, PotlatchDeltic Corporation PCH announced an investment of $131 million in its Columbia County, AR-located Waldo sawmill.

The investment will help it expand and modernize the Waldo sawmill, significantly reducing the mill’s operating costs. Also, it will increase the mill’s annual capacity from 190 million board feet of dimensional lumber to approximately 275 million board feet.

The project includes upgrades to the log yard and planer, a new saw line, and a new continuous dry kiln. The completion of the project is expected by the end of 2024 without any disruption to existing mill.

"The Waldo investment is an exciting strategic growth opportunity, and it will position the mill among the lowest cost producers in the U.S. South," stated PCH’s president and CEO, Eric Cremers. He continued, "We expect to achieve additional EBITDDA of $25 to $30 million per year and an IRR of approximately 22% in our base case, which is based on a relatively conservative lumber price assumption. The project reflects our belief that housing fundamentals will remain strong.”

PotlatchDeltic currently owns three sawmills and approximately 950,000 acres of timberlands in Arkansas. The mill expansion will create 55 new indirect jobs. PCH jumped 2.66% on Jun 6 after the news release.

Over the past year, PotlatchDeltic and other industry players like Louisiana-Pacific Corporation LPX, Weyerhaeuser Company WY and Boise Cascade Company BCC are grappling with higher raw material and energy costs, which represent significant components of our operating costs. These costs fluctuate based on certain macro-economic factors like changes in demand, supply chain disruptions and inflation or deflation.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The recent move will help the company to forgo these costs and improve profitability. The Zacks Rank #3 (Hold) company’s shares have outperformed the Zacks Building Products – Wood industry in the year-to-date period. Earnings estimates for 2022 have also moved up 7% in the past 30 days, reflecting analysts’ optimism over the company’s growth potential. The company has a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in 12 of the trailing 14 quarters.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A Brief About Above-Mentioned Stocks

Louisiana-Pacific or LP is a leading manufacturer of sustainable, quality engineered wood building materials, structural framing products and exterior siding. This Zacks Rank #1 stock has been benefiting from solid demand from the U.S. residential market and repair and remodeling (R&R) business. Strategic business transformation, effective cash management and inorganic moves are likely to boost its future performance.

The Zacks Consensus Estimate for LPX’s 2022 earnings has moved up to $14.87 per share from $13.02 in the past 30 days.

Weyerhaeuser is one of the leading U.S. forest product companies. This Zacks Rank #1 stock has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.

The Zacks Consensus Estimate for WY’s 2022 earnings has moved up to $3.20 per share from $2.83 in the past 30 days.

Boise, ID-based Boise Cascade — which makes wood products and distributes building materials in the United States and Canada — is aided by factors like favorable commodity wood products, pricing and robust construction activity.

Boise Cascade currently carries a Zacks Rank #2. Earnings estimates for 2022 have moved north to $18.43 per share from $15.07 over the past 30 days.


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Weyerhaeuser Company (WY) : Free Stock Analysis Report
 
LouisianaPacific Corporation (LPX) : Free Stock Analysis Report
 
Potlatch Corporation (PCH) : Free Stock Analysis Report
 
Boise Cascade, L.L.C. (BCC) : Free Stock Analysis Report
 
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