Greetings and welcome to the Weyerhaeuser First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Andy Taylor, Vice President of Investor Relations. Thank you, Mr. Taylor, you may begin.

Thank you, Rob. Good morning, everyone. Thank you for joining us today to discuss Weyerhaeuser's first quarter 2025 earnings. This call is being webcast at www.weyerhaeuser.com. Our earnings release and presentation materials can also be found on our website. Please review the warning statements in our earnings release and on the presentation slides concerning the risks associated with forward-looking statements as forward-looking statements will be made during this conference call. We will discuss non-GAAP financial measures, and a reconciliation of GAAP can be found in the earnings materials on our website. On the call this morning are Devin Stockfish, Chief Executive Officer; and Dave Wold, Chief Financial Officer. I will now turn the call over to Devin Stockfish.

Thanks, Andy. Good morning everyone and thank you for joining us. Yesterday, Weyerhaeuser reported first quarter GAAP earnings of $83 million or $0.11 per diluted share on net sales of $1.8 billion. Adjusted EBITDA totaled $328 million, a 12% increase over the fourth quarter of 2022. These are solid results considering elevated macroeconomic uncertainty in the first quarter, and I am pleased with the operational performance delivered by our teams. Turning now to our first quarter business results. I’ll begin with Timberlands on pages five through eight of our earnings slide. Timberlands contributed $102 million to first quarter earnings. Adjusted EBITDA was $167 million, a $41 million increase compared to the fourth quarter, largely driven by stronger domestic sales realizations in the West. Turning to the domestic market in the West, log demand was healthy in the first quarter as mills responded to strengthening lumber prices and seasonally lower log supply. As a result, pricing for our grade logs increased, and our average domestic sales realizations were significantly higher compared to the fourth quarter. Our domestic sales volumes increased moderately as we strategically shifted logs to domestic customers and paused shipments to China given the recent ban on U.S. log imports. Fee harvest volumes were moderately higher, and per unit log and haul costs decreased 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. In Japan, demand for our logs improved in the first quarter. This was largely driven by a recent decrease in shipments and inventories of imported European lumber, which has allowed our customers to increase market share. As a result, our sales volumes for export logs to Japan were significantly higher compared to the fourth quarter, and average sales realizations were slightly higher. In China, log demand moderated in the first quarter in response to reduced consumption during the Lunar New Year holiday. Given this dynamic, coupled with improving Western domestic market conditions, we elected to significantly reduce volumes into China during the quarter. In early March, we paused all shipments in response to Chinese regulators announcing an immediate ban on log imports from the U.S. As a result, our sales volumes decreased significantly compared to the fourth quarter, and average realizations were moderately lower. It's worth noting that the log ban had a minimal impact on our first quarter results, and we don't anticipate this being a material headwind to our Western business in the near term. Given our diverse customer base, we were able to shift volumes to other buyers for our Western logs. I will also note that we had reduced our China export program in the quarters leading up to the log ban, primarily due to ongoing consumption headwinds in the region and improving Western domestic market conditions. Turning to the south, adjusted EBITDA for Southern timberlands decreased by $3 million as log markets were largely stable compared to the fourth quarter. Southern sawlog demand remained muted in response to ample log supply and mills continuing to align capacity with lower takeaway of finished goods. In contrast, Southern fiber markets were generally balanced. In general, takeaway for our logs remained steady in the first quarter given our delivered programs across the region. As a result, our average sales realizations were comparable to the fourth quarter. Our fee harvest volumes and per unit log and haul costs were also comparable. Forestry and road costs were slightly higher. In the north, adjusted EBITDA increased slightly compared to the fourth quarter due to slightly higher sales realizations and volumes. Turning now to Real Estate, Energy and Natural Resources on pages 9 and 10. Real Estate and ENR contributed $56 million to first quarter earnings and $82 million to adjusted EBITDA. First quarter EBITDA was $6 million higher than the fourth quarter, largely driven by the timing and mix of real estate sales. Real estate markets have remained solid year-to-date, and we continue to capitalize on steady demand and pricing for HBU properties with significant premiums to timber value. I'll now turn to our Natural Climate Solutions business and cover some exciting news on one of our previously announced Carbon Capture and Sequestration agreement. Earlier this month, Occidental Petroleum announced an important milestone associated with our CCS project in Livingston Parish, Louisiana. They've signed a 25 year off-take agreement for approximately 2.3 million metric tons of CO2 per year from a third party facility that's being constructed in the region. The emitting facility is expected to be operational in 2029, and subsurface injection of CO2 should commence around that time. This is an important step for our CCS project with OXY and represents tangible progress in advancing Weyerhaeuser’s growth in the CCS space. In addition, this underscores the importance of selecting sophisticated counterparties with strong technical, commercial, and project development expertise. Now moving on to Wood Products on pages 11 through 13. Wood Products contributed $106 million to first quarter earnings. Adjusted EBITDA was $161 million, which was comparable to our fourth quarter results. Starting with Lumber, first quarter adjusted EBITDA was $40 million, a $19 million improvement compared to the fourth quarter. Although buyer sentiment remained cautious, the framing lumber composite increased moderately in the first quarter, largely driven by supply constraints from previously enacted curtailments and closures across the North American market combined with a slight seasonal improvement in building activity into the spring months. Pricing was further supported by concerns and speculation around tariffs on Canadian supply, particularly SPF lumber products. I'll also note that we've seen a steady increase in southern yellow pine lumber prices since January. For our lumber business, average sales realizations increased by 5% in the first quarter, largely in line with the framing lumber composite. Our sales volumes increased slightly compared to the fourth quarter, and unit manufacturing costs were slightly lower as production levels increased. It is worth noting that both sales volumes and unit manufacturing costs were slightly unfavorable to our initial outlook for the quarter. This was primarily driven by temporary operational impacts from winter weather in January and a somewhat softer demand environment in the more uncertain macro backdrop. Our log costs were moderately higher, primarily for Western logs. Turning to OSB, first quarter adjusted EBITDA was $59 million, a $4 million decrease compared to the fourth quarter. Benchmark pricing for OSB entered the first quarter on a downward trajectory, largely in response to elevated channel inventories and slower building activity in the winter months. As the quarter progressed, demand and pricing improved slightly in anticipation of the spring building season, but later reversed as buyers weighed the potential impacts of tariffs on the economy and housing demand. This dynamic has persisted into April. For our OSB business, average sales realizations decreased by 1% in the first quarter, which was favorable to the OSB composite. This is largely due to the length of our order files, which results in a lag effect for OSB realizations. Given the softer demand environment, our sales volumes were comparable to the fourth quarter. Unit manufacturing cost and fiber costs were slightly higher. Engineered wood products adjusted EBITDA was $53 million, a $16 million decrease compared to the prior quarter. I'll note that we experienced a multi-week outage at our MDF facility in Montana as a result of a fire event in February. This impacted our first quarter EWP results by approximately $11 million. The facility resumed partial production in mid-March and is now back to a more normal operating posture. We plan to make up most of the lost volume over the course of 2025. Moving to our full EWP segment, average sales realizations for most products were comparable to slightly higher than fourth quarter averages. Our sales volumes decreased in the first quarter primarily for MDF and solid section products, whereas i-joist volumes were comparable. Unit manufacturing costs were lower for most product categories, excluding MDF and raw material costs were higher. Turning to the overall demand environment, although our EWP sales volumes and pricing held up reasonably well in the first quarter, demand was softer than our initial expectations. That said, we have seen a slight uptick in our order files over the last several weeks, and we do expect our sales volumes to increase seasonally in the second quarter. Moving forward, demand for EWP products will remain closely aligned with new home construction activity, particularly in the single-family segment. In distribution, adjusted EBITDA decreased by $4 million compared to the fourth quarter, largely driven by lower sales volumes. With that, I'll turn the call over to Dave to discuss some financial items and our second quarter outlook.

