Lumber firms set for home reno comeback
Do-it-yourself home renovations are expected to regain popularity after taking a summer break, helping soften the blow of an expected earnings slowdown for lumber producers in the second half of the year.
The cost of wood products has swung wildly in recent months as a surge in home makeovers helped drive lumber prices to record highs, only to see demand soften when the hikes reached consumers and sticker shock set in. Lumber producers see that as temporary and anticipate consumers will return to home-improvement projects when the weather cools and lower prices hit the shelves of big-box retailers including Home Depot Inc. and Lowe's Cos.
Weyerhaeuser Co. has already started to see signs that this market is picking up after “a little bit of sticker shock,” chief executive Devin Stockfish said Friday during the Seattle-based company's earnings call with analysts.
“The do-it-yourself market should be picking back up,” Stockfish said. “We would expect that to accelerate as we get into the fall, you'll see cooler weather, you'll see kids going back to school, vacation season will be winding down.”
Resolute Forest Products Inc. CEO Remi Lalonde doesn't see an end to the “repair and remodel section” and said Thursday in an interview that consumers are just “taking the summer off ” after being cooped up during the pandemic.
The home-improvement market could be a bright spot for North American lumber producers when the earnings are expected to cool from the first half of this year.
Weyerhaeuser joined Resolute, West Fraser Timber Co. Ltd., and Canfor Corp. in posting second-quarter earnings that beat expectations, with higher lumber prices helping the company reach record profit in the period.
Still, Weyerhaeuser forecast that its timberland and wood products business will be “significantly lower” in the third quarter.
Uncertainties could still inject volatility into the lumber market.
Producers are facing disruptions due to wildfires raging across Canada, a major producer of wood for homebuilding.
Resolute temporarily stopped harvesting logs in Ontario, home to a quarter of its output, because the provincial government restricted operations that could potentially spark fires in dry conditions. Soaring costs combined with lower lumber prices have hurt income for B.C. producers, and Canfor sees no reprieve until early next year.