Despite positive fourth-quarter results, Weyerhaeuser Co. continues to be threatened by saturated lumber markets and punishing U.S. duties, analysts said. "The earnings were better than the Street predicted, but their core business is not doing that well," said one, who asked not to be named. "This is the world's largest softwood lumber producer and softwood lumber is in the tank right now." In the quarter ended Dec 27, the world's largest lumber producer posted net earnings of US$126-million, or US57c a share, up from a loss of US$15-million (US7c) last year. However, Weyerhaeuser was helped by a string of one-time items, including a US$65-million after-tax gain from the sale of timberlands and a US$26-million benefit from an insurance payment related to disruption costs at the company's mill in North Carolina. In total, the one-time items amounted to US$38-million. The company, which is based in Federal Way, Wash., has been streamlining its operations, partly in response to the soft lumber market. It has closed several mills and reduced head office staff significantly. Weyerhaeuser has 19 sawmills in Canada, most of them from its purchase in the late 1990s of MacMillan-Bloedel. Since May it has been paying U.S. softwood duties of 31%, compared with a Canadian average of 27%. In the most recent quarter, the company had to pay about US$26-million in duties. Weyerhaeuser has been active in lobbying the U.S. and Canadian governments to end the trade dispute. In December it unveiled its proposal for a possible solution, which called for a temporary export tax on Canadian softwood while the two sides hammered out a long-term deal. In a conference call with analysts yesterday, Steve Rogel, Weyerhaeuser's chief executive, said, "the proposal we presented has had an impact, and we are very encouraged by the reactions from all involved parties." Mr. Rogel did not elaborate on what the impact was. Besides unusual items, the fourth quarter results were helped the company's non-lumber operations. "During the quarter our pulp and paper, and container board, packaging and recycling businesses produced improved operating results in difficult markets," Mr. Rogel said. "Wood products, however, continues to be a problem due to over supplied markets and the uncertainty created by the Canadian softwood lumber issue." "There was no single item that really drove performance, the results were just a bit better than expected on a number of things," said Steve Cherchover, an analyst at DA Davidson & Co. based in Portland, Ore. Mr. Cherchover, whose firm neither owns Weyerhaeuser shares nor provides financial advice to the company, predicted the sawmiller will maintain its positive earnings momentum over the next few quarters despite the softwood trade dispute which he believes will not be solved any time soon.