Rayonier Inc (RYN) Q2 2021 Earnings Call Transcript

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Rayonier Inc (RYN -0.63%)
Q2 2021 Earnings Call
Aug 5, 2021, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome, and thank you for joining Rayonier's Second Quarter 2021 Teleconference Call. [Operator Instructions] Today's conference is being recorded, if you have any objections you may disconnect at this time.

Now I would like to turn the meeting over to Mr. Collin Mings, Vice President, Capital Markets and Strategic Planning.

Collin Mings -- Vice President, Capital Markets and Strategic Planning

Thank you, and good morning. Welcome to Rayonier's investor teleconference covering second quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayonier.com. I'd 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 2 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 & Chief Executive Officer

Thanks, Colin, and good morning, everyone. First, I'll make some high-level comments before turning it back over to Mark McHugh, Senior Vice President and Chief Financial Officer to review our consolidated financial results. Then I'll ask Doug Long, our Senior Vice President of 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 outlook for the balance of 2021.

We are pleased to report that the encouraging momentum we experienced across all our businesses to start 2021 continued into the second quarter. Specifically, we generated adjusted EBITDA of $95 million and pro forma EPS of $0.22 per share. Adjusted EBITDA exceeded the prior-year quarter by 21%, as favorable results in each of our timber segments more than offset lower adjusted EBITDA in the real estate segment. As we reflect on the second quarter, the operating environment was markedly improved as compared to the prior year period. We're pleased with how our team continues to capitalize on strong domestic lumber markets improving, real estate market trends and export market opportunities. As Mark will discuss in greater detail based on our solid first half results and our expectations for the balance of the year, we are modestly raising our 2021 adjusted EBITDA guidance.

Drilling down to our different operating segments, our Southern Timber segment generated adjusted EBITDA of $31 million for the quarter, which was 16% above the prior year second quarter. Net stumpage prices increased 14% which more than offset a 4% reduction in harvest volumes as weather conditions impacted productions across the South.

In our Pacific Northwest Timber segment, we achieved adjusted EBITDA of $14 million, an improvement of $10 million versus the prior year quarter. This sharp increase in adjusted EBITDA was driven by a 30% increase in delivered saw timber prices stemming from favorable domestic lumber markets and increased log export demand as well as higher volumes following the merger with Pope Resources.

In our New Zealand Timber segment. Second quarter adjusted EBITDA nearly triple to $28 million. The year-over-year increase in adjusted EBITDA was due to both significantly higher harvest volumes as the second quarter of 2020 was severely impacted by COVID 19 related headwinds and weighted average log prices and increased 51% as a result of robust export and domestic log demand. In our Real Estate segment, we generated adjusted EBITDA of $29 million, down from $45 million in an exceptionally strong period last year. The decline versus the prior year quarter was driven by a 61% reduction in acres sold, partially offset by significantly higher per acre prices. Importantly, our real estate team closed significant transactions in both our Wildlight and Belfast Commerce Park development projects during the quarter.

Switching gears from second quarter results, I'd like to provide an update on the Timber Fund business that we acquired last year through our merger with Pope Resources. Two weeks ago we announced that we had sold the rights to manage to -- of the Timber Funds, as well as our co-investment stake in both of these funds. The aggregate purchase price was $35.9 million and the transaction will be reflected in our third quarter financial results. As we had previously communicated the private equity timber funds business was not a long-term strategic fit for Rayonier. We believe this transaction reflects a favorable outcome for our shareholders. As it allows us to simplify our operations and allocate capital to other strategic priorities.

Following this transaction, we continue to manage, as well as own 20% co-investment stake in one Timber Fund comprising 31,000 acres in the Pacific Northwest. Since this fund is at the end of its investment term it was not included in the sale transaction rather we have commenced a process to liquidate the assets from this fund, which if successful will complete our exit from the fund business. With that let me turn it over to Mark for more details on our second quarter financial results.

Mark McHugh -- Senior Vice President & Chief Financial Officer

Thanks, Dave. Let's start on Page 5 with our financial highlights. Sales for the quarter totaled $291 million, while operating income was $84 million and net income attributable to Rayonier was $57 million or $0.41 per share. On a pro forma basis, net income was $31 million or $0.22 per share. Pro forma adjustments for the quarter were primarily associated with a large disposition in the Pacific Northwest, as well as a series of debt actions that I will discuss momentarily.

As Dave touched on second quarter adjusted EBITDA of $95 million was above the prior year period as higher results across all of our timber segments more than offset a lower contribution from our Real Estate segment. On the bottom of Page 5, we provide an overview of our capital resources and liquidity at quarter-end as well as a comparison to year-end, our cash available for distribution or CAD for the first half of the year was $111 million versus $80 million in the prior-year period, primarily due to higher adjusted EBITDA, 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 8 of the financial supplement. Consistent with our nimble approach to capital allocation, we raised $81 million through our at-the-market equity offering program during the second quarter an average price of $36.79 per share. As previously discussed, we view the ATM program as a cost-effective tool to opportunistically raise capital strengthen our balance sheet and match fund bolt-on acquisitions. We are also active in the debt market during the quarter taking steps to address our 2022 bond maturity, improve our debt maturity profile and lower our weighted average borrowing cost.

