Rayonier Inc

NYSE:RYN

Earnings Call Transcript 2021-Q4

[Operator]

Welcome, and thank you for joining Rayonier's Fourth Quarter and Year-End 2021 Teleconference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now, I will turn the meeting over to Mr. Collin Mings, Vice President, Capital Markets and Strategic Planning. Please go ahead.

[Collin Mings]

Thank you, and good morning. Welcome to Rayonier's investor teleconference covering fourth quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our Web site at rayonier.com.

I would like to remind you that, in these presentations, we include forward-looking statements made pursuant to the Safe Harbor provisions of federal securities laws. Our earnings release and Form 10-K filed with the SEC list some of the factors that may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on page two of our financial supplement.

Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measure in our earnings release and supplemental materials.

With that, let's start our teleconference with opening comments from Dave Nunes, President and CEO. Dave?

[Dave Nunes, President and Chief Executive Officer]

Thanks, Collin. Good morning, everyone. First, I'll make some high-level comments, before turning it over to Mark Mchugh, Senior Vice President and Chief Financial Officer, to review our consolidated financial results. And then we'll ask Doug Long, Senior Vice President, Forest Resources, to comment on our U.S. and New Zealand timber results. And following the review of our Timber segments, Mark will discuss our real estate results, as well as our guidance for 2022.

We concluded 2021 with solid operational results, and are very pleased with our overall full-year financial performance. We achieved record full-year adjusted EBITDA results in both our Southern Timber and Pacific Northwest Timber segments, despite contending with increased costs, as well as volume constraints driven by inclement weather conditions. Our New Zealand Timber segment achieved our third highest ever full-year adjusted EBITDA result despite navigating a myriad of export market challenges and COVID-related headwinds during the course of the year.

Meanwhile, in our Real Estate segment, we achieved the second-highest adjusted EBITDA result and highest weighted average pricing since our separation into a pure-play timber REIT, underscoring our focus on optimizing our portfolio and maximizing HBU premiums. We further achieved record improved development sales of roughly $52 million for the year. Overall, for the full-year, we generated GAAP EPS of $1.08 per share, pro forma EPS of $0.67 per share, and adjusted EBITDA of $330 million. While the pandemic continued to pose challenges throughout the year, we were able to achieve very strong results across the company, due in large part due to the unwavering focus of our people, the relative strength of our markets, and our nimble approach to operational decision-making.

These factors, coupled with improving end market demand, are setting the foundation for another strong year in 2022. As Mark will discuss in greater detail, we're providing full-year 2022 adjusted EBITDA guidance of $310 million to $340 million. Notably, the midpoint of our initial 2022 guidance is down only slightly from 2021, despite our expectation that the contribution from real estate activity will return to more normalized level this year.

Stepping back to the fourth quarter, we generated total adjusted EBITDA of $50 million, and pro forma EPS of $0.01 per share. Drilling down to our different operating segments, our Southern Timber segment generated adjusted EBITDA of $34 million for the quarter, which was 44% above the prior year fourth quarter. We were encouraged to see net stumpage prices increase by 25%, as well as a 14% increase in harvest volumes. In our Pacific Northwest Timber segment, we achieved adjusted EBITDA of $13 million, down 8% from the prior year quarter. The year-over-year decrease was primarily attributable to higher costs, partially offset by higher net stumpage prices and higher non-timber income.

In our New Zealand Timber segment, fourth quarter adjusted EBITDA fell to $10 million, down from $17 million in the prior year quarter, as higher pricing was more than offset by 9% lower production volumes, and compressed margins due to significantly higher shipping costs.

In our Real Estate segment, we generated adjusted EBITDA of $3 million, down significantly from $26 million in the prior year period as the 90% reduction in acres sold was partially offset by a significant increase in weighted average prices. The moderation in real estate activity to end 2021 was anticipated following an exceptionally strong third quarter.

Switching gears from fourth quarter results, I'd like to highlight the active quarter we had on the portfolio management front. As previously disclosed, we closed the final two transactions associated with our sale of the timber funds business during the fourth quarter, and have now completely exited this business. In sum, we generated total proceeds to Rayonier of approximately $73 million through our divestiture of the Timber Funds business. We're very pleased to have successfully exited this business as it allows us to simplify our corporate structure and financial reporting.

We're further pleased to have returned significant capital from this non-core asset at a favorable valuation relative to our initial underwriting, in 2020. Additionally, we closed the acquisition of 66,800 acres in Texas and Georgia for $124 million, or roughly $1,860 per acre during the fourth quarter. These properties are positioned in strong timber markets with a diverse customer base, and we expected that they will generate a sustainable harvest of approximately 220,000 tons annually. The opportunistic use of our aftermarket equity offering program, as well as proceed from the sale of the Timber Funds business provided us with ample balance sheet flexibility to fund this acquisition with cash on hand.

With that, let me turn it over to mark for more details on our fourth quarter financial results.

[Mark Mchugh]

Thanks, Dave. Let's start on page five, with our financial highlights. Sales for the quarter totaled $262 million, while operating income was $34 million, and net income attributable to Rayonier was $9 million, or $0.06 per share. On a pro forma basis, net income was $2 million or $0.01 per share. Pro forma adjustments for the quarter were primarily associated with the actions taken to exit the Timber Funds business. We generated fourth quarter adjusted EBITDA of $50 million, which was down from the prior year period primarily due to a much smaller contribution from our Real Estate segment.

