Weyerhaeuser Company (WY) CEO Devin Stockfish Presents at Raymond James Associates 42nd Annual Institutional Investors Conference (Transcript)

Weyerhaeuser Company (NYSE:WY) Raymond James Associates 42nd Annual Institutional Investors Conference March 1, 2021 10:50 AM ET

Company Participants

Devin Stockfish - President & Chief Executive Officer

Conference Call Participants

Buck Horne - Raymond James

Buck Horne

All right. Hello. I think we are live. So, thank you for joining us. My name is Buck Horne. I'm the housing analyst as well as residential real estate and now all things timber covering the timber REIT industry for Raymond James. Really thrilled to be able to introduce you Weyerhaeuser and we've got Devin Stockfish on the line CEO of Weyerhaeuser; as well as Beth Baum and Andy Taylor both IR directors at Weyerhaeuser and they're available as well.

And we're going to run through a very interesting presentation slides and of course really topical with all the things that are happening in the housing market that are also driving tremendous demand for wood products which Weyerhaeuser is the nation's and really North America's leading producers of lumber and wood products as well as the drivers for timber consumption and production.

So, lots of interesting derivatives related to what's happening in the housing market and the benefits accruing to Weyerhaeuser. So, with that we're going to run through a few presentation slides. We'll leave plenty of time for Q&A. If you've got questions go ahead and send those into the chat room feature. We'll be monitoring that as we go and I will try to weave in as many questions from investors as we can fit in as long as time permits.

And so with that, let me hand it over to Devin.

Devin Stockfish

All right. Well great. Thanks Buck. Appreciate the opportunity to talk to everyone about Weyerhaeuser Company and some of the exciting things that we're doing. In addition to following along on your screen a copy of today's presentation materials is also available on our website. I will be making some forward-looking statements this morning.

So, the typical cautionary language will apply to those. So, we'll go ahead and get started here. At Weyerhaeuser we focus on three key levers to drive value for our shareholders: an unmatched portfolio of assets, industry-leading performance, and disciplined capital allocation.

And as we've done for over 100 years, it's all built on a strong ESG foundation and I'll speak to each of these in bit more detail. We've been doing a lot of great work over the last year at Weyerhaeuser in really each of these areas; portfolio performance, capital allocation, and ESG leadership all in a way I think that positions us very well to deliver long-term value for our shareholders.

Starting with operating results --- go back a slide there. Starting with operating results across all of our businesses our teams are doing a remarkable job of serving our customers and delivering industry-leading performance despite the challenges of operating through a pandemic. This past year we were able to deliver the best EBITDA performance in 15 years and capture an additional $100 million of OpEx.

In 2020, we took actions to reduce our leverage and improve our balance sheet. We reduced our debt by $900 million and today we're comfortably below our target leverage ratio with a strong balance sheet that supports our solid investment-grade credit profile. We implemented a new dividend framework that will return significant amounts of cash to our shareholders and be sustainable across business cycles and I'll discuss this in a bit more detail here in a few minutes.

Last year, we took a number of steps to further cement our position as an industry leader in ESG. For example last summer we announced the launch of a new sustainability strategy that maps out ambitious commitments and goals for the next decade and beyond. We've also continued to enhance our efforts around diversity equity and inclusion and I'll talk more about our ESG programs here in just a moment.

I'm really excited about the leadership change that we've got underway. As we announced previously, Russell Hagen is moving from the CFO role into a newly created Chief Development Officer role. And this structure is really going to ensure that we have a unified approach to portfolio management and support the company's increasing focus on natural climate solutions.

And then we also just recently announced Nancy Loewe is joining us as our new CFO. Nancy comes to us from Visa with the broad finance and operational background and she's going to be just a great addition to our team.

And lastly I'll just note we've got some tailwinds in terms of the markets right now. Importantly I think there are also several emerging market trends that could be very constructive for our businesses. In particular the growing demand for building with wood including CLT and mass timber as well as the growing opportunities around carbon and climate solutions. I do think it's worth highlighting here at the outset that we're experiencing the best housing backdrop in over a decade.

