PotlatchDeltic Company (NASDAQ:PCH) This autumn 2021 Earnings Convention Name February 1, 2021 12:00 PM ET
Firm Individuals
Eric Cremers – President and CEO
Jerry Richards – VP and CFO
Convention Name Individuals
Kurt Yinger – D.A. Davidson
Paul Quinn – RBC Capital Markets
Ketan Mamtora – BMO Capital Markets
John Babcock – Financial institution of America
Operator
Good morning. My title is Emma and I will likely be your convention operator in the present day. Presently, I want to welcome everybody to the PotlatchDeltic Fourth Quarter 2021 Convention Name. All traces have been positioned on mute to stop any background noise. All traces have been positioned on mute to stop any background noise. After the audio system’ remarks, there will likely be a question-and-answer session. [Operator Instructions] Thanks.
I’d now like to show the decision over to Mr. Jerry Richards, Vice President and Chief Monetary Officer for opening remarks. Sir, chances are you’ll proceed.
Jerry Richards
Thanks Emma. Good morning everybody. And welcome to PotlatchDeltic fourth quarter 2021 earnings convention name. Becoming a member of me on the decision is Eric Cremers, PotlatchDeltic’s President and Chief Government Officer.
This name will include forward-looking statements. Please assessment the warning statements in our press launch, on the presentation slides, and in our filings with the SEC in regards to the dangers related to these forward-looking statements. Additionally, please be aware {that a} reconciliation of non-GAAP measures might be discovered on our web site at www.potlatchdeltic.com.
I will now flip the decision over to Eric for some feedback, after which, I’ll cowl our third quarter outcomes and our outlook.
Eric Cremers
Thanks, Jerry, beginning with our outcomes, full yr adjusted EBITDA of $653 million shattered the report we set simply final yr. That efficiency is a tribute to and wouldn’t be doable with out the efficiency resilience, flexibility, and continued focus of our staff in yr two of the pandemic.
Our Wooden Merchandise phase common rated a report $394 million of adjusted EBITDA 2021. to place that in context, Wooden Productss earn extra in 2021 than your complete Firm did in 2020 and consolidated 2020 EBITDA was a Firm report on the time.
On the operational entrance, we shipped simply over 1 billion board, ft of lumber. We accomplished nearly all of our capital tasks on time and below finances and our worker’s security efficiency was excellent. Key security milestones achieved through the yr included two yr anniversaries with out recordable accidents at our Bemidji and our Waldo sawmills. Three months through the yr, the place all of our mills had been incident free and in addition a report low damage severity charge for the yr.
Nonetheless. We had been dissatisfied in regards to the fireplace at our Ola, Arkansas sawmill in 2021. Fortunately no person was injured and property harm and misplaced earnings are coated by insurance coverage. Restarting, a big logline at Ola within the third quarter of 2022, is the highest Firm precedence.
Moreover, as soon as the mill restarts, it’ll have considerably decrease money processing prices and better manufacturing quantity than earlier than. Our Timberland phase generated report adjusted EBITDA of $263 million in 2021, regardless of our harvest quantity falling in need of our $6 million ton plan.
Listed, Idaho sawlog costs hit report ranges through the yr, which greater than offset the impact of Ola associated harvest deferrals within the south, and a decline in low margin pulpwood shipments in Idaho. Our actual property phase generated adjusted EBITDA of $48 million in 2021 on the agricultural facet of the enterprise, we bought roughly 18,000 at simply over $2,100 per acre.
Our rural gross sales group continues to do a superb job figuring out alternatives that create worth. On the event facet of our actual property enterprise, we bought 159 residential tons in our Chenal valley grasp plan neighborhood in little rock, and we accomplished a industrial sale through the yr.
Lot gross sales are off to a robust begin in 2022, which is a tribute to our group’s give attention to creating stock to fulfill sturdy residential lot demand. Turning to capital allocation, we distributed $388 million of to shareholders in 2021 equal to 90% of our money out there for distribution for the yr. We paid a $4 per share particular dividend in December.
We additionally elevated the common dividend 7.3% within the fourth quarter to a greenback 76 per share on an annual foundation. We stay dedicated to rising the common dividend sustainably. The big fourth quarter dividend enhance displays each bullishness in our enterprise and the profitable completion of accretive Timberland acquisitions.