Thanks Devin and good morning everyone. I'll begin with key financial items which are summarized on page 15. We ended the first quarter with $560 million of cash and total debt of just under $5.2 billion. First quarter share repurchase activity totaled approximately $25 million, and as of quarter end, we had completed approximately $925 million of repurchase under our $1 billion authorization. We returned $152 million to shareholders through the payment of our quarterly base dividend, which we increased by 5% to $0.21 per share during the quarter. This marked the fourth consecutive year of increasing our sustainable base dividend by 5% or more. We continue to believe that our dividend framework, combined with opportunistic share repurchase, enhances our ability to drive long-term value by returning meaningful and appropriate amounts of cash back to shareholders across market cycles. Capital expenditures for the quarter were $93 million, which includes $16 million related to the construction of our EWP facility in Arkansas. As we previously communicated, CapEx associated with this project will be excluded for purposes of calculating adjusted FAD as used in our flexible cash return framework. In the first quarter, we generated $70 million of cash from operations. It's worth noting that the first quarter is usually our lowest operating cash flow quarter due to seasonal inventory and other working capital build. During the quarter, we refinanced $210 million of high coupon debt at maturity by issuing a $300 million variable rate term loan. We have no additional debt maturing in 2025. Our balance sheet liquidity position and financial flexibility remain strong, and we are well positioned to navigate a range of market conditions. Unallocated items are summarized on Page 14. Adjusted EBITDA for unallocated decreased by $13 million compared to the fourth quarter, primarily attributable to changes in intersegment profit elimination and LIFO. Looking forward, key outlook items for the second quarter are presented on page 17. In our Timberlands business, we expect second quarter earnings and adjusted EBITDA to be approximately $15 million lower compared to the first quarter of 2025, primarily due to the seasonal increase in forestry and road costs in our western operations. Turning to the west, we anticipate steady log demand in the domestic market in the second quarter as mills respond to improving lumber takeaway as we get deeper into the spring building season. At the same time, log supply is expected to increase as weather conditions improve seasonally. Given these dynamics, we expect a fairly balanced domestic log market and stable pricing for Douglas Fir Logs. That said, we anticipate our average domestic sales realizations will be slightly lower compared to the first quarter, largely due to mix. We expect our fee harvest volumes to be slightly higher given seasonally favorable operating conditions. Forestry and road costs are expected to be higher as we enter the spring and summer months, and per unit logging haul costs are expected to increase slightly as we move to higher elevation sites. Briefly, on our log export program to Japan, as Devin mentioned, shipments and inventories of imported European lumber have decreased, which has allowed our customers to take market share. As a result, we expect steady demand for our logs in the second quarter. That said, we anticipate lower sales volumes compared to the first quarter due to the timing of vessels. Our average sales realizations are expected to increase moderately. Turning to the South. On balance, we're expecting southern log prices to be relatively stable during the quarter and our average sales realizations to be comparable to the first quarter. Log inventories were ample at the outset of the second quarter, but we expect a slight improvement in sawlog demand as mills respond to the recent uptick in pricing and takeaway of lumber. In addition, we anticipate improving fiber demand through the quarter as mills transition from spring maintenance outages. Our fee harvest volumes and forestry and road costs are expected to be higher due to drier weather conditions that are typical in the second quarter, and we anticipate moderately higher per unit logging haul costs. In the north, our sales realizations are expected to be moderately higher compared to the first quarter and fee harvest volumes are expected to be significantly lower given spring breakup conditions. Moving to our real estate, energy and natural resources segment, we continue to see solid demand for real estate properties and expect a consistent flow of HBU transactions with significant premiums to timber value. For the second quarter, we expect adjusted EBITDA will be approximately $50 million higher and earnings will be approximately $40 million higher than the first quarter of 2025 due to the timing and mix of real estate sales. For the full year, we maintain our adjusted EBITDA guidance of approximately $350 million for the segment which includes our target to reach $100 million of EBITDA in our natural climate solutions business. We now expect basis as a percentage of real estate sales to be 30% to 40% for the full year. In our wood products segment, we expect second quarter earnings and adjusted EBITDA to be slightly higher than the first quarter of 2025, excluding the effect of changes in average sales realizations for lumber and OSB as sales volumes increase seasonally across our wood products businesses. After a slower than expected start to the spring building season, I'll note that we are seeing signs of improving demand in certain end markets, particularly from the treater segment in the U.S. South. In addition, order files for our EWP products have improved over the last several weeks. As shown on page 18, our current and quarter-to-date average sales realizations for lumber are moderately higher than the first quarter average. This is largely in response to the steady increase in pricing for southern yellow pine lumber products. Conversely, for OSB, our current and quarter-to-date realizations are moderately lower compared to the first quarter average. For our lumber business, we expect slightly higher sales volumes and log costs compared to the first quarter. Unit manufacturing costs are expected to be comparable. For our Oriented Strand Board business, we anticipate slightly higher sales volumes and fiber costs. Unit manufacturing costs are expected to increase due to more downtime for planned annual maintenance compared to the first quarter. Turning to our engineered wood products business, we anticipate slightly higher sales volumes for all products in the second quarter and comparable average sales realizations. Unit manufacturing costs are expected to be lower, primarily driven by increased production at our MDF facility in Montana, which has returned to more normal operating levels, and raw material costs are expected to be moderately lower. For our distribution business, we expect adjusted EBITDA to be slightly higher compared to the first quarter as sales volumes increase seasonally. With that, I'll now turn the call back to Devin and look forward to your questions.