For the full-year, adjusted EBITDA, of $330 million, increased significantly over 2020 adjusted EBITDA of $267 million as each of our key operating segments registered meaningful year-over-year improvements. On the bottom of page five, we provide an overview of our capital resources and liquidity at year-end, as well as a comparison to the prior year. Our cash available for distribution, or CAD, for the full-year was $208 million, versus $162 million in the prior year, primarily driven by higher adjusted EBITDA which was partially offset by higher cash taxes, interest expense, and capital expenditures. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on page eight of the financial supplement.

Consistent with our nimble approach to capital allocation, we raised $66 million through our aftermarket equity offering program, during the fourth quarter, at an average price of $39.70 per share. As previously discussed, we view the ATM program as a cost effective tool to opportunistically raise equity capital, strengthen our balance sheet, and match-fund bold-on acquisitions. We closed the quarter with $359 million of cash, and $1.4 billion of debt. Our net debt, of $1 billion, represented 14% of our enterprise value based on our closing stock price at the end of the year. Subsequent to quarter-end, as previously announced, we redeemed $325 million of senior note, due 2022, with cash on hand and proceeds from the $200 million delayed draw term loan, executed in mid 2021.

Pro forma for these financing actions, our weighted average cost of debt declined to roughly 2.7%, while our weighted average maturity was extended to roughly seven years.

I'll now turn the call over to Doug to provide a more detailed review of our fourth quarter timber results.

[Doug Long, Senior Vice President, Forest Resources]

Thanks, Mark. Good morning. Let's start on page nine with our Southern Timber segment. Adjusted EBITDA in the fourth quarter of $34 million was $10 million above the prior year quarter. The year-over-year improvement was primarily driven by significant increase in net stumpage pricing and higher harvest volumes, partially offset by higher costs. More specifically, volume climbed 14% during the fourth quarter as dryer conditions enabled customers to ramp up production to meet demand.

Despite ongoing constraints on trucking availability, sawlog stumpage pricing rose 21% versus the prior year quarter. At nearly $31 per ton, fourth quarter pricing reflected the highest average Southern sawlog realizations we have registered since our separation into a pure-play timberland REIT in 2014. Improved pricing reflects strong demand from sawmills, the impact of weather-related constraint on supply, upward pressure on chip-n-saw pricing due to increased competition from pulp and pellet mills as well as export log demand in certain markets.

Pulpwood pricing also improved significantly increasing 34% from the prior year quarter. Primarily driven by strong domestic demand and constrained supply due to wet weather conditions leading into the fourth quarter. Overall, weighted average stumpage prices improved 25% year-over-year. We are pleased with the pricing gains we achieved during the quarter, and are encouraged that this positive momentum has continued into the New Year as customer demand across our Southern footprint remains very robust even as weather conditions have normalized.

Moving to our Pacific Northwest Timber segment on page 10, adjusted EBITDA of $13 million was $1 million below the prior year quarter. The year-over-year decrease was attributable to slightly lower harvest volumes and higher cost partially offset by higher net stumpage prices and higher non-timber income. Volume declined 2% in the fourth quarter as compared to the prior year quarter as unfavorable weather conditions impacted harvest activity.

Turning to pricing, at roughly $98 per ton, our average delivered sawlog price during the fourth quarter was up 2% from the prior year quarter. Strong pricing was generally sustained throughout the quarter with positive price momentum in early 2022 amid the recent surge in lumber prices and improving export market demand. Meanwhile, pulpwood pricing increased 9% in the fourth quarter relative to the prior year quarter due to improved demand as pulp mills in the region resumed full production.

Page 11 shows results and key operating metrics for our New Zealand Timber segment. Adjusted EBITDA in the fourth quarter of $10 million was $7 million below the prior year quarter. The decline in adjusted EBITDA was driven by lower harvest volumes, higher freight and emerged costs, higher logging costs, and lower carbon credit sales partially offset by stronger delivered log prices and favorable foreign exchange impacts. Volume declined 9% in the fourth quarter as compared to the prior year quarter primarily due to above average production in the prior quarter following COVID-related disruptions earlier in the year.

Turning to pricing, average delivered prices for export sawtimber increased 27% in the fourth quarter from the prior year quarter to nearly $133 per ton. The improvement in export sawtimber prices versus the prior year period reflected our ability to pass on some of the higher costs we are experiencing to customers as well as the restriction competing log imports into China from Australian. However, as compared to previous two quarters, the pricing environment for radiata pine logs weakened during the fourth quarter in response to elevated log inventories in China and softer demand, a slowdown in construction activity, adverse weather conditions and power shortage in China collectively reduced the off tick from ports resulted in pricing pressure on log exports.

That said, we believe pricing likely bottomed in December. We have seen pricing improve to start '22, reduced flow of European Spruce salvage logs into China, the continued ban on Australian log imports by China and the ban on Russian log exports are collectively translating into improving supply-demand dynamics ahead of the lunar New Year. We expect log inventories in China to normalize as demand picks up following the holiday which should translate into improved export pricing.

