Paper and timber company Weyerhaeuser Co posted a smaller-than-expected quarterly loss as cost-cutting helped offset weak demand from the U.S. construction industry.

The company reported a second-quarter net loss of $106 million, or 50 cents per share, compared with a loss of $96 million, or 45 cents, in the year-earlier period.

Excluding one-time items, Weyerhaeuser lost $125 million, or 59 cents per share.

That beat analysts' expectations for a loss of 69 cents, according to Reuters Estimates.

Sales at the Federal Way, Washington-based company fell 36 percent to $1.39 billion.

In addition to forest products, Weyerhaeuser is heavily involved in real estate. That segment was able to improve results to a loss of $50 million compared with a loss of $337 million a year earlier.

The unit closed on 8 percent more homes in the second quarter than the first quarter, though the company said it expects the unit to post a larger loss in the third quarter as home sales level off.

In the timberlands unit, Weyerhaeuser said earnings fell 36 percent, and that third-quarter results likely will be lower due in part to fewer log sales.

Although we've begun to experience some recovery in housing sales and starts, it is not yet clear that this improvement is driven by sustainable shifts in market fundamentals, Chief Executive Dan Fulton said in a statement.

Earnings at the cellulose fibers unit more than doubled because of a gain from fuel-mixture credits. Excluding the gain, earnings at the unit fell 91 percent, but the company expects them to rise in the third quarter.

The company slightly narrowed its loss at the wood products segment. Part of that unit's operations will idle in the third quarter to balance supply with demand, Weyerhaeuser said.

Costs and expenses across the company fell 44 percent to $1.45 billion.

We continue to reduce costs to make our businesses more competitive, and we continue to adjust our harvest and production levels to meet market demand, Fulton said.

Earlier this week, industry peer International Paper Co said its second-quarter profit slipped 40 percent. However, the Memphis, Tennessee-based company said it believes demand for its products is returning.

Shares of Weyerhaeuser rose 24 cents, or 0.7 percent, to $35.86 in morning trading on the New York Stock Exchange. The stock has traded between $18.67 and $66.50 in the past 52 weeks.

(Reporting by Matt Daily and Ernest Scheyder; Editing by Derek Caney and Steve Orlofsky)