Thanks, Dave. Before wrapping up this morning, I'll make a few comments on the housing and repair and remodel markets, starting with housing. For the first quarter, housing held up reasonably well, with total starts averaging nearly 1.4 million units on a seasonally adjusted basis and single-family starts averaging around 1 million units in the quarter. However, homebuilder sentiment waned somewhat as the quarter progressed and prospective buyers turned more cautious in response to elevated uncertainty surrounding tariffs in the broader economy. This cautious sentiment continued into April as trade policy actions accelerated and markets experienced elevated volatility. Given these dynamics, the spring building season has gotten off to a softer start than we were expecting at the outset of 2025. Moving forward, the housing market will ultimately be determined by the state of the economy and whether the employment picture remains healthy. If the U.S. economy and employment hold up reasonably well, there is no reason we cannot still experience a solid housing market in 2025. Further, if mortgage rates move down over the course of the year, we could even see some upside in housing activity. In the near term, however, I suspect we'll see some choppiness in housing activity as trade negotiations continue and the economy adjusts to these policies. But putting the current environment aside, we remain bullish on housing over the long term, supported by strong demographic tailwinds, a vastly underbuilt housing stock, and historically low existing home inventories. Turning to the repair and remodel market. Despite the seasonal decrease in activity that's typical in the winter months, R&R activity held up reasonably well in the first quarter. Underlying demand fundamentals remain solid, and we're seeing the typical pickup in activity as the weather improves. That said, we are still experiencing some headwinds in this market, namely higher interest rates and fewer existing home transactions due to the lock-in effect and, more recently, weakening consumer confidence. As we look forward, while repair and remodel activity may experience a little turbulence here in the near term as the economy adjusts to tariff actions, we do expect demand to pick up as the year progresses, and as we look out over the medium to long term, many of the drivers for R&R activity are still very much in place, including significantly increased levels of home equity and an aging housing stock. In addition, we've largely worked through the pull forward of projects that occurred during the pandemic and, in fact, are now seeing project deferrals for R&R projects. So this should be a tailwind for repair and remodel activity as the macro environment improves. In closing, we delivered solid results across our businesses in the first quarter. In addition, we increased our quarterly base dividend for the fourth consecutive year and recently reached an important milestone in our CCS agreement with Occidental in Louisiana. Looking forward, we're well positioned to navigate a range of market conditions in the near term, and we remain confident in the longer-term demand fundamentals that support our businesses. Our balance sheet is strong, and we continue to focus on driving operational excellence, serving customers, capitalizing on strategic opportunities, and creating long-term value for our shareholders through our disciplined and flexible capital allocation framework. With that, I think we can go ahead and open it up for questions.

