Q1 2026 Earnings Call Transcript

Greetings, and welcome to the Weyerhaeuser First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Andy Taylor, Vice President of Investor Relations. Thank you. Mr. Taylor, you may begin.

Thank you, Rob. Good morning, everyone. Thank you for joining us today to discuss Weyerhaeuser's first quarter 2026 earnings. This call is being webcast at www.weyerhaeuser.com.

Our earnings release and presentation materials can also be found on our website. Please review the warning statements in our earnings release and on the presentation slides concerning the risks associated with forward-looking statements as forward-looking statements will be made during this conference call. We will discuss non-GAAP financial measures, and a reconciliation of GAAP can be found in the earnings materials on our website. On the call this morning are Devin Stockfish, Chief Executive Officer; and Davie Wold, Chief Financial Officer.

I will now turn the call over to Devin Stockfish.

Thanks, Andy. Good morning, everyone, and thank you for joining us. Yesterday, Weyerhaeuser reported first quarter GAAP earnings of $156 million or $0.22 per diluted share, net sales of $1.7 billion. Excluding special items, we earned $77 million or $0.11 per diluted share.

Adjusted EBITDA totaled $308 million, a 120% increase over the fourth quarter. These are solid results, and I'd like to thank our teams for their continued focus and operational performance. Through their efforts, adjusted EBITDA improved across each of our business segments compared to the prior quarter, a notable achievement against the backdrop of elevated macroeconomic uncertainty. Before getting into the business results, I'll provide a quick update on previously announced actions to optimize our portfolio.

In February, we completed the divestiture of non-core timberlands in Virginia for $192 million. And in April, we received $22 million in proceeds following the transfer of our timber licenses in British Columbia to the buyer of our Princeton Mill. This represents the final proceeds associated with the Princeton transaction. I'll also highlight some recent advancements associated with our Wood Products growth strategy.

First, we were excited to preview two new products, AeroStrand and Pro Panel at the International Builders Show in February. We're committed to delivering products that meet the evolving needs of our customers, and these represent the first of many new and innovative products that we intend to introduce over the next several years. Feedback thus far has been overwhelmingly positive, and we expect strong demand for both products as we bring them to market. And finally, we expanded our distribution footprint in the first quarter, opening a new location in Billings, Montana, and announcing a new facility in Gallatin, Tennessee, near Nashville, which will be operational by year-end.

Both sites support our strategy for continued growth of Weyerhaeuser's proprietary products in strong and underpenetrated markets. With these new facilities, our distribution network expands to 22 locations. And as we laid out at our Investor Day, we see opportunities for additional growth through 2030. Turning now to our first quarter business results. I'll start with Timberlands on Pages 6 through 9 of our earnings slides.

Excluding a special item, Timberlands contributed $57 million to first quarter earnings. Adjusted EBITDA was $120 million, a 5% increase compared to the fourth quarter. In the West, adjusted EBITDA was $58 million, a $13 million increase over the prior quarter largely driven by higher sales volumes and seasonally lower costs. Starting with the Western domestic market, log demand and pricing improved in the first quarter as mills responded to strengthening lumber prices and seasonally lower log supply.

As a result, our average domestic sales realizations increased moderately compared to the fourth quarter. Our fee harvest volumes were slightly higher and per unit log and haul costs decreased as we made the seasonal transition to lower elevation and lower-cost harvest operations. Forestry and road costs were seasonally lower. Moving to our Western export business.

Log markets in Japan were muted in the first quarter in response to ongoing consumption headwinds in the Japanese housing market. As a result, our customers' finished goods inventories remained elevated and log prices decreased. Despite this dynamic, our customers remain well positioned relative to imported European lumber, which continues to face headwinds in the Japanese market. For the quarter, our average sales realizations for export logs to Japan were moderately lower and our sales volumes were moderately higher, largely due to the timing of vessels.

Turning briefly to China. We remain in the early stages of reestablishing our log export program to strategic customers in the region. However, our shipments have been limited to date, largely driven by ongoing weakness in the Chinese real estate sector and the seasonal slowing of construction activity around the Lunar New Year holiday. For the first quarter, we delivered one vessel to China, which was comparable to the prior quarter.

Turning to the South. Adjusted EBITDA for Southern Timberlands was $62 million, a $7 million decrease compared to the fourth quarter. Despite improved pricing and takeaway of lumber, southern sawlog markets remain subdued in the first quarter as log supply outpaced demand given drier-than-normal weather conditions. With respect to Southern fiber markets, demand and pricing moderated in the first quarter as mills reduced consumption ahead of spring maintenance outages and in response to lower takeaway of finished goods.

On balance, demand for our logs remained steady given our delivered programs across the region, and our average sales realizations were comparable to the fourth quarter. Our per unit log and haul costs were also comparable and forestry and road costs were higher. Our fee harvest volumes were slightly lower in the first quarter. In the North, adjusted EBITDA was comparable to the fourth quarter.