Shifting to the New Zealand domestic market, demand remains healthy albeit constrained to some degree by COVID related restrictions and the availability of labor. During the fourth quarter, average delivered sawlog prices increased 10% from the prior year period to $81 per ton. Excluding the impact of foreign exchange rates, domestic sawtimber prices improved 6% versus the prior year period following the upward trend in the export market.

As a reminder, domestic sawtimber pricing normally follows export pricing with a lag. Average domestic pulpwood pricing climbed 20% as compared to the prior year quarter. As it relates to carbon credits, we continue to defer sales during the quarter. However, we have resumed carbon credit sales in 2022 following a doubling of carbon pricing over the past year

Moving ahead, we will continue to remain opportunistic in our sale of carbon credits depending on market conditions. I'll now briefly discuss the results from our Timber Funds segment. Highlighted on page 12, the Timber Funds segment registered slightly negative consolidated EBITDA in the fourth quarter on harvest volume of only 22,000 tons. Adjusted EBITDA, which reflects the look-through contribution from the Timber Funds, was also slightly negative.

As Dave discussed earlier, we have completed our exit from the Timber Funds business and will discontinue reporting this segment next quarter. Lastly, in our Trading segment, we posted a slight operating loss in the fourth quarter. As a reminder, our trading activities typically generate low margins and are primarily designed to provide additional economies of scale to our fee timber export business.

I'll now turn it back over to Mark to cover our real estate results. Mark?

[Mark Mchugh]

Thanks, Doug. As detailed on page 13, as expected the contribution from Real Estate segment was relatively light during the fourth quarter compared to the exceptionally strong results posted in the third quarter. Fourth quarter real estate sales totaled $11 million on roughly 12,000 acres sold at an average price of over $86,000 per acre. Adjusted EBITDA for the quarter was $3 million.

Sales in the improved development category totaled $4 million in the fourth quarter. In our Richmond Hill development project, South of Savannah, Georgia, we closed $3 million of sales including our first non-industrial parcels which consisted of two residential lots and a 5-acre commercial property. We also completed an industrial sale consisting of 12 acres.

Meanwhile, within our Wildlight development project north of Jacksonville, Florida, we closed on roughly 5 acres of commercial property for approximately $2 million. While the timing of development related land sales will remain lumpy quarter to quarter, the location and increasing maturing of our projects offer us a strong foundation to capitalize on the migration demographic trends that we believe will benefit our land holdings in Wildlight, Richmond Hill, and the West Puget Sound area of Washington for years to come.

Turning to the rural category, sales totaled roughly $6 consisting of 1200 acres at an average price of just over $5100 per acre. Thus far in 2022, demand for rural land remains healthy as the space, privacy and recreational opportunities offered by these properties continue to attract buyers. We remain intently focused on achieving significant premiums to timberland volumes through activities of our real estate platform and are encouraged by the pipeline of sales we are building for the year ahead.

Now moving on to our outlook for '22, page 15 shows our financial guidance by segment and schedule G of our earnings release provides reconciliation our adjusted EBITDA guidance to our net income attributable to Rayonier as well as EPS. For full-year '22, we expect to achieve adjusted EBITDA of 310 to $340 million, net income attributable to Rayonier of 83 to $92 million, and EPS of $0.57 to $0.64.

In our Southern Timber segment, we expect to achieve full year harvest volumes of 6.3 to 6.6 million tons. The anticipated increase relative to prior year reflects a rebound in harvest activity following the wet weather conditions and supply chain constraints that negatively impacted full-year 2021 volumes as well as the expected contribution from recent acquisitions.

We also expect a meaningful improvement in weighted average stumpage realizations relative to full-year '21 driven by strong demand partially offset by higher harvest and transportation cost. Notably our guidance range also contemplates the near-term uncertainty associated with Southern log exports to China due to the recently implemented pinewood nematode policies.

All said, we expect full-year adjusted EBITDA of 145 to $153 million in our Southern Timber segment. In our Pacific Northwest Timber segment, we expect full-year harvest volumes of 1.7 to 1.8 million tons. We have seen improved domestic log demand following the recent increase in lumber prices. We are also seeing signs of increased export demand to start '22 and expect continued momentum as reduced flow of logs from other markets drives increased export demand in the Pacific Northwest.

Based on these supply-demand dynamics, we expect that weighted average log pricing will increase modestly relative to full-year 2021. However, we expect that higher delivered prices will be largely offset by increased harvest and transportation cost. Overall, we expect full-year adjusted EBITDA of 55 to $60 million.

In our New Zealand Timer segment, we expect full-year harvest volumes of 2.6 million to 2.8 million tons. While current log pricing remains below 2021 average levels, we expect the pricing will improve as log inventories in China normalize, and export demand picks up, following the Lunar New Year. For the full-year, we expect that average export and domestic pricing will be only modestly below 2021 levels. That said, we expect that increased harvest and transportation costs will continue to put pressure on net stumpage realizations.

Lastly, as Doug noted earlier, we expect that our New Zealand Timber segment will benefit from the resumption of carbon credit sales in 2022. Overall, we expect full-year adjusted EBITDA of $68 million to $75 million. However, due to seasonally lower volumes, continued supply chain disruptions and lower current pricing relative to the levels we expect for the full-year, we expect a lower adjusted EBITDA contribution from the segment in the first-half versus the second-half of the year.