And as we've said previously we have a massively underbuilt housing sector in the US. We have demographic trends that should be very supportive of growing millennial homeownership, low mortgage rates and the demand for housing right now is just incredibly strong. As US housing drives demand for most of our products, Weyerhaeuser should be a significant beneficiary of the stronger housing market in the years to come.

So let me move to our portfolio, which is truly unmatched in the industry. Weyerhaeuser is the largest private owner of timberlands in North America with 11 million acres of high-quality highly productive timberlands across the United States.

We're also one of North America's largest producers of Wood Products with 35 manufacturing facilities that produce lumber, OSB and engineered wood products. All of our business segments have significant scale and industry-leading performance and we manage them within a tax-efficient REIT structure. In fact, we're one of the largest REITs in the US.

Over the many decades of running these businesses, we've developed deep unrivaled expertise in creating and capturing superior value across every step of our supply chain. It's not just about being the best though. Equally important is that we're doing it in the right way.

We've been operating our business with integrity and a strong focus on ESG for over 100 years. And our new sustainability strategy further builds on that including our 3 by 30 initiatives, which we'll discuss later.

Our commitment to environmental stewardship starts with our commitment to sustainable forestry practices, which goes back to the very early days of our company. We're also very focused on minimizing the environmental footprint of our manufacturing operations.

And our forests and Wood Products are natural climate solutions. Our millions of acres of forest capture CO2 from the atmosphere and we store that carbon in the Wood Products that we produce.

We also have a strong commitment to social responsibility and governance. This covers a wide array of activities, including with respect to safety as well as diversity and inclusion. These strong ESG practices help us attract and retain top talent, support strong relationships with our stakeholders and ensure that we're managing our business and our resources in the right way for the long-term.

At the foundation of our company is our Timberlands business. Weyerhaeuser has an unrivaled portfolio of timberland assets with substantial an enduring value. As I mentioned, we're the largest private owner of timberland assets in North America. This is an unmatched portfolio of timberlands with both scale and diversity.

We have 11 million acres of highly productive high-quality timberlands across key growing regions. Of that about three million acres are in the west. These are some of the best timber growing regions in the world and these are premium assets high-quality Douglas fir, strong domestic and export markets.

We also have nearly seven million acres in the US South, high-quality southern yellow pine plantations that allow us to access all of the key markets across the Southern US. And in the north, we have one million acres with a broad mix of species, including high value hardwood sawlogs.

Our diversified customer base positions us well to capture the full value of our timber assets. We're aligned with a broad mix of third-party domestic customers as well as our own internal manufacturing facilities. And we've got a great access to ports to serve key export markets as well.

Our robust customer mix allows us to flex supply across our customer base to meet dynamic market demands and capture new opportunities. And we capitalized on that flexibility last year as we navigated numerous market disruptions over the course of the year.

Our export business out of the West is focused primarily on Japan. It's been a significant value driver for Weyerhaeuser for decades. We have a unique business supplying premium logs to the steady post and beam housing market. We also have long-term relationships with key customers in a number of other Asian export markets, including China and Korea and we're well-positioned to serve these growing export markets overtime.

So we're also very focused on disciplined management of our timberland portfolio. At the core of our portfolio management philosophy, is the focus on growing our timber base and continually optimizing and upgrading our holdings with a view towards owning the most valuable acres that will generate the highest returns for our shareholders overtime. And our recent Oregon and Alabama transactions are great examples of the work that we're doing to improve our timber base.

Now managing a large diversified portfolio, presents a number of opportunities beyond core timber to drive incremental value back to the acre. Our Real Estate and ENR business is very focused on maximizing the value of every acre we own. This includes the work we've historically done around capturing HBU premiums and unlocking value through our ENR business. We're also excited about some of the emerging opportunities in natural climate solutions and carbon.

A key aspect of our Real Estate business is identifying the acres across our portfolio where we can unlock value by capturing a premium to the timber value. Our AVO or Asset Value Optimization program looks at a multitude of different attributes that can support a higher and better use valuation. We refresh this analysis routinely and we've identified approximately 1.3 million acres that have the potential of getting a premium value.