Turning now to strategic land solutions on Pages 10 and 11. As a reminder, this is the new name for our Real Estate, Energy and Natural Resources segment. Starting this quarter, we're expanding our disclosure for this segment to three business lines: Real Estate, Natural Resources and Climate Solutions. The new name reflects our broadening scope and growth focus across these businesses, and the new reporting structure enhances the cadence of disclosure for our Climate Solutions activities. In the first quarter, Strategic Land Solutions contributed $169 million to earnings.

Adjusted EBITDA was $193 million, a $98 million increase compared to the fourth quarter. This reflects a very strong quarter for the segment, largely driven by the timing and mix of real estate sales and the completion of a $94 million Conservation Easement transaction in Florida. As we discussed last quarter, the conservation transaction conveyed approximately 61,000 acres of Weyerhaeuser Timberlands to a larger wildlife corridor, restricting future development and protecting habitat for a variety of species. Notably, the easement allows Weyerhaeuser to retain ownership of the land for continued sustainable forest management.

As for the rest of the segment, real estate markets have remained solid year-to-date, and we continue to capitalize on steady demand and pricing for HBU properties with significant premiums to timber value. For the quarter, our results reflect a sizable increase in real estate acres sold, which is a typical trend for this business in the first quarter. Our average price for real estate sales declined from the record level achieved last quarter, which benefited from several high-value development transactions in South Carolina. Now moving to Wood Products on Pages 12 through 14. Excluding a special item, Wood Products contributed $14 million to first quarter earnings.

Adjusted EBITDA was $71 million, a $91 million improvement compared to the fourth quarter, largely driven by an increase in lumber and OSB pricing. Starting with lumber. First quarter adjusted EBITDA was $27 million, an $84 million increase from the prior quarter. The framing lumber composite strengthened in the first quarter as buyers work to replace lean inventories into the spring building season, but face supply constraints from previously enacted curtailments and closures.

While this dynamic was felt across the North American market, it was most acute in Southern Yellow Pine, which experienced a significant price increase during the quarter. For our lumber business, average sales realizations increased by 15 -- by 13% compared to the fourth quarter. Our production volumes increased as we return to a more normal operating posture following market-related production adjustments in late 2025. As a result, our sales volumes increased slightly and unit manufacturing costs were lower. Log costs were comparable to the prior quarter.

Now turning to OSB. First quarter adjusted EBITDA was $3 million, a $13 million increase compared to the fourth quarter. OSB composite pricing entered the year on an upward trajectory as demand improved slightly leading into the spring building season. By February, pricing stabilized and remained steady for the balance of the quarter.

As a result, our average sales realizations increased by 8% compared to the fourth quarter. Our production and sales volumes were slightly lower, largely driven by temporary winter weather disruptions early in the quarter. Unit manufacturing costs were slightly lower and fiber costs were slightly higher. Adjusted EBITDA for engineered wood products was $39 million, a $10 million decrease compared to the fourth quarter primarily due to lower average sales realizations for most products and higher raw material costs, most notably for OSB web stock.

Our sales volumes for solid section products increased slightly, while I-joists volumes were comparable to the prior quarter. Unit manufacturing costs were also comparable. Although EWP sales volumes and pricing held up reasonably well, demand was softer than our initial expectations early in the first quarter. That said, we saw a slight uptick in order files in March, and we expect our sales volumes to increase seasonally in the second quarter.

Moving forward, demand for EWP products will remain closely aligned with new home construction activity, particularly in the single-family segment. In Distribution, adjusted EBITDA improved by $7 million compared to the fourth quarter, largely due to higher sales volumes. With that, I'll turn the call over to Davie to discuss some financial items and our second quarter outlook.

Thanks, Devin, and good morning, everyone. I'll begin with key financial items, which are summarized on Page 16. We ended the quarter with approximately $300 million of cash and total debt of $5.4 billion. During the quarter, we repaid our $150 million, 7.7% notes at maturity. We returned $151 million to shareholders through the payment of our quarterly base dividend and approximately $10 million through share repurchase activity in the first quarter.

Capital expenditures were $112 million in the first quarter, which includes $30 million related to the construction of our EWP facility in Arkansas. As we previously communicated, we anticipate approximately $300 million of investments for Monticello in 2026, and as a reminder, CapEx associated with this project will be excluded for purposes of calculating adjusted FAD as used in our cash return framework. During the first quarter, we generated $52 million of cash from operations. It's worth noting that first quarter is usually our lowest operating cash flow quarter due to seasonal inventory and other working capital build.

First quarter results for our unallocated items are summarized on Page 15. Adjusted EBITDA for this segment decreased by $27 million compared to the fourth quarter primarily attributable to changes in intersegment profit elimination and LIFO. Looking forward, key outlook items for the second quarter are presented on Page 18. In our Timberlands business, we expect second quarter earnings before special items and adjusted EBITDA to be comparable to the first quarter of 2026. Turning to our Western Timberlands operations. We expect steady log demand in the domestic market in the second quarter as mills respond to improving lumber takeaway through the spring building season and build log inventories ahead of fire season.

At the same time, log supply is expected to increase as weather conditions improve seasonally. On balance, this should translate to a fairly stable domestic log market. We anticipate our average domestic sales realizations will be slightly higher than the first quarter as price increases in April are expected to hold steady through quarter end. Given seasonally favorable operating conditions in the second quarter, our fee harvest volumes and forestry and road costs are expected to be higher, and per unit log and haul costs are expected to increase as we move to higher elevation sites and in response to elevated fuel costs.

