Deltic Timber’s Most Valuable Asset? Its @530,000 Acres of Timberland

A natural resources enterprise, Deltic Timber Corporation owns roughly 530,000 acres of timberland (stocked mainly with Southern Pine), and operates two sawmills and a medium density fiberboard (MDF) plant. In addition, the El Dorado, Arkansas based Company involves in real estate development. Its operations are located mainly in Arkansas and north Louisiana.

Established in 1996, Deltic Timber engages in the growing and harvesting of timber; as well as the manufacturing and marketing of lumber and medium density fiberboards (MDFs) in the U.S. In late 1996, Murphy Oil declared a stock dividend split to spin off Deltic Farm & Timber. Subsequently, Deltic Farm & Timber reincorporated as Deltic Timber Corporation. Del-Tin Fiber L.L.C. is a wholly-owned subsidiary of Deltic Timber. Del-Tin Fiber manufactures and markets the aforementioned MDF.

Deltic Timber’s principal operations are its Woodlands segment. The Company’s most valuable asset is the timberlands. Deltic also has its Manufacturing segment and its above-mentioned Real Estate segment. Deltic Timber has reported positive annual financial results every year since 2002 and for 27 out of the last 29 quarters.

The counties and parishes where the Company owns timberland include: Ola, Little Rock, Hot Springs, Waldo, and El Dorado in Arkansas, as well as areas in Louisiana. Deltic’s land comprises 124,500 acres of pine forests and 340,000 acres of pine plantations. The remainder comprises hardwood and non-forested land.

Regarding Deltic Timber’s Real Estate segment, it develops and markets residential lots for homebuilders and individuals; and commercial sites for developers and businesses. Additionally, it sells undeveloped acreage. For Q2 2016, Deltic Timber’s real estate operation reported Operating Income of $1.2 million versus an operating loss of $1.1 million the year prior.

Furthermore, this segment leases retail and office space to third parties; resells existing homes; and also operates a country club. Three development projects of the Real Estate segment are Chenal Valley, Chenal Downs, and Red Oak Ridge, all in Arkansas. The Company’s two state-of-the-art Southern Pine mills are at Ola in central Arkansas and at Waldo in south Arkansas, respectively.

In 2015, Deltic harvested 755,417 tons of pine sawtimber and 394,165 tons of pine pulpwood. It invested $24.4 million in projects in manufacturing facilities to boost
production rates as well as efficiencies. The Company sold 105 residential lots.

For the six months ended June 30, 2016, Deltic Timber harvested 409,381 tons of
pine sawtimber and 263,398 of pine pulpwood. It grew lumber sales volume 15%, to
141.5 million board feet. In addition, it sold 28 residential lots at an average price of $89,000 per lot and sold 10.8 acres of commercial real estate for $152,500/acre.

Concerning Q3 and year of 2016, Deltic Timber’s estimation is that finished lumber sales volume will be 60 million to 70 million board feet, and 265 million to 285 million board feet, correspondingly. Regarding Q3 and year of 2016, the MDF sales volume is forecast to be 25 million to 35 million square feet, and 100 million to 120 million square feet, respectively.

Deltic Timber has scheduled a conference call at 10:00 a.m. Central Time on Thursday, October 27, 2016. This call is to review the Company’s Q3 results, which it will announce on Wednesday, October 26, 2016 after the market closes.