[Operator Instructions] Our first question comes from Susan Maklari with Goldman Sachs.

I want to start on the Wood Products side of things. Can you talk a bit more about the inventories that you're seeing across the products there? And I guess as we've gone through earnings season and a lot of these builders have taken down their guides for their full year closings, what does that imply in terms of the supply demand setup in the back half of the year and the potential for pricing and realizations as a result?

Yes. Thanks for the question, Sue. I mean, as you can imagine, it's going to be somewhat differential depending on product line. Maybe I'll start with lumber. I would say, in general, what we've seen this year has been a preference throughout most of the channel to keep a little bit leaner inventories. And so you really just haven't seen a whole lot of folks building up large decks of wood across the system. And so I think that's also been one of the dynamics that's maybe pushed pricing a little bit more this year. Obviously, the supply side is a big issue for demand and supply balance in lumber. And so I'd say at present, inventories, probably just slightly below average, not super lean but certainly not on the heavy side. On the OSB side, similar story. I think just nobody really is inclined to build up large inventories. There's plenty of supply available and you can see that really across the system. And so it's been fine to just carry a just-in-time approach on the OSB side. And so I would say, similarly, OSB inventories are pretty balanced across the system, not heavy, not too light, but for the level of activity, pretty appropriate. And then EWP is, I would say, pretty normal given the level of activity. And so in terms of your second question, builders bringing their guide down for the year. I mean, look, it's obviously better to have more demand and more building activity on the demand side of the equation. But overall, on lumber, it still feels pretty balanced in terms of the overall system even as we look out to the back half of the year. OSB, similar story to what we've seen here really over the last handful of quarters, which is, there's more than adequate supply available out there. And so I think that's just going to be a slog until we see either demand pick up or more supply come out of the system. And then EWP feels reasonably balanced given this level of building activity.

Yes. Okay. That's great color. And then turning to Timberlands. It's nice to hear about the Oregon transaction that came through. Given the rising backdrop for lumber prices, can you talk about what you're seeing in terms of transactions for timberland, the valuations and just the overall market conditions there?

Yes. You bet, Sue. I think in general, the Timberlands A&D markets are going to look through kind of near-term pricing and be thinking more about the longer-term trends that we've been talking about for some time. And so I think with that, we're not really seeing a significant change in the market. I think it's maybe been a little bit slow to the year in terms of the start based on the activity levels. But we started to see a few more transactions as the year progresses. And I expect, when all is said and done, the whole market will end up in that typical $2 billion to $3 billion range. Once again, it was kind of a similar story last year and we did end up coming in towards the upper end of that range. So again, there's significant capital out there pursuing this asset class. Much of that's been raised over the past several years and has not yet been deployed. And so again, our experience is that demand remains very strong for high-quality timberland packages. And while we have seen some level of valuation disconnects on some of those lower quality packages, again, I think we continue to expect solid demand for quality assets over time.

Our next question comes from George Staphos with Bank of America.

I guess the first question I had is on lumber. So I was wondering, Davie or Devin, if you can quantify what the effect in 2Q on the slowbacks in the South might have been as you're managing inventory levels relative to transportation. Relatedly, if that was a measurable amount, why would we not necessarily see an increase in lumber and in wood EBITDA ex pricing?

Yes, you bet, George. So maybe just to start on the adjustment in the second quarter. We did reduce the guidance by approximately $20 million for Q2 as a result of really several factors impacting lumber. We had increased grade logs, reduced residuals takeaways in the West as a result of downtime at one of our larger customers. But the largest really was the transportation difficulties that you're referring to. And I'd say that was probably about half of the total reduction there. As we mentioned, we've largely worked through those transportation challenges. And so as we look ahead for the third quarter and we think about the lumber guide, we are guiding for higher sales volumes. So we do anticipate that improving. We are guiding for slightly lower unit manufacturing costs. And so those things, we do anticipate improving into the third quarter.