Moving to our Western Export Program. We anticipate log markets in Japan and China will remain relatively stable in the second quarter, albeit at reduced levels. As a result, our log shipments and pricing are expected to be comparable to the first quarter. That said, export costs have increased in response to the Middle East conflict.

Turning to the South, log inventories were elevated at the outset of the second quarter, and log supply is expected to increase seasonally. As the quarter progresses, we anticipate relatively stable sawlog demand, while fiber demand remains soft in response to spring maintenance outages and lower takeaway of finished goods. On balance, takeaway for our logs is expected to remain steady given our delivered programs across the region, and we anticipate our sales realizations will be comparable to the first quarter. Our fee harvest volumes and forestry and road costs are expected to be higher due to drier weather conditions that are typical in the second quarter, and we anticipate moderately higher per unit log and haul costs, largely due to increased fuel costs.

In the North, our average sales realizations are expected to be moderately higher than the first quarter due to mix and fee harvest volumes are expected to be significantly lower given spring breakup conditions. Moving to Strategic Land Solutions, or SLS. We continue to expect full year adjusted EBITDA of approximately $425 million. And given our new segment disclosure framework, basis is now provided as a percentage of total SLS sales and is expected to be between 20% to 30% for the year.

Real estate markets have remained solid year-to-date, and we expect a consistent flow of transactions with significant premium to timber value as the year progresses. Additionally, we expect to deliver steady growth from our Climate Solutions business in 2026. For the second quarter, we expect SLS adjusted EBITDA will be approximately $70 million lower and earnings will be approximately $80 million lower than the first quarter of 2026, driven by the sizable conservation unit transaction in the first quarter. We expect this to be partially offset by stronger results from our real estate business due to timing and mix.

For our Wood Products segment, we expect second quarter earnings before special items and adjusted EBITDA to be comparable to the first quarter of 2026, excluding the effect of changes in average sales realizations for lumber and OSB. Notably, we expect improved sales volumes across all Wood Products businesses as we get deeper into the building season. This will be offset by higher costs in the second quarter, largely driven by inflationary pressures related to transportation and certain raw materials as well as planned annual maintenance outages at three of our OSB mills. As for product pricing, we're encouraged by the recent upward momentum in lumber.

As shown on Page 19, our current and quarter-to-date average sales realizations for lumber are significantly higher than the first quarter average, while OSB realizations are slightly higher. For our Lumber business, we anticipate higher sales volumes and slightly higher log costs in the second quarter. Our unit manufacturing costs are expected to be comparable to the prior quarter. For our OSB business, we expect higher sales volumes and moderately higher fiber costs in the second quarter.

Our unit manufacturing costs are expected to increase, largely due to the previously mentioned planned outages and higher prices for resin. For our Engineered Wood Products business, we anticipate higher sales volumes for all products in the second quarter and comparable average sales realizations. Raw material costs are expected to be slightly higher. For our Distribution business, we expect adjusted EBITDA to be slightly higher compared to the first quarter as sales volumes increased seasonally.

With that, I'll now turn the call back to Devin and look forward to your questions.

Thanks, Davie. Before wrapping up this morning, I'll make a few brief comments on the housing and repair and remodel markets. Starting with housing. After a lackluster 2025, the housing market remains largely stuck in second gear.

Based on conversations with our homebuilder customers, the biggest issues continue to be weak consumer confidence and ongoing affordability challenges. And more recently, the conflict in the Middle East has reinvigorated inflationary pressures and elevated uncertainty around the economy. Further, after briefly dipping below 6%, mortgage rates have ticked back up to around 6.3% here recently. Given these headwinds, the spring building season has gotten off to a somewhat softer start than we were expecting at the outset of 2026. However, we're still fairly early in the year.

So there's certainly time for the housing market to pick up some momentum, especially if we see a resolution in the Middle East or if mortgage rates trend lower. I'd also note a few positives on housing. First, we did see a much better March starts number than we were anticipating. Plus, we've seen a slight pickup in mortgage applications here recently.

Additionally, there have been some positive developments on the policy front with recent executive orders and the potential for bipartisan legislation on housing, which could be an additional tailwind over time. But that all being said, in the near term, I suspect we'll continue to see choppiness in the housing market as consumers navigate ongoing affordability challenges and uncertainty around the economy. Our longer-term outlook on housing fundamentals, however, remains favorable, supported by strong demographic trends and a vastly underbuilt housing stock. Turning to the repair and remodel market.

Activity has been steady, but has lacked a clear catalyst, largely driven by many of the same factors impacting the residential construction market. We do expect to see the typical pickup in activity as we get deeper into the building season, and more broadly if interest rates move lower, and we get some improvement in existing home sales. In addition, we think the dynamic around deferrals of large discretionary projects over the last few years, will ultimately serve as a tailwind, particularly as the macro environment improves. But similar to the housing market, a material pickup in repair and remodel activity likely will require an improvement in overall consumer confidence.