Our Energy and Natural Resources business looks to capture incremental value off the acre by generating lease and royalty income from a variety of non-timber resources. This includes things like construction materials or renewable resource characteristics on the land base.

The Real Estate and ENR business has shown an ability to generate consistent reliable cash flow over time. And we're forecasting $255 million of adjusted EBITDA in 2021. And finally, we're one of North America's largest Wood Products manufacturers. As I'll cover momentarily, we've made significant improvements in our Wood Products business that has reduced cost, improved profitability to help maximize our margins throughout the business cycle.

Our Wood Products business is an industry-leading low-cost producer of lumber, oriented strand board and engineered wood products. We have 35 mills across the US and Canada that are well aligned with our timber base. We also have 18 distribution facilities as well. Our mix of assets and geographic coverage allow us to serve a broad mix of customers across North America.

Our diversified mix of customers and end markets allows us to capture opportunities across a wide array of market conditions. We have long-standing relationships with virtually all of the key builders, distributors and big box stores. And our customers value our quality, our consistency and reliability.

We've been very focused on improving our operating performance across our Wood Products businesses and we've made tremendous progress. Significant reductions in our cost structure have yielded real benefits and we now have reached flak at the bottom, meaning that we are positioned to generate positive cash flow even in a pricing environment similar to the Great Recession.

Now a core part of our overall strategy as a company has been our intense focus on improving our operating performance across the entirety of Weyerhaeuser. At the heart of this effort has been our operational excellence journey. Since 2014, we've captured nearly $750 million of margin improvements across our businesses. This effort has cut across every aspect of our business and has become core to how we operate our company. We're continuing to maintain our disciplined focus on cost and margin improvement opportunities just as we have been for a number of years. We're also focusing our OpEx efforts on future value creation, cost avoidance and efficiency. We've targeted an additional $50 million to $75 million of OpEx for 2021.

You can see how this work has translated into improved relative performance versus our competition. We've made significant improvements over the last several years and we now have industry-leading positions across all of our manufacturing businesses.

Now let me turn to the third pillar of our investment thesis, which is disciplined capital allocation. We know this is a critical lever to driving long-term shareholder value. At Weyerhaeuser, our balanced capital allocation philosophy has three key priorities: returning cash to shareholders, investing in our businesses and maintaining an appropriate capital structure.

As we announced at the end of last year, we've instituted a new dividend framework. We believe this new dividend framework enhances our ability to return meaningful and appropriate amounts of cash to our shareholders across a variety of market conditions, while positioning Weyerhaeuser to deliver superior long-term value creation.

In this framework, we're targeting an annual payout 75% to 80% of adjusted funds available for distribution. This targeted payout underscores our commitment to returning a significant portion of our free cash flow back to shareholders.

Our dividend framework includes two components. First is a sustainable quarterly base cash dividend. This remains our core mechanism for returning cash. It's supported by the cash flow from our timberlands and real estate and ENR segments, and we fully intend to grow the base dividend over time.

Secondly, each year we will supplement that base dividend with an additional return of cash to achieve the targeted 75% to 80% of adjusted FAD. We expect to achieve this primarily through a variable supplemental dividend.

This will generally be paid annually in the first quarter based on prior year cash flow. We anticipate the first supplemental dividend will be paid out in Q1 2022. We may also utilize this opportunistic share repurchase to return cash under certain circumstances.

On this slide, we show our adjusted FAD and adjusted EBITDA back to 2017, when our current portfolio was established. The base plus variable supplemental dividend framework enables our shareholders to more fully benefit from the mix of cash flow profiles generated by our businesses.

Shareholders receive a stable income stream that's fully supported even in adverse market conditions. And they also benefit from significant upside in strong commodity markets, like we're seeing today through the variable component.

The remainder of our cash generation, that's the cash in excess of our base and supplemental dividends, is available for value-enhancing growth opportunities, additional debt pay down and opportunistic share repurchase. We're committed to allocating this excess cash in a disciplined manner to grow our base dividend and drive superior long-term shareholder value.

Again, returning cash to shareholders is a key component of our capital allocation strategy. We've returned $8.5 billion in cash back to shareholders since 2014 and we remain committed to returning cash to shareholders though our new dividend framework going forward.