Okay. And that makes sense, maybe half of the $20 million. Lumber, well, maybe it's more seasonal but we have noticed some of the trade pubs are talking about a little bit of erosion. Is it just that? Or is there something else going on in terms of lumber realizations? My other question, then I'll turn it over. Can you talk a bit about the timber inventories? I think you mentioned, Devin, that they'll be building in the third quarter on the West. Is that just precautionary ahead of fire season? Or does it reflect less takeaway, if you will, than we'd like to see? And then last, on Climate Solutions, can you give us a quick update, I know it's maybe a little bit out there but on what you're seeing both in terms of your storage and your credit program?

Yes. So let me take the lumber piece first. What you're seeing in the South is what happens pretty much every year in the South. You're going to see a little bit of a seasonal slowdown in demand just because in many of these geographies, you're pushing 100 degrees every day and that always slows down building activity, R&R activity. So nothing that I would say is outside of the norm or anything unexpected. You see that largely every year. And then when things cool off a little bit as you get into the fall, activity will pick back up. So nothing unusual there. I think similarly, when you think about the Western log inventory, there's a seasonality to that as well. So this is pretty typical. As you get into that June time frame, generally speaking, you're going to see most mills build up some log inventories as an insurance measure for fire season. I think this year, in particular, because we entered the year -- entered the summer with such a low snowpack, there is a heightened, I think, anxiety about fire season in the Northwest. And so people build up some inventory. Now look, if you have a few days of heavy fire activity and you shut down activity in the woods, people will chew through that pretty darn quickly. And alternatively, if it's a really, really light fire season, which frankly, seems a little unlikely at this point, that extra inventory will put a little bit of a headwind, at least through August, into early September on log pricing. And so that's, again, just kind of the normal seasonality. And in terms of your last question on the Climate Solutions business, we're still kind of early in the year from a forest carbon standpoint. The team is doing a great job on putting together high-quality forest carbon projects, working their way through the approval process, the auditing process. So that's all going very well. And they are in the heart of marketing carbon offsets. And so everything is tracking pretty much as we would expect for this time of the year. And then lastly, I think you mentioned the carbon storage. So I think you're referring to CCS projects. I think that's just kind of moving along. The big project that's moving along is the one with Occidental Petroleum. They've got a large offtake agreement with CF Industries. I think the easements are now underway for the pipeline, for the CO2 pipeline. So things are moving along. We still expect that's probably going to come online somewhere around 2029.

Our next question comes from Ketan Mamtora with BMO Capital Markets.

Maybe first question on the engineered wood side, encouraging to see prices moving higher. Can you talk about what you have out there by way of any price increases? Or is this more of sort of higher cost pass-through? How should we be thinking about it?

Yes. So a couple of things I would highlight. When we look at the Q2 increase in pricing, I would say, to a large degree, that was mostly just a mix issue. We did a little bit more solid section, which has a little better realizations versus I-joists. So Q2 is more of a mix. As we roll into Q3, we are expecting to see the price increases that we rolled through in Q2 take effect. And I would say that is largely primarily just a reflection of passing along some of the increased resin costs and other input costs with higher fuel overall. So that's really what that is. It's still a competitive market out there. And so it's really not a demand issue. It's more of a passing along some of those costs and that's really what's driving that.

Understood. No, that's helpful. And then just switching to OSB. Devin, I'm curious to get your updated thoughts around sort of what is your approach to managing sort of production and capacity given an extended slump in new residential construction. I mean 3 out of the last 4 quarters have been EBITDA negative for you guys. I'm curious sort of -- how are you sort of approaching this if sort of new residential continues to remain weak here in the back half.

Yes. I mean, this has been a -- it's been a tough environment for OSB here recently for us and really everyone in the industry. I'd say it starts with a strong focus on cost management. I do think we are the lowest cost producers across the OSB industry. So that's where it starts. We certainly focus on product quality. We do lean a little bit heavier to flooring, which is generally a little bit better margin opportunity. And then it's all about what can you do for the customer to create value and that's how you win business in this market. Look, over time, as you think about this industry and you can see a great example of this in lumber. You can have stretches that are like this. Ultimately, supply and demand balance out, it can be a painful period getting from here to there. But ultimately, we're going to see either more demand come or more capacity rationalized. And generally speaking, how that works is, folks that are a little bit further down on the cost cut curve are the ones that will ultimately rationalize that capacity. We obviously can't speak to what other people are going to do or not do. They're going to make their own decisions. But for us, it's about making sure that we have our costs low, making sure that we're serving customers and just navigating what is a pretty challenging environment right now.

