Rayonier Q3 2026 Earnings Call Transcript

Rayonier (NYSE:RYN) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Rayonier reported Q3 net income of $40 million, or $0.13 per share, excluding significant items. Adjusted EBITDA was $145 million, driven by contributions from PotlatchDeltic operations.

The Southern Timber segment saw a 23% increase in adjusted EBITDA due to higher harvest volumes, despite lower pricing. Northwest Timber segment’s adjusted EBITDA rose significantly year-over-year with increased harvest volumes.

The company executed a strategic like-kind exchange, selling 36,000 acres in Washington and acquiring 57,000 acres in Texas and Alabama, reflecting ongoing portfolio optimization.

Rayonier’s Real Estate segment reported $208 million in revenue, driven by accelerated closing activities and significant land sales, with adjusted EBITDA exceeding guidance.

The company approved an additional $300 million for share repurchases, highlighting a focus on capital returns amid a perceived discount to asset values.

Future outlook includes stable timber prices and continued momentum in real estate sales, with plans to pursue further timberland dispositions to enhance operational flexibility.

Full Transcript

Mark McHugh (President and CEO)

For $0.41 per share. Results included $91 million of income related to the large disposition in Washington, which is part of the like-kind exchange transaction with RMS that we announced in August. As a reminder, the exchange consisted of the sale of approximately 36,000 acres in Southwest Washington for $145 million and the concurrent acquisition of approximately 57,000 acres in Texas and Alabama for $146 million. Excluding pro forma items, which included the large disposition as well as $7 million of merger-related costs, net income was $40 million, or $0.13 per share.

Adjusted EBITDA in the third quarter was $145 million, which was well above the prior-year period primarily due to the contributions from the PotlatchDeltic operations along with solid operational performance across our segments. Moving on to our segment results, let’s start on Page 9 with our Southern Timber segment. Adjusted EBITDA in the third quarter of $52 million was 23% above the prior-year quarter as increased harvest volumes more than offset lower pricing. Total harvest volumes increased 56% versus the prior-year quarter, primarily due to the addition of roughly 1.4 million tons of volume from the PotlatchDeltic timberlands. Turning to pricing in the Southern Timber segment, as a reminder, starting this year our Southern Timber pricing reflects delivered log prices rather than net stumpage, as it is now the predominant method of sale following the merger.

In sawlog markets, demand was steady during the quarter supported by healthy lumber prices and production in the U.S. South. Average delivered sawlog prices of $45 per ton were 5% lower than standalone Rayonier prices in the prior-year quarter, but up 2% sequentially from the second quarter. While lumber prices have moderated recently, Southern sawmills continue to gain market share from Canadian producers, and we expect that this trend will continue to drive higher mill operating rates and stronger sawlog demand across our U.S. South footprint over time.

Turning to pulpwood, delivered pulpwood prices of $31 per ton were 15% lower than standalone Rayonier prices in the prior-year quarter but were up 3% sequentially from the second quarter. While pulpwood markets remained challenging, we continue to believe that prices have generally stabilized in our primary market areas. Moving on to our Northwest Timber segment on Page 10, third quarter adjusted EBITDA of $32 million was significantly above the $6 million reported in the prior-year quarter. Harvest volumes more than doubled in the third quarter as compared to the prior-year period, primarily due to the contribution of nearly 370,000 tons of incremental harvest volume from the PotlatchDeltic Idaho timberlands. Healthy lumber prices also helped propel sawlog prices higher in Idaho in the quarter, as a significant portion of our sawlog sales in the state are indexed to lumber prices.

Delivered sawlog prices of $129 per ton were up 29% from the prior-year quarter and 8% from the second quarter, primarily due to higher pricing on Idaho sawlogs. Turning to Wood Products on Page 11, this segment generated $27 million of adjusted EBITDA in the third quarter, a slight improvement from the prior quarter and the strongest quarterly adjusted EBITDA result that this segment has registered since PotlatchDeltic’s third quarter of 2022. Our average lumber price realization was $528 per MBF and shipments totaled 327 million board feet. In line with our prior guidance, our average lumber price realization increased by roughly 5% versus the second quarter, which more than offset higher per-unit manufacturing costs.