Thank you. Our first question comes from Susan Maklari with Goldman Sachs. Please proceed with your question.

Good morning, everyone. This is Charles Perron in for Susan. Thanks for taking my question.

Good morning. Thank you, Charles.

Good morning. Just first, I want to talk a bit about what hearing on demand for lumber as we enter the building season. I think we've heard from the builders taking down their closing skies for the year and the choppy DIY demand in your prepared remarks. But what are you hearing from retailer demand through the spring and their willingness to ramp inventory given the demand uncertainty, I guess, the expectations for higher tariffs this summer and specifically given the risks of tariffs on Canadian lumber, do you see any shift in order patterns between SPF and Southern Yellow Pine that could sustain over time?

Sure. Let me address your questions. Overall lumber demand is currently steady. While there has been some pullback as reflected in builder confidence levels recently, it’s not as robust as we expected at the start of the year. However, around 4 billion board feet of capacity was removed from the system last year, which helped balance supply and demand, even though demand is somewhat muted right now. As spring approaches, we are witnessing the usual increase in demand, with the repair and remodeling market showing some signs of improvement and an uptick in interest from the treating sector. With uncertainty surrounding the housing market, we are not seeing inventories build up to the usual levels for this time of year as people remain cautious about future developments. Presently, supply is adequate to meet demand, preventing significant disruptions in the supply chain. It’s important to note that when there aren't substantial inventories at this time of year and if building activity increases, we could face short-term supply shocks leading to price increases. We are attentive to ongoing tariff and duty issues, particularly regarding softwood lumber duties, which will take effect later this summer. However, these factors aren’t significantly affecting buying activity at the moment but may influence it more as we approach the end of the quarter. Additionally, there's been an increase in Southern Yellow Pine production in the southern region over the past few years, making it a larger part of the market. We are beginning to see more inquiries about shifting from Spruce-Pine-Fir to Southern Yellow Pine, although it’s still early in that transition.

Got it. That's helpful, Devin. And then second, I want to talk a bit about EWP. It was encouraging to see that you were able to get a little bit of pricing lift sequentially across both solid section and i-joist this quarter, despite the builders trying to cut costs and find savings wherever it can given the affordability issues. How do you see the outlook for realization for EWP going forward? I know I think you guided for comparable for the second quarter. But considering the dynamics with the builders looking for savings against rising inflation in some of the raws and overall the market, what do you see the impact for realization and the expectations for volume for those products going forward as well?