Our next question comes from Kurt Yinger with D.A. Davidson.

Davie, I was hoping we could just go back to kind of the Wood Products outlook. Just kind of considering the higher volume across all the categories, EWP pricing distribution, I mean it seems like there's a lot working in your favor in terms of kind of sequential profitability. So could you just maybe talk about some of the big offsets there? I know you mentioned some OSB maintenance, maybe some pieces on the cost side as well. So can you just help us understand kind of those big offsets there?

Yes. You bet, Kurt. So you're right. There's some favorable outlook guide on the volume side, across the products. The big ones that I would point you to would be in OSB, the unit manufacturing costs. We do have a similar amount of maintenance in the third quarter, although higher costs in terms of what we're -- what the activities are that we're doing. And so there is a little bit more cost associated with that in the third quarter. And then we do also expect to see the increase in resin costs, just be slightly higher in the third quarter in that space as well as in EWP. And then as we're looking across lumber, we do see some increase in log costs, which is obviously favorable to us on the timberland side. So that's kind of all in when you weigh all that together, that's how you get to the slightly lower ex price.

Okay, okay. I appreciate that. And then Devin, I was hoping we could talk a little bit about kind of what you're seeing or thinking second half of the year into the early part of 2027, even on kind of lumber imports, just with kind of the pricing environment we've seen plus presumably finalized Canadian duties moving lower. How are you thinking about incremental supply from Canada? And then what are you also hearing in terms of shipments coming over from Europe as well?

Yes. Maybe I'll take that in 2 parts. From Canada, which is obviously the bigger of the two, we are going to see with AR7, we're going to see the duties come down by 10%. So the all-in duty rate with tariffs is going to be around 35% versus 45%. So that does provide a little bit more breathing room on the downside from a pricing standpoint. My own personal view is, I wouldn't expect to see a meaningful amount of additional volume coming in from Canada based on that 10% reduction, 35% is still a healthy number. And I'd say the other thing, too, right, is we've seen a bunch of Canadian capacity come out of the system. I don't anticipate that those mills that have been shut down are going to come back. And so there's a certain amount of volume that's just out of the system. So there may be a little bit of noise once the implementation date is set. And as a reminder, that can be anywhere from August to October. Maybe around the margins, you'll see people kind of moving shipment dates to try to navigate that change. But I don't see that resulting in any sort of meaningful increase in lumber coming across the border. Now with respect to Europe, now that's always -- just as a reminder, that's always been a relatively small piece of the overall demand. I do see that continuing to trend down over time. I mean you may have a few monthly spikes here and there. But with the transportation and logistics costs these days, getting that wood across the pond, together with the fact that just log costs have gone up in many of these key producing regions in Europe. And so it just -- it strikes me as unlikely that you're going to see European imports really get back to more of those peak levels. And I would just remind you that when we really saw the peak in imports coming over from Europe, part of that was because they were working through salvage with wind blown, pest, fire, et cetera. And for all intents and purposes, those logs are free. And so that just gives you a lot of flexibility to take on the transportation cost, to get it over. Now log prices have gone back to market levels and they've been going up. So that's going to be, I think, a bit more challenging for European volume to really spike up meaningfully.

Our next question comes from Mark Weintraub with Seaport Research Partners.

Devin, a pretty big picture question. Normally, housing is the drivers for you for sure. Right now, we're going through this massive spend. But it's on AI infrastructure. Are there ways that you are participating at all? And are there ways that you could possibly increase participation from this massive spend going on?