We're also investing back into our businesses through disciplined capital expenditures. These are organic investments to sustain and enhance our Wood Products and Timberlands operations.

These projects have been a key part of our operating improvements and cost reductions. We're planning for $420 million of CapEx in 2021. And this includes the beginning of our recently announced Holden sawmill modernization project.

And the final part of our balanced capital allocation approach is maintaining an appropriate capital structure. Core to this is maintaining an investment grade credit profile. We took a number of steps last year to strengthen our balance sheet.

We reduced our net debt -- reduced debt by $900 million and ended the year well within our net debt-to-EBITDA target of 3.5 times. We also further reduced our pension obligations by $765 million through our retiree, annuity purchase transaction.

So with our un-rivaled assets and industry-leading performance, we believe we're well positioned to fully capitalize on market opportunities going forward. So, just a few comments on market conditions. First with respect to housing.

As I noted earlier, residential construction and repair and remodel has been very strong lately. And we're anticipating we'll continue to see strong demand on both fronts in 2021. Turning to lumber and oriented strand board.

With the strong housing and R&R segments combined with extremely low inventory levels throughout the system, we've seen pricing run-up to historically high levels over the last month. Demand is really strong across the board. So we're anticipating that things will stay pretty tensioned into the spring building season.

There's been some disruption in the south from recent weather events. Most of our southern wood products mills incurred some weather-related downtime due to snow and ice including some extended electricity and natural gas outages.

On balance, the system is recovering and things are getting back to normal for the most part. We do expect weather will have some effect on our first quarter production volumes and costs. We've seen some higher input costs as well.

If you exclude the changes of sales realizations for lumber and OSB, we're now anticipating that the impacts from the weather and higher than anticipated web stock and log costs, will have an approximately $25 million impact on Wood Products' first quarter earnings and adjusted EBITDA. However, we've also experienced a stronger-than-expected pricing environment. Our quarter-to-date realizations for lumber are up $227 per 1000 board feet relative to Q4 and our current realizations are up $277 per MBF.

At our OSB, our quarter-to-date realizations are up $77 per 1000 compared with Q4 and current realizations are up $111 per MSF. So we're really benefiting from a very strong pricing environment.

Turning to log markets. In the West, high lumber pricing has kept mills running full out for the most part. With the weather issues lately, there was some reduction in log flow for a really brief period, but log inventories are fairly balanced at present. We're seeing good domestic markets, our fire salvage efforts in Oregon are progressing well. Some additional volume hitting the market in Oregon from salvage activity, but with the strong overall demand we really don't anticipate a material impact on pricing.

Export markets in the West have remained solid as well. Although Japanese housing has been down somewhat, our customer demand has really been very favorable. We're also seeing fairly robust demand out of China right now as they're dealing with some supply challenges from Europe and Australia.

In the southern markets, sawlog demand's improved somewhat lately, but there has been adequate supply to meet the demand, which has kept pricing relatively flat. Most of our southern harvest crews have lost several operating days due to the snow and the ice, but we really haven't experienced any timber damage and things are getting back to normal as our customers resume operations.

And then lastly, with respect to export markets out of the south, we began ramping our exports out of the south up again in the back half of last year. And we see that continuing to grow in 2021. Still a small percentage of our overall harvest, but the opportunity to grow we believe is there over time.

Lastly, let me just briefly comment on climate change specifically. As society continues to focus on the impacts of climate change and global warming, we think that the role of forest and Wood Products is a key part of the solution and will just become more and more evident.

A growing conversation around climate and carbon, we believe will help drive incremental demand for our sustainable building products as well as potentially opening up additional market opportunities for carbon and climate solutions.

So in closing, we've taken a number of actions over the last year including paying down significant amounts of debt, implementing a new dividend framework that we think will position us very well going forward.

And I'm confident with our unmatched portfolio of assets, our deep operating experience, industry-leading cost structure, our strong culture, great employees and track record of disciplined capital allocation, we're going to drive superior value for our shareholders into the future.

And so that concludes the prepared remarks. I think we can now go ahead and open it up for questions.

