Cellulose sales boost Weyerhaeuser, shares jump

NEW YORK (Reuters) - Strong demand for cellulose fiber used to make diapers, paper and bandages helped Weyerhaeuser Co (WY.N) post a higher-than-expected quarterly profit, sending its shares up more than 3 percent.

The forest products maker and homebuilder, which recently converted to a real estate investment trust, warned its three units tied to the housing market will be constrained this year.

"Our continued focus on improving what we control, while being ready to take advantage of any uptick in market conditions, is the right strategy for achieving improved 2011 financial results," Chief Executive Dan Fulton said on a conference call with investors.

Weyerhaeuser posted net income of $171 million, or 32 cents a share, compared with a net loss of $175 million, or 83 cents a share, a year before.

Excluding one-time items, the company posted profit of 10 cents per share. By that measure, analysts had expected earnings of 5 cents per share, according to Thomson Reuters I/B/E/S.

"It wasn't any blow-the-doors-off quarter, but you don't expect that from a timber company," said Kent Croft, co-manager of the Croft Value Fund (CLVFX.O), which owns about 1 million Weyerhaeuser shares. "It's sort of confirmation that things are still tough, but they're not as bad as they were. Things should be looking up from here."

Revenue rose 14 percent to $1.66 billion. Analysts had expected revenue of $1.58 billion.

(For a graphic click on: r.reuters.com/qyb87r)

Sales rose at three of the company's four units, including the cellulose fibers unit, where sales rose 25 percent to $511 million.

Weyerhaeuser's real estate unit sold 606 homes in the fourth quarter, a 21 percent jump from the third quarter but a 22 percent drop from the same period last year. The company said it expects to lose money in the first quarter as home sales seasonally slip.

The company's real estate outlook stands in contrast to rival Plum Creek Timber Co (PCL.N), which said its fourth-quarter home sales more than doubled.

Federal Way, Washington-based Weyerhaeuser has repeatedly said it has no plans to slice its underperforming real estate unit off from the rest of the company.

LAND SALE

Weyerhaeuser resisted calls during the recession to sell large chunks of it 7 million acres of United States timberland, comprised of profitable Pacific Northwest and Southeast trees.

Rather, executives have worked to sell so-called "nonstrategic" land at attractive prices. On Friday they sold 82,000 acres in Washington State for $200 million, roughly $2,400 per acre.

The sale of the land, which was damaged by a 2007 storm, will boost first-quarter profit by $150 million.

"At the very least this underscores the value of Weyerhaeuser as far as the asset value of their timberlands," said Croft, the Weyerhaeuser investor. "To have the deal close at a decent price gives me some comfort."

Shares rose 3.1 percent to close Friday trading at $24.30. The stock has traded between $15.06 and $53.69 in the past 52 weeks.

(Reporting by Ernest Scheyder in New York and Fareha Khan in Bangalore; Editing by Gerald E. McCormick, Dave Zimmerman)