PotlatchDeltic outlines $40M synergy target and real estate momentum as merger with Rayonier advances

Earnings Call Insights: PotlatchDeltic Corporation (PCH) Q3 2025

MANAGEMENT VIEW

* Eric Cremers, President and CEO, announced "third quarter total adjusted EBITDA of $89 million," highlighting strong results from the real estate segment and robust operational performance across all business units despite market headwinds.
* Cremers emphasized the strategic significance of the proposed merger with Rayonier, stating "the merger between our 2 companies will result in significant strategic and financial benefits beyond what either of us could achieve independently." He detailed that the combined entity will control nearly 4.2 million acres of timberlands across 11 states and maintain a significant wood products manufacturing base.
* Cremers noted the combined company is expected to realize "synergies of $40 million, which will be primarily driven by corporate and operational cost optimization," with the transaction anticipated to close in late Q1 or early Q2 2026.
* The CEO provided an overview of key segment performances: Timberlands met the planned Q3 harvest volume of 1.9 million tons; Wood Products posted an EBITDA loss of $2 million due to weak lumber prices but achieved the lowest average manufacturing cost per thousand board feet since Q2 2021; Real Estate reported strong sales, including "2 larger transactions in Georgia totaling $39 million in revenue."
* Cremers reported further progress in natural climate solutions, with "34,000 acres under solar option agreements and expect this to grow to 40,000 to 45,000 acres by year-end," and a new lithium mineral lease with Saltwerx LLC (ExxonMobil subsidiary) covering 4,200 acres.
* Wayne Wasechek, VP & CFO, stated "Total adjusted EBITDA was $89 million in the third quarter compared to $52 million in the second quarter. This sequential quarter-over-quarter increase in adjusted EBITDA is mainly attributed to strong real estate activity in both our rural and development real estate businesses."

OUTLOOK

* Wasechek indicated Timberlands harvest volumes for Q4 are expected to range between 1.7 million and 1.8 million tons, with 80% sourced from the South, and Idaho sawlog prices are expected to decline by approximately 13% in the fourth quarter.
* The company plans to ship 290 million to 300 million board feet of lumber in Q4, with average lumber prices so far in Q4 at $397 per thousand board feet, similar to Q3.
* Real Estate is expected to sell approximately 5,000 acres of rural land at an average price of $3,200 per acre in Q4. Chenal Valley development is projected to close on 46 residential lots at an average of $95,000 per lot.
* Wasechek stated, "We expect total adjusted EBITDA in the fourth quarter to be lower than third quarter results."

FINANCIAL RESULTS

* The Timberlands segment's adjusted EBITDA increased from $40 million in Q2 to $41 million in Q3.
* Idaho sawlog harvest rose from 360,000 tons to 411,000 tons quarter-over-quarter, while Idaho sawlog prices declined by 5% per ton.
* The Wood Products segment reported an adjusted EBITDA loss of $2 million for Q3, compared to a positive $2 million in Q2. Average lumber price realization dropped from $450 to $396 per thousand board feet.
* Lumber shipments increased from 303 million to 333 million board feet.
* Real Estate delivered adjusted EBITDA of $63 million in Q3 versus $23 million in Q2, with notable rural sales including 15,600 acres at nearly $3,300 per acre and a $7 million commercial land sale.
* The company finished Q3 with $388 million in liquidity and refinanced $100 million of debt, maintaining a weighted average cost of debt at approximately 2.3%.