Question-and-Answer Session

Q - Buck Horne

Yes. Thank you. So a wonderful overview, Devin. Thank you very much. And just as a reminder everyone if you feel like throwing in a question use the chat feature at the bottom of your Zoom screen and we'll queue those up as we go. Let me start and back up first with the lumber price outlook just given how strong these realizations are coming in through the first quarter and then everyone's obviously watching these record high lumber futures prices that are still out in the horizon and the demand from the housing backdrop feels like it's still almost insatiable right now. So there's no drop off in demand at the moment.

So people are asking and I guess the question from investors is kind of when is this going to normalize? But maybe is that the right question, given how strong the housing outlook certainly appears to be -- I mean, we're -- futures are around $1000 per board, but it's kind of scary to think about numbers that high in historic hindsight, but what is the potential for a new normal in terms of how we think about where lumber pricing heads this year and maybe into future years given what we think is certainly.

And I think a lot of investors believe is a multiyear secular growth cycle ahead for housing and for new home construction and maybe repair and remodel. But how do you think about pricing and the whole supply demand dynamic around lumber capacity at the moment?

Devin Stockfish

Yes. Well a couple comments on that. Certainly, seeing lumber prices round the $1,000 market, similarly OSB prices are incredibly strong right now. It really goes back to a couple of things. As you noted, it's about supply and demand. And as we think about, just the underlying dynamics around demand for wood products right now, they're incredibly, strong starting with the housing market. Buck as you know, we've been talking about housing getting back up to these levels for a number of years. Certainly, I think the demand has been there for some period of time. The challenge has been just on the builder side being able to accommodate that level of building. And I think certainly, over the last six or so months we've seen that the homebuilders can't ramp up production. As you know, the demand for housing right now is just insatiable.

Our customers in the homebuilder sector, they're telling us they have strong pipelines. They're incredibly bullish for 2021, and really beyond that. And all those demand drivers that we've been talking about under built housing strong demographic support just the overall demand for housing is just expected to stay strong for a period of year. And so we're expecting a strong 2021 for housing. But really, I think we've got multiple years where you're going to have to build at incredibly strong levels just to get up to kind of that normal rate relative to population growth.

So we think the housing market's going to continue to stay strong and that's going to drive a lot of Wood Products demand. And similarly, the repair and remodel fees, has been a big driver of wood products demand. We saw an incredible year last year in terms of repair and remodel demand. And as we talk to you, our customers both in the big box store space, but also in the dealer networks, our view is we're going to continue to see good healthy, strong, repair and remodel demand. And so when you put those two things together that, tells us that we're going to see strong wood pricing demand for the foreseeable future.

Now, the question on supply, obviously, as you think about 2020 most of the industry ended up taking some downtime in the early days of COVID. And as the demand really rebounded quicker than most folks had anticipated, it's really been a struggle, I think across the system to build up any sort of inventory. And that's really been the story for a number of months, certainly, the case now as we head into March, which is really the starting of the building season is upon us, inventory levels across the channel are extremely lean. That's a statement really across all of the wood products that we manufacture.

So with this really strong demand and inventories, it's hard to see that really getting back into balance in the near term. So we're expecting continued strong pricing here as we head into building season. The one caveat, I will say is, as we think about $1,000 lumber prices, I don't think there are too many people that think this is the new normal. At some point, I would expect that to normalize down to a somewhat lower level. That being said, as long as we have strong housing, strong repair and remodel, I do think you're going to see a healthy pricing environment, maybe not $1,000 lumber prices, but a healthy environment for some time to come.

Buck Horne

No. I appreciate that. But thinking about it in terms of just a tremendous economic incentive right now for entrepreneurial mines to add some capacity, maybe start new sawmills or maybe buy some mills and try to expand capacity. What's the realistic time frame though between when you can get a sawmill off the ground and running? What are the supply bottlenecks maybe regionally whether you think about the US South versus the Pacific Northwest? Are any specific things that are preventing the timeline for how quickly supply could be added?

Devin Stockfish

Yeah. Typically, to add a greenfield mill, you're realistically looking at 18 months to 24 months to get it designs, build, permit it, get the employee base in, get all of the infrastructure the logistics all put in place and really be up and running at full speed. So there is – there's a bit of a time lag between when you decide you're going to put a new mill in place and when it's actually up and running.

