Weyerhaeuser Company (WY)

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Weyerhaeuser Company (NYSE: WY) is one of the largest integrated forest product companies, with annual revenues of nearly $5.53 billion in 2009. As an oft-cited example of vertical integration, Weyerhaeuser has businesses in timberland management, wood products, cellulose fiber, containerboard, and real estate. Cooperation between its segments allows the company to minimize transaction costs and to coordinate supply and demand internally.

However, despite these inter-segment synergies, Weyerhaeuser may decide to focus on its core timber business in restructuring efforts. In 2006, the company sold its fine paper business to Domtar, a Canadian pulp and paper company, giving Weyerhaeuser $1.35 billion in cash (used to pay off long-term accumulated debts) as well as stock in the newly merged company. There is speculation that Weyerhaeuser's possible future focus on the timberlands business is an effort to become a real estate investment trust (REIT), which would secure it significant tax benefits.

Regardless of focus, company profitability is affected by the timber market cycle, which fluctuates due to many external conditions. For example, the housing market and interest rates affect demand for real estate and wood products. Increased digitalization has also cut demand for paper--although this may be balanced by online shopping's boost to containerboard sales. The timber market and Weyerhaeuser may also be affected by environmental legislation, natural disasters, and the growth of cellulosic ethanol.

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I was sreoiusly at DefCon 5 until I saw this post.

hi

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