Talking of Timberland acquisitions, we closed 4 bolt-on offers within the south within the fourth quarter for an mixture consideration of $131 million. The most important transaction was a tax free merger with rural land and Timber Firm whereby we acquired simply over 51,000 acres of top of the range, effectively stocked Timberlands in Southern Arkansas and Northern Louisiana for 1.96 million shares within the assumption of $6.6 million of debt.
The agricultural Timberlands are a extremely enticing addition to our portfolio. Common stocking ranges of roughly 90 tons per acre, and a median Timber age better than 40 years are each effectively above the norm.
Typical metrics for Southern Timberlands are roughly 45 tons per acre, and a median age of Timber of 14 to fifteen years, assuming a 30 yr rising cycle and even age administration. We count on to comprehend common annual EBITDA of $8.5 million over the primary 10 years of possession offering an interesting money yield.
We had the liquidity of almost $600 million on the finish of 2021 after paying the particular dividend. Our leverage additionally stays the bottom of the Timber reeds, regardless of our giant particular dividend. Our monetary power gives a stable platform for continued progress, as we take into account further accretive acquisitions and investments in our present mills.
I’ll now present some ideas on our expectations for 2022. DC transportation challenges, and COVID absenteeism harassed, a provide chain that has had problem persistently assembly lumber demand over the past two years. Consequently, lumber costs elevated again above a thousand {dollars} per thousand board ft as reported by random lengths.
We don’t consider costs at this stage are sustainable and we count on lumber costs to average as we transfer via 2022. Having mentioned that we proceed to consider common lumber costs for the complete yr will likely be structurally increased than long run averages because of distinctive lumber demand and tight provide housing fundamentals stay strong.
U.S housing begins enhance to 1.7 million items on a seasonally adjusted foundation. And constructing permits had been almost 1.9 million items in December. Each statistics had been notable milestones and symbolize a robust end to a robust yr. A scarcity of properties within the giant millennial demographic cohort, proceed to underpin our view, that housing ought to be arrange for a multiyear growth.
We’re monitoring rising mortgage charges, given their impact on housing affordability, dwelling consumers and builders have levers to offset affordability points attributable to increased charges migration to more cost effective housing markets given the sturdiness of distant work builder concessions and smaller homes or examples of things which will mitigate the impact of upper mortgage charges.
Apparently, Fred Mac launched a forecast simply final week, predicting that the only household housing market will stay secure in 2022. They count on that increased mortgage charges will average the tempo of dwelling value will increase and that the entry stage dwelling phase will stay tight because of a scarcity of properties on the market.
We count on continued progress within the restore and rework phase in 2022. Within the final week, we receipt revealed an expectation that R&R spend will enhance 3% in 2022. And the Harvard joint heart for housing research is predicting 17% progress. Components supporting progress within the restore and rework phase embrace excessive ranges of dwelling fairness, that earn a living from home pattern and the age of us housing inventory, which is now 42 years on common.
Concerning environmental, social and governance reporting, we plan to publish our third annual ESG report in Could. We’re additionally creating a full ESG part of our web site and we plan to publish a carbon and local weather report in September.
PotlatchDeltic has a robust ESG story and we’re dedicated to do our half to mitigate local weather change and proceed our legacy of accountability throughout the ESG spectrum. To wrap up my feedback, PotlatchDeltic could be very effectively positioned to benefit from favorable business fundamentals and our sturdy stability sheet and liquidity present a excessive diploma of flexibility as we search to maximise shareholder worth.
I’ll now flip it over to Jerry to debate fourth quarter outcomes and our outlook.
Jerry Richards
Thanks, Eric begin beginning with web page 4 of the slides adjusted EBITDA decreased from $107 million within the third quarter to $76 million within the fourth quarter, the decline largely displays the impact of decrease listed. Idaho sawlog costs and seasonally decrease harvest volumes within the fourth quarter.
I will now assessment every of our working segments and supply extra on the fourth quarter outcomes. Data for our Timberland phase is displayed on slides 5 via seven. The segments adjusted EBITDA was $42 million within the fourth quarter in comparison with $76 million. Within the third quarter, we harvested 349,000 tons of sawlogs within the north within the fourth quarter. That is down seasonally from the 462,000 tons that we harvested within the third quarter.
Northern sawlog costs had been 28% decrease on a per ton foundation within the fourth quarter, in comparison with the third quarter, the lower in stable log costs displays decrease costs for listed and Cedar sawlogs in addition to seasonally heavier logs. As a result of our index costs reset on a one month lag the upper lumber costs that occurred in December will not be mirrored in our sawlog costs till the primary quarter.