Yes, absolutely, Mark. And so I'll highlight a few different areas. So in the very near term, one of the areas that we're going to benefit is from our solar and renewables business. I think when you look across all of North America, certainly in the U.S., the amount of energy demand is just spiking. And so that's causing a significant degree of interest in developing, in particular, solar because that's the fastest to market. So that's going to be a nice tailwind for us for a very long time, is just the incremental demand for electricity and we'll get that in the renewables business. You're already starting to see some of that. I'd say the second one is with our land position. We're obviously the largest landowner in North America. We have a number of sites that we feel are very well suited for data center build-outs. And so we are actively marketing a handful of sites and we're building that pipeline. So that's another area where I think in the relatively near future, we could see some upside. As you would expect, the price per acre from data centers is pretty significant and just an extraordinary margin above timber values. And so we're actively pursuing that. And then the other piece, which I would say is probably a little bit more in the early stages, although we, Weyerhaeuser, and we, as an industry, are actively working this is, utilizing more wood-based construction in the build-out of data centers. I think there's a really nice sweet spot for us in this space in that most of the folks that are building data centers also have pretty significant climate pledges and greenhouse gas reduction commitments. Building with wood is substantially better from an environmental standpoint. And so we're out there working with the data center developers trying to get wood more extensively utilized in this build-out. And so the early indications, I think there is certainly an openness to it. But in all candor, today, it's all about speed. And so what we've got to do is we've got to convince the developers that you can get mass timber up more quickly than the alternative building product. So we're working that. I do think we'll get some momentum here, the softwood lumber coalition, a whole bunch of other industry associations are working this. So it's a big opportunity and we're going after it.

Right. [indiscernible] are they primarily using like steel and concrete currently?

Steel and concrete, yes. Steel and concrete.

Yes. And maybe there's a little bit of relationship to this next question, too then. And it's on Monticello. And so one thing that's been very apparent out there is the cost to build things has increased very substantially in the last several years. Is the $500 million budget still good? I mean were you out in front and have things locked down so that we can stay there? And then relatedly and this again might tie into the last question a little bit, any update or read on look forward demand for the product?

Sure, Mark. This is Davie. I'll take the budget question on Monticello. So big picture, construction is progressing really well. We are on track as we had indicated for a start-up in the first half of 2027. For this year, we do anticipate approximately $300 million in spend. We've said that. Yes, we are seeing some amount of cost pressures particularly when you think about areas like labor, steel, concrete, really, those are the areas, to your point, that are seeing competition in larger scale construction activities impacting those dollars. Also seeing some pressure from tariffs. But as always, our teams are working to minimize the impact of these pressures through things like value engineering. So at this point, I think it's hard to say whether and how much that would increase. But regardless, I think even if we did see some level of overall budget increase, the return profile remains very attractive.

And maybe I'll take the second part of the question, Mark, which is the early demand signals for TimberStrand, just very strong across a whole host of different opportunities. Just the baseline utilization of TimberStrand, what we're currently making out of Kenora, there remains a lot of demand for that product. It's a great product at a good price point. We are looking at a whole host of additional opportunities to add on to that. So things like AeroStrand, which is a new product that we're very excited about, that's based off of the TimberStrand technology. I think there's a really interesting application in the mass timber space and we've had a bunch of conversations about TimberStrand being utilized in that building capacity. And just general industrial. I think there's a -- we've got a good strong anchor customer already in the South who's expanding. I think there's a variety of opportunities there. So we're really excited about this product. Our sales folks are very excited about this product. So we're looking forward to getting this mill up and running so we can start moving product out of Monticello.

Super. And just one last confirmation since we're on the topic of [ OS ], so is it correct to say that the new Canadian tariffs are not applicable to Kenora's products?

That is correct, yes.

Our next question comes from Hamir Patel with CIBC Capital Markets.

On the biocarbon initiative, how should we think about timing of the build-out of additional sites beyond the first one?

Yes. So we are actively looking at the footprint. We have a handful of additional sites that we've identified and we're working through those with Aymium. One of the challenges with the first site is, there's just a lot of groundwork you have to do to make sure that the product, the residuals, the pulpwood, the chips, the process, those are all working to get to the end product of biocarbon that the buyers want. And so as you would expect, that takes a fair bit of testing. That should get easier as we go forward because a lot of this work has been done. So at this point, really, we have a pretty good line of sight on what wood baskets would be best for new facilities. And that's a function of the growth-to-drain in these various markets, our ability to serve with both our sawmill residuals as well as our pulp logs, the transportation and logistics. So there's work to be done but we're making good progress. We hope at some point later this year or early next year to be able to announce some additional sites. But the focus right now is, we want to get this first facility outside of McComb mill. So we're getting -- permits all in order and land purchase and doing all the groundwork. So we're really excited about this. We've had our team, Paul and a few of his folks were earlier this summer all across Europe, meeting with potential customers for biocarbon. We still think this is a really big opportunity for us over time. So we're getting after it.

