Wood Resources LLC – Q3 Review 2011
Bill Corbin, Chairman
Richard Yarbrough, President and Chief Executive
Wood Resources LLC – Q2 Review 2011
Bill Corbin, Chairman
Richard Yarbrough, President and Chief Executive
Wood Resources LLC (the “Company”) results in Q2 2011 were softer than expected. Demand for structural panels remains very weak as U.S. domestic demand has remained essentially flat since the middle of 2010.
Safety of associates working within the Company remains a top priority. Safety performance as measured by recordable incidents sequentially improved nearly 60%, from 3.4 in Q1 to 1.4 in Q2.
Moncure Plywood led the Company’s financial performance in Q2 and through the first half of 2011. Mill operating performance has been excellent and its increased product offering has allowed Moncure to differentiate itself in the marketplace. Moncure’s all-in cash costs per unit were 5% lower than in the same period in 2010, despite glue costs driven higher by increased oil prices.
Chester Wood Products also operated very well for the quarter with significantly improved labor productivity and tight cost controls offsetting higher glue and marginally higher wood fiber costs. Unfortunately, sales prices for the commodity panel products manufactured by Chester were disappointing due to market conditions.
The Company’s overlay specialty business, Olympic Panel Products, experienced higher wood fiber costs combined with increased glue and overlay costs due to increased oil prices. On the market side, Olympic’s mix of products was forced to shift toward the less specialized, more competitive products due to market constraints. These factors combined to create extremely weak operating results in Q2.
A very challenging picture is likely to exist for the remainder of 2011. On the positive side, oil prices have begun easing and wood fiber prices in the Pacific Northwest are falling. The effect should be reduced operating costs at all of the Company’s mills. As a result, we are hopeful to achieve improved results in the second half of 2011.
Wood Resources LLC – Q1 Review 2011
Richard Yarbrough, President and Chief Executive
Eric L. Larsen, Vice President, Finance
The Company’s commodity business, Chester Wood Products, led our performance. Although demand was weak throughout most of Q1, slight improvements by the second week of March enabled modest increases in product pricing. Moncure produced and shipped more product in Q1 2011 than in any quarter since Q2 2008. Moncure Plywood’s furniture business was relatively flat compared to the prior quarter, but its diversification strategy resulted in increased production and shipments of pine products. Moncure’s exemplary safety performance continued with no incidents for the quarter, extending its zero-incident record to 14 months.
Abnormally adverse weather conditions throughout the U.S. not only affected demand for the Company’s products in January and February, but the unusually cold and snowy weather also affected operational performance and created transportation issues for our Carolina mills. Underlying demand is still weak across most of the company’s product lines as construction spending continues to lag.
Wood Resources LLC – Q3 Review 2010
Richard Yarbrough, President and Chief Executive,
Eric Larsen, Vice President, Finance
Q3 2010 experienced a decline in the markets served by Wood Resources LLC (the “Company”) from the market peak of Q2. Although industry-wide production remained on a decline, consumption declined even faster, as buyers returned to their practice of buying only on back-to- back business. Inventories remain nearly non-existent in the channel.
Even though pricing retreated to Q1 levels by the end of Q3, improved operating performance enabled the Company to generate positive EBITDA. The Company’s commodity business, Chester Wood Products, led the Company’s performance for the quarter. Safety performance was excellent, with no incidents during Q3. Moncure Plywood continued improving its cash cost of production, achieving its best quarter to date. In addition, Moncure’s exemplary safety performance continued, with no incidents for the quarter and only one incident in the last six quarters. Olympic continued its trend of stable performance with its sixth consecutive quarter of positive EBITDA.
With current lackluster demand across most of the Company’s markets, we are anticipating prices to drop below Q3 levels and continue to languish at these levels during Q4. We remain hopeful that a moderate pickup in demand in early 2011 will have a disproportionate impact on pricing, given the extreme tightness in the channel — similar to the experience of the first half of this year. Until then, our objective will be to maintain our highly competitive cost structure.
Wood Resources LLC – Q2 Review 2010
Richard Yarbrough, President and Chief Executive Officer
Wood Resources is a producer and distributor of engineered wood panels for industrial and commercial customers, operating in Washington, the Carolinas and Florida. Q2 2010 saw significant positive momentum in the markets served by Wood Resources. Notwithstanding the challenging economy, Wood Resources generated its best quarterly performance since the business was established in 2003.
The company’s commodity business, Chester Wood Products, led its financial performance, with product pricing 25% above that of Q1. Strong demand early in the quarter extended the order backlog and Chester took advantage by pushing production volume to the highest levels realized under our ownership.
