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Weyerhaeuser beats expectations, ahead of Canadian lumber tariff

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US timber producer Weyerhaeuser Company reported better-than-expected earnings and revenues, even before Canadian competition was pressured by an anti-dumping tax.

Weyerhaeuser reported net earnings in the first three months of 2017 at $157m, up from $61m over the same period a year ago.

Net sales were $1.7bn, up 21% year-on-year, compared to analyst expectations of $1.6bn.

"In the West, domestic and export sales realizations increased compared to the fourth quarter as wet weather limited domestic log supply and customer demand remained strong," Weyerhaeuser said.

"Fee harvest volumes increased, and logging and road costs decreased as harvest activity shifted into lower elevation tracts."

"In the South, fee harvest volumes decreased and average sales realizations declined slightly due to a higher proportion of pulpwood sales," the company said.

Steady profits

Weyerhaeuser expects earnings to remain flat in the April to June period of 2017.

"In the West, the company expects average sales realizations to increase slightly in the second quarter compared with the first quarter, more than offset by lower harvest volumes and higher logging, road and silviculture costs," the company said.

"In the South, the company anticipates seasonally higher silviculture costs compared with first quarter, partially offset by higher harvest volumes."

"Average log sales realizations in the South are anticipated to be roughly comparable to first quarter levels."

Uncertainty over Canadian competition

Weyerhaeuser shares are also being driven by uncertainty over a new tariff of Canadian softwood exports.

Canadian Prime Minister Justin Trudeau and US President Donald trump are reported to have spoken multiple times this week, amid continued uncertainty over trade relations between their nations.

A key sticking point between the countries is timber, as US politicians claim that Canadian supplies are unfairly subsidised by provincial governments.

The complaint lies in the idea that access to woodlands held by the provincial governments is offered at too low a level, leaving Canadian exporters at an advantage.

An anti-dumping tax on softwood imports from five Canadian suppliers was announced this week, though at an average of 20% this was somewhat less than analysts were expecting.

Although Weyerhaeuser operates in provincially-owned Canadian forests, it was not affected by the tariffs.

Mr Trump pulled back from earlier threats to withdraw from Nafta on Wednesday of this week, although he insists that an exit is still on the table if no deal is reached.

By William Clarke

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