The improvement in lumber markets during the third quarter was largely driven by supply-side factors as mill curtailments, industry-wide transportation challenges, and tariffs on Canadian imports limited supply. As we discussed last quarter, our team was proactive in navigating transportation challenges by leveraging rail transportation alongside our established trucking network. Lumber prices have generally trended lower since peaking in July, a decline that continued through October as demand softened due to both seasonality and growing macroeconomic uncertainty, particularly around housing markets.

We are generally maintaining a steady order file, albeit at lower prices relative to our Q3 average. Moving to our Real Estate segment on Page 12, in the third quarter, real estate revenue totaled $208 million on approximately 43,000 acres sold, which included the large disposition in Washington. Excluding this transaction, pro forma third quarter sales totaled $63 million on roughly 7,000 acres sold at an average price of $8,000 per acre. Pro forma sales fell from the prior-year quarter due to a lower number of acres sold, which was partially offset by a significantly higher average price per acre.

Real Estate segment adjusted EBITDA in the third quarter was $49 million, which was well above our prior guidance range of $25 to $35 million due to some accelerated closing activity. In improved development, sales totaled $12 million. Our Chenal Valley project in Little Rock contributed over $6 million of sales during the quarter and remains well positioned to provide a steady stream of cash flow moving forward. Activity also continues to trend favorably at our Wildlight and Heartwood development projects, reflecting the investments we’ve made over the past several years in entitlements, infrastructure, and market development.

In addition, we completed a 1,700-acre unimproved development sale in Florida for $19 million, or roughly $11,000 per acre. Moving to the rural category, third quarter sales totaled $26 million, consisting of nearly 5,100 acres sold at an average price of roughly $5,000 per acre. Overall sentiment in the rural land market remains positive, and we continue to achieve strong premiums above timberland value in our rural HBU business. I’ll now turn the call over to Wayne to cover key liquidity and balance sheet metrics as well as our outlook for the balance of the year.

Wayne Wasechek (Chief Financial Officer)

Thanks, Mark. Moving to our capital resources and liquidity, our cash available for distribution, or CAD, was $287 million through the first nine months of 2026 versus $154 million in the prior-year period. The significant increase in CAD was primarily driven by the contribution from the PotlatchDeltic businesses coupled with significantly improved real estate results. As a reminder, our CAD excludes the large disposition of $145 million that Mark discussed earlier.

A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the supplement. During the third quarter, we repurchased approximately 2.8 million shares at an average price of $21 per share, or $60 million in total. We have been very active on this front during 2026, repurchasing 7.8 million shares through the first nine months of the year for a total of $163 million. At the end of the third quarter, we had $66 million remaining on our prior share repurchase authorization. We continue to believe that our stock is trading at a significant discount to net asset value.

Accordingly, our board approved a $300 million increase to our share repurchase authorization this week. We remain active under the program as we view buybacks as a compelling use of capital and one of the most attractive opportunities to create value for our shareholders in the near term. Turning to our balance sheet, we continue to maintain a conservative leverage profile and significant capital allocation flexibility. We finished the third quarter with $361 million of cash and roughly $1.9 billion of debt. Our net debt to enterprise value, based on our closing stock price at the end of the quarter, was 22%.

Moving to our outlook, as a reminder, full-year metrics reflect a pro rata contribution from the PotlatchDeltic operations starting on January 31st. With respect to our individual segments, starting with our Southern Timber segment, we expect to achieve full-year harvest volumes of 12.2 to 12.4 million tons, with anticipated harvest volumes of 3.0 to 3.2 million tons in the fourth quarter. We expect regional sawtimber and pulpwood prices to remain relatively stable for the fourth quarter compared to the third quarter.

However, as previously discussed, full-year and quarterly average pine prices for the combined company’s Southern Timber segment are expected to be lower than legacy Rayonier prices based on geographic mix of the combined portfolio. In our Northwest Timber segment, we expect to achieve full-year harvest volumes of 2.0 to 2.1 million tons, with anticipated harvest volumes of approximately 500 to 550 thousand tons in the fourth quarter. We expect overall sawtimber prices to be lower in the fourth quarter compared to the third quarter, primarily due to lower index sawlog prices in Idaho. We continue to expect that full-year 2026 average log pricing for the combined company’s Northwest Timber segment will be higher than the standalone pricing for Rayonier in the prior year.

