Weyerhaeuser is all about growing trees.
Take a look at its Web site: “Weyerhaeuser releases the potential in trees to solve important problems for people and the planet. … We are inspired by trees. Their strength, vitality, and unlimited potential to be transformed into useful products have guided our approach to business for more than a century.”
Listening to its new CEO Daniel S. Fulton during an earnings call last week: “We see our tree land as core.”
So it should be no surprise that the company, under the stress of a market that is hitting both its core wood products business as well as its ancillary home building business hard, is talking about going back to its—pardon the pun—roots.
Weyerhaeuser lost $148 million in its first quarter—$0.70 per diluted share—much of which was related to impairments of its real estate holdings as well as the costs of shutting down some of its wood products capacity. Conspicuously, there was no specific mention of impairments to Weyerhaeuser’s investment in LandSource, the California-based land development company Weyerhaeuser invested in with McFarlane Partners over a year ago, which appears to be on the verge of bankruptcy.
One bright spot in the earnings report was the $721 million gained by selling off its fine paper business. Another infusion of cash is expected to come from selling its containerboard packaging and recycling assets in the third quarter.
And more divestures are being considered. “It will take unprecedented action on our part to deal with these operating conditions,” Fulton said during the May 2 conference call. Restructuring is in order, he said. “We continue to examine our non-timberland assets and strategies for their long-term value and fit.”
Could the company’s home building companies be next on the chopping block?
Like other home builders, there was no good news to report from Weyerhaeuser’s building companies last quarter.
“The spring selling season has not materialized,” said Larry Burrows, the recently named CEO of Weyerhaeuser Real Estate Co. “Excess inventories of new and existing homes plague markets.”
Burrows said Las Vegas, Phoenix, and California’s Inland Empire are the company’s weakest markets. San Diego has improved a bit, but sales remain “far from brisk.” And in the Washington, D.C., area, sales are “below trend.”
In response, the company is buying less land, developing less land, and concentrating on selling inventory, reducing staff, and selling smaller, less-expensive homes.
“Today’s results are sobering, but we have weathered similar business cycles before,” said Fulton.
Way Beyond Toilets and Tubs
While some companies are paring down core offerings in the face of a bad market, Kohler is expanding.
The Kohler, Wis.–based company has bought Mark David—an upscale provider of furniture to the hospitality industry—and merged it into its interiors group, which already included Baker and McGuire brand furnishings, Ann Sacks tile and stone, and Kallista, a luxury plumbing brand.
One might wonder about the synergies that exist between furniture and plumbing fixtures, but when you think about it, really, plumbing kind of goes with everything related to buildings. When Mark David sells a bunch of couches to a hotel chain, maybe they will buy Kohler plumbing fixtures for all the bathrooms as well.
Besides, Kohler has already gone well beyond kitchens and baths in its business portfolio. It also makes engines and power generation systems.
Masco Exits the European Radiator Business
Masco Corp. has sold The Heating Group, a group of three European-based radiator manufacturers, to an affiliate of Vaessen Industries.
"We believe this transaction will be beneficial to all involved,” said Tim Wadhams, Masco’s CEO. “It will enable Masco to concentrate on businesses that are core to our growth strategies and should provide The Heating Group with additional growth opportunities."
The Heating Group sale includes Vasco, a manufacturer of designer radiators, and Brugman International and Superia Radiatoren, manufacturers of steel panel radiators.
Staying Out of Trouble
Owens Corning has sold two composite manufacturing plants in Belgium and Norway to quiet European regulatory concerns in the wake of the company’s acquisition of Saint-Gobains’ reinforcements and composite fabrics business last November.
Platinum Equity bought the plants for $242 million. After costs associated with the transaction, Owens Corning expects to net $197 million, consisting of $185 million in cash plus the assumptions of liabilities by the buyer. Owens Corning recorded an additional impairment charge of $10 million in related to the sale.
Home Depot Veteran Goes Green
Nate Kredich is stepping into the new role of vice president for residential market development, overseeing the U.S. Green Building Council’s (USGBC) LEED for Homes program.
“We’re extremely excited to have Nate join our leadership team,” said USGBC president and CEO Rick Fedrizzi. “Nate’s experience in the residential market, track record for driving growth, and commitment to USGBC’s vision of a sustainable built environment will be extraordinary assets.”
Kredich has extensive experience in residential construction. He spent the last five years with Creative Touch Interiors (CTI), the national turnkey provider of design center services to home builders.
He led the sale of CTI to The Home Depot in 2004 and directed the company’s integration. He led a team that grew the business three-fold through geographic expansion as well as new business development and acquisition. Kredich left the role of general manager, California and Nevada, at the end of 2007.
Before joining CTI, Kredich was CEO of BlueBolt, a software company in Durham, N.C., focused on the commercial interior design market. His experience also includes corporate banking, strategic planning, and sales and marketing in the energy and textile industries. Kredich is a graduate of Emory University and holds an MBA from the University of Virginia’s Darden School of Business.