Our next question comes from Anthony Pettinari with Citi.

You raised the full year guide for Strategic Land Solutions. And in terms of Climate Solutions and the contribution there, I think if you back out the big conservation easement in 1Q, it seems like Climate Solutions EBITDA was like $14 million in 1Q, $13 million in 2Q. Is that like a decent run rate as we think about the second half? Or is that just -- is that number going to be very volatile and spiky? Or any kind of way that you can help us sort of frame Climate Solutions contribution in the back half and maybe kind of on a run rate basis?

Yes. Sure, Anthony. It is going to be pretty lumpy as we move forward. That's kind of the nature of these businesses as we are building them out and investing in the long-term growth in each of those areas. You're going to see that move around quarter-to-quarter. So I don't think that reading too much into the current quarter amount as a run rate is a good thought moving forward. I think we're continuing to focus on growing that business up to the $250 million target through 2030. So I think we'll continue to update you as we progress along the way to that.

Yes. I would just add, that's definitely true today. It is going to be lumpy. I will say, though, over time, you're going to see this become more of a run rate business. So when we get to full scale on renewables, when you get to growth on the construction materials, when you see the CCS project come into play, some of these businesses are a little bit more run rate and won't be quite as lumpy as, say, some of the conservation mitigation deals that we're doing today.

Got it. Got it. That's helpful. And then, Devin, at the Investor Day, you identified $180 million in enterprise initiatives for the company. Obviously, that comprises a lot of individual projects and programs. But I'm just wondering if you could give any sort of update there. And I guess the context of the question is, since the Investor Day, housing market has been a bit weaker than expected. Some of the product prices have been a little bit weaker than expected. Do you sort of prioritize some of those projects? Do you cut back? Do you accelerate? I'm just wondering how you think about that and how those are progressing.

Yes. I mean the good news about those enterprise initiatives is that for the most part, they're not really expensive to move forward with. So look, if I kind of look at the different buckets there, I'm really pleased with how this is coming along. We've got a lot of activity going on, on the AI front. We're starting -- I mean we're in the early stages of some of these things, or we're starting to see a little bit of the money flow in from that. We got a whole host of projects in the AI space that we're really excited about. And so I'd say that is progressing at or even perhaps better than we expected pace. When we think about some of the cost initiatives, Davie and his team are doing a great job together with the businesses, really looking for every penny. I think the last count is, we have 53 separate cost initiatives underway at the company. We're starting to see some benefit there. I think next year, we'll really start to see some meaningful benefits from some of that activity. The procurement folks are doing a great job driving spend and being very thoughtful about how we organize the spend. We've got new initiatives from the integration excellence team, things like our contractor loyalty program, which is really starting to gain some traction, really just kind of working, making sure that we're getting every conceivable possible dollar from the integrated nature of our platform. So I'm really excited about that. We're going to do that regardless of what's going on in the market. And you could almost say that tough markets make that a little easier. Cost initiatives sometimes are a little easier to sell to the organization when times are tight. So it's all going according to plan, if not better than planned. So we're just moving forward full force on those enterprise initiatives.

Our next question comes from Matthew McKellar with RBC Capital Markets.

Just on transportation, can you just give a bit more color on the steps you've actually taken to improve capacity around transportation for lumber? It was just a bit unclear to me to what extent the market has improved and maybe to what extent you've taken steps yourselves to remedy the issue.