Putting the near-term uncertainty aside, our longer-term outlook continues to be positive as many of the key drivers supporting healthy repair and remodel demand remain intact, including favorable home equity levels and an aging housing stock. In closing, we delivered solid results across our businesses in the first quarter. In addition, we advanced key growth initiatives in our Wood Products business and made progress on actions to further optimize our portfolio. We're encouraged by the recent increase in lumber prices, and we're well positioned to navigate a range of market conditions, and we remain focused on serving our customers, driving operational excellence and advancing our strategy to accelerate growth and deliver significant long-term value for shareholders.

With that, I think we can open it up for questions.

[Operator Instructions] Our first question comes from Susan Maklari with Goldman Sachs.

My first question is looking at the Wood Products. It's nice to see how the margins there came back specially in lumber. Can you talk about your ability to continue to drive profitability really across your wood products. As you think about the potential for prices to hold maybe flat sequentially, especially with lumber, and how the changes in supply and demand are -- and your positioning relative to that will come into play?

Thanks, Sue. I think that's a really good question, particularly with respect to the supply demand dynamic. Obviously, we have been operating in a challenging housing environment over the last several years. And that's put a lot of pressure on pricing across most of our products, and that's true across the industry.

One of the things that I think it's really important to understand about our business and the potential for profitability is that -- of course, we would like to see housing improving, and I do ultimately think that will happen for a variety of reasons, and we've discussed that in previous calls. But ultimately, what drives profitability in our business is the supply-demand dynamic across our product lines. And I think you saw a really good example of that in the lumber business in Q1. We would love to see housing starts at $1.5 million. But as you look back over the last several decades, there have been plenty of moments in time where we've made significant profits with housing starts well below 1.5. It really comes down to what is the supply-demand dynamic in each individual product line.

As we saw lumber prices really at on an inflation-adjusted basis, historic lows last year, we saw the market respond by shutting down and curtailing mills. And that supply impact is really one of the key drivers for what happened with lumber prices in Q1. And so I think that's just a really important thing to keep in mind is that, yes, we think housing will improve, but ultimately, it's about supply-demand dynamics in each product line. Of course, we've been very focused on all the things that we're supposed to be focused on cost, OpEx, we've layered in innovation. We've got really strong brand recognition, customer support, so we're out there battling every day.

We've got a lot of upside as you see pricing improve, and you started to see some of that in lumber in Q1. And certainly, at some point, when we see the housing market really return to a more normalized level, there is just a tremendous amount of upside across our businesses and wood products.

Okay. That's great color, Devin. And then maybe sticking with Wood Products, it's great to hear the innovation and the new products that you launched the Builder Show this year. Can you talk a bit about pipeline that you have there.

And as AeroStrand and some of these other offerings, momentum, what that means just in terms of your ability to drive above-average growth? And as Monticello comes online, how you can fill that volume, and what that will mean for the business as well.

Sure. One of the things that we've really been focused on over the last few years is better leveraging the resources and capabilities that we have around new product development, particularly in our Wood Products business. We've always had just remarkably strong wood scientists. We've got some brilliant people here in the wood products space, I would say, arguably, we've underutilized them over the last decade, but we've really ramped up that effort.

And the new products that we brought out at the Builder Show, Pro Panel and AeroStrand are really the first big ones that we're bringing to market, but we've got a long pipeline. And at the end of the day, it's really all about how do we serve our customers? How do we solve problems for our customers, reducing costs, improving efficiencies helping deal with all of the issues around weather and code. We're in business to serve our customers.

And I think one of the ways that we can do that going forward, and I think really distinguish ourselves in the market is through this new product development. So we've got a healthy pipeline, and we're expecting to continue to bring out new products and, I would say, accelerate that as we move forward. But we're really excited about these two. AeroStrand, in particular, that's based off of our timber strand technology.

We're going to have a lot more opportunity as we bring Monticello up next year. And so that's just another example of how broad-based the opportunity set is for that timber strand technology. And one of the reasons we're really just so excited about Monticello coming up next year.

Our next question comes from George Staphos with Bank of America.

So I was wondering if you could update us on your view in terms of how tariffs and duties will play out over the course of the year relative to your business, Devin. And then relatedly, just -- it's nice to see lumber pricing higher. And certainly, you had a very, very strong operating quarter across from our vantage point across all your businesses. There's been a little bit of a pullback in Southern Yellow recently.

What do you think is driving that?

So maybe I'll hit the lumber piece, and then Davie can touch on some of the impacts from the tariffs on the business. From a lumber standpoint, we obviously saw a nice run in Southern Yellow Pine and really across the composite, but mostly in Southern Yellow Pine in Q1. I think that was really driven primarily by two key things. Number one, we just saw a lot of supply come out of the system last year. As we've said over the past couple of years, probably 50-ish mills have been shut down or curtailed.

And so part of that was just less supply, and that was against the backdrop of coming into 2026. I think just for risk mitigation, a lot of the dealer networks and customers, generally speaking, were carrying pretty lean inventories. And when we moved into the spring building season, there was just a bit of a scramble to get product. You've seen that level off a little bit here in Southern Yellow Pine. It's been a little volatile over the last few weeks.