Within the south, we harvested slightly below 1.1 million tons within the fourth quarter. This quantity was 4% increased than the third quarter as our Southern Timberland group labored onerous, decrease the quantity of our harvest shortfall for the yr.
Our Southern sawlog costs had been 2% decrease within the fourth quarter in comparison with the third quarter. As mentioned on final quarter’s name, we anticipated pine sawlog costs to average as soon as circumstances dried out and sawlog mill or sawlog mill — sawlog inventories return to extra regular ranges. Sorry.
Turning to what merchandise on slides eight and 9 adjusted EBITDA was $37 million within the fourth quarter in comparison with $27 million within the third quarter. Our common lumber value realization elevated 6% from $533 per thousand board ft within the third quarter to $563 per thousand board ft within the fourth quarter.
Our value will increase corresponding to the random lengths, framing lumber composite on a proportion foundation, when the composite is shifted to account for the size of our order information. Our lumber costs elevated every month through the fourth quarter, our common lumber value realizations per a thousand board ft had been $487 in October $570 in November and $639 in December. Lumber shipments decreased from 265 million board ft within the third quarter to 243 million board ft within the fourth quarter.
COVID absenteeism was a drag on manufacturing. Our plywood enterprise carried out exceptionally effectively in 2021 and delivered report profitability. The unfavourable residuals and panels variants on web page eight of the slides, primarily for decline in plywood costs after peaking at an all-time excessive within the third quarter.
Transferring to actual property on slides, 10 and 11, the segments adjusted EBITDA was $10 million within the fourth quarter of barely from $9 million within the third quarter. Increased rural land gross sales closings barely exceeded fewer residential lot gross sales in our Chenal valley grasp plan neighborhood in little rock Arkansas.
Shifting to monetary gadgets, that are summarized on slide 12. Our whole liquidity stays sturdy at almost $600 million. This quantity contains $296 million of money, in addition to availability on our undrawn revolver. Talking of a revolver in December, we prolonged its maturity to February 14, 2027. We additionally decreased the dimensions of the ability to $300 million, given our sturdy stability sheet and plentiful out there capital.
We refinanced $40 million of debt scheduled to mature in December of 2021, lowering our annual pursuits spends roughly $700,000. We additionally repaid the $6.6 million of debt, we assumed within the Loutre merger in December and $3 million of medium time period notes at maturity in January.
We didn’t repurchase any shares through the fourth quarter. As a reminder, we have now a 10b5-1 plan in place. This displays our means and dedication to repurchase our shares at enticing costs. Capital expenditures had been $19.6 million within the fourth quarter.
Notice that the quantity I simply talked about contains actual property growth expenditures, that are included in money from operations and our money move assertion and excludes the Timberland acquisitions that Eric mentioned. We additionally recorded a positive earnings tax adjustment of roughly $5 million within the fourth quarter, principally to mirror decrease state earnings taxes.
I’ll now some excessive stage outlook feedback. The small print are introduced on slide 13. We count on to reap about 6.1 million tons in our Timberland phase in 2022, with roughly 70% of the amount within the south, we count on our annual harvest quantity run charge will enhance to six.2 to six.4 million tons, after our Ola Arkansas sawmill startup curve is behind us someday in 2023.
Harvest volumes within the north are deliberate to be comparable within the first quarter, relative to the fourth quarter, we count on Northern sawlog costs to extend considerably within the first quarter, reflecting increased lumber index costs, harvest volumes and sawlog costs within the south are anticipated to lower seasonally within the first quarter. The sawlog value decline is due primarily to seasonally, fewer hardwood sawlog within the combine.
We plan to ship simply over 1 billion board ft of lumber in 2022. Within the first quarter, we plan to ship 230 to 240 million board ft lumber. Our estimates mirror uncertainty related to pandemic associated absenteeism. Our common lumber value to date within the first quarter, together with orders booked, however not but shipped is roughly 70% increased than our common fourth quarter lumber value.
Our present lumber costs are roughly 90 on increased than our common fourth quarter value. As a reminder, a $10 per thousand board foot change in lumber value equals roughly $12 million of consolidated EBITDA for us on an annual foundation.
Shifting to actual property, we count on to promote roughly 13,500 acres of rural land and roughly 160 valley residential tons in 2022 further actual property particulars are offered on the slide. We estimate that curiosity expense will likely be $3 million within the first quarter and simply over $8 million per quarter for the second, third and fourth quarters of 2022.