Yes, our perspective in the near term is that pricing will remain relatively stable. We anticipate a slight increase in volumes during the second quarter primarily due to the increase in building activity as we enter the warmer months. Over time, this really hinges on the value proposition we offer homebuilders. We provide substantial support for our product, which is of very high quality and generally in high demand. This is an ongoing conversation with our customers, as delivering value is essential for meeting their needs. If the housing market remains stable or improves, it will positively influence pricing; conversely, it could have the opposite effect. Ultimately, our focus is on providing value and supporting our customers every day.

Our next question comes from George Staphos with Bank of America. Please proceed with your question.

Hi everyone, good morning. Thanks for the detail, Devin. So I guess the first question I had for you, given what's been the softer pickup to the summer building season, demand being a little bit soft just given the uncertainties that you mentioned, have you adjusted your harvest profile at all? Or should we still be expecting a 35.5 million tons? And can you give us a bit more color in terms of what you're seeing in terms of the profile of what you're going to do relative to what you might have been looking at 2, 3 months ago?

Yes. George, really outside of a very meaningful recession-type environment, our harvest levels are what they are. We set those to really be within sustainable harvest levels over time. So I wouldn't anticipate any change to our full year harvest levels. We don't typically have an issue moving volume. Sometimes around the margins, there can be some pricing dynamics given what's going on in our end markets, whether that's lumber, pulp and paper. But generally, we set our harvest plans that are pretty stable over time.

Okay. Fair enough. Appreciate that. And then you mentioned the Occidental Petroleum agreement. Can you give us a bit more color relative to what we should be expecting in terms of cash flows, milestones, timing in that regard? And I'll turn it over with that. Thank you.

Yes, thank you for the question. We're really excited about this. As we've stated for several years, I believe CCS represents a significant opportunity for us in the long run. Its development has been slower than we initially expected. The industry is still figuring out the economics of some of these off-take agreements, and the permitting process has taken longer than anticipated. This demonstrates that progress is being made, and we are genuinely enthusiastic about this project. I think this off-take agreement is one of the largest, if not the largest, in the CCS sector in North America, which adds to our excitement. Again, this underscores why we partner with companies like OXY, as they are very experienced in navigating this space. We are not disclosing specific economics on a deal-by-deal basis, as we are focused on securing more CCS agreements while ensuring we achieve the best possible terms. We will provide additional details as these developments occur. Regarding the timeline, I understand they are currently working on obtaining their permits, and we expect that construction of the infrastructure will begin within the next couple of years, with the goal of having the first injection in 2029.

Okay, Devin. Regarding cash flows, I understand you won't provide specific numbers, but are we looking at 2029 and the following decade for when we can expect to see that reflected in the profit and loss statement?

Yes, I mean, I would expect it to start showing up in the P&L in 2029. Once you have first injection.

Great, thanks. I’ll turn it over.

Yes.

Our next question comes from Matthew McKellar with RBC Capital Markets. Please proceed with your question.

Hi, good morning. Thanks for taking my questions. Maybe first, if we do see some meaningful Section 232 tariffs on Wood Products announced, how do you think about the likely impact to timberland valuations over the medium term?

Yes. I mean that's a great question. First, what I would say is just with respect to the 232 investigation, really not a whole lot of clarity on how that's going to shake out, what products that's going to cover, what level of tariffs they would cover if that does end up being the results. So hard to make any sort of real definitive determinations around that until we get more information. That being said, in terms of Timberland valuations, I don't expect that would have a meaningful impact in the near term. And that's just primarily because unless and until you have good clarity on how long those kinds of tariffs would be in place, I suspect people are not going to be building that meaningfully into the valuation of Timberlands because, again, it's just a very long-term asset class and people tend to look out over the course of decades rather than in 2 and 3 year increments. So I don't know that it would necessarily have an impact on Timberlands values or at least not anything material.

Okay, thanks for the color. And last for me, just on the OSB business, you mentioned some planned annual maintenance in the quarter. I recognize this as planned maintenance, but have you been intending to perform this maintenance in Q2 for some time? Or are you pulling forward any maintenance maybe based on what you're seeing in the market?

No. I mean, this was part of our annual plan. As a general matter, we plan the annual maintenance work well in advance if you have to order equipment, you have to schedule outside contractors. And so we typically come up with a plan to cover the year. And absent something really meaningful changing in the environment, we typically stick with those plans. It's just you typically incur some extra cost if you start moving that around late in the season.

Okay, thanks very much. I’ll turn it back.

All right. Thank you.

Our next question comes from Mark Weintraub with Seaport Research Partners. Please proceed with your question.

Thank you. A few quick follows. One, on that OSB annual plan maintenance, order of magnitude, how much impact would you expect that to have in 2Q?

Yes, Mark, not a meaningful impact. I mean, I think we're still expecting that operating rates would be in the kind of the low to mid-90s, which is consistent with where we were in the first quarter.

Maybe $10 million or something or less...

