Plum Creek mills report $9 million loss

By CHRIS PETERSON / Hungry Horse News

Plum Creek's manufacturing segment, which includes mills, here, reported a $9 million operating loss for the first quarter of this year, which compares to a $1 million loss in the first quarter of 2007.

The company says that average lumber prices were 6 percent lower than the same period as a year ago.

Still the company isn't expecting any large layoffs, Tom Ray, general manager for Northwest Resources said. Ray said some short-term job reductions at the small log section of its sawmill here are forthcoming this month. But that's due to spring break-up and a shortage of smaller logs, he said, not lumber markets.

Ray said that while the company faces some short-term challenges, the longer term housing market is expected to rebound and housing demand in the U.S. is expected to go up.

He also noted that lumber prices have recently stabilized.

The company reduced production and wrote down the value of its inventory by $4 million. The company, in a prepared release, claimed the plywood and MDF operations, however, remained profitable and higher than average prices for medium density fiberboard were partly offset by higher raw material costs.

Overall the company, which is the largest private landowner in the U.S., reported first-quarter earnings of $38 million, compared to $45 million last year.

The earnings gains were seen in areas where the company sells logs to mills and in real estate, where the company continues to sell off lands for it deems "non strategic timber lands" or "higher and better use lands."

In Montana, those lands are sold for subdivisions or the company gains profit by selling conservation easements on the properties. The easements still allow Plum Creek to harvest timber on those properties.

Plum Creek's plans to possibly sell off lands in Missoula County have raised considerable eyebrows in the past week, as the easements to some of those parcels is under scrutiny by Missoula County officials.

The Forest Service in many cases owns lands that Plum Creek has easements across. But the language of those easements — whether it's just for timber or for any kind of easement, such as a driveway for a subdivision — remains the subject of debate.

Mark Rey, the U.S. Undersecretary of Natural Resources, met with Missoula County officials last week and the question on those easements could be headed to court, as Rey seemed to indicate the easements would allow any sort of land use, not just timber-related, the Missoulian reported last week.

Company officials remained upbeat about the financial outlook for the second quarter. They expect earnings to be lower, but manufacturing results to be better.

"Well-managed timberlands are unique assets with lasting value. Our diverse asset base and strong balance sheet provide the operational and financial flexibility to make the correct value decisions in these challenging markets," company CEO Rick Holley said in a prepared release.