So we've had a number of mills that have been announced over the last several years I think it's in the neighborhood of 6.5 billion board feet of new capacity that's come into the south over the last several years, and some new mills that have recently been announced. And so there's no question, there continues to be new lumber capacity coming into the US South. And I think unlike Canada and the Pacific Northwest, which seems on likely we'll see a dramatic amount of new capacity in those regions.

The South is a great place to manufacture lumber. And so I think there will continue to be new capacity added in, both from a greenfield standpoint, but also existing mills that are making capital investments to add capacity in their existing facilities. But there's a time lag for new mills. And so, it's still a ways out in terms of when you're going to see meaningful amounts of additional capacity hitting the market.

Buck Horne

I appreciate that. And that helps a lot. So, let me look at the Weyerhaeuser portfolio, specifically you mentioned part of the CapEx budget this year goes to this modernization effort at the Holden sawmill facility. What other specific opportunities do you have maybe this year or even in the out years to add some really accretive or high-returning CapEx projects just to expand your existing capacity, within your existing facilities, or do you look to potentially add or develop new processing capability from the ground up? How do you think about those opportunities?

Devin Stockfish

Sure. Our CapEx program in Wood Products for a number of years has been primarily focused on getting the right cost structure in our mills and being very productive, very reliable mill set. So that, we have a cost structure that can allow us to win, regardless of what's going on in the pricing environment. So that's been really the driving effort behind our CapEx programs and Wood Products for a number of years. And I'd say that by and large remains our primary focus.

Now, we have added some capacity to our Dierks mill, our Millport mill, the newly announced Holden mill. Dierks and Millport together added about 300 million board feet; Holden mill will add about 100 million board feet when that's completed. And so, we are adding capacity, concurrent with some of these projects. But by and large it's really about making sure that we have the most cost-effective and efficient and reliable mills in the industry and that continues to be our primary focus here in the near term.

I think, we still have a number of opportunities on those types of projects throughout our mill set, at least for the next several years. Whether we would do a greenfield project, I'd say in the near term that's probably not going to be our focus. As we think about getting a return on the capital that we're investing into our mill set, we invest into a mill that we already own, we know the employees, we know the operating ability. We have the logistics in place, the supply chain, offtake agreement. So, I think okay it lowers the risk in terms of putting that capital to work in our existing facilities versus a greenfield mill. So that's probably not going to be our focus in the near term, although over the longer or term obviously we have a lot of good timber. And down the road, perhaps that would be something we would consider.

Buck Horne

Perfect. I'm going to leave in a question from an investor at this point. So this is good question. The stock still isn't back to its 2018 peak, given the strength of the market at the moment and potential ESG tailwinds on that. Why do you think the stock isn't being rewarded more at this point?

Devin Stockfish

Yes. I think part of that is really just a timing question, right? So we're coming off of a 2020 period that had some volatility with COVID. There were some peaks and valleys last year to be sure. We rolled out a new dividend structure. And I think, to some extent the market has to see us implement the dividend structure and really see how that transpires. And so, over the course of the year, I think investors will get visibility on what the FAD looks like, they'll be able to calculate what the supplemental dividend payment will look like. And I think over the course of the year, we'll have an opportunity both in terms of how we're executing on this plan and what we're sharing with investors for folks to get maybe a better understanding of how this new dividend framework is going to work.

But ultimately again I go back to the fact that we have the best assets in the industry we've got industry-leading performance. We're being very thoughtful about how we're allocating our capital and certainly when you think about a 75% to 80% FAD payout target as we sit here in strong commodity markets we're running our business as well that's going to result in a fairly significant payment of cash back to shareholders this year. And so some of that I think is just investors need to see us actually prove out what we've said we're going to do, which we fully intend to do and show the market what this new structure will do for them.