No, no, no, less than that.

Less than that. Okay. And then in terms of the EWP, the fire impact, so that was $11 million in the first quarter. So does that $11 million disappear in the second quarter? And then you actually hope to recoup some of it with stronger volumes in the back half of the year, all else equal?

The $11 million was the impact in the first quarter. We have mostly returned to normal operating levels at this time. There will be a minor impact on the second quarter, but as mentioned, we expect to recover most of that volume over the year. Some of that may return in Q2, but it is more likely to come back during the second half of the year.

Okay. You have a 16% tax rate in the first quarter, which suggests that you anticipate a significant portion of your income will come from your TRS this year. This likely indicates optimism regarding the Wood Products business for the remainder of the year. Is that a correct assessment? If the performance is somewhat weaker, would the tax rate simply decrease for the rest of the year? Is that how it would work?

Yes, Mark, I agree with your assessment of the mechanics. The projected tax rate for the full year is largely influenced by the mix of REIT and TRS earnings, with TRS earnings being heavily impacted by the Wood Products business. There are also various factors that may affect this, such as the regional earnings mix in Timberlands or Real Estate, and the unpredictability of commodity prices in today's environment makes forecasting even more complex. This is why we're not providing full-year guidance. That said, considering the strong lumber prices we've experienced so far and the possibility of increased duties later this year, along with the factors Devin mentioned earlier, if employment and the broader macroeconomic landscape remain stable, there’s good potential for a strong year in Wood Products.

Got you. Thanks a lot.

Our next question comes from Ketan Mamtora with BMO Capital Markets. Please proceed with your question.

Good morning and thanks for taking my question. First question, can you talk a little bit about the channel inventories as you guys see it in lumber or SPF and EWP in the context of what we've discussed today with a slower sort of start of the spring season, homebuilders sounding a little more cautious. How would you characterize inventories still lean, more balanced or probably a little bit kind of more than balanced at this point?

Yes. I mean, so relative to what you would normally see this time of the year, I would say the inventories are a little lighter than you would expect. Now that being said, it's currently by and large, the supply is meeting the demand. So there's not a tremendous urgency on the part of the buyer community to build meaningful inventories on balance right now. And so again, I think things are fine as long as building activity continues along the current path. If things were to pick up, as I mentioned earlier, I think what that typically results in is you'd see a little bit of a spike in pricing as people try to get out from under lean inventories.

Got it, that's helpful. For my second question, it's great to see the progress on the CCS side. I'm curious about forest carbon. Last quarter, you mentioned a significant increase expected in 2024. Is that still on track for 2025?

We have two projects that are already approved and seven more in various stages of review by third-party auditors, with several awaiting final approval from ACR. Everything is moving forward. While it's difficult to predict the exact timing of the process, we are anticipating a significant increase in forest carbon this year, possibly ranging from five to ten times, depending on how quickly we can navigate the audits. We are seeing good demand from our customers, which suggests that we should see a substantial uptick in forest carbon this year.

Perfect. That’s very helpful. I’ll jump back in the queue. Good luck.

All right, thanks.

Our next question comes from Hong Hang with JPMorgan. Please proceed with your question.

Yes, thank you for taking my questions. My first question is about the supply and demand dynamics affecting OSB pricing. In the near term, what do you think needs to change for prices to stabilize?

Yes. I mean I would say it's by and large, pretty stable right now. It's obviously a little lower price than we saw a little while ago. But I think right now, the supply/demand dynamic is pretty balanced. We started the year in OSB with pretty light buying activity, particularly from the home improvement warehouse segment. And so that kept it pretty light. You saw that pick up a little bit over the course of Q1, but it's come back down here over the last several weeks. It feels like it's sort of stabilizing right now from a pricing standpoint, I would expect as we get deeper into the building season, remember, even though we had 1.4 million starts in Q1, that is on a seasonally adjusted basis. So in terms of the actual number of units that are going to get built, it will be higher as we get into Q2 and the summer months. And so you'll see that activity pick up here. And I think all things being equal, even on the current path, things are probably in a pretty stable range right now. Obviously, if you saw interest rates go down to have buying activity pick up, then obviously, that would have some tailwind effect for pricing. But overall, it feels pretty stable right now.

Got it. My second question is about the recent executive actions by the administration aimed at increasing timber production, which have opened up public land for timber harvest. How do you expect this to impact the timber market?