In our Wood Products segment, we continue to expect lumber shipments to total approximately 1.1 billion board feet for the 11 months of contribution in 2026, including approximately 295 to 305 million board feet in the fourth quarter. We expect fourth quarter lumber realizations to be lower than the third quarter, reflecting softer market conditions and typical seasonal demand patterns. As of October month-end, our average quarter-to-date lumber price realization was roughly 6% lower than our average price realization in the third quarter.

Lumber prices have continued to soften recently, with the current Random Lengths composite pricing 12% lower than the third quarter average composite. In our Real Estate segment, we see continued momentum and maintain a healthy pipeline of rural and improved development land sale opportunities. Based on our current transaction pipeline and sales closed quarter-to-date, we expect an adjusted EBITDA contribution in 4Q of $60 to $70 million, which would result in full-year Real Estate adjusted EBITDA toward the upper end of our prior guidance range of $180 to $200 million.

To assist with modeling, we note that the third quarter results include purchase accounting adjustments related to prior quarters. In aggregate, these adjustments increase depletion, depreciation and amortization, or DD&A, by $8 million for the quarter. By segment, they increase DD&A by $8.3 million in Northwest Timber, $3.3 million in Wood Products, and $0.5 million in Real Estate, and reduced DD&A by $4.1 million in Southern Timber. These nonrecurring adjustments should be excluded when estimating future DD&A run rates.

I’ll now turn the call back to Mark for closing comments.

Mark McHugh (President and CEO)

Thanks, Wayne. As we wrap up today’s call, I’d like to reiterate our current capital allocation priorities. Given the significant disconnect between private market timberland values and the valuation currently implied by our share price over the last several years, we’ve demonstrated our commitment to creating shareholder value through nimble capital allocation, active portfolio management, and a disciplined approach to our balance sheet. We’ve remained focused on executing this strategy in 2026. Through the end of September, we’ve repurchased $163 million of shares, repaid over $220 million of debt, and closed a strategic like-kind exchange transaction that we expect will be accretive to cash flow. As we noted when we announced the merger, one of the key benefits of combining our two organizations was the opportunity to further optimize our asset base through value-enhancing dispositions while retaining the advantages of scale.

At today’s share price, repurchasing our stock effectively allows us to acquire our own high-quality timberland portfolio at a meaningful discount to private market values. Given this ongoing dynamic, we intend to pursue additional timberland dispositions over the next 12 to 18 months to further enhance our flexibility to lean into share repurchases, incrementally reduce leverage, and fund other capital allocation priorities. While creating value through asset sales and buybacks is a high priority in the current environment, our team also continues to advance initiatives that will position the company for long-term growth.

We remain encouraged by the growing opportunity set for land-based solutions as well as structural shifts in North American lumber supply that should position our assets more favorably over time. A successful integration, combined with a capital allocation approach that adapts to evolving market conditions, will be central to capitalizing on these opportunities over the long term. In sum, I remain optimistic that Rayonier is well positioned to build value per share throughout the economic cycle. That concludes our prepared remarks, and I’ll now turn the call back to the operator for questions.

OPERATOR

We will now begin the question-and-answer session. If you would like to ask a question, please press Star one to raise your hand. Your line will remain open after your first question. For follow-up questions, to withdraw your question, press Star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality. If you’re muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.

Your first question comes from the line of Michael Roxland with Truist Securities.

Michael Roxland (Analyst at Truist Securities)

Yeah, thank you, Mark and Wayne, for taking my questions. Mark, you just mentioned that you intend to pursue additional timberland dispositions over the next 12 to 18 months. Any sense of the dollar value of the timberland that you’re looking to sell, and maybe where some of those dispositions would come from?

