Eric Cremers: You know I would say our order books are there adequate — they’re not. What will generally happen is when we have a point of view that markets are going to get better, we’ll keep our order book short, basically saving lumber that we can sell what we think is going to be at a high at a higher price. When prices are really strong, will tend to extend our order books and sell lumber out as much as I don’t know, four weeks out into the future. Today, our order books are relatively short and the reason it’s short, is not necessarily because of lack of demand, it’s because our sense is that things are bottoming and we want to save lumber to sell at a future higher price. That makes sense
Ketan Mamtora: No, that’s helpful. And then just one last one from me. I want to come back to capital allocation again. You’ve talked about during Q1 you were going through the asset purchase and to that — to some degree that sort of push the share repurchases to the back burner. So as we think about now, as you move past that, how do you approach that? And I’m just curious, how does this for the net leverage, which is of course driven by depressed lumber prices, which is sitting at enough buybacks right now. How does that sort of influence and sort of your decision as you think about share repurchases in particular?
Eric Cremers: Yes. So Ketan, we started out the year, we were pretty optimistic on where markets were headed. You think back, I think the market was expecting six rate cuts by the Federal Reserve by the end of the year, suddenly that went to three interest rate cuts. Last I heard, we were down to maybe one rate cut perhaps in December, and I don’t know after some employment cost index data this morning, we may be at zero cuts for the year. So — what kind of an economic environment are we in? Is this — we have a hard landing and have a soft landing. Is there going to be no landing?. It’s really murky, what the outlook for the economy is right now. And so it’s hard to have a lot of conviction about where markets are headed, with this kind of a kind of a backdrop.
So I think that’s one of the factors that weighed into the discussion. The Board meets every quarter to talk about share repurchases and certainly that will be a topic of conversation at an upcoming Board meeting. Now, I would I would also tell you that, what we look at, we don’t we think about our five-year plan our five-year model for what our dividend ought to be and what leverage ought to be. They’re going to be periods of time where markets are blowing and going, like they were during COVID and they’re going to be periods of time where the industry gets stressed and we get stressed like we are right now. This too shall pass. I do think markets are going to get better. I do think lumber markets are going to get better. I do think supply is going to come down.
I do think demand is going to come back. Capacity utilization in the industry will come back and earnings are going to come back to our Wood Products business. And I would also add that as I think about our interest coverage and leverage and all that, our current forecast has our cash balances running higher than where they are today by the end of the year. So, I feel pretty good about where we’re at in the environment. The only question I have is where is the economy headed? It’s very, very unclear at this stage.
Ketan Mamtora: And that’s fair. And do you still have a 10b5-1 program in place, Eric?
Eric Cremers: Yes, we still have one in place.
Ketan Mamtora: Okay, perfect. I’ll turn it over. Thanks for all the clarifications.
Eric Cremers: Thanks. Yes.
Operator: Our next question comes from the line of Mark Weintraub from Seaport Research Partners. Please go ahead.
Mark Weintraub: Thank you. And first question. So in the slides, it indicates you’re expecting higher lumber prices 2Q to 1Q. You mentioned that Eric to-date flat and presumably the spot is lower than where it was on average. So that seems to convey some optimism that there’s going to be some improvement. And can you kind of just clarify that that’d be pretty soon. I totally understand the conversation about why we’re at lows or toward lows over the cycle of what gives the confidence that we’re going to get some improvement hopefully sooner rather than later?
Eric Cremers: Yes, we do expect prices to improve and we do think we’re feeling some weakness right now particularly multifamily using project finance costs move up also R&R treated markets in particular in the south is under bit of pressure. I think the one thing that gives me hope or optimism Mark is that we are moving into the spring demand build time of the year. Markets haven’t completely fallen out of bed. Demand is not phone completely out a bed. Single-family starts are hanging in there at over $1 million. As we said for several months in a row now. I think Home Depot said their comp store sales are going to be down 1% for the year I think lows was maybe minus two to minus 3% for the year. And so things haven’t completely fallen out of bed.
And as we get into the summertime and people start taking on more and more repair and remodel projects. And I think demand will come back and there’s an opportunity for prices to move higher. It’s just it’s hard for me to see prices not getting better given that. Given that so many mills across North America are below breakeven right now.
Mark Weintraub: I totally understood. But it just there’s nothing though that you’re seeing right in this moment I’m over reading it. If I if I conclude that you’re seeing something that’s going to lead to like a near-term improvement necessarily reasons you gave all very valid although the timing I guess unclear on most of them? Or am I missing something?
Eric Cremers: Yes. I mean our forecast as things dip in May and then they come back in June we’ll see.
Mark Weintraub: Okay. And then second kind of on the almost a flip side of that is I see sawlog prices expected to be up 6%. I guess the strength that we’ve seen in the West I would have thought there would have been a bigger increase given though in — the way it lags through. Maybe if there’s just a word on the dynamics or if there’s something that’s going on there that wouldn’t be obviously apparent.