Curiosity bills decrease within the first quarter, as a result of that after we obtain our annual patronage cost from the farm credit score banks. Our whole capital expenditures are deliberate to be within the vary of $70 million to $75 million in 2022, excluding acquisitions. That estimate contains roughly 15 million to rebuild OLA, which we count on will likely be reimbursed by insurance coverage.
General, we count on to begin 2022 with a really sturdy first quarter. We anticipate whole adjusted EBITDA for the primary quarter will likely be a bit greater than double fourth quarters stage due, primarily to increased lumber and index all log costs. We stay bullish on business fundamentals to combat rising rates of interest, our built-in working mannequin and leverage the lumber costs are aligned with these fundamentals and we’re a effectively positioned to proceed rising shareholder worth.
That concludes our ready remarks. Emma, I would now wish to open the decision to Q&A.
Query-and-Reply Session
Operator
[Operator Instructions] Your first query in the present day comes from Kurt Yinger with D.A. Davidson. Your line is now open.
Kurt Yinger
Nice, thanks and good morning, Eric and Jerry. I simply wished to morning, I wished to begin off on plywood. Jerry, you touched on, the unfavourable influence from decrease costs form of flushing via there, realizing what you are making is a bit totally different than commodity is, is there something we ought to be conscious of as we take into consideration value doubtlessly recovering there? Like we have seen form of on the commodity facet?
Eric Cremers
Yeah. Kurt. So, our plywood costs did decline within the fourth quarter significantly apparently sufficient, it was a couple of one quarter lag to what occurred to, to lumber costs. If you consider lumber costs, Q2 to Q3, there was a reasonably be important drop in that quarter. Our plywood costs held up in Q3 largely as a result of our order information had been fairly lengthy. And as we received into to This autumn costs reset is calls for softened slightly bit. I do not, I believe the worst of it’s behind us. And our expectation is issues are going to be comparatively flat from right here as we glance out via via 2022.
Kurt Yinger
Bought it, Okay. That is useful. After which, you talked about form of the long term outlook by way of finish market tendencies, however hoping you can simply speak slightly bit about what you are seeing by way of order tendencies on the lumber facet, from the massive field retailers anyway, to consider that by way of the way it’s trending versus final yr and any considerations round stock ranges in that channel or indications of possibly sticker, inventory shock, beginning to sluggish consumption in any respect?
Eric Cremers
Yeah. Kurt. So, R&R it pause final yr Q2 and two Q3, costs received as much as 1600 bucks, a thousand, after which the market rebounded in This autumn. We, we count on as we set in our opening remarks, we count on progress in R&R to proceed.
For us dwelling centered takeaway, it picked up throughout This autumn. And it is nonetheless a stable enterprise for us right here in Q1. There’s numerous explanation why know our exercise goes to remain sturdy. we have talked about it, restricted provide, new properties, folks need to broaden dwelling house, embrace outside areas, report dwelling fairness ranges, sturdy labor market. median age of homes is 42 years. All these, all these components are going to work collectively to assist assist the R&R enterprise.
What I’d inform you particular to our, and I do not need to get too down into weeds for aggressive causes, however I’d inform you that our dwelling heart demand in the present day is at the moment outpacing our expectations.
And we predict that is pushed each by the DIY in addition to the professional contractor segments of R&R. So the best way I would characterize it’s we, we have now a program with the house facilities to ship a sure quantity of lumber every week, every quarter. And what I’d inform you is that they’ve come to us they usually have requested for incremental lumber provide right here or early in 2022.
They usually’re clearly gearing up for the, the spring summer time R&R season. So from our viewpoint the R&R market, the house heart market, it’s totally sturdy.
Kurt Yinger
Bought it. Okay. Nicely that, that is good to listen to. After which simply lastly, on, I assume the three different Bolt-on Southern Timber land transactions that you just touched on, any coloration there, you can give us by way of acreage and I assume geography and, and, and valuation?
Eric Cremers
Nicely, yeah, so, in order that they’re, they’re comparatively small. They had been all down within the south. they had been, effectively, three of them, two of them had been in two of them had been in Arkansas and considered one of them was over in in Mississippi. They had been within the gosh, $2,000 an acre form of vary on common, very enticing effectively inventory tracks and our common actual IRR over the course of the yr, which would come with these 4 offers in This autumn was round 5.4%, which is effectively above our, our value of capital for our Timberland’s enterprise.
