7/27/2015 | By Sarah Borchersen-Keto
In 2014 Rayonier spun off its Performance Fibers manufacturing business in order to focus on its forest products and timber operations.
Nunes described the split as a “natural progression” for the company. The REIT emerged as a “more pure timber play,” Nunes said, owning 2.7 million acres in the United States and New Zealand.
“We’re excited about the clarity of that,” Nunes said. From a capital structure standpoint, Nunes said the change means that Rayonier is no longer forced to compete for funds in two difference businesses.
Rayonier is focused on two regions in the U.S., the Southeast, where it holds 1.9 million acres, and the Pacific Northwest, where it owns slightly less than 400,000 acres. In New Zealand the company owns a little more than 400,000 acres.
The Southeast market is focused on pulp and paper and the housing market, Nunes said. “We’ve had relatively strong pulp and paper demand and we see good pricing in that geography,” he noted. Housing demand, however, is showing a gradual recovery, Nunes added.
Rayonier’s operations in the Pacific Northwest export about 80 percent of its lumber and other products. The region is heavily reliant upon China, which currently has a high inventory of logs, and that has dampened demand, Nunes explained.
In New Zealand, roughly 40 percent of Rayonier’s products are destined for export markets, principally South Korea, China and India.
“We like to think of our three geographies as providing greater diversification and exposure to timber for investors,” Nunes said.
Nunes added that demand drivers for timber are going to be a function of a general improvement in the economy, particularly housing starts. “We’re seeing a gradual recovery in housing starts from where we were in 2009 and 2010, and we think we’re on a path to getting to a trend level of housing sometime in the next two to five years,” he said.