Devin W. Stockfish
President and Chief Executive Officer at Weyerhaeuser
Thanks, Andy. Good morning, everyone, and thank you for joining us. Yesterday, Weyerhaeuser reported full-year GAAP earnings of $839 million or $1.15 per diluted share on net sales of $7.7 billion. Excluding special items, full-year 2023 earnings totaled $749 million or $1.02 per diluted share. Adjusted EBITDA totaled $1.7 billion for the year. For the fourth quarter, we reported GAAP earnings of $219 million or $0.30 per diluted share on net sales of $1.8 billion. Excluding a net after tax benefit of $98 million for special items, we earned $121 million or $0.16 per diluted share for the quarter. Adjusted EBITDA was $321 million.
I'll start this morning by thanking our employees for their solid execution and performance in 2023. Through their collective efforts, we delivered industry-leading operating performance, continued to serve our customers and drove meaningful advancements across our multi-year targets. As we entered 2024, we're well-positioned to capitalize on improving market conditions and remain focused on driving superior long-term value for our shareholders.
As highlighted on Page 19 of our earnings slides, we generated $986 million of adjusted funds available for distribution in 2023. We announced yesterday that our Board of Directors declared a supplemental cash dividend of $0.14 per share. When combined with our quarterly base dividends of $0.76 per share, we are returning total dividends to shareholders of $0.90 per share, including $125 million of shares repurchased during the year, Weyerhaeuser is returning $783 million of total cash to shareholders based on 2023 results, or approximately 80% of 2023 adjusted FAD, which is at the high-end of our annual target payout range.
As summarized on Page 20, upon payment of the supplemental dividend, we would have returned $4.6 billion in total cash to shareholders through cash dividends and share repurchase since the first full-year of our new cash framework in 2021. It's worth noting that although our adjusted FAD in 2023 was lower than the last couple of years due to challenging market conditions, we continue to demonstrate that our cash return framework is both sustainable and appropriate for the company's portfolio and the cash flow that we generate from our businesses across market cycles.
Notably, we increased our base dividend by 5.6% in 2023 and returned additional cash through share repurchase in our supplemental dividend. The additional cash was fully funded within our framework and required no balance sheet or portfolio actions to cover our return commitment. And given the design of our framework, we retained 20% to 25% of our adjusted FAD annually, all of which can be utilized as we evaluate future capital allocation levers, including strategic growth opportunities. We continue to believe this framework is a powerful differentiator, one that enhances our ability to drive long-term shareholder value by returning meaningful and appropriate amounts of cash back to shareholders across a variety of market conditions and also delivers an attractive total dividend yield to our shareholders.
Before moving on the business segment results, I'd like to comment briefly on the purchase and sale transactions that we completed in the fourth quarter, which included the acquisition of high quality Timberlands in the Carolinas and Mississippi, and the divestiture of less strategic acreage in upstate South Carolina. These transactions represent a unique opportunity to further optimize our Southern Timberlands portfolio with high quality, highly productive acreage that is well-integrated with our existing operations. And these transactions were structured in a tax efficient like-kind exchange, resulting in a net cash inflow of $7 million. The gain was recorded on the sale transaction and reported as a special item in the fourth quarter.
As highlighted on Page 22, we are progressing nicely against our target to grow our Timberlands portfolio through $1 billion of disciplined investments between 2022 and 2025. To date, we have deployed approximately $530 million towards our goal, including announced acquisitions in Washington, the Carolinas and Mississippi.
With that, I'll now turn to fourth quarter business results, starting with Timberlands on Pages 7 through 10 of our earning slides. Excluding special items, Timberlands contributed $77 million to fourth quarter earnings. Adjusted EBITDA was $143 million, and results across all Timberlands regions were comparable to the third quarter.
Turning to the Western domestic market. Log demand and pricing faced downward pressure at the outset of the fourth quarter as mills adjusted to a softening lumber market and worked through elevated log inventories. As the quarter progressed, lumber takeaway improved slightly and log supply decreased seasonally.
Despite lower log prices during the quarter, our average domestic sales realizations were slightly higher compared to the third quarter, largely driven by an increased mix of grade logs. Our domestic sales volumes were lower in the fourth quarter as we shifted volume to China to capture higher margin opportunities. Per unit log and haul costs were moderately higher and forestry and road costs were seasonally lower. Our fee harvest volumes were slightly lower compared to the third quarter.
Moving to the Western Export business. In Japan, despite ongoing consumption headwinds, inventories of European lumber imports have largely normalized and the Japanese log market return to a more balanced state in the fourth quarter. As a result, our average sales realizations for export volumes to Japan were comparable to the third quarter.
Our Japanese sales volumes were slightly lower in the fourth quarter and continued to be impacted by reduced shipments to a customer that sustained fire damage at one of its sawmills in the third quarter of last year. That said, this customer has implemented plans to recover most of the lost production and we continue to shift volume to other customers in Japan. As a result, we expect to increase our export volumes into the Japanese market in the first quarter.
In China, log supply into the region has adjusted to lower consumption levels and the market was largely balanced in the fourth quarter. As a result, our average sales realizations for export volumes to China were comparable to the third quarter. Given steady demand from our Chinese customers, coupled with moderating market conditions in Western domestic market, we significantly increased our sales volumes into China in the fourth quarter.