Moncure Plywood recovered from Q1 operational difficulties and substantially increased production to meet increased demand. Moncure has historically produced exclusively hardwood plywood for the upholstered furniture industry; however, the mill has been focused on adjusting its product mix to diversify its business. Although furniture still remains an important market for Moncure, almost one-third of sales are now other specialties, including sanded pine, platforms and ply-form. In Q2 2010, these products benefitted from improved pricing and helped Moncure generate its best quarterly performance since Q2 2006. Safety performance at Moncure was exemplary, with no incidents for the quarter and only one incident in the last five quarters.
Olympic Panel Products, our overlay plywood facility, continued its trend of stable performance. Inventory rebuilding in its distribution network generated improved demand throughout the quarter, allowing the highest level of production since Q3 2008.
We are anticipating commodity plywood prices to remain approximately at current levels during Q3, well below pricing achieved in Q2 2010, before normal seasonal declines in Q4. Although operating results are not expected to repeat the record set in Q2, Wood Resources anticipates continued positive operating results above our 2010 operating plan.
Finally, we want to welcome Bill Corbin as the new Chairman of the Board of Wood Resources. Bill has been a Director of the company since 2008 after having retired as Executive Vice President of Weyerhaeuser Corporation, where he was responsible for the wood products operations.
Wood Resources LLC – Q1 Review 2010
Richard Yarbrough, President and Chief Executive Officer
Wood Resources is a producer and distributor of engineered wood panels for industrial and commercial customers, operating manufacturing and distribution facilities in Washington, the Carolinas and Florida.
Despite difficult market conditions, the first quarter of 2010 yielded positive financial results for Wood Resources. Short-term supply constrictions late in the first quarter of 2010, stemming from the Chilean earthquake and heavy rainfall in the Southeast, have improved pricing. Coupled with very low inventory levels in the supply chain, slight improvements in demand should support more stable pricing and volumes in the second quarter of 2010. While there are signs of stabilization in the housing markets, all of Wood Resources’ facilities remain focused on cost control.
The Chester Wood Products subsidiary in Chester, South Carolina, is a world-class commodity panel mill that is positioned to capitalize on a strengthening market. As a result of log-sourcing decisions late in 2009, Chester was in an enviable position with adequate fiber supply to enable full capacity utilization in Q1 2010, a period when a number of its competitors were forced to idle.
Meanwhile, the Moncure Plywood subsidiary in Moncure, North Carolina, managed its fiber sourcing challenges by producing a more diverse product mix from readily available fiber sources. Late in the first quarter of 2010, Moncure returned to profitability.
The Olympic Panel Products subsidiary in Shelton, Washington, which produces specialty overlay plywood for concrete forms, signage and panels for roll-up truck doors, generated positive earnings of almost $1 million in Q1 2010, its best quarterly performance since 2007. Olympic benefitted from the permanent closure of Ainsworth Plywood, its largest North American competitor. Olympic also made significant strides in its safety performance, achieving a 67% improvement in the Q1 2010 total incident rate as compared to 2009, and posting its lowest incident rate ever this far into the year.
Wood Resources LLC – Q4 Review 2009
Richard Yarbrough, President and Chief Executive Officer
Wood Resources, a producer and distributor of engineered wood panels for industrial and commercial customers, weathered the worst market for its products since at least 1982, and perhaps since World War II. Housing construction reached a 45-year low. Industrial markets were weak and commercial construction declined precipitously.
Wood Resources businesses operate in the State of Washington, the Carolinas and Florida. Olympic Panel Products LLC in Shelton, WA, produces specialty overlay plywood for concrete forms, signage and panels for roll-up truck doors. Moncure Plywood LLC in Moncure, NC, and Chester Wood Products LLC in Chester, SC, manufactures plywood for the furniture and construction industries.
All of Wood Resources’ facilities achieved increases in man-hour production efficiency through reductions in overhead and labor costs in 2009. The management of Moncure and Chester was consolidated under the leadership of Operating Partner Richard Baldwin, and the synergy provided value to both mills. Moncure was successful in diversifying its product line, adding sanded pine and platforms, which enabled the business to operate profitably in the second half of the year. Moncure reached agreement on a three-year contract with the International Association of Machinists and Aerospace Workers in March. The mill significantly improved its safety record, with not a single recordable accident since March 2009.
Olympic improved its per-unit cash cost to levels that, despite a market-driven, 35% reduction in volume year-over-year, the business generated profit. Olympic remains the premier supplier of overlay panels in the U.S., and its market leadership was further expanded in 2009 when Ainsworth, its largest North American competitor, was permanently shuttered.