Specifically in May, we issued $450 million or 2.75% senior notes due 2031. Additionally while currently remains undrawn. We executed a credit agreement for a delayed-draw term loan for up to $200 million, which if utilized would mature in 2029. We also obtained an amendment to lower the interest rate on the term loan we have maturing in 2026 and amended the terms of the debt we assumed in the Pope acquisition to make this debt, unsecured. Furthermore, we also lowered the pricing of our revolving credit facility as well as extended its maturity by year to April 2026. A portion of the proceeds from the May debt offering were used to completely repay a $250 million term loan that was due in 2025. Additionally, given our strong cash position, following the large disposition completed during the quarter we prepaid $100 million of the term loan that matures in 2026 reducing the outstanding balance to $200 million.

In conjunction with these actions, we recorded a $2.2 million loss associated with the termination of an interest rate swap as well as cost of $1.1 million related to debt extinguishments and modifications. Collectively, these items translated the $0.02 per share, a pro forma adjustments in the quarter. Looking ahead, we believe the actions taken during the quarter help to facilitate an optimal capital structure and leave us with ample liquidity to fund the repayment of our 2022 bond maturity early next year. Pro forma for the repayment of our 2022 bond maturity, we expect that our weighted average cost of debt will drop below 3% and our weighted average maturity will extend to roughly seven years. Moreover, almost all of our term debt has been swapped to fixed, which gives us strong visibility on our forecasted interest expense.

Lastly, by tapping into the bond markets at an advantageous time we preserved additional debt capacity within the farm credit system providing us with increased future financing flexibility. In sum, we closed the quarter with $310 million of cash and $1.4 billion of debt, both of which exclude cash and debt attributable to the Timber Funds segment which is non-recourse to Rayonier. Our net debt of $1.1 billion represented 17% of our enterprise value based on our closing stock price at the end of the second quarter.

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

Doug Long -- Senior Vice President of Forest Resources

Thanks, Mark. Good morning. Let's start on Page 9 with our Southern Timber segment. Adjusted EBITDA in the second quarter of $31 million was $4 million above the prior year quarter. The year-over-year improvement was largely attributable to higher net stumpage pricing albeit partially offset by lower harvest volumes. The 4% decline in volume during the second quarter was largely due to wet weather resulting in lost production days. This modest decline in volume though was more than offset by higher prices. Specifically, average sawlog stumpage pricing was roughly $28 per ton, a 10% increase compared to the prior year quarter. Improved pricing strong demand from sawmills as well as improved export log demand in certain markets.

Pulpwood pricing climbed 14% from the prior year quarter, reflecting robust customer demand, coupled with tighter supply due to wet weather conditions. A favorable mix shift toward our Coastal Atlantic markets also contributed to the strong year-over-year comparison. Overall weighted average pine stumpage prices increased 14% versus the prior year quarter due to higher sawtimber and pulpwood prices as well as a more favorable mix of sawtimber. We are encouraged by the pricing gains registered during the quarter. Which underscore the importance of local timber market dynamics across the USL and the construction of our portfolio across those markets.

Moving to our Pacific Northwest Timber segment on Page 10. Adjusted EBITDA of $14 million was $10 million above the prior year quarter. The year-over-year increase was largely attributable to significantly improved pricing due to strong domestic lumber markets and the incremental pension created by healthcare export demand. Second quarter harvest volume was 4% above the prior year quarter due to additional volume from last year's merger with Pope Resources. At $98 per ton, our average delivered sawlog price during the second quarter was up 30% from the prior year quarter. Strong pricing was sustained throughout the quarter. Even as lumber prices preceded from the record levels set in May. In part due to the pricing support created by stronger export market demand meanwhile pulpwood pricing fell 21% in the second quarter relative to prior year quarter. As sawmill residuals remain plentiful and that increased lumber production.

As it relates to the export market in Pacific Northwest improved demand we discussed on our last call has continued into recent months. The constricted flow of European Spruce salvage logs, the ban on Australian log exports to China and an improvement in Japanese demand have all contributed to a favorable environment for log exports from the region. And we have seen more inventories in China rise in recent weeks. We believe these forces continues for healthy demand for log exports Pacific Northwest. We've continued strong demand for domestic sawmills as well as the attention created by the flow of Pacific Northwest marks in the export market will translate into a relatively stable pricing environment in the second half of the year.

While we are closely monitoring the correction in lumber prices, we believe the underlying log demand remains healthy. In particular, demand for green logs remained robust given the supply disruptions caused by wildfires, and other regions.

On that note, I'd also like to offer a few comments regarding the risk wildfires across parts of the Western United States. Thus far, none of our properties have been seriously threatened by the fires that have impacted the region in 2021. As a reminder, none of our fee timber properties were impacted by last year's fires, either on the roughly 10,000 acres of timber fund properties sustained fired image. While there continues to be upward pressure on higher cost in the areas that have been directly impacted by fires over the past year, our operations have not been materially impacted from the salvage efforts conducted by others.