So, we had been, we’re fairly enthusiastic, a number of of these offers, by the best way, we’re form of one off negotiated transactions and in the event you have a look at our observe report, that is form of how we like to amass Timberland.
We do not like the massive, extremely aggressive, broad auctions. All the surplus returns are inclined to bit away. We, we like discovering these little nichey one-off offers the place the aggressive bidding depth is comparatively low and that is, that is what we received within the fourth quarter.
Operator
Your subsequent query comes from the road of Paul Quinn with RBC Capital Markets. Your line is now open.
Paul Quinn
Yeah. Thanks very a lot. good morning guys. Simply, simply wished to get some extra data on the Ola fireplace and the insurance coverage proceeds, or, what the extent the insurance coverage covers is there any enterprise interruption, insurance coverage, after which when do you count on the mill to be again up and what’s a brand new product capability of the mill?
Jerry Richards
Yeah. So I will take the primary a part of that, Paul, by way of insurance coverage protection. So insurance coverage protection is sweet. we have now protection of each the property harm, in addition to enterprise interruption with a minor deductible round 1,000,000 {dollars} for the deductible. And what we have now over time is, is a little bit of a mismatch at, by way of one week incur bills or capital expenditures.
Definitely we had enterprise interruption or, or losses final yr. And we received to undergo the enterprise interruption piece of that protection, however what come out very effectively financially on the finish of the day and the feedback you heard CapEx to rebuild [indiscernible] is about $15 million this yr 2022 and that is totally coated by insurance coverage.
We have already form of taken our lumps for the, for the small deductible, and we’re within the means of sorting via the enterprise interruption. So, all year long, you may most likely, we proceed to see, some noise each on the constructive at this level, perspective by way of recoveries. And we’ll proceed to name that out as a particular merchandise as, because it happens. After which, I will go it over to Eric for the second a part of the query.
Eric Cremers
Yeah. So good morning, Paul. So, by way of startup, we will take supply of that new giant log line form of within the July, August timeframe. We’re having common interplay with the seller and the gear is on observe and, demolition has been accomplished on the website and there is, there’s structural metal entering into as we converse.
So we’re, assured in that July, August form of a timeframe. So what I, what I inform you is that after we get accomplished with, getting via, hiccups that inevitably come from beginning up a, a bit of kit like this, the mill goes to be actually aggressive. We predict restoration goes to be roughly 10% improved over the pre-fire Ola.
We predict our processing prices are going to be about 15% decrease than the, the pre-fire Ola. And we will get about 25 million ft of incremental. So up in 150 million foot per yr form of vary. So we predict the Mill’s competitiveness is, is, is admittedly going to going to enhance form of as soon as it is as soon as it is up and operating.
Paul Quinn
Okay. After which simply simply over on actual property, I imply, simply have a look at, at tons gross sales values in Q versus the outlook. What, what, what why do, why the expectation of upper pricing on the lot gross sales? Are they higher? Heaps is the market transferring up considerably?
Jerry Richards
It is an awesome query, Paul, and, really it is a mixture of each to be trustworthy with you, however, the first reply is, I will begin with this piece of it, is admittedly combine often is the first issue. So, there have been a whole lot of extra entry stage kind dwelling, tons, that had been bought within the fourth quarter. And what we have now within the combine for the primary quarter is extra of the, premium tons, if you’ll. And that may, what we do is we launch a, form of a neighborhood by neighborhood. So know you’ll be able to see that combined swing quarter of 1 / 4. We additionally did enhance costs round 10% final yr and proceed to extend costs for tons, simply because demand has been so sturdy.
I assume the opposite attention-grabbing, as I am speaking about sturdy demand for tons’ whenever you have a look at, we launched or made 130 tons out there within the second half of final yr, all of these bought and or, are below contract and simply final week we launched 26 tons in one other neighborhood. once more, a few of these nicer extra premium tons which are known as to, why the worth is increased, all 26 are actually spoken for. So we, our group, fairly truthfully cannot develop tons quick sufficient and demand has simply been terribly sturdy in that undertaking.
Eric Cremers
Yeah. And on, on that, on that be aware, Paul, we had anticipated of these 26 tons, we had anticipated 14 of them to promote. And as an alternative as Jerry mentioned, all 26 went, so that offers you any indication about, how the builders are fascinated by 2022. I believe that is a extremely good actual time indication.
