Steep declines in new-home demand and residential construction hit Weyerhaeuser Co., a forest products company with a home building subsidiary, coming and going last quarter.
"The protracted recession in the housing market has had a devastating impact on our first-quarter performance," Dan Fulton, CEO and president, acknowledged during Friday's earnings conference call.
Weyerhaeuser, which is based in Federal Way, Wash., lost $148 million in the first quarter. That includes a pre-tax loss of $74 million from Weyerhaeuser Real Estate Co., or WRECO, on $371 million in revenue. This subsidiary, which includes Pardee, Maracay, and Winchester Homes, qualifies as one of the largest home builders in the country.
As such, Weyerhaeuser is suffering many of the same challenges as other major builders. Its first-quarter closings slipped 13.5 percent year-over-year, to 844. Cancellation rates fell 14 percentage points from the fourth quarter, to 26 percent, but that figure still stands 10 points above WRECO's cancellation rate in 2007's first quarter.
With new orders down 45 percent, to 926 sales, the company expects similar results in the second quarter. "The industry's spring selling season has not really materialized," Larry Burrows, WRECO's president and CEO, told analysts during the call. He believes consumer confidence must rise if the housing market is to recover. "Buyers [must] regain confidence that the new home they buy today will not be selling for less tomorrow," he said.
In terms of impairments, Weyerhaeuser's results include $33 million in home building-related write-downs. Overall, the forest products company generated $3.4 billion in revenue last quarter.
For more information, visit www.weyerhaeuser.com.
Alison Rice is a contributing editor to Builder Online.