Q&A

* Ketan Mamtora, BMO: Asked about pulpwood market pressures and mill closures in the U.S. South. Wasechek responded that despite closures, "given our size, our scale and the relationships that we have with customers, we find a home for our volume," and emphasized the risk mitigation benefits of the Rayonier merger.
* George Staphos, BofA: Inquired about increased lumber shipments versus guidance and future margins in Wood Products. Cremers explained, "We generally run them as hard as we can to leverage and absorb overhead costs in each stick of lumber."
* Staphos also questioned the drivers of strong Q3 real estate results. Wasechek attributed outperformance to "a couple of larger sales as we noted. The bigger one is on conservation."
* Mark Weintraub, Seaport: Asked about real estate pricing trends and conservation sale impacts. Wasechek said, "We've been able to increase our prices, I think, fairly significantly... maybe prices are up about 10%."
* Weintraub also probed on lithium lease economics and timing. Wasechek said, "It's too early to provide any detailed insight into P&L opportunity."
* Michael Roxland, Truist: Sought clarification on lumber inventories and NCS pipeline. Cremers confirmed inventories are lean, while Wasechek said, "We expect to grow acres under solar option by the end of the year."

SENTIMENT ANALYSIS

* Analysts raised persistent concerns about weak lumber pricing, pulpwood demand, and sustainability of real estate sales, with a neutral to slightly negative tone but acknowledged strong segment performances and merger potential.
* Management displayed confidence in the merger's strategic benefits, operational execution, and real estate demand, while remaining realistic about ongoing headwinds, stating, "We maintain a positive view of the long-term fundamentals that drive demand in our industry" (Cremers).
* Compared to the previous quarter, analyst skepticism around Wood Products and pulpwood markets persisted. Management's tone remained optimistic yet measured, shifting focus toward merger-related synergies and diversified business resilience.

QUARTER-OVER-QUARTER COMPARISON

* The Q3 call introduced the proposed merger with Rayonier and its $40 million synergy target, compared to no such announcement in Q2.
* Adjusted EBITDA rose to $89 million from $52 million, driven by a surge in real estate activity, whereas Q2 highlighted operational disruptions and one-time costs in Wood Products.
* Management maintained a positive long-term outlook but became more explicit about real estate pricing power and natural climate solutions progress.
* Analysts in both quarters pressed on lumber pricing, segment margins, and capital allocation amid market uncertainty.

RISKS AND CONCERNS

* Management cited continued challenges from historically low lumber prices, soft demand, and persistent oversupply.
* Risks include anticipated declines in Idaho sawlog prices, seasonally lower Q4 harvest volumes, and real estate activity volatility.
* The pending merger with Rayonier introduces integration and regulatory approval risks.
* Analysts questioned the sustainability of real estate sales, the impact of pulpwood market pressures, and the timing of NCS and lithium monetization.

FINAL TAKEAWAY

PotlatchDeltic's Q3 2025 call highlighted a significant step forward with the proposed Rayonier merger, targeting $40 million in annual synergies and expanding to 4.2 million acres of timberlands. The company reported record real estate results and demonstrated cost discipline in Wood Products despite challenging market conditions. Management remains focused on operational efficiency, executing on natural climate solutions opportunities, and progressing toward closing the transformative merger, while acknowledging persistent headwinds in lumber and pulpwood markets and potential near-term earnings volatility.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/pch/earnings/transcripts]

MORE ON POTLATCHDELTIC

* PotlatchDeltic Corporation (PCH) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4837637-potlatchdeltic-corporation-pch-q3-2025-earnings-call-transcript]
* PotlatchDeltic: The Idaho Portfolio Is Catching My Eyes [https://seekingalpha.com/article/4837644-potlatchdeltic-the-idaho-portfolio-is-catching-my-eyes]
* Rayonier And PotlatchDeltic Carve A New And Controversial Destiny Together [https://seekingalpha.com/article/4829942-rayonier-and-potlatchdeltic-carve-a-new-and-controversial-destiny-together]
* PotlatchDeltic Q3 2025 Earnings Preview [https://seekingalpha.com/news/4512601-potlatchdeltic-q3-2025-earnings-preview]
* Key deals this week: Paramount Skydance, PotlatchDeltic, Brighthouse Financial, Papa John's and more [https://seekingalpha.com/news/4505434-key-deals-this-week-paramount-skydance-potlatchdeltic-brighthouse-financial-papa-johns-and-more]