Paul Quinn
Okay. That is that is nice. After which simply over on the Timberland facet expectation for, for acquisitions in ’22, do you see any change in any respect on {the marketplace} and are you continue to centered on, on the south?
Eric Cremers
Yeah, I’d, we, I, we would love to seek out one thing to do, up within the inland area, Paul it is simply little or no involves market right here. So we’re virtually compelled to go look to the south for progress. the south is large, it is deep it is liquid. That is form of the place the, the Timberland M&A sport is, is performed today. And what I’d say is there are a selection of offers which are, which are within the pipeline.
And I’d inform you that it is unbelievably aggressive proper now. Chasing, chasing Timberland offers low cost charges or at all-time low ranges. Persons are being very aggressive, each, each REITs in addition to TMOs. So we’ll, we’ll see if issues change, but it surely’s a extremely aggressive market proper now for, for Timberland.
Paul Quinn
So the expectation for increased rates of interest via, hikes within the fed have not actually come again to, to rent low cost charges at this level but?
Eric Cremers
No, I do not. I do not assume so. And the opposite manner to take a look at it, there’s a whole lot of discuss folks, investing in actual property today. Timberland traditionally has been a reasonably good inflation hedge. And in the event you consider in wooden baskets, beginning to tighten you’ll be able to offset rate of interest will increase with elevated log costs to offset these doubtlessly increased low cost charges.
So folks, after they purchase Timberland, they actually purchase it for the long-term, not for what’s occurring to rates of interest in the present day or tomorrow or subsequent yr, even it is actually a long-term play. However I will, I will inform you that it is extra aggressive than ever.
Paul Quinn
Okay. Possibly one bonus query, since you introduced it up simply, simply on tightening Timber markets, particularly within the south. Do you count on these, so these sawlog costs to maneuver up materially anytime quickly, or what’s your expectation of, of value will increase your via your sawmill workplace?
Jerry Richards
Yeah, it is an awesome query, Paul, and also you have a look at our Southern sawlog value realizations final yr, 2021 is up 4% in comparison with 2020. So, definitely moist climate and log shortages that mills play performed a job. I believe it is nonetheless a bit early in our thoughts as as to whether, there’s form of a broader tensioning that that is occurring.
We do see that, sooner or later and assume we’re on the proper pattern and path as, as mill capability continues to get added or expanded in, within the U.S. south now having set that, we’re forecasting subsequent yr 2022 versus 2021 that stable pricing most likely strikes up one other 2%. So, we’re fairly optimistic. but it surely’s, it is onerous to say, past form of native wooden baskets and blend, whether or not, like I mentioned, issues have turned within the south, which is admittedly the broader query you are asking. Proper?
Operator
Your subsequent query comes from the road of Ketan Mamtora with BMO Capital Markets. Your line is now open.
Ketan Mamtora
Thanks. And good afternoon. First query, I used to be simply curious form of, we have seen this large rally in lumber says, at a time often the place, demand is seasonally sluggish. So what do you assume type of are the 2 or three type of key drivers? Is it extra pushed by type of the absenteeism that you just’re seeing on the mills incapacity to actually produce — produced lumber or is it, that demand really has continued to stay sturdy in all, all of the totally different type of finish markets?
Eric Cremers
Yeah. Ketan, the best way I’d characterize it’s, it is a operate of each actually, we have seen demand stay fairly sturdy right here, even supposing we’re within the, within the winter months R&R stay sturdy housing begins figures have been fairly sturdy, so demand has been sturdy. After which, so in the event you have a look at the availability society equation, sure definitely COVID has impacted manufacturing and cargo volumes.
We predict it prices us 10 million ft of shipments within the fourth quarter. We predict it may value us one other 5 million ft right here in Q1. It is a problem the entire business is, is, is grappling with. And whenever you mix that with, the problems that DC has had with the flooding after which all of the transportation points up there making an attempt to get lumber out to DC right down to the uswhere, they BC is 15 to twenty% of, of North American provide.
I believe that’s, that has helped conspire to lift costs as effectively. However, I believe you bought to consider this by way of the diminishing quantity of spare capability that is within the lumber producing business. For those who check out the long term and I imply, long term, identical to a 5 yr pattern, we have seen North American capability develop roughly 2 billion board ft, regardless of all this speak you hear about all these new mills and all these expansions, you add all of it up.