We do not conduct logging on federal lands except for a very small quantity of wood in Montana. We obtain logs from our own timberlands and other private landowners, so federal lands are not a focus for us. It’s somewhat difficult to predict how this situation will evolve. However, there is a consensus that active management of federal forests could enhance their resilience against fire risk. If the executive orders help the forest service take a more proactive approach and reduce the acres burned each year, that's beneficial for everyone, including Weyerhaeuser. That said, I don't expect to see a significant rise in logging on federal lands, particularly in the West, since the existing mill infrastructure isn't suited for larger logs. There are also practical issues like limited capacity and trucking challenges that could impede any substantial increase in logging activity in the near term. The administration is focusing on manufacturing jobs in the U.S., which is a positive development we support, but I'm uncertain if opening federal forests will lead to a significant increase in log production soon. We will continue to monitor the situation, but logging federal lands is not typically our area of involvement.

Thank you.

Our next question comes from Hamir Patel with CIBC Capital Markets. Please proceed with your question.

Hi, good morning. Devin, you mentioned more inquiries around transitioning to customers looking to transition to Southern Yellow Pine from SPF. Can you speak more to perhaps where are you seeing that interest? Is that more larger public builders versus private? And any maybe differences across regions?

Yes, I would say that the interest is primarily in the Midwest regions, which have historically been markets for SPF. There has been some movement of Southern Yellow Pine into those areas, but SPF remains dominant. This trend is observable across various segments, from dealers to home improvement warehouse customers. Looking ahead, it's evident that SPF availability will decrease due to factors such as beetle infestations, wildfires, government policies, and trade issues. At the same time, there is an increase in Southern Yellow Pine lumber capacity entering the market. As a result, people are beginning to recognize this shift and are considering exploring Southern Yellow Pine. While I wouldn't say we're significantly advanced in this transition, we are in the early stages, and there's a noticeable uptick in inquiries regarding Southern Yellow Pine.

Okay, thanks. That's helpful. And you also indicated you expected R&R activity to pick up later this year. Do you think that end market for wood products experiences growth this year, just given the sluggish pace year-to-date?

Yes. I mean, it's puts and takes, right? Because from a housing standpoint, obviously, it's hard to know. We're still early in the year. But just given the general commentary that we've heard from some of the builders whereas we were thinking initially maybe housing was up slightly, maybe that's perhaps down to flat or even slightly down overall. From an R&R standpoint, I think where we're coming from is we've got massive amounts of home equity out there. I do think we've seen a little bit of a headwind from activity during the pandemic. That was a little bit of a drag. But I think we've worked through that pull forward. And so that should open up a little bit more. And as interest rates, particularly on the short end, open up a little bit more financing activity. I think that could be another tailwind as well. And so we are expecting things to pick up. All things being equal, obviously, if we're in a recession or there's some other meaningful impact to the economy, then of course, that would impact our view. But if things stay relatively stable, then I think that can be some upside over the course of the year. And just whether that balances out, slightly softer housing, I think it's hard to say. It really depends on how much uptick you get on R&R. But again, there's a lot of negativity out in the market right now. I understand that. There's uncertainty, clearly. But sitting here today, I mean, we're still looking at having a good year this year. And so our views on that haven't really changed. There may be some bumps in the road along the way, but the businesses are operating well. The pricing environment is still reasonably good. And so we're not maybe as pessimistic as some other folks.

Fair enough. That’s all I had. I’ll turn it over. Thanks.

Thank you.

Our next question comes from Mike Roxland with Truist Securities. Please proceed with your question.

Yes. Thank you, Devin, Dave and Andy for taking my questions. Devin, I just wanted to follow up on the sense that was driving the slight uptick in order files in EWP over the last several weeks. Is that you mentioned seasonality? I mean have you seen a pickup in building activity? Because it certainly doesn't start for your comments that there's been much in the way of restocking, so is the seasonality of pickup in drilling activity that's led to better order files in EWP. And can you remind us the operating rate you ran at an EWP in 1Q and what you expect in 2Q?

Yes, I believe it's mainly due to seasonality and the comparison period. The first quarter is typically the slowest part of the year because of the weather. As the weather improves, we usually see an increase in building activity. It may not be as strong as we initially expected for this year, but it is still better than the first quarter. That seems to be the main reason for the increase we're seeing now. In terms of operating rates for EWP, we were in the low 70% range and we anticipate that will improve as we move into the second quarter.

Got it. Okay. Congratulations on the progress with Occidental and the overall probes related to CCS. At a recent conference, you mentioned that CCS is a significant opportunity, but it is not as large as initially anticipated. Can you provide an update on the scale of the opportunity as you currently see it and how it compares to your previous expectations? What has caused this shift in outlook? Is it primarily due to the permitting process?