Mark McHugh (President and CEO)

Yeah, thanks, Michael. I mean, at this point, we’re not going to be overly prescriptive on how much we’ll look to sell. It’s really going to be driven by, you know, the buyer response to packages we bring to market as well as just, you know, how overall market dynamics continue to evolve. You know, keep in mind, when we announced a disposition plan back in late 2023, we were looking to significantly lower our leverage. You know, that’s less of a factor now, just given our current cash position and leverage profile.

We still want to maintain some flexibility around debt reduction, but, you know, additional sales at this point are really motivated by capitalizing on that disconnect between public and private timberland values. And as I noted in the prepared remarks, we now have a much larger portfolio from which to evaluate disposition opportunities without compromising the benefits of scale. You know, that was one of the benefits that we highlighted when we announced the merger. So we feel we’re well positioned to continue being nimble and opportunistic on that front.

Michael Roxland (Analyst at Truist Securities)

Got it. Makes sense. And just on that front, in terms of capitalizing on the disconnect between valuations, you probably mean public market vs. private market timberland valuations. How should we think about the dollar amount of repurchases you could pursue each quarter? You have about $350, $360 million authorized right now. Should we think, you know, maybe $40 million, $45 million of share repurchases per quarter would be the right amount? And then just quickly, on the lumber business, given the housing backdrop, given weakening fundamental pricing more recently, how do you think about opportunities to add additional scale in lumber—maybe acquire some assets, maybe buy some assets from producers who may be distressed?

Mark McHugh (President and CEO)

As it relates to the volume of buybacks, again, we continue to see buybacks as a compelling use of capital, but we’re not going to be prescriptive as to exactly how much we buy back in any quarter. I think the fact that our board just approved $300 million of incremental repurchase activity, you know, that really underscores our conviction around buybacks. You know, that said, we’re going to continue to be measured as to how much we deploy at any one point in time, particularly just given how volatile market conditions have been here recently.

We’re very focused on growing value per share. We believe that buybacks at these levels certainly achieve that end. We’re also focused on maintaining balance sheet flexibility and also our investment-grade credit rating. You know, fortunately, our balance sheet’s in great shape right now. But as we’ve executed on our buyback program here in the last, you call it 18 months, our leverage has ticked up a bit towards that three-times target that we’ve laid out. So as we discussed in prepared remarks, that’s why we’re really looking at additional disposition opportunities in order to build incremental capacity and really extend our runway for buybacks.

Just to address your next question around wood products and growth in that business, you know, we’re going to evaluate those types of opportunities as we would any other capital allocation alternative, really with a view towards building long-term value per share. You know, we’re certainly open to exploring growth in wood products, including both investing in our existing mills as well as considering potential external growth opportunities. But as we’ve discussed in the past, you know, the bar for external growth right now is pretty high, you know, given the opportunity that we see in buybacks.

Michael Roxland (Analyst at Truist Securities)

Got it. Thanks very much, and good luck.

OPERATOR

Your next question comes from the line of Anthony Pettinari with Citi. Your line is now open. Please go ahead.

Anthony Pettinari (Analyst at Citi)

Good morning. With the challenging housing demand this year—hey, you know, a lot of homebuilders have talked about activity kind of pulling back from August to September to October. It sounds like from your comments you’re kind of seeing that in lumber prices, but it doesn’t sound like you’re seeing it so much in rural land sales and real estate sales. I’m wondering if you can comment more on the demand you’re seeing for land and lots, and if you’ve seen any kind of softening there, or just what those discussions have been like recently.

Mark McHugh (President and CEO)

I mean, land values have really held up quite well. You know, I think we’ve commented on this a number of times in recent quarters, and I’d say that really highlights what we think is the recurring nature of what we see as a longer-term trend in this business. I’ve been really impressed with how our team continues to find opportunities to monetize land at, you know, very significant premiums to timberland value. So while timber market conditions, you know, continue to be pretty difficult, you know, underlying land values have just continued to appreciate, and we’ve been able to capture that appreciation through our real estate business.

I’ve said this before, but this is a part of our business that we think is really underappreciated. Every time we sell an acre of land at a significant premium to timberland value, we’re generating NAV accretion. Or to put it another way, you know, we’ve been selling land at very big premiums to timberland value; we’ve been buying back our stock at what we think are very big discounts to timberland value. You know, that’s really part of our ongoing capital allocation strategy.