In our Real Estate segment, we expect full-year adjusted EBITDA of $70 million to $80 million. As previously discussed, following exceptionally strong real estate results in 2021, we anticipate more normalized transaction activity in 2022. More details regarding our 2022 guidance can be found on page three of the earnings release, as well as page 15 of the financial supplement.

In sum, the market backdrop generally remains positive across our businesses. That said, as discussed last quarter, we are not immune from the supply chain and inflationary pressures that are impacting many parts of the global economy. We expect these challenges will likely persist through at least 2022. However, our team continues to work diligently to optimize haul distances, leverage our scale and dependability in both domestic and export markets, and make prudent silviculture investment decisions tied to localized supply-demand dynamics. Overall, we believe we are well-positioned to navigate logistical challenges and largely recoup the impact of cost increases in our log pricing.

I will now turn the call back to Dave for closing comments.

[Dave Nunes, President and Chief Executive Officer]

Thanks, Mark. As I reflect on 2022, I'm proud of both our exceptional financial performance as well as our team's relentless focus on executing against our strategic priorities in what was a challenging and ever-evolving operating environment.

Following a very tumultuous 2020, with the introduction of vaccines early in 2021, we were hopeful that we would return to some form of normalcy as the year progressed. However, with the emergence of two new variants, the operating environment remained challenged by period COVID-related disruptions and supply chain constraints. We further had to content with labor shortages and persistent wet weather in many of our regions, which when combined with the challenges posted by COVID, reduced our harvest volumes versus our original plan. Despite these headwinds, our team work diligently to adapt to fast-changing market conditions, and logistical challenges to capitalize on the favorable pricing environment, and post excellent financial results.

Our real estate team also did a stellar job in 2021 of capitalizing on market opportunities, and successfully leveraging the breadth of product offerings across our portfolio. Due in part to general shortage of residential logs within our markets, we made a strategic decision to sell undeveloped pods in both Wildlight and the Pacific Northwest. Meanwhile, the favorable momentum associated with the expansion of the Port of Savannah as well as the new I95 Interchange in Richmond Hill allowed us to accelerate the absorption of industrial parcels. In sum, real estate results benefited from both strong pricing and faster absorption. Looking ahead, we are encouraged by the momentum across our development project, and believe that they're ideally positioned for further success.

Beyond our favorable full-year financial performance, we tackled a number of important initiatives in 2021. In the wake of the Pope Resources transaction, a major initiative this past year was to create some added balance sheet capacity for future growth. To this end, we successfully sold over 16,600 acres of less strategic holdings in Washington State, as well as completed our exit of the timber funds business at a value that exceeded our initial underwriting. Further, we opportunistically issued a total of $236 million equity to our ATM program in 2021, at a weighted average price of $37.05 per share, as well as restructured our debt portfolio to a series of actions that extended our weighted average maturity, and lowered our weighted average cost of debt. These portfolio and balance sheet moves allowed us to remain nimble and active, acquiring Timberland, in 2021, as we closed nine acquisitions in the U.S. and New Zealand, totaling 102,000 acres for $179 million.

With year-end net debt to adjusted EBITDA of 3.1 times, we believe we are well-positioned to execute on future high-quality growth opportunities and other capital allocation priorities. While this was a very busy year on the operational capital markets and transaction fronts, we also made significant strides in advancing ESG-related initiatives. We believe Rayonier is uniquely well-positioned for a low carbon economy, and we're proud to publish our first ever carbon report covering 2019 data earlier this year. We followed this report, in August, with the publication of our 2020 carbon report, as well as our inaugural sustainability report.

Beyond the publications of these reports, I would also note that we continue to advance many other ESG-related initiatives, and have further set out ambitious ESG objectives for 2022. As we enter 2022, I'm encouraged by strong end market demand, and believe we have the team and portfolio to capitalize on favorable pricing momentum across many of our timber markets, as well as continued strong interest in rural land and entitled development properties. The resiliency and dedication of our employees over the past two years demonstrates their ownership mentality. As market conditions and opportunities continue to evolve, I'm confident this collective mindset will continue to drive long-term value creation for our shareholders.

This concludes our prepared remarks. And I'll now turn the call back over to the operator for questions.

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Anthony Pettinari with Citi. You may go ahead.

[Anthony Pettinari, Citi]

Good morning.

[Dave Nunes, President and Chief Executive Officer]

Morning.

[Anthony Pettinari, Citi]

In real estate, in the last year, you generated $100 million in EBITDA, which was well above the guidance you initially gave for the year. And, I think, in 2020, you did $90 million, which was at the high end of the initial guidance, even with the pandemic hitting. So, when we think about the '22 guide of $70 million to $80 million, I'm just wondering if you could talk or help us sort of frame the dynamics in that business which is, obviously, lumpy, but has been beating expectations in recent years. And is there a level of conservatism in the guide just given how hot land markets in the south appear to be?