Page 11 shows results and key operating metrics for our New Zealand Timber segment. Adjusted EBITDA in the second quarter of $28 million was nearly triple the $10 million that we reported in the prior year quarter. The increase in adjusted EBITDA was driven by a much stronger pricing and then more normalized level of harvest activity versus the prior year period constrained by COVID 19 disruptions. Increased volumes and pricing were partially offset by reduced carbon credit sales. We continue to defer credit sales during the quarter as we expect that the value of these credits this poised for further price appreciation.

Turning to pricing, average delivered prices for export sawtimber jumped 50% in the second quarter from the prior year period to $148 per tonne, reflecting improved China demand the ban on a strain log exports in China and the reduced flow of European Spruce salvage logs into China. As we've previously noted, prior to the ban Australia was applying approximately 10% of the total volume imported by China. Furthermore shipments of European Spruce salvage logs in the China may constrained by higher transportation costs and the lack of container availability. These constraints on the flow of logs into China. When coupled with the healthy demand translated an exceptionally strong export pricing in New Zealand. Underscoring the favorable pricing environment A grade log export prices to China surpassed previous record highs during the second quarter.

As reaching record levels, though there has been a pullback in pricing in recent weeks as demand for Radiata logs has softened in response to higher log inventories in China. Shifting to the New Zealand domestic market average delivered sawlog prices increased 27% in the prior year period to $85 per ton. The increase in US dollar pricing was driven primarily by foreign exchange rates and New Zealand domestic pricing improved by more modest 9% in the second quarter versus the prior year quarter. Average domestic pulpwood pricing declined 35% as compared to the prior year quarter. In sum, while we expect lower pricing over the balance of the year, our New Zealand operations continue to generate strong net stumpage realizations. We believe we are well positioned to continue to capture market share from Australia and Europe and the export market as well as benefit from strong domestic demand.

I'll now briefly discuss the results from our Timber Funds segment. Highlight on Page 12 Timber Funds segment generated consolidated EBITDA of $8 million in the second quarter on harvest volume of 185,000 tons. Adjusted EBITDA, which reflects the look through contribution from the Timber Funds was $1 million. As discussed earlier, we are in the process of extinguish Timber Funds business expect contribution from this segment will be negligible moving forward.

Lastly, in our Trading segment we reported $400,000 of adjusted EBITDA in the second quarter. As a reminder, our trading activities typically generate low margins in our primarily designed to provide additional economies of scale for fee timber export business.

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

Mark McHugh -- Senior Vice President & Chief Financial Officer

Thanks, Doug. As detailed on Page 13, our Real Estate segment delivered strong results in the second quarter, second quarter real estate sales totaled $75 million on roughly 17,000 acres sold, which included a large disposition in Washington consisting of roughly 8500 acres. Excluding this transaction, second quarter sales totaled $39 million on roughly 8,000 acres sold at an average price of $4900 per acre. Adjusted EBITDA for the quarter was $29 million.

Sales in the Improved Development category totaled a record high $19 million in the second quarter as we closed significant transactions within both our Wildlight and Belfast Commerce Park development projects. In our Wildlight development project north of Jacksonville, Florida sales included a $9.1 million sale of 130 acres to a national homebuilder for the first phase of an active adult community. Due to post closing obligations roughly $5 million of revenue from this transaction was deferred and will be recognized in future periods. The addition of an active adult community is a significant milestone for the Wildlight project as it adds a complementary market segment, which we believe will help to catalyze additional downstream demand. In addition, we closed on 36 residential lots in our Wildlight project for $2.3 million or $65 per lot.

Meanwhile, in our Belfast Commerce Park development project south of Savannah, Georgia, we sold 153 acre parcel to a national developer of industrial properties for $7.9 million or $51,000 per acre. Overall, we are pleased with the demand for entitled infrastructure served land that is translating into additional momentum across our development projects. We remain encouraged by the pipeline of opportunities in Wildlight, Richmond Hill and the West Puget Sound area of Washington. In the rural category sales totaled roughly 7700 acres at an average price of just over $2600 per acre, a nearly 100-acre sale in Georgia to the Conservation Fund comprise the bulk of our second quarter activity. More broadly, demand for rural land remains healthy as the space privacy and recreational opportunities offered by these properties continue to attract buyers.

We are well positioned to capitalize on these demand trends moving forward and remain focused on achieving price realizations well above timberland values. We also closed on a conservation easement sale covering 18 acres in Washington for $4 million in the second quarter. The property covered by this easement was in the Town of Port Gamble, which was acquired as part of the merger with Pope Resources. Lastly, if we closed on a large disposition in Western Washington during the quarter for $6 million roughly $100 per acre. This roughly 8500-acre property was a relatively less strategic holding for us in the region and was sold through a competitive bid process.

Now moving on to our outlook for the year. Based on our solid first half results and our expectations for the balance of the year, we are raising our full-year adjusted EBITDA guidance to range of $300 million to $320 million, which reflects a 3% increase at the midpoint from our original guidance. In our Southern Timber segment, we now expect full year harvest volumes of $5.9 million to $6.1 million tons as production has been constrained by regional weather conditions and trucking availability. We expect that weighted average pricing will remain above prior year levels, driven by continued strong demand from domestic pulp and lumber mills, as well as improving export demand in select US South markets.

