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Rayonier Inc. (



Credit Suisse Global Paper & Packaging Conference Call

February 22, 2012 12:00 pm ET


Carl Kraus - SVP, Finance & Head, IR



Unidentified Analyst

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Alright, well thanks again. So we are moving right along and it’s a real pleasure to have with us today Rayonier, the leading global producer of specialty dissolving pulp and they also have 2.7 million acres of land, timberland in their control and with us today is Senior Vice President and Head of Investor relations, Carl Kraus and with that let me turn it over to Carl. Thank you.

Carl Kraus

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Thanks Al and thank you for coming folks. Turning to page four and for anybody that did not get a presentation we still have some up here to my left, but Rayonier is a global forests products company with a market cap of $5.4 billion. We have three core businesses, forest resources, real estate and performance fibers and we will explain that in more detail in a few minutes.

Our annual revenues are about $1.5 billion and we have sales in 40 different countries comprising about 45% of revenue. And our current annualized dividend of a $1.60 per share is yielding about 3.6%. Our dividend is taxed at capital gains rates and dividend growth is a key part of our growth strategy.

We are structured as a highly efficient real estate investment trust with strong credit ratings and in fact Moody’s upgraded us yesterday to BAA1 and we have a BBB+ rating from Standard and Poor’s.

Turning now to page five and taking a look at our structure, as I mentioned we are a REIT and on the left side you can see that our timberland assets are housed in the REIT, but we also have a very robust taxable REIT subsidiary that houses our performance fibers business and some of our real estate activities. And we are also able because of the strong credit metrics to house the majority of our debt within our taxable REIT subsidiary.

Turning now to page six and looking at our cash flows from our three core businesses, you can see good growth over the cycle here with almost a doubling of EBITDA from our performance fibers business into 2006. If you take a look at the bottom stack which is forest resources that back around 2006 and 2007, we were generating about a $150 million of EBITDA in that business with the recession, with harvest deferrals that segment declined to about $77 million by 2009 and we’ve grown back to about $110 million in 2011, but certainly see the potential to equal or surpass historical cash contribution levels.

Turning now to page seven and looking at the cash flow and the coverage of our dividend, you can see that in 2011, our payout ratio was 65%. You can also on the bottom as we’ve noted here we’ve had seven dividend increases over the last nine years including the 11% increase that was effective in September of 2011.

Turning now to page 8 and looking at our credit metrics, we’ve a very strong balance sheet and conservative leverage. On a GAAP basis, our debt-to-total cap is 39%. At year end, we had debt to adjusted EBITDA of 1.7 times and the interest coverage is very strong at 12 times.

Turning now to our strategy on page 9, first with respect to our Forest Resources Group. Here our focus is to optimize and grow our timberland portfolio overtime. We go through a continuous evaluation process for every acre of land under management and at times we will identify some of the acreage as non-strategic and then we will divest that land.

From an operational point of view, we focus on best practices through good silvicultural use to enhance the growth and yield over time. Moving to real estate, here our focus is to monetize our higher and better used properties through conservation, recreation and industrial sales and also with respect to our coastal corridor properties in the southeast to take select properties through a land use change to enhance the future value of these properties.

And then lastly with respect to performance fibers, our focus here is to continue to maintain our global leadership in the cellulose-specialty products. And here this is through differentiation with the purity, consistency and technical support for these products. We also have a significant capital project underway in the performance fibers mill in Jesup and we will give you more details on that in a few minutes.

Now diving into the segments, first timberlands on page 11. This has been a unique asset class that has shown good appreciation above the inflation rate overtime. The asset class also has tremendous flexibility in terms of being able to differ harvesting if the markets turn soft and also you have a renewable resource. We had mentioned the restructure which is highly tax efficient for us and in 2011, this segment contributed $110 million worth of EBITDA.

Taking a look at the map, we own, lease or manage over 2.7 million acres globally with most of that in the US. In our Atlantic region, we’ve over 1.1 million acres, over 700,000 acres in the Gulf States and nearly 400,000 acres in Washington State. And then we’re the managing general partner and have a 26% equity interest in a venture in New Zealand which owns over 320,000 acres.

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