And again, we think we’re building long-term value per share by doing this. We’re going to continue to take advantage of those opportunities, and I think that could ultimately translate to a higher long-term trend line in terms of that contribution from the real estate business.

Anthony Pettinari (Analyst at Citi)

Okay, that’s very helpful. And then just on the election, I’m curious if there are two or three policy issues that you’re really, you know, maybe focused on in the next few years. Renewables and wind maybe—that’s a good one; data center restrictions maybe—I don’t know if that’s something that’s really meaningful for you. But I’m just curious what policies are on your radar.

Mark McHugh (President and CEO)

Yeah, I mean, you know, we’re just about, I guess, a day and a half removed here from the midterm, so it’s a little early to gauge the impact. You know, I think it’ll take some time to see how leadership roles shake out and, you know, what priorities gain momentum as this new Congress takes shape early next year. You know, we generally believe that the biggest issues impacting our industry are, or should be, bipartisan issues that garner support from both sides of the aisle, and that really includes housing affordability and policies that improve the health of the rural economy.

But, you know, to your point, as it relates to land-based solutions, you know, of course federal policies around data centers and renewable energy have been hot-button topics here recently, so we’ll have to see how the election ultimately impacts those opportunities for us. Again, hard to say right now what issues might gain traction, but in the near term we’re not necessarily expecting any significant changes to the overall regulatory environment as it relates to our business.

Anthony Pettinari (Analyst at Citi)

Okay, that’s helpful. Turn it over.

OPERATOR

Your next question comes from the line of Buck Horne with Raymond James. Please go ahead. Your line is open.

Buck Horne (Analyst at Raymond James)

Hey, good morning, guys. Congrats. I just wanted to maybe follow up on that line of questions right there in terms of the land solutions business and really maybe focusing in on solar options and what kind of progress you’re seeing or any uptake and additional interest from the solar community, or, you know, converting some of those options to working sites. Any other progress on other discussions you’re having, whether it’s kind of mineral rights or exploration deals, or discussions with hyperscalers on those data center sites you might have?

Mark McHugh (President and CEO)

Yeah, I mean, I’d say our long-term optimism around, you know, what I think we broaden out to refer to as our energy solutions business, you know, it hasn’t really changed. We continue to see a long runway ahead there, especially given the growing demand for power and the relatively low cost of solar and other forms of renewable energy. Right now, I’d say some developers are probably more focused on optimizing their existing pipeline rather than expanding it as they’re continuing to navigate changes in the regulatory environment. We’ve definitely seen some puts and takes in our option portfolio in recent quarters. Our overall acreage under option is actually down modestly. That said, we think the options that remain in the portfolio should have a higher probability of conversion.

Developers are generally taking a more disciplined approach to site selection today, and that should translate to fewer agreements but a higher-quality option portfolio in the aggregate. As I mentioned last quarter, 2027 is really the first year that we expect to see a big step up in those option maturities. And so we think over the next two to three years we should start to get better visibility just in terms of what that long-term conversion rate might look like on those energy options. But overall, again, still very optimistic about the long-term opportunity for Rayonier.

Again, finding suitable land remains a key constraint for data center development, for powered land development, and we feel that we’re really well positioned to be a solutions provider on that front, just given the scale of our land base and, you know, specifically where our land is located. Yeah, none of the mills that recently announced curtailments were major customers of ours, but, you know, we did supply some volume into those facilities. But in general, look, whether a mill is a customer or not, or major customer or not, any type of mill shutdown within a particular fiber basket or sourcing radius is going to create some headwinds in that market area, as the timber that was going into those mills now has to find a new home. So our team is working to reassess supply-demand dynamics in those market areas and shift around volume as needed.

Fortunately, our land base is very diverse, so we’re not overly exposed to any particular market area, and that’s especially true following the merger. Recall that we had highlighted that as one of the benefits of the merger was really just a diversification of the land base. So, you know, we’re not anticipating any material impacts to our business, but, you know, it is something that we’re monitoring.