[Mark Mchugh]

Yes, thanks, Anthony. This is Mark, I'll take that. Look, it's a very tough business to forecast because the nature of the transactions, they're binary; they either occur or they don't occur. Last year, in particular, we obviously had the Arborwood transaction in the Pacific Northwest, which was a $37.5 million transaction. So, that meaningfully moved the dial to the positive. And from time to time we had those, and it does -- it can dramatically change your outlook for the year when you have a single transaction of that nature that comes in, because we were not anticipating that transaction coming into the year in 2021. So, I think we've tended to outperform in real estate.

We're obviously in a very hot real estate market. We built the pipeline of development properties. And to the development properties, in particular, tend to be a bit more predictable. They have to be at a sort of state of readiness to go out to market with. It's really the rural and the unimproved development where, from time to time, we'll have some outsized wins that we weren't anticipating going into the year. But it's a little bit -- we're always a bit reluctant to kind of assume that we're going to see that type of activity, because if it doesn't happen you end up sort of -- you could end up meaningfully underperforming your outlook for the year.

So, we always think it's prudent to be a bit conservative in our outlook for the year, and we'd prefer to kind of outperform that outlook versus underperform. But, keep in mind, from a very long-term perspective, we do try to kind of model this business based on our historical experience. And our historical experience, it's going back 15 years, as, on average, we've sold about 25,000 acres a year into that HBU market, generally at premiums in the range of 50% to 100% above Timberland value. Obviously, last year was quite a bit stronger than that. But when we think about the longer-term and sort of the stead state for that business, that that's kind of where we come out. So, I think what we've guided to for next year is very consistent with that, albeit leaning more towards some higher value opportunities, particularly on the development front.

[Anthony Pettinari, Citi]

Okay, that's very helpful. And then, last year, your weighted Southern Timberland pricing was up, I think, 15%. I know there's a lot in there with mix, and weather, and higher cost, but looking to '22, your outlook for U.S. outpricing seems upbeat or maybe a little bit more upbeat than peers. Just wondering from a big picture perspective, if you could talk about your sort of degree of visibility or degree of confidence in pricing momentum in the south in '22 maybe compared to previous years?

[Dave Nunes, President and Chief Executive Officer]

Yes, Anthony, this is Dave. I'll give some intro, and Doug can kind of pick up. I mean, this is something that we've been talking about for a long time, as you know. I think an element of this is certainly geographic mix. And keep in mind, as we've discussed, the majority of our southern ownership is in wood baskets with balanced growth train relationship ratios. And so, these create greater price elasticity during times of rising lumber markets. And so, I think that fact gives us a fair bit of bullishness as we think about those markets. And we've certainly seen that this last year, and starting this year. I think another nuance to kind of keep in mind is, as a pure play timber REIT, we have a fair bit of flexibility in the form of sale, and we pride ourselves in that.

Some people like to say they're all delivered. We believe in a mix of delivered sales and stumpage sales, which we think gives us a nimble sales posture where we don't have internal mills to feed. We feel like we can pull that lever and extract a value from time to time. And then thirdly, I think a breadth of product offerings. We vary our [regimes] [Ph] species to species, region to region, some where we have -- we're heavier to saw timber, others where we're heavier to pulpwood markets, trying to capitalize on what the market gives us. And then I think lastly is the role that exports play. And we feel that helps tension markets in the south on the margin, and really that's how prices are ultimately determined.

Maybe Doug can provide some additional color to your question.

[Doug Long, Senior Vice President, Forest Resources]

Yes, I would agree with. I mean, Dave said very well. I think the key thing we see, particularly we've been talking about is the increased capacity of sawmills in our operating area, and particularly along the Atlantic coast. And so, we've really seen those come to play. In the past few years, we've seen about a 500 million board feet come into the Florida markets, another 1.3 billion in the Georgia markets, and 700 million in the South Carolina, another, call it, 1.5 billion board feet in the Alabama market. And so, we're really seeing a lot of growth in those areas, a lot of competition for sawlogs. And so, we're really seen demand, even as weather normalized, we've just seen increased demand and in pricing in those markets.

So, we're really seeing that reaction that Dave mentioned to the supply-demand there, and really pleased that in all of our areas, except for Arkansas, we saw meaningful price improvement across all of our grades. So, really, just the one [lag] [Ph] that we had in that area, and, thankfully, we're about done with our harvesting in that area, and we're moving on past those. So, it was a really strong year for us. And we see that continuing into this year, as Dave mentioned, capitalizing on those stumpage sales program early in the year.

[Anthony Pettinari, Citi]

Okay, that's very helpful. I'll turn it over.

[Operator]

Thank you. The next question is from Mark Wilde with BMO Capital Markets. You may go ahead.

[Unidentified Analyst]

Good morning, guys. It's [Jesse Barone] [Ph] on for Mark. I guess just to start, could you give your outlook for Timberland M&A activity in 2022, kind of what valuations look like and kind of what you're seeing on the ESG front, how that's impacting those valuations?

[Dave Nunes, President and Chief Executive Officer]

Yes, I think we're definitely in a mode where the markets are pretty strong right now. We're seeing a fair bit of capital continue to flow into those markets. And I think that's translated into some compressed discount rates in terms of behavior. It's always hard to predict fully, in a year, a forward sense the level of transactions activity. I can't say that we're active in all three of our primary geographic segments looking at properties. But at the same time, we're being careful to stay disciplined, and really looking for those opportunities that are nice bolt-on fits. We're a believer in sort of smaller is better in terms of complimentary fit. And so, we just continue to kind of plug away in that respect.