However, we are seeing higher trucking costs which could limit the upside and net stumpage realizations over the balance of the year, we are taking measures to mitigate the upward pressure on these costs by optimizing whole distances on our deliberate log sales and targeting stumpage sales to customers with great advantages. Overall, we expect full-year adjusted EBITDA of $118 to $122 million and our Southern Timber segment a modest increase from prior guidance.

In our Pacific Northwest Timber segment we are maintaining our full year volume guidance of $1.7 million to $1.8 million tons, along with our full-year adjusted EBITDA guidance of $50 million to $55 million. We expect pricing in the region, we remain relatively stable as long demand across both the domestic and export markets remains favorable. In our New Zealand Timber segment, we are maintaining our full year volume guidance of $2.6 million to $2.8 million tons.

Given the robust start to 2021, we now expect full-year adjusted EBITDA of $78 million to $82 million. That said, we expect relatively lower export pricing over the second half of the year as log inventories in China have increased significantly in recent weeks. Further, we anticipate that shipping and demurrage costs will remain elevated. In our Real Estate segment, we now expect full-year adjusted EBITDA of $78 million to $86 million. We expect a strong second half of the year in this segment given the healthy demand for residential and commercial properties within our real estate development projects, as well as continued strength in rural land sales activity.

More details regarding our updated guidance, can be found on page G of the earnings release as well as page 15 of the financial supplement.

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

Dave Nunes -- President & Chief Executive Officer

Thanks, Mark. Overall, we're very pleased with the quarter and optimistic about our outlook for the balance of the year. As I reflect on the last 18 months. I'm very proud of how our team has successfully navigated pandemic related disruptions and integrated Pope Resources, while also continuing to execute on several other strategic priorities. To this end, in the second quarter, we continue to improve our portfolio through both addition and subtraction. We opportunistically recycled capital out of a non-strategic timberland holding in Washington State while also closing on a total of $22 million of bolt-on acquisitions.

These portfolio moves have helped us improve our positioning in the strongest softwood log markets in the US and New Zealand, which should help us grow both cash flows and value per share over time. Subsequent to quarter end, we also closed on the sale of two Timber Funds, an important step toward exiting a private equity fund business that is not a strategic fit for Rayonier. Meanwhile, the benefits of the strategic investments we've made on the real estate front, are being increasingly realized as quarterly improved development real estate sales reached a record high in the second quarter.

Furthermore, we took steps to optimize our cost of capital and better position our balance sheet for long-term growth by accessing both the debt and equity markets during the quarter. In addition to achieving important operational and financial goals, we also continue to embrace the increased interest from stakeholders in our environmental social and governance practices. As previously discussed, we believe our mission of providing industry-leading returns while serving as a responsible steward of the lands is well aligned with key ESG principles that we're looking to advance. Building on the inaugural carbon report we published earlier this year, we are planning to release a comprehensive sustainability report in the coming weeks, which will further enhance our ESG disclosures. Overall I continue to be impressed by the dedication and focus of our employees as they work together to better position Rayonier for long-term success.

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

Questions and Answers:

Operator

[Operator Instructions] Mark Wilde from BMO Capital Markets. You may go ahead, sir.

Jesse Barone -- BMO Capital Markets -- Analyst

It's Jesse Barone on for Mark, good morning guys. First question, could you guys just going to dive a little deeper into what's driving the rise in inventories in China, is it more just slower demand is there kind of a return of European supply into China. Just any additional color would be helpful.

Doug Long -- Senior Vice President of Forest Resources

Sure, this is Doug. I'll take that one. So at the end of July, we did see China log inventories [indecipherable] cubic meters, Pine making up about 70% of that and European spruce actually down significantly only around 15%. So while demand typically weaker during hot summer months there are a lot of the storms monsoon and things like that. We even saw less than normal demand about 60,000 sweeteners per day in June and the first weeks of July. And that was due to a couple of things. There was a shortage of electricity and some of the areas where the malls operate there is also a government anti-pollution regulation locked down at Burt Hi-Song [Phonetic], and there was deferrals of construction due to lack of materials are high cost. So get beyond lumber as far the products also. In the recent weeks, we've seen demand return to more normal 70,000 plus units per day for this time of year and as we move into August construction typically begins to pick back up, we'll get into a little bit cooler months and get pass on the reins and log toward default after that.

So with this 10,000 cubic meter per day increase in log demand, we recently saw the appears that trend maybe starting to happen. And last year we moved in this time of you're going to fall. We saw about 82,000 cubic meters day of demand. So lastly, we're also encouraged that for the first half of 2021 the National Bureau Statistics reported that investment in Chinese real estate is up over 15% compared to 2019 pre-COVID. So, I think there is still a strong demand out there for construction chills [Phonetic] as we go forward.

Jesse Barone -- BMO Capital Markets -- Analyst

Great, thanks. And then, could you guys give an update on legislation around the Australian log. And then if there is any update on the Russian legislation, you guys kind of mentioned in Q1.

