Weyerhaeuser May Convert To REIT, Cuts Dividend By 80%, Closes Taylor Mill

July 7, 2009 12:30 p.m. EST

Federal Way, WA (AHN) - Weyerhaeuser Co. (NYSE: WY) announced Tuesday that the firm has slashed its dividend by an 80 percent on expectations that the company might be converted into a real-estate investment trust. The company also shutters its lumber mill near Taylor.

The forest and paper products giant said Tuesday that it will now pay 5 cents per share of dividend, down from 25 cents per share as the company struggled for profit over the last few quarters. The current decision is expected to save the firm around $85 million on annual basis.

"Although our guidance for the recently completed quarter remains unchanged, the economic outlook for our businesses continues to be challenged and uncertain," Dan Fulton, president and chief executive officer, said in a statement today.

He added, "In light of these conditions, this dividend decision enhances our current liquidity and provides for more financial flexibility, including a possible REIT conversion should the board make that decision in the future."

Fulton said that the firm is taking many actions, including deferring timber harvest, shutting and curtailing facilities, and reducing costs wherever possible to preserve our long-term value and improve our performance during this uncertain period.

Separately, Weyerhaeuser announced permanent closer of its iLevel lumber mill near Taylor in Louisiana, effective immediately. The announcement will affect approximately 39 employees at the site.

Demand for wood products continues to decline due to a slowdown in the housing market. These challenging market conditions have forced the closer of the Taylor facility, as the firm will continue to balance supply with customer demand.

Weyerhaeuser said it will support affected employees through the closure and will provide transition benefits.

"Unfortunately, the current extraordinarily weak market conditions require that we take decisive action," Tom Gideon, executive vice president, Forest Products, said in the statement.

He added, "We fully understand the major impact of this closure on our employees, contractors, and the Taylor community, and we will work constructively in the weeks and months ahead on the transition."

Weyerhaeuser said it continues to employ around 924 employees in Louisiana at five manufacturing facilities. The company owns and sustainably manages more than one million acres of timber in the state.

Weyerhaeuser will release second quarter 2009 results on July 31 before the market opens. The company reaffirmed its previous outlook for the quarter earnings.

In 2008, the company's sales were $8 billion, and has operations in 10 countries.