PCH
#Yes, <UNK>, this is <UNK>.
So the first part of your question was the capital spend at Warren.
That was a little over $2 million for a log booking optimization project.
Now when you talk about sequential earnings in wood products, and <UNK> indicated, we'll get to roughly $8 million to $10 million of earnings in Q3 in wood products.
And by the way, we're about halfway through the quarter now, so we feel pretty good about that number.
Part of that is going to come from what we believe will be a lumber price increase.
The pundits are talking about, more or less, a 2% price increase.
That should drive incremental earnings of a few million dollars.
We've also got the Warren issue that we had to deal with in Q2 that will not repeat in Q3, and that ought to provide, as well, a couple million dollars of incremental earnings.
So those three factors combined gets you to $8 million to $10 million.
I think there's a number of packages that are on the street being valued by parties, so it's been kind of quiet about the announcements on those.
I think when those come to closure it will seem like a normal level of deal activity by the end of the year.
That's our feeling.
I agree that maybe it's a little bit light so far, but I think there's still a number of TMOs and, certainly, REITs that are competitive on these things.
Interest rates are low for the REITs that are borrowing money.
I think we'll see the projects clear and I think they will continue to be at prices that are quite strong.
We don't have any expectation about what they're going to be or if there will be any.
I think the only thing that we know with certainty, through the softwood lumber coalition we're a part of, is if we get to October 13 and there's not a negotiated settlement, the US is free to file a trade case, and I fully expect that will happen if we aren't making progress.
Yes, people have been talking, <UNK>, about a point of inflection for a number of years now and we have yet to see it, although some of the major consulting firms that are out there covering in the industry, they believe that we aren't too far from where that inflection point is.
It could be with an extra 100,000 or 200,000 housing starts we could start to see prices move.
One actually thought ---+ that I spoke with recently, said we would see it move by the end of the year.
So our fingers are crossed and at some point it will happen, but we haven't seen it yet.
Thanks.
Absolutely.
We wouldn't have ---+ the incremental capital that we spent last year of the $15 million to $18 million that I mentioned with a 20% return threshold or higher, I think that's kind of money we can take that bank.
And I absolutely think that gets factored in when we think about dividend coverage and how much head room we have to raise the dividend on a long term sustainable basis.
But nevertheless, I think you can never forget about what happened in the wood products business last year where we had our EBITDA fall by roughly $50 million to $60 million in one year as lumber prices weakened for a variety of factors.
So I think the Board will factor in the improvements that we've done in our lumber business, but fundamentally we need to see southern log price improvement to have a meaningful impact.
You're talking about from a log pricing ---+.
Well, we're seeing strength as we talked about, Q1 to Q2 our sawlog prices were up 14%, and I think as we indicated in our call, we'll see them up again in Q3 another 4% or 5%.
At these lumber prices and with the outlook being for continued strong lumber pricing, and with the fact that 70% of our northern sawlog production is indexed to lumber, we'll see continued strength in sawlog prices in the north.
That's our expectation.
Oh, it tends to go up right alongside the index pricing.
Any given quarter it may vacillate plus or minus a little bit, but it will move in tandem.
Thank you, Latonya, and I certainly appreciate everybody's attention and interest in Potlatch, and we look forward to catching up with you on next quarter's call.
