Citi Comments On Temple-Inland Inc Following Management Meetings

Citi recently met with Temple Inland Inc. TIN CEO Doyle Simons, COO Pat Maley, and CFO Randy Levy at the company's Austin headquarters. The meeting left us incrementally positive on containerboard, and provided additional detail on TIN's Box Plant Transformation 2 initiative and Building Products businesses.

TIN expects to reduce costs by $30mm in 2011 through its Box Plant Transformation 2 initiative. Citi thinks it will likely hit this target, but there is long-term risk the gains will be competed away as other producers pursue similar cost saving programs. Citi was encouraged by management's insistence that BPT's goal is not to push box volumes, but rather improve relative return on sales, suggesting TIN will be disciplined on price.

Citi is seeing increased investor interest in TIN's Buildings Products business, which was 17% of 2010 sales but has posted an operating loss since 2008. It expects a small 2011 earnings contribution on improving lumber fundamentals, but the gypsum business is likely to remain challenged given industry overcapacity.

Citi has a Hold rating and $25 PT on TIN

TIN closed Friday at $23.26