Deltic Timber CEO doesn't expect imminent housing recovery
Deltic Timber Corp. (NYSE: DEL) CEO Ray Dillon said the depressed residential housing market will continue throughout the remainder of 2007, well into 2008 and maybe early 2009. Dillon made the comments during a midday conference call.
“Deltic’s reported net income for the third quarter of 2007 was largely impacted by the depressed environment that exists for our lumber and real estate market,” Dillon said. “I am pleased to report positive financial results despite these difficult operating conditions.”
After Monday’s close, the El Dorado, Ark.-based company, which harvests and markets lumber, reported third-quarter sales of $25.5 million, down 42% from $43.7 million a year earlier. Deltic’s quarterly net income plunged 96% to $0.25 million, from $6.4 million during the same period of 2006.
“With the current short-term market outlook for the residential real estate and lumber markets, operating in forest products and real estate development business will be very challenging for some time,” the chief executive said. “We will continue to maximize sales realizations where possible while concentrating on being even more efficient and cost conscious than ever before in order to weather this period.”
A fire at a southern Arkansas mill during August caused Deltic to halt operations. Dillon said the firm’s insurance policy will cover any lost business and damage resulting from the fire.
“The mill’s segment operations for the quarter were greatly affected by this fire, as it caused us to temporarily suspend production,” Dillon said. “The expected property damage proceeds could exceed the book value of the assets damaged in the fire and related cleanup costs by over $1 million.”
He said the company has installed new equipment at the mill and expects production to resume in early November.
During the quarter the firm made no commercial real estate sales, compared to sales of about $13 million a year earlier. Capital expenditures fell 60% to $6.3 million, from $15.6 million during the year-ago quarter.
When a market recovery occurs, Dillon said Deltic is well-positioned to take advantage of opportunities.
“These conditions should present buying opportunities, as we look to wisely grow Deltic’s asset base,” he said.
In midday trading, DEL shares are down 5.5%, or $3.21, at $55.15. Over the last 52 weeks, shares have ranged from $45.79 to $64.98.