OPERATOR

Your next question comes from the line of Ketan Mamtora with BMO Capital Markets. Please go ahead.

Ketan Mamtora (Analyst at BMO Capital Markets)

Thank you. Good morning, Mark, Wayne, Colin. Maybe just coming back on the repurchase authorization. I’m just curious, as you think about sort of progressing with this, how much of this sort of really depends on kind of, you know, potential asset dispositions, you know, at some point later this year? Or put it differently, like how much could you do, you know, share repurchases without any asset disposition?

Mark McHugh (President and CEO)

Yeah, again, you know, Ketan, we’re not going to be overly prescriptive on that. You know, we do continue to have the ability to repurchase shares. You know, we’re comfortable with where leverage sits currently. But like I said, you know, it has, you know, ticked up modestly with the repurchases that we’ve done to date. And so, you know, we certainly have the ability to press leverage a bit higher than that target rate. You know, we do tend to look at that as sort of an over-the-cycle leverage target.

We still think that Wood Products is contributing below mid-cycle EBITDA. We still anticipate some incremental merger synergies to come into play here in the coming 12 months. And so we do have some flexibility in terms of how we’ve articulated that target. But we are more mindful of leverage just given the interest rate environment. So that’s why we’re really focused on looking at additional disposition opportunities, really to extend that runway.

Ketan Mamtora (Analyst at BMO Capital Markets)

Understood, that’s helpful. And then relatedly, on the asset dispositions, Mark, I’m just curious, how do you sort of think about, you know, maintaining sort of scale and size in whether it is, you know, some regional markets or just broadly Southern versus, you know, the West versus kind of, you know, just the perceived disconnect between public-private market valuations as you consider these potential dispositions?

Mark McHugh (President and CEO)

Yeah, I mean that’s certainly a key consideration. As we evaluate where we may look at additional dispositions, we want to make sure we maintain sufficient scale in the different market areas in which we operate. But again, recall that that was one of the benefits we laid out at the time of the merger with Potlatch Deltic was, to the extent that this discount disconnect persisted, we now had a bigger sandbox to play in, so to speak. And, you know, we think we have the ability to continue to lean in on disposition opportunities really without compromising those benefits of scale.

Ketan Mamtora (Analyst at BMO Capital Markets)

Got it. And then just final question, I’m just curious with pulpwood prices, and it seems like it’s stabilizing but it’s come under a lot of pressure here in the last 18 to 24 months. Are you seeing any signs, or y’all changing either silvicultural practices or thinning regimes? Any changes there given how depressed prices have been here recently?

Mark McHugh (President and CEO)

Yeah, look, we’ve talked about this quite a bit in the past. Pulpwood markets have been very challenging these past few years. We faced this perfect storm of, you know, mill closures coupled with pretty elevated supply in certain areas due to dry weather and some large-scale casualty events. With that said, we do think pulpwood markets have generally stabilized over the last several months, or several quarters really, as mill operating rates have generally improved following some capacity rationalization that occurred.

So conditions have improved somewhat, but pulpwood prices are still, you know, well below where they were a few years ago, which has really been a pretty big headwind for our industry here recently. We’re investing a lot of time right now in new market development to try to bolster demand for pulpwood and residuals as well, and that’s specifically around bioenergy, biofuel, biochar-type opportunities. But again, this is going to take some time to play out. So it’s been a tough backdrop here for pulpwood recently, but we are cautiously optimistic that we could see some of these new sources of demand start to scale up and hopefully replace some of that demand that was lost from the traditional pulp and paper industry.

And certainly silvicultural practices, I think, are under review across the industry today to, again, just lessen the volume of pulpwood that’s in the market or that’s being targeted on final harvest.

Ketan Mamtora (Analyst at BMO Capital Markets)

Got it. That’s helpful perspective. Good luck.

OPERATOR

There are no further questions at this time. I will now turn the call back to Colin Mings for the closing remarks.

Colin Mings

Thank you. I’d like to thank everybody for joining us. Please contact us with any follow-up questions.

OPERATOR

This concludes today’s call. Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.