But ultimately, between treaters and multifamily, I think Southern Yellow Pine should hold up reasonably well going forward. I would note, we've also, at the same time, seen a pretty nice run-up in Douglas fir prices. And so obviously, we benefit there. But ultimately, it's really just about, as I said earlier, supply and demand.

And we still, I think, have some opportunity for repair and remodel to pick up a little activity, particularly as we come out of some of the colder months in Northern region. So our view is lumber prices at the aggregate level should hold up reasonably well. There may be a little bit of volatility here in the near term with Southern Yellow Pine. But still view that as an opportunity, particularly as you see less SPF coming into the U.S., that's just an opportunity for Southern Yellow Pine.

Davie, do you want to speak to tariffs?

Yes, sure, George. So with respect to tariffs and how that impacts the kind of the cost and procurement on our end. It's another inflationary pressure. Obviously, we've been living in an environment where there's been some level of inflation, a little bit elevated over the last several years.

So it's another thing that our teams have to be focused on. Most notably, that's going to affect us in our CapEx program, whether it be steel and aluminum, thinking about the cost inputs there and a variety of other elements across the supply chain in that realm. But ultimately, we've been aware of the tariffs for well over a year, incorporating that into our capital pipeline and the analysis on how we think about the return profile particular project. So like any other inflationary pressure, it's something that we're dealing with, but our teams are focused on disciplined cost execution, ensuring we can minimize the cost there, and we're still looking to get very favorable returns across our capital program.

Davie, I appreciate that. Just on duties, what's your view, Devin and Davie, on where duties may reset come late summer versus where they're at right now?

Yes. The preliminary results from the AR7 have dropped the duties about 10%. So if that comes in more or less on track where the preliminary duties were set, that would mean the all-in duties would come down from about 45% down to 35%. So that's both softwood lumber duties as well as the 232 10% tariff.

And then that should come in somewhere around August, oftentimes, that gets pushed back a little bit into the fall, but that's the general time frame.

Our next question is from Ketan Mamtora with BMO Capital Markets.

Congrats on a good quarter.

Thank you.

Thank you.

Maybe to start with Devin or Davie, can you talk a little bit about the inflationary pressures you are seeing and specifically thinking about resin for OSB and in general freight transportation costs. Is there a way to quantify either in some sort of sensitivity or just sort of ways to think about what the potential impact could be.

Yes. You bet, Ketan, it's Davie. I'll take that one. We are, of course, as you'd expect, we're seeing the impacts of higher energy costs as a result of the conflict in the Middle East in several places across our business.

In Timberlands, most notably, that's going to be in log and haul costs, fertilizer, transportation as well as ocean freight for our export business. On the Wood Products side, to your point, yes, we are going to see that in resin and additive costs as well as transportation as we think about getting products to customers. Right now, when you take all of that together across the businesses the headwind on a gross basis is about $10 million a month. But that said, we're able to offset a majority of that headwind.

As always, we're focused on leveraging our procurement, logistics expertise, to minimize the cost and really focusing on disciplined execution, but we're also able to share some of those costs with vendors and customers, whether that be through log and haul rates or via the delivery costs that are typically passed along to customers. So the net effect of that that's incorporated into our guidance for the second quarter. Of course, we're going to continue to monitor how the macro environment evolves, while continuing to be focused on disciplined execution and cost control.

Understood. Very helpful. And then just switching to capital allocation. Leverage has climbed to sort of 5%, a little over 5% recognized at Q1 as a working capital use quarter, but to the extent we are in this higher for longer environment thousands remains depressed, you've got Monticello investment this year as well.

How are you thinking about, one, just sort of the level of leverage and sort of potential options that you could look at to lower it over time, maybe? And would that involve potentially kind of selling from timberlands?

Yes. Look, as we've said, maintaining that investment-grade credit rating, that's foundational for us. We're going to leverage, or we're going to manage our leverage to a mid-cycle target and we have a lot of flexibility and levers across a wide range of market conditions. I think just to put this in perspective, we're clearly operating at a cyclical low in earnings, and that's going to impact our trailing leverage metrics, particularly when you think about the very low pricing environment we saw over the second half of last year, that's still heavily weighed on that ratio.

So again, that 3.5x net debt to EBITDA target is designed to be evaluated over the cycle, not at the trough. And so when we look at leverage through mid-cycle ends, we remain very comfortable with our balance sheet and expect leverage to improve naturally as that EBITDA normalizes. I mean you can do the math on, it doesn't really take that much improvement from current levels to get back to the the 3.5x target. And then just as we think about the capital allocation priorities for the year and how we're navigating that our approach is really going to remain consistent and disciplined.

As you know, we're going to evaluate every dollar that we spend and ensure it's allocated in a way that creates the most value for shareholders. We do have approximately $300 million teed up for Monticello this year as well as we're going to continue to invest in our business on a programmatic basis. specifically to that Monticello [indiscernible], and I think it's worth noting that the timberland divestiture, the Princeton proceeds we received in the first quarter, that alone would offset a significant portion of the expected Monticello spend over the course of 2026. So again, we feel really good about the strength of our balance sheet, the work that we've done over the last several years to strengthen and improve the portfolio, and we've got a lot of levers as we navigate these conditions.