Turning to the South. Southern sawlog and fiber markets softened slightly in the fourth quarter, largely in response to ample log supply, elevated mill inventories and reduced demand for finished goods. Despite these market dynamics, demand for our logs remained steady, given our delivered programs across the region. As a result, our average sales realizations and fee harvest volumes were comparable to the third quarter. Per unit log and haul costs were also comparable and forestry and road costs were seasonally lower.
Turning now to Real Estate, Energy and Natural Resources on Pages 11 and 12. For the full year, Real Estate and ENR generated $320 million of adjusted EBITDA, slightly higher than our revised full-year guidance. In the fourth quarter, the segment contributed $50 million to earnings. Adjusted EBITDA was $67 million, a $27 million decrease compared to the third quarter, largely driven by the timing and mix of properties sold. Average price per acre increased from the prior quarter and remains elevated compared to historical levels as we continue to see stable interest from buyers for HBU properties, resulting in high-value transactions with significant premiums to timber value.
I'll now make a few comments on our Natural Climate Solutions business. As shown on Page 23, our full-year adjusted EBITDA was $47 million. This represents a 9% increase compared to 2022 and a 114% increase since the inception of this business in 2020. For 2023, we achieved solid contributions from conservation, mitigation banking and renewables, and demand for these businesses continues to grow. In addition, we achieved notable milestones in our Forest Carbon business in 2023, including the approval of our pilot project in Maine, and the monetization of the initial credits from this project. These credits were sold in the fourth quarter at a strong price and demonstrate our commitment to offering only the highest quality credits to the market. Looking-forward, we expect the new issuance of credits from our Maine project later this year. Further, we are developing additional Forest Carbon projects within our US Timberlands. We anticipate receiving approval on two projects in the US South in early '24, and intend to monetize additional credits in the voluntary market this year.
Turning to our Carbon Capture and Sequestration business. We continue to see solid progress being made on the projects we've announced with Oxy Low Carbon Ventures and Exxon, and both are expected to be online in late 2025 or 2026. Moving forward, we continue to advance discussions with high quality CCS developers on portions of our Southern US acreage, and expect to announce additional agreements in the future.
As we look back over the last several years, I am extremely proud of the progress that we've made in our Natural Climate Solutions business, and the leadership we've demonstrated along the way. We were the first company in our space to embark on this journey in a comprehensive manner and it delivered notable accomplishments across all of our NCS businesses. And in the process, we've build a world-class team with deep technical expertise and a strong commercial focus. We've laid the foundation to develop and advance our NCS offerings in-house, allowing Weyerhaeuser to capture the vast majority of the economics associated with these opportunities. And we've quickly established a peer-leading position in emerging carbon markets.
As we think about the future, we remain focused on growing our NCS business to a $100 million of EBITDA by year end 2025. And we see significant future upside as markets continue to develop, particularly in carbon and renewables. And with the work we've already completed and the prospects of advancing NCS across our expansive Timberland Holdings, we have a lot of conviction that there is no company in this space with the capabilities or asset base to deliver on this value creation opportunity at scale like Weyerhaeuser.
So now moving on to Wood Products on Pages 13 through 15. Wood Products contributed $105 million to earnings before special items in the fourth quarter. Adjusted EBITDA was $159 million, a 52% reduction from the third quarter, largely driven by lower commodity pricing. Starting with lumber. Fourth quarter adjusted EBITDA was a $34 million loss. Weaker product pricing was the primary driver as the framing lumber composite posted its lowest quarterly average in a number of years. Our average sales realizations decreased 14% compared to the third quarter. This was driven by a cautious buyer sentiment and ample lumber supply in the North American market.
That said, buyer sentiment and product pricing started to improve towards the end of the year, following stronger-than-expected housing starts data and positive signals from the Fed on the trajectory of interest rates. Our fourth quarter performance was further impacted by a decrease in production volume levels, which resulted in lower sales volumes and higher unit manufacturing costs. This was largely driven by a combination of taking additional holiday downtime at our Pacific Northwest mills, a period of downtime at our mill in British Columbia, and operating challenges at certain facilities. Market conditions were particularly challenging in the Northwest in the fourth quarter, given the more rapid decline in lumber pricing compared to log prices. As we enter 2024, market conditions are starting to improve and we expect stronger performance from our lumber business in the first quarter.
Adjusted EBITDA for OSB was $73 million, a decrease of $45 million compared to the third quarter, primarily due to lower product pricing. Benchmark pricing for OSB began the quarter on a downward trajectory, but stabilized by the end of October and increased through year end. This improvement was largely driven by lean inventories, supply limitations, and a resilient demand from new home construction activity. As a result, our OSB pricing exited the quarter at a higher level than where we entered. However, our fourth quarter average realizations decreased by 17% compared to the prior quarter. Our sales volumes and fiber costs were comparable to the third quarter and unit manufacturing costs were moderately lower.
Engineered Wood Products delivered $104 million of adjusted EBITDA, a decrease of $21 million compared to the third quarter. Deals realizations for most products decreased slightly as supply and demand continue to rebalance in certain markets. I would note, however, that pricing remains quite healthy on a historical basis. Sales volumes were lower for most products compared to the third quarter, driven by seasonally lower demand and improving supply across the EWP market. Unit manufacturing costs were slightly lower in the fourth quarter and raw material costs increased primarily for OSB web stock. In distribution, adjusted EBITDA decreased $15 million compared to the third quarter, largely driven by a decrease in commodity realizations and seasonally lower sales volumes.
With that, I'll turn the call over to Davie to discuss some financial items and our first quarter and 2024 outlook.