Yes. I mean, so really, what happened in Q2 is, we just had kind of a perfect storm of events all happening at more or less at the same time. Now I would say, if you look back over time, it's not unusual to see markets tighten and loosen over time. And I think our team does a good job ordinarily of managing through that. So it's not necessarily going to be impactful to our operations. But when you had the higher fuel costs from the Iran situation, we've also had some regulatory changes here that unfortunately have reduced the number of available truck drivers. And I'd say just overall trucking capacity and the usage just created a very challenging dynamic in Q2. Fast forward to today, I would say maybe things are slightly better but not meaningfully. The overall market, particularly for flatbed trucks in the U.S. South is still pretty tight. Our commentary on why we don't think it's going to be as impactful in Q3 is because our team has taken a number of steps to help navigate that. And that covers a lot of different areas, things like maybe moving a little bit more volume to rail versus truck, things like adding additional loading days at the mills, things like there's ordinarily an option for customers to arrange pickup of their product from our mill versus us managing that transportation. We've taken a little bit more of that management on our team to help manage that a little bit better. So we're doing a whole variety of different things to try to navigate this more challenging environment. And I would expect it to continue to be tight here for the foreseeable future.

Our next question comes from Buck Horne with Raymond James.

I'll try to keep this brief. Just wondering if you've got any thoughts on the Canadian wildfire situation this year and either in terms of the longer-term impact on fiber supply, or if there's any near-term potential salvage inventory impact? Or how do you think about what's happening with the wildfires in Canada impacting overall North American flows?

Yes. I mean, first of all, just say that fortunately for us, the wildfire in Canada really hasn't impacted our operating areas too much. Alberta really is a key region for us and they just -- they had a lot of rain early in the year, so it hasn't been quite as bad. In some of the other geographies, I think the fire activity has probably been a little bit further north. So it hasn't been quite as impactful to date. And it's fire salvage opportunity, I suppose, even if it's far north but sometimes the logistics cost to get after that just make the economics a little tricky. So sitting here today, I'm not sure I see a massive influx of salvage logs hitting the Canadian system. I mean there may be a few spots where that may be the case. But generally speaking, to date, I don't know that I see that as being a huge issue for us.

Our next question comes from Hong Zhang with JPMorgan.

I guess how do you think about share buybacks in your capital allocation priorities, just given where the stock trades today?

Yes. You bet, Hong. It's -- our approach there really remains disciplined and consistent. We designed our capital allocation framework to ensure it aligns with the cyclical nature of our business. So we start with that commitment to returning significant amounts of cash back to shareholders. And then beyond that, we can allocate additional capital to value-add activities, whether that be investing in our businesses, debt paydown or incremental share repurchase. So this year, of course, we've got the significant amount of Monticello spend. So we're focused on that. But beyond that, we'll continue to evaluate opportunities for share repurchase. We like it. We've been active in that space. We closed out our $1 billion authorization last year, announced a new one. So I think that's a good indication of the value of that lever that we see. But of course, we're going to weigh that with all the other long-term investment opportunities that we have and maintaining an appropriate capital structure.

Got it. And then on the OSB side, so what we saw with lumber last year was that producers are willing to operate under negative margins for a surprising amount of time. Do you think that could -- we could face a similar situation on -- in OSB this year? Or do you think the market will correct a little bit more faster?

Yes. To be perfectly frank, I think that's very hard to predict. I mean each individual organization is going to have their rationale for how they operate and I just don't know that we have visibility into that to make a good prediction.

Our last question comes from Mike Roxland with Truist Securities.

Just two quick ones for me. Devin, in OSB, can you give us a sense of what's happening with the start-ups for those new mills? Do you expect them to start on schedule? Do you think that they could be delayed given the persistent housing weakness we're currently seeing as well as OSB oversupply? And then just secondly, Devin, in EWP, if conditions remain steady, do you think that you guys could be poised for another increase in early '27?

Yes. I mean, so with the 2 new OSB mills, like, what I know is what we've read in the press. And so the latest I've heard is those have been pushed out to the end of this year, early next year. I don't know that we have any insight other than what's been publicly reported on that. On EWP, it's very hard to predict what you're going to do from a pricing standpoint that far out. The reality is, it's just going to depend on what does the demand environment look like, particularly if you're talking about early next year. It's going to also depend on what the general confidence level is of the builders as they're putting together their buy program. So I'd say at this point, it's a little bit hard to say what that pricing environment is going to look like as you get into '27.

There are no further questions at this time. I'd like to turn the floor back over to Devin Stockfish for closing comments.

All right. Well, thanks, everyone, for joining us this morning. Thank you for your continued interest in Weyerhaeuser and have a great day.

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