[Unidentified Analyst]

And then just one other for me, on the southern export side, can you just give more detail around kind of what those volumes look like, where they could eventually get to in a couple of years, and how much of an impact they've really had on pricing on the short-term? Thanks.

[Doug Long, Senior Vice President, Forest Resources]

Yes, this is Doug, I'll take that. Yes, as mentioned before, for competitive reasons, I won't really go into our specific volumes and things like that on these markets, but can talk a little bit overall about what we're seeing right now. And, basically, with the pinewood [intern] [Ph] policy that's been implemented in China, we're seeing quite a few exporters that have left the market; matter of fact, over a dozen exporters along Atlantic Coast have shut down exports to China. So, expect to see a pretty sharp decline in exports in China into Q1, at least. Matter of fact, between October-November, which it normally goes till the New Year, but we saw 50% decline, so, we've seen a significant decline there.

To make up for that though we've heard China importers have acquired three Panamax vessels from Uruguay, and -- for Q1. And Uruguay has been a large importer of [Southern Yellow] [Ph] Pine into India. So, their pivot from India to China has opened up the market for Southern Yellow Pine into India. And so, we're working on moving volume into India, have been, and increased our volumes in there in Q1. And so while we analyze that China supply side implementation of the new nematodes, we're looking at growing our business into China and Vietnam. So, we do believe there's going to be a reduction, at least in the first-half of the year, overall, across the south of exports as people try to react to what things look like, but that it favors the larger exporters as we look to position ourselves in the different markets.

[Unidentified Analyst]

Great, thanks. I'll turn it over.

[Operator]

Thank you. The next question is from Mark Weintraub with Seaport Research Partners. You may go ahead.

[Mark Weintraub, Seaport Research Partners]

Thank you. So, just following up a little bit on this, the notion of more lumber production in the south helping your business, it's sort of interesting, if you actually look at the data, it doesn't seem like there was that much more lumber production in the south this year overall. But maybe it's been different in your specific markets. And I guess there, there's a good and a bad interpretation of that. On the one hand, I may ask the question, was it weather or more demand that was helping pricing in the south to date? And then I guess the follow-up would be, if we didn't have that production increase show up, do we have a big step up that's ahead of us, and obviously that could be a positive, I would think. So, any thoughts or color around those observations?

[Doug Long, Senior Vice President, Forest Resources]

Yes, I'll start there. I mean, we definitely had a wet summer in particular, and so we definitely saw some wet weather impacts on things we went through. But really, in Q4, that started to moderate and dry out, and has been reasonable, actually below the prior year as we move into the first quarter. So, while there were wet weather impacts, we also have just seen that increased demand from the mills. And can't really comment to myself -- the mills on their production levels or where they are, but we continue to see we had a wet weather impact, but after that things have moderated, and we continue to see just increased demand for every time we put wood out for sale we have a delivered negotiation.

[Dave Nunes, President and Chief Executive Officer]

Yes, Mark, I'd add to that, keep in mind that you have fairly long ramp-ups on some of these CapEx announcements on the sawmill side, and then that's been exacerbated by COVID outbreaks from time to time. And so, I think that's acted, those two things plus general backlog on equipment that's been ordered for part of these new facilities, I do think you're going to see kind of a gradual increase in southern production as those things kind of get ironed out over time. But I think to Doug's point, we're encouraged that we're seeing that already in a demand sense, even though we've got a ways to go to get to those kind of nameplate production levels.

[Mark Weintraub, Seaport Research Partners]

And I guess I was just trying to get a read as to whether or not there is the potential for a more compressed step up because of the issues that you referenced with COVID, et cetera, that sort of maybe prevented the industry from really running at its production -- full production capability. As supply chain and absenteeism potentially become less of a problem, do you think there's -- do you get a sense from your customers that there could be a big step up that arrives or is it -- I think I heard you suggesting the, in all likelihood, more gradual, so, just wanted to push on that a little bit.

[Doug Long, Senior Vice President, Forest Resources]

Yes, I'll take a step at this, Doug again. I mean, I'll give you some and-all evidence, I guess, from customer discussions. And to your point, we're well aware of multiple mills -- a lot of mills having to take downtime one to two weeks due to COVID over time. So, I do think, as Dave mentioned, there's incremental capacity that'll come online and continue to work. I wouldn't learn -- try to guess on whether there's a compressed increase or not, but what we're seeing is just that sustained price momentum and growth as we go. And I do believe there'll be increased demand, because we have seen a lot of the mills that we supply have taken downtime, particularly on the sawmill side of things over the course of the past year.

[Mark Weintraub, Seaport Research Partners]

Okay, great. And one quick other follow-up on the Timberlands question, so, based on your comments and what we've heard from some others, it sounds like the market feeding up, the discount rates are low again, et cetera. And yet you're selective. I mean, how hard is it going to be for you to get the type of opportunities to grow the business at the prices that make sense to you? Are you feeling at all discouraged at this point, given what's going on? Or, conversely, are there reasons for optimism?