Internet you’ve got seen tough, roughly 3 million ft come out to Canada. And you have seen, 4 or 5 billion, billion ft right here within the U.S. However over that very same 5 yr stretch you’ve got seen North American consumption develop by roughly 8 billion board ft. So capability utilization is getting tighter and tighter within the business.
Eric Cremers
And anytime there is a hiccup within the provide chain, whether or not it is DC floods or it is, COVID absenteeism, it may power costs increased. So I, I believe, that is only a, a scenario the business finds itself in after, a decade of underbuilding within the U.S., there wasn’t an entire lot of free money move floating across the business for folks to go put money into their mills. And so now we’re left with, demand is, is coming in actually sturdy and there simply is not the availability to fulfill it. So it is a, it is a, it is a actually, each a provide and a requirement subject.
Ketan Mamtora
Bought it. That is has full perspective. After which switching to your CapEx plans for 2022 outdoors of, you realize Ola that we, we mentioned earlier. Are you able to discuss, possibly a few key tasks which are happening at your S for this yr?
Eric Cremers
Yeah. So we have, we have two further tasks which are entering into to Ola in addition to the rebuild undertaking we’re placing in a brand new trimer optimization piece of kit. We’re additionally placing in a log simulator. that is about$4 million of capital and, 32% form of IRS on these tasks. We thought so long as we’re rebuilding Ola, can we get all this chance with that mill to actually get it and, preventing form, we thought, why not improve the efficiency of the mill of these two tasks?
We have additionally received a an attention-grabbing undertaking out at our, our plywood mill. That is a couple of 4 and a half million greenback undertaking with a roughly 40% IRR. It is a, it is an automatic patch line. So proper, you bought 10, 15 those who do patch restore for plywood, because it strikes down the meeting line this new computerized patch gear that we’re putting in.
It is not solely going to take away roughly 12 staff from the mill, which, labor’s onerous to get, in order that’s useful. We’re additionally going to chop chemical utilization about $1.7 million per yr. In order that undertaking goes to going to wrap up right here in, in Q1 and Q2 will likely be off to the races. So we’re actually trying ahead to getting that behind us as effectively.
After which we’re additionally investing some capital, frankly, for tasks that are not going to occur. This yr essentially due to vendor lead instances they’re, they’re out into, into, into subsequent yr. We have got two tasks added our Gwen mill that look actually enticing to us.
So we will, we will begin work on these tasks right here this yr as effectively, one’s a, an edger improve and the opposite’s a, a trim Brief-line alternative undertaking. So a whole lot of issues within the hopper, however our, our focus candidly this yr is admittedly the Ola sawmill rebuild.
Ketan Mamtora
Bought it. That is that is very useful. After which flip to actual property. You, you talked about type of the event, the Chanel valley growth facet, however even on the agricultural facet, it looks as if there’s fairly a little bit of exercise and curiosity, for Q1, you’re speaking about type of, oh, $4,000 in value per acre. That looks as if a really wholesome quantity?
Jerry Richards
Yeah, that that is appropriate. Kate. Then I, I’d simply begin by saying over all demand for rural has been actually sturdy as effectively. it is a mixture of things, a few of it, is simply rural recreation and other people, in a pandemic window wanting house and prioritizing that much more than, than previous to the pandemic, however, all the pieces I will contact on is when you consider, our, our group at all times discover form of new market alternatives. So at all times fascinated by, what’s, what’s the subsequent solution to form of create worth?
And one of many issues that, via on the combo is, there’s about 50 million of photo voltaic tasks that our group is . that is, this might be long term, this’s not essentially, I am not speaking Q1 particularly, or however these, with be situations the place more than likely we might promote the land after harvesting it and promote it at a extremely enticing value.
So, general, give me some examples as to, sure segments of that market have simply been actually sturdy they usually proceed to evolve over time. In order you see within the Q1 value per acre, clearly, we have now a number of, actually enticing to yields that we’re anticipating and stay up for offering coloration in, in April. Assuming we will pull these over the end line.
Eric Cremers
Yeah. And ke simply so as to add to what Jerry was, was saying apparently sufficient, we have spoken about this Loutre deal down in south Arkansas and north Louisiana Loutre had a, a historical past of actually not promoting a lot, a lot land. They form of, form of stored it for themselves. And since we have acquired Loutre and made the announcement, we have now fielded a dozen inbound cellphone calls, folks involved in making an attempt to purchase some rural acreage from us.
