Weyerhaeuser Plans to Pull Back
From a Slowing Housing Market

Weyerhaeuser Co.'s home-building unit said it is pulling back from the housing market in several parts of the country, in the latest sign of how corporations are shifting strategies to respond to the national housing slowdown.

Weyerhaeuser made the announcement in a conference call with analysts yesterday, when the forest-products titan released its second-quarter earnings. While profit for the Federal Way, Wash., company declined 25% from the same quarter a year earlier, amid a fall in lumber prices and other factors, it was substantially higher than analysts predicted because of strengthening paper prices.

But company officials sounded a cautionary note on one important growth area: its expansion during the past few years into home building. Now accounting for almost 15% of the company's total revenue, the Weyerhaeuser Real Estate Co. unit ranks as a major U.S. home builder, with brands that include Pardee Homes, Winchester Homes, Trendmaker Homes, Quadrant Homes and Maracay Homes.

Officials of the unit said that their home-building activity remained strong in the second quarter in the Houston and Seattle markets, but that new-home sales have slowed in the once sizzling markets of Southern California, Las Vegas, Phoenix and suburban Washington, D.C. As a result, Weyerhaeuser's overall cancellation rate for new homes in the second quarter shot up to 26% from 12% at the same time a year earlier, pushing its total homes completed but unsold to 176 at the end of June from 109 at the same time last year, Dan Fulton, chief executive of the unit, told analysts.

Mr. Fulton said Weyerhaeuser is reacting to the slowdown by limiting its housing starts and deferring land-purchase commitments, where it can. He added that Weyerhaeuser remains confident in the long-term prospects for housing and will stay positioned "to take advantage of buying opportunities in support of our long-term vision for business expansion."

For the second quarter, Weyerhaeuser reported net income of $314 million, or $1.26 a share, on revenue of $5.69 billion, compared with a year-earlier profit of $420 million, or $1.71 a share, on revenue of $5.71 billion. Both quarters included various charges and gains.

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