[Dave Nunes, President and Chief Executive Officer]

I mean it certainly is competitive; I don't want to sort of mislead you there. But I'd say also, we purchased 102,000 acres last year, which is not insignificant. We tend to put a fair bit of emphasis on negotiated bolt-on sales that tend to get less visibility, so we like that, that posture. And we're happy with the growth that we've had. We've placed $179 million into those transactions, all of which were bolt-ons. And we added lands in strong markets, roughly a quarter in Florida and Georgia, roughly a half in Texas, and the balance, a small amount in New Zealand. And so, we think these are all very nice from a complimentary fit with our existing land base, nice quality lands, they're not encumbered by wood supply agreements, so we think that gives us lots of optionality going forward. And in this recently announced transaction that had lands in about roughly 52,000 acres in Texas, that's within three hours of two of the nation's top 10 single-family housing markets. And so, we're excited about kind of the strategic location of that and the fit with our existing operations in Texas.

[Mark Weintraub, Seaport Research Partners]

Okay, great, thanks. Appreciate the color and the insights.

[Operator]

Thank you. The next question is from Paul Quinn with RBC Capital Markets. You may go ahead.

[Paul Quinn, RBC Capital Markets]

Yes, thanks, guys. Good morning. Just to start off and maybe in Timberlands. Just trying to understand the conservatism that sort of I -- I expected a higher guide on Pacific Northwest and New Zealand just because of that log export ban in Russia. So, just wondering what the log inventories are currently in China, when you expect them to normalize, and why you aren't seeing further or more upside on the pricing side?

[Doug Long, Senior Vice President, Forest Resources]

Sure, this is Doug; I'll start off on this one. So, currently, we're seeing the China inventory level, it's around 5.4 million cubic meters, which is actually down from December, so that's a good for us. December and early January demand, actually prior to Lunar New Year surprised us to the upside. And, in December, it was running around 8,000 cubic meters per day, and then around an average of 45,000 cubic meters per day in January, which include the impact of holiday shutdowns. So, pretty strong demand going into the holiday, so we're upside on that.

And the customers are beginning to see that the future impacts of reductions in softwood log supply that you mentioned from Russia and reduced European spruce salvage, and the continued Australia ban, and now, the uncertainty over U.S. Southern Yellow Pine due to the nematode policies, as well as the strong U.S. domestic demand. What we did have though was that kind of a real estate correction that loomed over the markets in late Q3 and in early Q4. And so, the market did drop off where it was in 2021. But with the government stepping in to restructure made those debt companies come with more state-owned entities were starting to see that less in the market, and the government had already lifted some of the constraints on mortgage borrowers, and reduced the bankers ratio, still more liquidity in that market, and in addition, they're investing more infrastructure projects to help boost growth, and that's a good signal to our lumber and plywood customers, and that will significantly offset the housing downturns. So, we see good strong demand coming out of China after the Lunar New Year.

One of the big things we have working on is still shipping. So, shipping prices are still extremely high. There is plenty of pressing out there in the world, I think it's happening. Times are getting better, going into China. But you still are subject to individual port lockdowns due to strict COVID policies they have there. So, any given vessel can be locked down, and we've had vessels sit for upwards of 30-40 days sometimes trying to get in. So, there's a few things that out there that kind of give us a cautiousness around -- we're looking at, we see strong demand, but we still see supply chain challenges as we go through there, but you know, the logs that you mentioned, and then also there is couple, but there's a decrease of over 25% lumber imports in 2021 due to the strengthening of the markets in U.S. and Europe. But we do see positive on the demand side, but we are just bit cautious around the supply chain constraints in the market right now.

[Paul Quinn, RBC Capital Markets]

Okay, that's great color. Thanks. And then, over on the carbon side, with respect to North America, when your competitors has been pretty -- well, started to set some goals, longer-term goals, just wondering what -- how you think about monetizing your carbon sequestration on your timberlands in North America?

[Mark Mchugh]

Hey, this is Mark. I'll take that. The market opportunity there I think is still fairly speculative. We continue to believe that carbon represents a very significant opportunity for our sector, not only to be part of the solution to climate change, but also to improve the economics of our forest. The path in that zero is going to require negative emissions. The key issue going forward is how negative emissions are accounted for, and how the market for negative emissions ultimately evolves over time. The demand for carbon offsets in the voluntary market was about 100 million units in 2020. Various forecasts show that demand growing by 10 to 15 times by 20230, and by 50 to 100 times by 2050. So, that's what it gets you to imply demand for negative emissions of at least 5 billion metric tons of CO2 equivalents in 2050, within accelerating path to that figure between now and then. To put that in context, the global industrial round wood harvest in 2019 was about 2 billion tons. So, there is a big disconnect between sort of the demand for carbon and kind of the available fiber supply to provide that carbon at least within the forestry market. So, we think this could become a big opportunity for our sector. Working for us are the most readily available and cheapest technology that's out there today to generate negative emissions, but that's not the only technology, you know, there are other technologies like direct carbon capture and storage. But those types of technologies are going to require much higher economic incentives to really get off the ground in the form of higher offset pricing for example.