So there’s pent up demand on the market for a few of these tracks, a and we’re not going to hurry into any offers we wish to take our time, stratify our acreage, and actually be aware about what we will promote and what sort of premium we will get. However I believe that form of offers you a sign of what we love to do after we do a significant Timberland acquisition.
We stratify, we stratify, after which we extract these, these acres that have gotten actually excessive, rural demand, potential value potential, and we, and we promote ’em off, however we’re seeing, as Jerry mentioned, no, slow-down in rural demand.
Ketan Mamtora
Bought it. That is very useful. And only one fast one from me on Cedar costs, have you ever began to see these stabilized or are they nonetheless below strain? To date in Q1?
Jerry Richards
Yeah. I, nonetheless a bit below strain could be the quick reply Ketan however the decline has not been as, as important. And the opposite factor that is essential is, they’re nonetheless buying and selling at actually enticing costs relative to historical past. So, despite the fact that they arrive off you realize form of a report peak, if you’ll, they’re nonetheless we’re nonetheless, we’re nonetheless very proud of the worth that they are buying and selling at in the present day.
Operator
Your subsequent query comes from the road of job of John Babcock with Financial institution of America. Your line is now open.
John Babcock
Hey, thanks. And thanks for taking my questions. Beginning out, did you make any feedback on the place you count on EBITDA to return out in any respect for the quarter?
Jerry Richards
Yeah. In, in, within the ready feedback, John, on the very finish, I form of touched on and, we count on Q1 EBITDA consolidated for the Firm to most likely be a bit greater than double This autumn is, is our present estimate.
Clearly, a key transferring half is, is lumber pricing, costs, which, have made a robust transfer and on a spot foundation, offered coloration that they are up 90%, in comparison with our fourth quarter common. However, additionally appears like, there’s an opportunity they may have hit a, hit, a, hit a peak and, is dependent upon form of how the remainder of the quarter performs out.
John Babcock
Okay. Bought you. Simply need to make clear that. After which the subsequent half simply on Ola sounds such as you guys count on that to begin up within the three Q 4 Q sorry, not three Q 4 Q July, August timeframe. How ought to we are saying in regards to the ramp up of that?
Eric Cremers
Wow. That is slightly early to attempt to be giving that form of form of steerage, John. I imply, I, I believe our plan is to get to totally operation by January 1st, 2023. these, startups are at all times difficult. Lots of kinks get labored out within the system, however I believe you can draw, a line beginning August 1st at zero manufacturing for the massive log line. After which it may linearly get to hopefully get to 150 million ft by January 1st. That may be only a easy manner to take a look at it and give it some thought.
John Babcock
Okay. And CapEx is, going to be a, slightly bit elevated this yr. How would you could have us take into consideration, the long term CapEx profile? I believe previously, we have had, $40, $45 million yearly baked in and it seems like about, $15 million or so is O after all plus or minus, some, a pair million for different investments. So how would you could have us form of take into consideration that?
Eric Cremers
Nicely, I’d say that, our Timberlands CapEx is, is comparatively secure round, I do not know, $17 million a yr, our actual property CapEx. It actually simply is dependent upon, our means to provide tons. And that runs, who is aware of $10, $12 million a yr. After which, after which it is Wooden Productss and for us wooden it is actually pushed by discretionary investments, to what extent can we see excessive return tasks that we really feel actually good about? It varies from yr to yr. I believe this yr it’s elevated due to the Ola spend. I believe you bought to again out, that $15 million of insurance coverage proceeds that had been going to get reimbursed. However I believe a traditional run charge could be within the $25 to $30 million form of vary going ahead had there, had there not been an Ola.
Operator
Presently. I am displaying there are not any extra questions. I will now flip the decision again over to Jerry Richards.
Eric Cremers
Nice. Thanks once more, him. And, simply to reiterate, we count on to begin, 20, 22 with a extremely sturdy quarter, as you heard, within the Q&A, a minimum of double what we simply generated within the fourth quarter, housing fundamentals and restore and rework market fundamentals stay actually sturdy or effectively positioned and have a extremely sturdy stability sheet to proceed to develop the Firm and develop shareholder worth over time. So thanks on your curiosity and serve to reply detailed modeling questions the remainder of the day. Thanks.
Operator
This concludes in the present day’s convention name. Thanks for attending. Chances are you’ll now disconnect.