Potlatch 4Q15 Earnings Call Notes

Potlatch Corporation’s (PCH) CEO Mike Covey on Q4 2015 Results

Lumber prices hurt by strengthening dollar

“Lumber prices were hurt principally by our strengthening U.S. dollar which has gained 43% against the learning [ph] since January of 2013. To a lesser degree, weaker from China and a modest growth in the U.S. housing market also put pressure on lumber prices. As a result, our average lumber price realization dropped $56 per 1,000 board feet and EBITDA for the Wood Product segment dropped $56 million year-over-year.”

Trying to arbitrage the high private market values of land vs the deep discount that our stock trades

“we are actively pursuing opportunities to take advantage of the arbitraged between high private market timberland values and this deep discount in which are stock currently trades in the public equity market. Hence we have shifted from being a buyer of timberland to a seller with intend of using sale proceeds before successful to repurchase our share and reduce debt. ”

We think our stock is at a 40% discount to NAV

“Our stock is currently about 40% lower than analyst’s estimates of NAV are roughly $900 per acre. The resent market volatility and the further decline in our stock prices only increased our conviction at ours that this is an attractive strategy.”

Their assumed value per acre

“our arbitrage opportunity really comes from the fact that I think the stock is trading at around $900 an acre for the company and we think Southern timberland is worth as I said $1,700 to $2,000 an acre and our Northern Idaho timberland we think it worth $2,000 an acre. So there is the arbitrage opportunity.”

Jerry Richards

There are lots of reasons to be optimistic on lumber prices this year

” if you look at the demand factors that are out there, I mean we are talking about higher housing starts, we are talking about improved repair remodel markets, we’re talking about non-residential construction doing well. The only think that’s really holding back the industry is weakness in China which ultimately is causing the Canadians to push lumber away from China towards the U.S. That’s the only real negative factor. But if you collectively take all those things into consideration, there is reasons to be optimistic. And we’re talking about 5% improvement in pricing year-over-year and that’s right in line with where the fund it’s forecasting as well.”

Eric Cremers

A little early to say whether we’ve seen prices turn yet

Yeah, so I would say we’ve seen pickup in pricing yet, it’s still too early in the year George. I wouldn’t expect to see it frankly until we get out into maybe mid-February. It’s now like you can pinpoint one day and say okay, this is the day that the prices turns. So far no, we’ve not seen prices turn.