Doug Long -- Senior Vice President of Forest Resources

Sure, I'll take that again. Right now, the Australian log still ongoing, we haven't seen any changes that are making anything, make us think this isn't going to happen for some more time here going forward. And we've actually seen some of the Australian saw millers and other folks repositioning and with suppliers. So when we think there's some things here for a while, so there's no real updates on the actual regulations themselves, but just the way people positioning, it appears that this looks to be drawn out. And on the Russian log band all indications are it's still going forward for January 1 and that will be a ban of exploring those sawlogs in the China and also we've seen markets reposition themselves looking how to make sure either longer lumber. I mean we would expect to be more, it will come out of Russia's ton goes in the mid-term but in short-term we are seeing increased demand for logs quickly in United States.

Jesse Barone -- BMO Capital Markets -- Analyst

Great. And then last one for me, have you guys seen any kind of alleviation on the logistics front, I'm especially on the ocean freight side, it sounds like trucking in the US, South still remains pretty tight just any color there and then I'll turn it over. Thanks.

Doug Long -- Senior Vice President of Forest Resources

Sure, I have to answer that again. So ocean freight is still a major issue for us, the economies pick back up in the world. We're seeing a lot of competition for ships on out of New Zealand and we've seen freight rates go up there. When it comes to containers out the United States also very competitive, but so far we have ourselves some position with multiple airlines and we able to procure containers. So it hasn't been too much for the bigger issue as you mentioned, in the trucking and at the ports slowdowns at the ports. So where we see the biggest issue is that those ports and getting trucks in turnaround times where can take two to three hours per truck to turnaround. So it's not to say that we don't have enough drivers and trucks is at the time of court so long that it's causing us to not deliver as much as possible.

Jesse Barone -- BMO Capital Markets -- Analyst

Great, thanks. I'll turn it over.

Operator

Thank you. Our next question comes from Anthony Pettinari from Citi Research. You may go ahead, sir.

Unidentified Participant

Hi, this is Ashley Simon [Phonetic] sitting in for Anthony. Just my first question. During the quarter, I think Europe unveiled their plans to go carbon-neutral. At the same time like a large asset management firm Campbell global to get to the carbon market. So can you just talk about how the drive to go carbon-neutral by different stakeholders, which it seems to me to be accelerating impacting the business. Are you seeing any premium creep in timberland values. Just wondering how that could move the needle financially in the coming years.

Dave Nunes -- President & Chief Executive Officer

I mean we are certainly watching this very carefully. I think right now there is a lot of speculation around how carbon is playing a role, and in terms of, the rationale for the purchase of Campbell global, I mean, I'll leave that to JPMorgan Chase to sort of address. I think there are a number of people that certainly look at the space, both on the private equity side as well as public equities and are making assumptions that there is some carbon value that is starting to creep into to various valuations, but that's a pretty hard one to segregate out. I think the key though going forward, is it working for us are going to be part of the solution. And I think there is a greater awareness of the carbon sequestration that is taking place, when we use wood products relative to other construction materials.

So I think there is generally a view that we're going to see more wood used in the future. And that's a positive for the sector whether it's related to carbon monetization or just overall demand of wood, but this is an evolving thing it on both kind of a regulatory level as well as the private markets level and we're continuing to participate in it. And we feel that we have a little bit of a of an advantage in that we've been operating under an emissions trading scheme in New Zealand, for a number of years and so we've seen how that has evolved over time and expect to participate and in the US as it to evolves over time.

Unidentified Participant

Thanks, that's helpful and then just with regards to raise guidance, can you talk about what the biggest swing factors that could get you to maybe the high or low end of the range, is it fair to say that China demand maybe New Zealand or the biggest sources of variability or other factors that we should keep top of mind?

Dave Nunes -- President & Chief Executive Officer

I mean real estate is going to always be the biggest swing factor, just in terms of the lumpiness of revenue there and obviously one larger transaction can really kind of move the dial pretty significantly. I mean just in terms of the overall stability of our different business segments. Without a doubt US South tends to be the most stable and predictable followed by Pacific Northwest, followed by New Zealand. We obviously had extraordinarily strong first half of the year in New Zealand. We've seen some inventory build in China that's giving us a little bit more muted view of the second half, but clearly if that resolved, we could see some price upside there in the back half of the year as well. But generally speaking, I'd say, real estate, followed by New Zealand are likely going to be the biggest upside swing factors.

Unidentified Participant

Thanks. I'll turn it over.

Operator

Thank you. Our next question comes from Mark Weintraub from Seaport Research Partners. You may go ahead, sir.

Mark Weintraub -- Seaport Research Partners -- Analyst

Thank you. First question, when you think about the impact of weather versus stronger demand for in the US, South on sawlogs and maybe pulpwood as well. Recognizing it's hard to segregate. But I mean if one were to assume just things dried out again and demand stayed at the types of levels that we've been seeing. Do you think that much of the pricing would be net pricing would be retained or do you think that most of that would be given back to trying to get a feel, again, for how much is weather driven versus demand driven.