Our next question is from Kurt Yinger with D.A. Davidson.

I was hoping to start off on the wood products side. Can you just talk a little bit about demand patterns you saw with home center customers over Q1? And maybe specifically looking at March and April, whether the seasonal pickup that you might typically expect occurred or perhaps is just delayed a little bit and pushed back a little bit later.

I'd say, overall, the -- it's a mixed view here. When we talk to our customers, I'd say crossed R&R generally, but that includes home centers as well. There's been different views depending on geography, and I do think you've seen the professional segment holding up better than DIY, probably also seeing a little bit more focus on smaller remodeling projects, which typically use a little less wood. So it's been sort of mixed, I would say it's solid.

But certainly, we haven't seen as meaningful a pickup because maybe sometimes you do this time of the year. But nevertheless, we still think we're still in the heart of pair and remodel season, some of the colder areas are really just starting to get into the warmer season, and we have a while to go before the South really dialed it back for kind of mid-summer heat. So again, sort of a mixed story to date on R&R thus far.

Okay. That makes sense. I appreciate that. And then on EWP, realizations have come in a little bit the last two quarters.

Some folks have kind of talked about a bottoming having been found on price in the last couple of months or so. How would you just describe the market balance today in early Q2. Are there any kind of green shoots you're seeing either from a demand or kind of competitive dynamic perspective?

Yes. I mean at a high level, a lot of what's been going on with EWP is really just the story of what's happening with family housing. And as we've said, it's just been a more challenging single-family environment here recently, and that's created some downward pressure on pricing. As we think about seasonally, we are seeing a bit of an uptick as you expect.

We've seen order files pick up a little bit as we got into March and April, and so that's certainly a positive. I would say just from a pricing standpoint, again, it's very regional in terms of the dynamic. And so that's sort of how we're managing demand and pricing across our portfolio is really market by market. Ultimately to see a meaningful pickup in EWP demand and ultimately, pricing.

I think you're just going to have to see improvement in single-family housing, unlike lumber and OSB, where you see a little bit more R&R demand on the EWP side, it's really residential construction primarily. And so we view it as being stable. As we guided for Q2, we think we're going to see comparable pricing with upside on sales volumes, but that's kind of really where we are right now.

Our next question comes from Mark Weintraub with Seaport Research Partners.

Devin, first, just a question on the very strong or what looks to have been very strong cost performance, particularly in lumber, OSB as well in what presumably was an inflationary environment. I mean, by my numbers, and they could be wrong, it looked like your lumber cost per unit were the lowest they've been for several years. Anything that you want to call out to help us understand, and how sustainable that is, or was it more onetime-ish?

So overall, Mark, I think this is really just the continuation of the OpEx and cost focus that we've been working on for a number of years. One of the -- obviously, there are some inflationary pressures, particularly with the Middle East. That's going to be a cost headwind that we have to overcome. But what I would say is just given the tougher operating environment, it's just yet another reason for us to be really clamped down on costs.

And so I think from a controllable cost standpoint, the team in Wood Products, and this is really true across the whole business, but they have just been very, very focused on every dollar they spend and making sure that we're being just really, really vigilant on the cost side. You combine that with -- as we moved into Q1, we were able to operate at more normalized rates. For the back half of last year, we were operating a little less than we ordinarily would just because of market conditions. When our business can run full, we are in a very, very strong cost position.

And so I think it's just a combination of continued vigilance on controllable costs and really operating the mills at normal levels, that really puts us in a good cost position. So there's no reason to think that, that can't continue going forward.

Okay. Great. And I'm just curious because I thought I heard you said volumes were a little bit weaker than you had expected, but you were -- but at the same time, you just said you were running full. Did you build some in? I guess we could see this in your financials, et cetera, but had you built inventory in the first quarter, or how do we square...

I'd separate that. So I think what I said was really just with respect to the back half of last year, we were operating a little below normal because of market conditions. We did build a little inventory separately on the lumber side and OSB for that matter just because we typically build a little bit of inventory in Q1, just so that we are prepared for the full building season, which is pretty typical. So nothing outside the norm on inventory build.

Got you. And then shifting gears, what might you be seeing on like the solar leasing front, et cetera? Obviously, with energy costs having gone up a lot, is that trading any added impetus for people to start having conversations with you? And any color you can give us on how things feel is, we're getting closer to times where some of those options should be coming up for potential exercise.

We're seeing some really nice momentum across the renewables business, both in terms of converting leases into operating solar facilities. We've got one operating now. The next one should be operating any day now. We've got three currently under construction.

By the end of this year, we could have 4 to 6 under construction. So the pipeline is developing nicely. And I think interestingly, we've just seen a whole lot of activity on the new option front. We've had a whole wave of solar options that we've signed up here recently and even on wind.

Now those will come -- the wind will come along a little later just because the time line to put wind facilities up is a little longer. But overall, the interest level in renewables has been very strong this year.

Our next question is from Hamir Patel with CIBC Capital Markets.