Chester remains a world-class commodity panel mill and is well-positioned to capitalize on a strengthening market. Its low-cost advantage and integration with Moncure will help ensure its long-term strategic value.
The second half of 2009 yielded positive financial results for Wood Resources, which we anticipate will carry over into 2010. Most economists are predicting a modest increase in housing starts and repair and remodeling activity. Improved demand, coupled with very low inventory levels in the supply chain, should support more stable pricing and volumes throughout the year.
The operating focus at all of Wood Resources’ facilities will remain on safety performance, production efficiency, aggressive product and market development to fill capacity at Wood Resources’ specialty operations, and selective capital spending to solidify competitive position and support operating reliability.
Wood Resources LLC – Q3 Review 2009
Richard Yarbrough, President and Chief Executive Officer
While housing starts remained anemic and panel demand from industrial markets remained weak in Q3, Wood Resources LLC’s businesses – Olympic Panel Products LLC, Moncure Plywood LLC and Chester Wood Products LLC – are well-positioned to increase their market share. Wood Resources received a major infusion of new capital from its investors in Q3. That investment will support continuing growth initiatives at all three operations and allow the Company to maintain its capital assets in a responsible fashion.
Olympic Panel Products is benefitting from its Continuous Improvement Process initiatives, showing continued modest profitability for Q3 despite operating at exceptionally low levels of production. Olympic’s strong management team has positioned the Company to take market share from its largest competitor, which suspended operations in Q2 and laid off a significant portion of its work force.
Moncure Plywood returned to profitability in the last two months of Q3, an extraordinary achievement considering that the business is operating at 65% of capacity. Through attacking costs and product diversification, the Company – led by Operating Partner Dick Baldwin and his team – continues its expansion into upgraded sanded pine products and other specialty hardwood segments to offset the continued soft upholstered furniture market.
Prices for commodity plywood panels bumped along the market bottom in Q3 with some periods of slight improvement. Nonetheless, Chester Wood Products remained profitable as a result of its world-class cost structure and its focused management team and employees. Chester continues to be a center of manufacturing excellence within Atlas Holdings.
Wood Resources LLC – Q2 Review 2009
Richard Yarbrough, President and Chief Executive Officer
Despite an extraordinarily difficult market, with total housing starts in April at their lowest level since 1959 and an equally depressed market for industrial plywood, Wood Resources LLC’s businesses — Olympic Panel Products LLC, Moncure Plywood LLC, and Chester Wood Products LLC — have positioned themselves to manage through the historic downturn.
Olympic Panel Products returned to modest profitability at the end of Q2 after aggressive cost-cutting measures were implemented by its management team. This achievement is extraordinary, given that Olympic is operating at approximately 50 percent of its production capacity, and it is a testament to the strong leadership of Jim Zmudka and our management team. Olympic Panel’s largest competitor announced it will suspend production in the face of the difficult market, which creates an opportunity for Olympic to increase its market share.
Moncure Plywood and the International Association of Machinists and Aerospace Workers reached a contract agreement after an eight-month strike. The contract provides for employees to share in the cost of their health insurance premiums and for greater operational flexibility to meet customer demands. Responding to the negative outlook for the upholstered furniture industry, Moncure Plywood is diversifying into other specialty plywood segments to offset the shortfall in demand from local furniture producers.
Chester Wood Products continues to distinguish itself as a center of manufacturing excellence within the Atlas family of companies, resulting from its dedication to continuous improvement. Chester set new records in its per-unit production costs, managing to generate only modest losses in a period of historically low panel prices. We expect that, whenever the housing market turns, Chester will be well positioned to generate substantial profits that will more than make up for the challenges of the last several years.
Wood Resources LLC – Q1 Review 2009
Richard Yarbrough, President and Chief Executive Officer
With its customers in the residential and commercial construction and furniture industries in deep distress, Wood Resources LLC and its businesses — Olympic Panel Products in Shelton, WA, Moncure Plywood in Moncure, NC, and Chester Wood Products in Chester, SC — are struggling. But the three businesses turned in better-than-expected financial performance for the first quarter.
Chester built on the best-in-industry safety, cost, quality and earnings marks it earned last year. Olympic achieved the coveted Forest Stewardship Council certification for its products and managed to almost break-even at approximately 40% capacity utilization, which is a heroic achievement. And Moncure reached agreement on a new, three-year labor contract with the International Association of Machinists and Aerospace Workers that provides for greater workscheduling flexibility to meet customer orders and for a sharing of health insurance premiums.
With no immediate recovery in demand in sight, all three businesses will continue to focus on reducing raw materials costs through integrated sourcing, streamlining manufacturing processes to take out cost, and expanding our product lines to strengthen our long-term competitiveness.