I think it's also worth noting that even when you kind of putting aside carbon, there are various other potential uses of wood fiber on this path in that zero, but we also think to be pretty impactful for industry, such as sustainable aviation fuels, biomass energy, and mass timber. So, as we think about the broad opportunity around -- economic opportunity around ESG, any one of these uses could have a very significant effect on the demand for wood, fiber and land use, especially if they really scale up, taken together we think it's such a pretty compelling backdrop as we look forward around the role the working forest could play in climate change, but it's still very difficult to estimate kind of what that value looks like on a go-forward basis. Right now, the voluntary market prices of carbon are at a level that isn't really going to incentivize a meaningful change in our behavior. So, we are really going to need to see that market scale up over time, and the price of carbon in the voluntary market move up over time to really kind of start to assess how that's going to affect our industry.

[Dave Nunes, President and Chief Executive Officer]

Yes, I would just add to that, kind of on New Zealand experience, and our participation in the emissions in New Zealand gives unique perspective as it relates to monetizing carbon, and the New Zealand government implement changes to program in 2020 that we believe will significantly increase the value of carbon and then actually did result in doubly the prices to currently over $7. So, those changes included a floor and a cost containment cap of $70 in 2022 to help reduce price volatility. And we believe that's obviously written as a market, so we starting to optimistically selling in that market. And that's example of Mark said where there is still things working up trying to understand, but the value that we see there is a lot more opportunity in New Zealand and that pricing that we saw compared to what the current voluntary markets are. And we have seen New Zealand prices move a lot as it got regulated over time. So, I think we have to careful as we think about how we move into this market.

Even the secondary market in New Zealand right now is trailing above that cost containment cap, which we also saw in 2021. So, based on individual's needs, there is opportunities for price improvement even in the market where we have cost containment caps. Though it's a very fluid market with a lot of potential upside and we participate in the New Zealand market and that gives us a lot of insight when we think about North American process. Yes, suffices to say, we are spending a lot of time looking at this and thinking about it right now and looking to kind of scale up resources to really tackle this. We think it's a bit premature to start to put out a financial forecast around what we think is achievable in the near term.

[Paul Quinn, RBC Capital Markets]

All righty. Hey, thanks -- thanks for help. That's all I had.

[Operator]

Thank you. [Operator instructions] Our next question is from John Babcock with Bank of America. You may go ahead.

[John Babcock, Bank of America]

Hi. Thanks for taking my question. I guess actually just following up on that last point you talked about doubling of prices in New Zealand on the carbon front. I mean is there any way you can provide some sense as to what the contribution is to sales or earnings down in that region at all recognizing this is still pretty small part of your overall business?

[Doug Long, Senior Vice President, Forest Resources]

Yes. Essentially all of our non-timber sales within New Zealand are carbon credit sales. And so, we actually provide disclosure in our supplement. And so, if you look at the non-timber sales line item, the vast majority of that is carbon credit sales.

[John Babcock, Bank of America]

Got you.

[Doug Long, Senior Vice President, Forest Resources]

Like I said we didn't have them in 2021, but have started to monetize carbon in 202 with the big increase in prices.

[John Babcock, Bank of America]

Okay. It's helpful. And then next question just kind of back to the Southern saw pricing recognizing there are all different factors here that could play into that. But, with lumber prices as high as they are, I mean are you seeing any sort of carryover from that into sawlog price at this point?

[Doug Long, Senior Vice President, Forest Resources]

Yes, I mean as we discussed before, we have I mean obviously the real strength in the markets we talked about Atlantic Coast and so we continue on a daily basis if not weekly basis we negotiate our sales and delivered and stumpage, and we are seeing that pricing on lumber, as Dave mentioned, very elastic market due to tight supply and demand ratio. So, we are absolutely seeing that translate straight into stumpage pricing.

[John Babcock, Bank of America]

Okay. And then really just I guess the last question on my side. Can you just talk about how you are thinking about the level of dividend, and what it would take to see an increase in the dividend level?

[Mark Mchugh]

Sure. I mean we evaluate the dividend periodically with the Board. And we take into account other capital allocation priorities as we do that. But ultimately our goal is to stay nimble with respect to those capital allocation priorities with an eye always on maximizing our long term value per share. We do want to ultimately grow the dividend over time but we also want our dividend to be sustainable and predictable from the perspective of our shareholders. And because of that whenever we make an increase, we view that as a fairly permanent decision. So, therefore we make those decisions on a pretty measured and deliberate basis. We don't sort of look for short term reactions to changing market conditions. We really have a mindset where at the beginning of COVID, for example, we chose not to reduce our dividend because we saw that as a situation that was going to last a few quarters, not a few years. And I think that proved to be the case. Obviously, we have seen a major uptick in market conditions of late. And I think now the key is to sort of prudently assess the staying power of those recent market trends as we think about the dividend going forward. But, keep in mind this is definitely something that we look at on a pretty regular basis with our Board.

[John Babcock, Bank of America]

Okay, thank you.

[Operator]

Thank you. And that was our final question. I will now turn it back to the speakers for any closing remarks.

[Collin Mings]

All right. Thank you. This is Collin Mings. I'd like to thank everybody for joining us. Please contact us with any follow-up questions.

[Operator]

Thank you. And that does conclude today's conference. Thank you all for participating. You may disconnect at this time.