Devin, there were two new OSB mills supposed to start up later this year. Just given the relatively sluggish demand backdrop. Do you think we'll see supply additions being delayed into 27?

It's hard for me to speculate on that. I have seen some articles written on delays there, but I don't have any specific knowledge of that. That's really going to be something they'll have to decide against the current market backdrop. I'm not sure I have a whole lot to add there.

Fair enough. And just the last question I had on your Log Export business, how is the initiatives to grow Southern Yellow Pine exports progressing?

It's going really well. Now obviously, the transportation costs associated with the Middle East conflicts are going to be a headwind that we have to move through. But overall, I'm just really pleased with how that's developing, particularly in the India market. We've really gotten some nice traction with the customer base there.

I think there's a lot of opportunity to continue to grow that. We're continuing to work on really driving costs out of the supply chain. That's particularly the case with our break bolt program out of the Gulf South, I think we have some near-term opportunity to take out some meaningful costs there, which will just make us even more competitive from a cost standpoint. So we're excited about it.

We're looking to grow the India program. And again, we're going to have to overcome some additional costs from a freight standpoint, but I think we can do that. And even beyond India, just the opportunity in Cambodia, Vietnam, Thailand, we've seen some good strong customer interest there. I think ultimately, there may be some opportunity to export into Europe.

We've had some initial conversations with some sawmill customers there. So I think there's a lot of opportunity, and we're going after it.

Our next question comes from Anthony Pettinari with Citi.

If I look at Timberland's results in the 2Q outlook, it seems like first half Timberlands EBITDA could be down year-over-year, maybe 25% from the first half of '25. And if you think about kind of big picture earnings improvement drivers for Timberlands going forward, is it just really about lumber recovery flowing through the Western log prices, or do you see kind of meaningful scope to improve log prices in the South or reduce costs or any kind of idiosyncratic items around weather that we should keep in mind? Just wondering kind of big picture as you think about Timberlands earnings improvement really going forward.

What are the building blocks?

Sure. I'll give you a few comments on that. So first and foremost, what's been happening in the Timberlands business. And I would say this is mostly a Western comment, is with lumber prices being at historic lows, that put a lot of downward pressure on log prices.

And you can see that really over the last few quarters. Now we saw log prices start to improve in Q1, and they've continued to improve into Q2, but there's still -- if you look back over the last several years, they're still at relatively low levels. So really, as we think about the near term, particularly as you've seen Doug fir prices going up here recently, that gives us a little bit more room to push log prices in the West. And so I would expect that to happen.

It's still a very tensioned wood basket. So I would say, number one, it's been a pricing issue primarily in the West. Number two, from a volume standpoint, if you look back over the last couple of quarters, particularly in the West, but a little bit in the South because of some weather issues volumes have been down a little bit. If you look at 2026 as a whole, what we said is, in the South, volumes will be up slightly, harvest volumes and in the West are going to be comparable.

So when you sort of chart that out over the course of the year, there's some upside from a volume standpoint. I'd say the other piece that's really of late been an issue is on the cost side. Obviously, as Davie mentioned, with some of the issues with the Middle East, that has put some incremental cost pressures are, and we're going to have to figure out a way to overcome those. I don't think that is structural going forward.

But look, ultimately, if transportation costs are up, we're going to have to find a way to push that through on the price side, and we'll work that. There may be a lag. But ultimately, that's certainly something that we can work through. And I would say even beyond that, when you look out into the future, as we said at our Investor Day, we do think there's a significant amount of volume increase coming in the West.

And so it's been a little bit more challenging on the Timberland side over the last couple of quarters, but we certainly see that improving over time.

Okay. That's very helpful. And then just switching gears, with distribution understanding it's not the biggest part of your business. But with the greenfields, is the goal there really to enter new markets where you're not present or underpenetrated or to sell more of kind of high-value EWP and new products.

I'm just wondering if you could talk about what you're trying to accomplish with the greenfields versus just leveraging existing distributor relationships?

Yes, you hit it. I mean the principal rationale there is we sell currently about 50% of our EWP through our distribution business and what we found in and really trying to dial this into key growth markets and really important building markets is that when we have our own distribution sales force on the ground in those markets, we're able to push more volume and gain market share for our EWP products. So that is the primary rationale. I would say over and above that, there's also opportunity.

We obviously sell commodities through our through our distribution businesses as well. And so there's another channel that we can move that product. And the team has done a really nice job building out vendor partnerships with decking and siding, and so there's a sales profit opportunity there, too. But the primary rationale is really to drive EWP sales and growth in markets that we feel like we're currently under-penetrated.

Our next question comes from Hong Zhang with JPMorgan.

I guess my first question, with the runoff in lumber prices, are you seeing any changes in valuations volumes [indiscernible]?

Sorry, you cut out there a little bit on -- do you mind repeating that question?

Yes. With the run-up in lumber prices, are you seeing any changes in valuation or just the amount of product coming to the market when it comes to Timberlands transactions?

No, not really. The timberland market really don't change a whole lot quarter-to-quarter, week to week. It's just really more long-term price appreciation. So you don't necessarily see timberland values moving with lumber prices not in the near term.