Doug Long -- Senior Vice President of Forest Resources

Sure, this is Doug. I'll answer that one. So that 14% increase on stumpage across the South. You're right, it's multiple factors out there. And what I would say is, when you think about. We think about kind of the impact, the export business, supply chain cost increases, geographic mix and then improved market demand or for the main drivers whether as part of that market demands and as I think about that. Each of these factors had a relatively similar contribution to the overall increase as we went through the year or through the quarter.

Mark Weintraub -- Seaport Research Partners -- Analyst

Okay. And then on the question of the carbon credits, and how that could evolve understand things can change a lot from where they are now, but if I were to look at how things operate in New Zealand now and apply that to your North American business, if that makes any sense whatsoever. Can you give us a sense as to what type of financial contribution that might provide and any additional color you want to give us in terms of being cautionary about how to use that even as a starting point?

Doug Long -- Senior Vice President of Forest Resources

Yeah, that's a hard one Mark to gauge because it took a lot of time for that New Zealand system to evolve. There are a lot of key policy questions around carbon such as how you treat additionally. There is also a strong effort afoot to focus on emissions reductions versus carbon offsets. And that's more of a public policy debate that will ultimately kind of come into play. So pretty hard to predict both timing and kind of the nature of that, it took a while for the New Zealand system to get into place, and we think the same is going to take place in the US. We've seen some efforts in the US to sort of test that we have the California cap and trade system and that's been around for a little bit, it has tended to operate in areas that don't have as strong market for us, we've seen another effort. It's looking more annual deferrals. And so this market is testing itself an evolving and we expect that's going to continue for some time.

Mark Weintraub -- Seaport Research Partners -- Analyst

Okay and how much, what is the contribution from carbon credits to the New Zealand business, let's say this year order of magnitude or last year.

Doug Long -- Senior Vice President of Forest Resources

I mean right now it's pretty deminimis. And part of that is intentional on our part, we have elected to withhold carbon credit sales, because we see increasing pressure on carbon credit pricing. And so that's a decision that we have that we make each year as we sort of look across that and it's not going to be a super large contribution, but in Timber economics you looking for those increments of value where we get them.

Dave Nunes -- President & Chief Executive Officer

Last year we disclosed that in our financial supplement, last year was roughly $8 million this year it's been pretty de minimis because like Dave said we've been really holding back on sales of carbon credits, given our optimistic view about the trajectory of carbon prices are.

Mark Weintraub -- Seaport Research Partners -- Analyst

Got it. And curious it was that $8 million we don't want to be the dead horse, though, is that kind of roughly what your, if you were to monetize the annual credits that you're far provided, would that be more kind of representative of, if you were monetizing the credits as they come about?

Dave Nunes -- President & Chief Executive Officer

It's a bit more complex than that we can maybe take that offline Mark, I can give you a little bit more detail on how the emissions trading scheme works there.

Doug Long -- Senior Vice President of Forest Resources

You have a mix, you have a mix of onetime credits that essentially can be liquidated. Then you have a mix of others that are more ongoing through normal forestry operations.

Mark Weintraub -- Seaport Research Partners -- Analyst

Okay, understand. And one last one if I could, on the real estate business the guidance for the full year, so EBITDA went up some. And then the EBIT guidance went up a lot. Can you sort of talk through that and I may have a follow-up to what you say so.

Doug Long -- Senior Vice President of Forest Resources

Yeah, it's really just a function of the mix of properties as the year is progressing as we've got better visibility on the pipeline. I'd say, more of the real estate transaction activity and upside that we've seen there has come from price and not necessarily volume and so that's what kind of drives the lower DD&A and noncash basis figures is just kind of having getting on the stronger price per acre, and I'd say that that's what's driving the differential.

Mark Weintraub -- Seaport Research Partners -- Analyst

And is that primarily a function of just the mix of businesses or are you actually seeing an improvement in the types of realizations you're getting for a given property. So your assessment of the value would presumably be going up the latter were the case?

Doug Long -- Senior Vice President of Forest Resources

It's both. It's a mix issue as well as just having gotten strong realizations on transacted in what we see in the pipeline for the balance of the year.

Mark Weintraub -- Seaport Research Partners -- Analyst

Okay, thank you.

Operator

[Operator Instructions] Our next caller comes from Buck Horne with Raymond James. Sir, you may go ahead.

Buck Horne -- Raymond James -- Analyst

Hey, thanks, good morning guys. I wanted to follow up on the real estate question there, a little bit. Just maybe if you can offer any additional color on exactly how the pipeline is shaping up for the back half and maybe into next year as well in terms of what types of opportunities you're seeing, if you're seeing additional capital that's interested in different types of residential development. I think the active adult communities a great addition. Are you seeing any other interest from perhaps multifamily developers or even single family rental operators or what's shaping up in the pipeline for land development these days.

Doug Long -- Senior Vice President of Forest Resources

I'd say both. What you're seeing probably within some of your other segments on the home building front is probably representative of what we're seeing in our development projects. I'd say pretty strong demand and interest across the board from different categories of the real estate kind of mixed use real estate development and I'd say that's been a definitely not necessarily a surprise, but it's been some upside that we've seen, within our development projects here in the last 12 months.