Buck Horne

That's great. Thank you. Let's just diving in on the dividend discussion a little bit further. So, obviously, just the realization so far this year just look to be substantially ahead of expectations for the year. We'll see how sustainable it is. Of course there's a lot of unknown still yet to be seen across the course of a full year. But what's the thought in terms of how do you determine what that first supplemental dividend is going to look like amount or otherwise? And is there a possibility that given the cash flow accretion we're seeing early this year what's the thought around an interim special dividend sometime this year? Is that possible, or just really not on the table?

Devin Stockfish

Well, yeah, so the first part of the question is pretty easy math frankly. So we'll be reporting our year-to-date FAD every quarter. And so shareholders will be able to see how that translates over the course of the year. And so the math is pretty straightforward. We've said we're going to distribute 75% to 80% of our adjusted FAD for the year back to shareholders. And so you can just take the FAD, subtract out what we've paid out in the base dividend and you can do the math to get up to that 75% to 80%. So that should be pretty straightforward.

In terms of the timing as we said, the plan is to do this on an annual basis in Q1 looking back at the prior year cash flow. And we do that to make sure that we're really matching up that distribution that supplemental dividend to what our full year cash flow looks like. And so that's normally going to be the case. It's going to be a Q1 supplemental dividend. Could there be a situation where cash flow -- the balance sheet gets to the point where it makes sense to do some kind of interim supplemental I wouldn't close the door on that. That is conceivable. But again the plan is going to be typically that that goes out in Q1.

Buck Horne

Got you. That's helpful. Helpful. Maybe shifting to timber portfolio for a second. Just thought we'd highlight the recent moves you made in the portfolio the acquisition of the Alabama acreage last week and of course recently swapping some acreage in Oregon, so some active portfolio management. Is this a signal that you're seeing a little bit more buying and selling activity? Should we expect more of that? And how do you think about where to potentially add some acreage in terms of the pricing tension, the dynamics in the Northwest versus what's happening in the south?

Devin Stockfish

Sure. Well, I'd say at the outset we are always active from an M&A standpoint in the timberlands business. I think that's really core to what we do. It's part of our business. And so we've done a number of transactions over the year. I think over the last six months I'm really excited about a couple of things we've been able to do. You mentioned the Oregon transaction. This really highlights what we're trying to do from a portfolio optimization standpoint.

We sold out some acres that were lower performing. We traded those up for some really high-quality Timberlands in the Mid-Central coast region of Oregon. Net-net we probably have fewer acres from that transition, but we have higher value Timberlands which are going to generate in the neighbourhood of $20 million of incremental EBITDA per year for the next 15 years to 20 years.

So, just a great example of the optimization work that we're trying to do across the portfolio, and then the recent Alabama acquisition that we just announced again, this is really a good opportunity for us to upgrade our overall Southern Timberlands portfolio.

This land was high quality. It's in a really strong market both on the grade side and the fiber side. It fits really well within our footprint in that region. And so, we think we're going to be able to drive some real synergies off of that land. And it's going to fit really nicely overall with how we're trying to upgrade the overall portfolio.

In terms of where we focus, we're always looking across the West in Oregon and Washington and really across the south. Now obviously, within those broader geographies they're going to be micro regions that are going to be more appealing or less appealing just depending on what the specifics of that market are. But we're always looking really across all of those markets.

In the West, obviously, higher-priced Timberlands, you have a strong stronger pricing environment. In the South, slightly lower timberland prices, a little bit more flat in terms of pricing. But for us it's really about, where can we put money to work that's going to generate the best return on assets.

And so, obviously the quality of the Timberlands, the market, the cash flow, but price is also a piece of that. So that's really what we look at across all geographies, where can we drive that best return on asset. And so that's really a guiding principle for our program.

Buck Horne

That's wonderful. Thank you so much, Devin. And we're right against our time limit for this session. So I want to thank everyone that joined us for this meeting. I want to especially thank Devin, and Beth, and Andy for helping us assemble just a tremendous presentation and a great story that continues to unfold here.

So feel free to reach out, if you got any further questions. Happy to help you with that on Weyerhaeuser and we can certainly get in touch with the company here for more details. But with that, thank you so much Devin. We really appreciate it. And everyone have a wonderful conference. And we'll talk to you soon.

Devin Stockfish

Thanks Buck. Take care, everyone.

Buck Horne

Thank you.