Now obviously, if there was a longer-term structural change in lumber prices, that ultimately could flow through, but you don't typically see that in the near term.

Got it. And I guess just sticking to the higher lumber prices. Are you seeing any operators that previously shut down mills start to restart the mill in response to pricing.

As a general matter, no, once the mill has shut down versus taking extended 2-, 3-week outages when a mill goes through the process of actually closing down and laying off their employees, it's pretty unusual for them to come back. And so we really haven't seen that. I will say around the margins, we've seen it a little bit, and this is really a southern statement. I do think, particularly as you were in the back half of 2025, we saw a lot of mills that were not operating full out.

So maybe at a reduced posture, certainly not running over time. And so there was a little slack capacity in the system for mills in many instances across South. You probably have seen a little bit of pickup there as Southern lumber prices have picked up. But I wouldn't say it's significant, at least not from our vantage point.

Our next question comes from Mike Roxland with Truist Securities.

First one, just on the SLS guide. Based on your 2Q outlook for EBITDA, if I -- what age should be around $320 million, but you're guiding 2026 to $425 million, implying a significant step down into. So realizing that you had some one-off benefits from real estate in 1Q, but you also got to a pretty strong Q2, what gives you the confidence that you could have such a step down in the back half of the year?

Yes, Mike, thanks for the question. It's pretty typical for us to be fairly front-loaded in our Strategic Land Solutions business. I think if you look at it over the last several years, you'll see that pattern. That's some timing and mix.

We -- so as I think about the second half of the year, we'll see a little bit of that mix play out over the second half, but nothing unusual there in terms of the trends that we're expecting as always if we continue to see strong real estate markets, we can look to adjust. But for now, I think that $425 million is a good guide on what we were thinking about for the year.

Got it. Okay. And then Climate Solutions, you had sales of $100 million -- $111 million in 1Q, a big increase year-over-year, quarter-over-quarter. Davie, what drove that?

Yes. It's the conservation easement that we pointed out in the first quarter, large transaction, $94 million. So that's the biggest component of that.

Got it. Perfect. And last question real quick. Just following up on an earlier question in terms of EWP.

Margins in EWP are now at about to over 17% in 1Q. It seems like prices may have declined more than you expected. I think you were calling for last quarter, modestly down, price was down about 4% to 5% sequentially. So I'm just wondering I understand the backdrop in find me, but have your competitors been more aggressive trying to drum up business?

Or has the competitive landscape changed such that there's increasing competition to drive sales, which has negatively impacted pricing more than you expected.

Well, I would say just as a general statement, our competitors are always aggressive in trying to get business. That's no different now than it's ever been. Obviously, when you have housing starts down a little bit relative to where they were a few years ago. There's less pie to go around, so people are battling it out.

Where we compete, obviously, we have to be thoughtful about price, no question about that. But I think where we try to compete in the market is we have a service model that I think, is valuable to our customers. We have high-value products. We're continuing to innovate to make sure that we're trying to solve our customers' needs.

So we're not necessarily battling it out for the lowest price opportunities. We're trying to serve long-term strategic customers with the value proposition. So the competitive dynamic is tough. It's always going to be tough, and you just have to find a way to win regardless of where you are in the cycle.

Our last question will be from Ketan Mamtora with BMO Capital Markets.

Just a couple of quick questions. What is driving the strength in Douglas fir prices here recently?

Yes. I think we've just seen primarily an uptick in demand coming out of California. We've seen a little softening last year, I'd say, broadly speaking, the California market. That's picked up here recently, and that's a lot of where that Doug fir product goes.

And so I think that's been a big driver. And it's -- generally speaking, there's only so much opportunity for supply. You hadn't seen that supply, maybe dial back as much as we've seen in some other geographies. And so there's just not as much incremental supply to meet that demand as it improves.

Understood. Okay. And then just one last one. Are you seeing any signs of increased use of Southern Yellow Pine in new residential construction, I'm thinking about profits and those kind of things.

We are. I think there are a few things going on here. First and foremost, there's just a lot less SPF coming into the U.S. today. And that's a function of some long-term trends with beetle infestation, regulatory dynamics that have made it very challenging to make lumber or in Canada.

That's also a function of the duty tariff dynamic that we have in place. So there's just overall less SPF coming into the U.S., which creates an opportunity for both Douglas fir, but also for Southern Yellow Pine. I think additionally, at least in the recent past, there was an opportunity because of the delta between SPF and Southern Yellow Pine prices to go out and really market value. But I would say, just broadly speaking, as you look at where supply is increasing, and where supply is decreasing, there's just going to be more Southern Yellow Pine.

So that's a trend that is going to continue. I think you've seen probably a little bit more traction here recently, I would say, for Weyerhaeuser specifically, we've been active on that front. We've got some products or warp stable products. That's a really nice transition product for folks that have historically used SPF to move into Southern Yellow Pine.

So I think you picked up some momentum there, and I would expect that trend to continue really as we move forward.

There are no further questions at this time. I'd like to turn the floor back over to Devin Stockfish for closing comments.

Okay. Well, thanks, everyone, for joining us this morning, and thank you for your continued interest in Weyerhaeuser. Have a great day.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.