Dave Nunes -- President & Chief Executive Officer

I'd add to that, I think, it covers both the full mix. But also I think you're seeing an acceleration of the absorption based on that demand. And so it's been, it's been positive, both from a timing and value and breadth perspective.

Buck Horne -- Raymond James -- Analyst

And because of that demand do you anticipate investing additional capital into land development activities is that opportunity, growing to reinvest some cash flow?

Dave Nunes -- President & Chief Executive Officer

I would say that our stance on that is always going to be that we prefer to minimize our investment of development capital and it's not really our core business, we're really investing capital where we see the need to do so to catalyze demand and so much like we saw in Wildlight and in the early phase of that we were doing kind of more of that horizontal infrastructure development. We're now seeking to do less of it and I think you can kind of see that with the active adult side that we sold, it was more sort of just mass rated land. And so I think our appetite around that is really going to be driven by kind of what we see is the downstream demand opportunity, but generally speaking, I think we're going to see to minimize our investment of capital, but only do so when we kind of feel like we need to catalyze that demand. They recognize as well that I mean we really had three primary areas that we're kind of focus on development activities. It's in Wildlight, Richmond Hill area of Georgia, West Pisa [Phonetic] town area of Washington, with the acquisition of Pope. And so, you know, the flow of investment capital and kind of the pace of activity is going to be quite differential among those markets but again I think that our appetite to invest more capital is really going to be driven by the demand opportunity that we see in kind of the need to invest that capital to catalyze that demand.

Buck Horne -- Raymond James -- Analyst

Got it. That makes lot of sense. And the last question is, with the balance sheet. So well positioned now, and congratulations on all the activity in the quarter. Does it afford you more flexibility to accelerate or look at additional M&A opportunities and kind of what are you seeing out there in terms of availability of offerings and kind of what are sellers pricing expectations right now.

Dave Nunes -- President & Chief Executive Officer

I mean I think there are couple of things, I mean first of all, we're always in the market really across all of our geographies. So that's something that we're monitoring at all times. I think one of the things that we've seen that's a little different right now is that as people are starting to travel more, you're starting to have more of an availability to do on the ground due diligence and I think because of that you're tending to see some properties that may have come to the market last year starting to come to the market now. So we've got plenty of things to look at right now. But for us, we continue to have kind of a flexible approach, we're looking across all regions and trying to improve our portfolio where we can and it was certainly one of the things that we had in mind as we looked at working on our balance sheet this quarter and to really be prepared for properties that might fit us.

Buck Horne -- Raymond James -- Analyst

Thanks for the call. I appreciate that.

Operator

Thank you. Our next question comes from John Babcock from Bank of America. You may go ahead, sir.

John Babcock -- Bank of America -- Analyst

Hey, good morning and thanks for taking my questions. First one, I was just wondering, have you seen any notable change in activity in the Southern sawlog markets with lumber prices settling out.

Doug Long -- Senior Vice President of Forest Resources

Yeah, I'll cover that. This is Doug. Again yes, as you well know the correction. We've seen lumber often unsustainable historic high and so while the headline peak current price drop is eye-catching and sawmills and South are still generating very strong cash flow. And so while lumber pricing trends both good and bad are inherently a point of discussion we have with our customers, our customers are still doing quite well for now. And they have low log inventories as we've discussed [indecipherable] weather, but also just on demand side, and so demand remains very strong in the South, as well as in the Northwest, there is an earlier than normal fire season. That has the market nervous about sending fire restriction shutdowns, let me limiting available logs. So demand is going to remain pretty constant for us and shutdowns in British Columbia. That we're hearing back from the fires. We've also seen Pacific Northwest they're trying to ramp up and capture that lost capacity. So overall, we've seen strong demand across the United States for sawlogs.

John Babcock -- Bank of America -- Analyst

Thanks Doug. And on a reasonably similar topic, I mean, we've also heard a fair bit about increased fiber cost from paper and paperboard mills and so on that point. I was just wondering if you might be able to provide some color on which regions in this out there are seeing the greatest increases in pulpwood prices and also how those prices have fared since the end of the core?

Dave Nunes -- President & Chief Executive Officer

Yes. So as we talk about pricing is differential across the US, South and where we've seen both on fiber and sawlogs we have increased demand from the export side in particular. So those markets in that coastal area of the Atlantic Coast Florida and Georgia in particular seeing some strong pricing, but we've been really encouraged to see pricing across the board, across the South. So there is a stronger uptick, where we have leverage export. But overall, we've seen a general increase. I'd say the only place we really haven't seen as much of that probably market responses has been in Arkansas Mississippi area.

John Babcock -- Bank of America -- Analyst

Okay. And also if you did talk a little bit about some transportation challenges on the trucking side or is that kind of broad-based across the South and Northwest or more focus in the South and then also you know what I mean, are you seeing signs of that getting better?