Just to be clear, I do not view it as less overall opportunity. In fact, I think the opportunity set for CCS is fairly significant. So our views on the magnitude of the opportunity haven't changed. The only thing that's really changed is just the timeline. We had originally thought we would start seeing injections in kind of 2026, 2027 time frame. And that's been pushed back by a few years. So the timeline to get these things up and running is a brand-new business for everybody involved, and it's just taken longer to come to fruition. But the magnitude of the opportunity, we still think is fairly significant. Any heavy manufacturing is going to need CCS if you're going to reduce your greenhouse gas emissions; there's just really no other way to do this cost-effectively. So I think this is going to happen. It's going to happen in a big way. It's just going to come to fruition over a little bit longer timeline.

Got it. And I appreciate the clarity there. And then just one last thing, in terms of CCS, does it tend to be higher margin relative to wind, solar and carbon credits and mitigation banking? Is that typically the highest margin product that you have in natural climate solutions?

Yes. I mean the margin is incredible, right? Because you're leasing subsurface space. We're not putting any of our own money into building out the infrastructure. We're not really managing it. There are very little in terms of cost from our standpoint around employees; we've got people managing the program, but it's a really, really low cost. It's virtually all upside because it's on top of the Timberlands aboveground. So it's like wind in the sense that this is just pure upside to managing the land base.

Got it. Thank you very much.

Great.

Our next question comes from Buck Horne with Raymond James. Please proceed with your question.

Thank you, good morning everyone. I wanted to take a moment to assess our current stock price performance. The discount to NAV is among the largest we've seen since the pandemic. Are there any non-core timber assets you might consider monetizing soon, or possibly increasing share repurchase activity to help close this NAV gap or capitalize on the current market dislocation?

Yes, Buck. We're consistently exploring ways to enhance shareholder value. Our approach to capital allocation has been balanced, so we're not forced to choose between different outcomes. We're in a good position regarding our leverage and dividend requirements. This allows us to consider various opportunities independently. On the timberland side, we are confident that the value will increase over time, so we plan to remain active there. However, it's crucial to maintain discipline and avoid overpaying in our transactions. We have been willing to adjust our portfolio when there are more efficient uses for our capital, including through our real estate program and similar transactions that we executed late in 2023. Our goal is to enhance the quality of our portfolio and its cash flow generation. We have been proactive in share repurchases and are close to completing the $1 billion authorization. We will continue to act strategically in that area. Ultimately, we aim to evaluate all available opportunities and allocate our capital in a way that maximizes value for our shareholders.

Got you. Appreciate that, thanks Dave. And just a follow-up on solar leasing. Is there any update in terms of market momentum in terms of option conversions or how do you view the opportunity set for solar uptake in the next couple of years?

Yes, we're making significant progress. We've established our first operating solar site and have two more under construction that should be operational later this year or early next year at the latest. Our pipeline is expanding, and we're signing new agreements. We are focused on partnering with larger, more experienced counterparties who can manage the permitting process and navigate supply chain challenges. We are optimistic about our conversion rate regarding the pipeline we've built, and I expect we'll be adding several new projects every year over the next decade. We anticipate that this will increasingly become a larger part of our NCS business over time, which is very encouraging.

Thanks guys, appreciate it.

Our next question is from George Staphos with Bank of America. Please proceed with your question.

Thanks for your question. I'm curious about tariffs and how they might be impacting lumber pricing. Have you noticed any effects from tariffs that are currently influencing pricing in the field? Additionally, given the significant increase in U.S. capacity over the years and the narrowing gap between supply and demand, do you believe that tariffs are still having a notable impact on lumber prices today, especially considering a stronger housing market might widen that gap again?

Yes. In terms of today, I don't think it's having a meaningful impact on pricing. It can. And I think we saw that around the April 2 announcement; there was clearly some impact to lumber pricing in anticipation of that. And you kind of saw the run-up, and then when it was determined that Wood Products would be exempted from the across-the-board tariff, you saw those prices come back down. I do think as you get closer to the August, September time frame where the new duty structure will come into place, I suspect you'll see some impact there. And the wildcard, too, is what happens in the broader tariff environment, whether that's the 232 or just the broad-based tariffs to the extent that those come into play, I mean, it will impact pricing around the margins, for sure. Is it going to have a material impact? I think that, to your point, George, is really just a function of where we are in the demand cycle. If demand is strong, that will push pricing up, tariffs maybe put a little bit on top of that. If demand is weak, really, what it does is just adjust where the cost floor is. And so that ultimately can impact capacity decisions. So I think this will play out over time. There's a lot of uncertainty around it. And I think to some degree, you may see some hesitancy from people building inventories, not knowing necessarily what's going to happen on tariffs, at least until we get closer to a more certain date on those new duties.

Thanks, Devin.

All right, thank you.

There are no further questions at this time. I'd like to turn the floor back over to Devin Stockfish for closing comments.

Okay. Well, thank you, everyone, for joining us this morning. Thank you for your continued interest in Weyerhaeuser. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.