Dave Nunes -- President & Chief Executive Officer

So trucking availability is actually across the United States, New Zealand and China. So trucking is an issue across the board with some kind of ramp back up after post pandemic. What we've seen. As we have long-term contracts with a lot of our suppliers and so we've had relatively good opportunity to get the bill but of trucks in most cases, except for the new developing like I mentioned and around the ports and exports in South and that's work developing new markets and so we've had compete strongly for trucking there and we're competing against other products. So it's been kind of hampering to us there. And really the wet weather has a major impact in that it takes longer for the trucks to get down the roads, as well as in the long yards. So a truck driver might lose a low today doesn't sound like a lot, but when you're at max capacity, including a low today, you could lose 10% of the capacity in the workforce. So we haven't really had been constrained by not being able to get trucks. It's been a matter of utilization of the trucks, and it's really been more in the ports.

John Babcock -- Bank of America -- Analyst

Thank you. And then just on that front. I mean might you be able to provide some color on what sort of increases you're seeing on freight rates, and I'm just curious if that's all the trucking available is having an impact on that. And then also, I think you did mention something around that and so just overall. I mean if that does have some pass-through effect into log prices how sustainable would that increase there or would that just be something that's variable based on freight rates?

Dave Nunes -- President & Chief Executive Officer

Yeah, I'm kind of go back to, as I mentioned before on that increase we had Steinbruch there's multiple factors with export supply chain cost increases, geographic mix and the improved market demand and each of those factors are relatively similar contributions that increase. And I'm not going to break it down any further and that just going to want to get too specific in there, but can you give us a sense of where things were.

John Babcock -- Bank of America -- Analyst

Thank you.

Operator

Thank you. Paul Quinn from RBC Capital Markets. You may go ahead, sir.

Paul Quinn -- RBC Capital Markets -- Analyst

Yeah, thanks very much. Morning, guys. Just strong results in, I'd like to see the increased guidance, one of the areas that would also saw an increase in corporate costs but what is that increase related to?

Dave Nunes -- President & Chief Executive Officer

Yeah, I mean, so I guess I'm one of the components, would be as we measure our corporate costs in our bonus allocation, it's going to be dependent. We will accrue on the basis of kind of where we're tracking relative to budget, and so that will definitely be a component of it Paul. But also and then just with the integration of Pope Resources and sort of rightsizing the overall corporate, we're still working through some of that. So I'd say those are probably the two biggest components.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay and then just on exports. I know a big pickup in the Pacific Northwest. Just what are you seeing in certain southern markets. And as you're I guess increase in exports sort of on parallel with what we seen in the US overall?

Doug Long -- Senior Vice President of Forest Resources

This is Doug. I'll answer that one again. Since this is competitive and developing market as I mentioned before, I won't provide more granular detail on Rayonier's efforts other than to say, as I mentioned, it's providing uplift to our Southern net stumpage prices. So we're very pleased with the outcome so far, but I kind of talk one more general terms and as of May US, South Southern Yellow Pine log exports have recovered to the 200,000 cubic meters per month achieved prior to the tariffs implant in 2018. And we're seeing quite a few parties looking at trying to open up the export yards including ourselves. So while the bulk of the shipments are leaving for the ports Savannah, several of the ports are also becoming that flow of logs out of U.S. South, and in particular, Jackson, one of the port we operate out of. So, we continue to be encouraged by the demand for these logs as well as what that incremental pension is really doing for pricing mix in our coastal markets.

And demand currently exceeds our bill of [Phonetic] supply due to the supply chain restrictions I mentioned before the ports, both here in the U.S. and China. And it's quite interesting to see that single pine monthly exports to China have now exceeded Pacific Northwest working ton on a monthly basis. So we're seeing quite a bit of growth in this market. And we're also optimistic about the potential export more logs from U.S. South to markets like India and Vietnam, and I'm looking at growing this part of business too. But for now, the bulk of the logs that export out of South still going to China and so we got opportunity to move ahead of us and we believe our timberland are well positioned to multiple southern ports as we mentioned before, in particular, the largest ports and Savannah.

Paul Quinn -- RBC Capital Markets -- Analyst

Any go out to the Gulf?

Doug Long -- Senior Vice President of Forest Resources

Yes, there is some volume going out the Gulf shipping is not as favorable the Gulf is on the East Coast. And so, we see more container availability on the East Coast, but there are logs going on the Gulf mobile and [indecipherable].

Paul Quinn -- RBC Capital Markets -- Analyst

Great, that's all I had. Thanks guys.

Operator

Thank you. At this time, I'm showing no further questions.

Collin Mings -- Vice President, Capital Markets and Strategic Planning

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

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Collin Mings -- Vice President, Capital Markets and Strategic Planning

Dave Nunes -- President & Chief Executive Officer

Mark McHugh -- Senior Vice President & Chief Financial Officer

Doug Long -- Senior Vice President of Forest Resources

Jesse Barone -- BMO Capital Markets -- Analyst

Unidentified Participant

Mark Weintraub -- Seaport Research Partners -- Analyst

Buck Horne -- Raymond James -- Analyst

John Babcock -- Bank of America -- Analyst

Paul Quinn -- RBC Capital Markets -- Analyst

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