LP Building Solutions Reports Third Quarter of 2022 Results, Provides Capital Allocation Update, and Q4 2022 Outlook

Louisiana-Pacific Corporation (LP) (NYSE: LPX) today reported its financial results for the three and nine months ended September 30, 2022.

Key Highlights for the Third Quarter of 2022, Compared to the Third Quarter of the Prior Year

• Net sales from continuing operations decreased by 16% to $852 million
• Siding Solutions net sales increased by 27% to $393 million
• OSB net sales decreased by 35% to $388 million
• Income from continuing operations attributed to LP decreased by $203 million to $129 million ($1.74 per diluted share)
• Adjusted EBITDA⁽¹⁾ was $200 million, a decrease of $281 million
• Adjusted Diluted EPS⁽¹⁾ was $1.72 per share, a decrease of $1.80 per share
• Cash provided by operating activities was $195 million

(1)	This is a non-GAAP financial measure. See “Use of Non-GAAP Information”, “Reconciliation of Net Income to Non-GAAP Adjusted EBITDA, Non-GAAP Adjusted Income, and Non-GAAP Adjusted Diluted EPS” below.

Capital Expansion Strategy Update

• After Sagola, Michigan, the next SmartSide capacity addition will be the expansion of the Houlton, Maine facility, with production currently estimated to begin in mid to late 2024
• In addition to ongoing expansion projects at existing facilities, LP is planning to add ExpertFinish^® capacity at a new facility to be built near Spokane, Washington, with production there estimated to begin in late 2024 

Capital Allocation Update

• Received $217 million from the Engineered Wood Products (EWP) sale, resulting in a pre-tax gain of $118 million
• For the quarter, LP paid $325 million to repurchase 5.6 million of its common shares, leaving 71.7 million common shares outstanding at September 30, 2022
• Paid $86 million for capital expenditures during the third quarter
• Paid $16 million in cash dividends during the third quarter
• Cash and cash equivalents of $482 million as of September 30, 2022
• Declared a quarterly cash dividend of $0.22 per share

“Q3 of 2022 was another record quarter for LP’s Siding segment, which saw 27% sales growth with 9% higher volume and 16% higher prices than last year,” said Brad Southern, Chair and Chief Executive Officer of LP. “New residential construction appears to be slowing, and OSB prices have stabilized at a more historically normal level. However, demand for SmartSide siding remains strong, especially in repair & remodeling applications. LP is investing in long-term growth, including expanding the Houlton, Maine siding facility and plans to add new ExpertFinish capacity in Washington.”

Third Quarter 2022 Highlights

Net sales for the third quarter of 2022 decreased year-over-year by $166 million (or 16%). This included a decrease in OSB revenue of $212 million (or 35%, due to 39% lower prices and 5% higher volume) partially offset by Siding Solutions revenue growth of $83 million (or 27%, due to 16% higher prices and 9% higher volume).

Income from continuing operations attributed to LP for the third quarter of 2022 decreased year-over-year by $203 million (or 61%) to $129 million, or $1.74 per diluted share. This reflects a $281 million decrease in Adjusted EBITDA and a decrease in the provision for income tax of $67 million driven by lower pre-tax income in the current year.

Income from discontinued operations for the third quarter of 2022 increased year-over-year by $64 million to $97 million, or $1.31 per diluted share, primarily due to the gain on the sale of EWP, net of income taxes.

First Nine Months of 2022 Highlights

Net sales for the first nine months of 2022 increased year-over-year by $69 million (or 2%). This included Siding Solutions growth of $199 million (or 23%, primarily driven by 14% higher prices and 8% higher volumes). OSB revenue decreased by $112 million (14% lower OSB prices on 9% higher volumes) .

Income from continuing operations attributed to LP for the first nine months of 2022 decreased year-over-year by $237 million (or 21%) to $898 million, or $11.16 per diluted share. The decrease primarily reflects a $311 million decrease in Adjusted EBITDA, $15 million of insurance recoveries, and a $66 million decrease in the provision for income tax driven by lower pre-tax income in the current year.

Income from discontinued operations for the first nine months of 2022 increased year-over-year by $149 million to $196 million, or $2.43 per diluted share, primarily due to the gain on the sale of EWP, net of income taxes, and the first quarter of 2022 sale of LP’s 50% equity interest in two joint ventures that produce I-joists.

Segment Results

Siding

The Siding segment serves diverse end markets with a broad product offering of engineered wood siding, trim, and fascia, including LP^® SmartSide^® Trim & Siding, LP^® SmartSide^® ExpertFinish^® Trim & Siding, LP BuilderSeries^® Lap Siding, and LP^® Outdoor Building Solutions^® (collectively referred to as Siding Solutions).

The combined effects of list price increases and improving mix of innovative products drove year-over-year increases in the average net selling price for the three and nine months ended September 30, 2022. The volume increases for the three and nine months ended September 30, 2022 are attributable to steady customer demand and production increases made possible by the ongoing ramp-up of the Houlton facility as well as increasing operational efficiency at other Siding facilities.

Adjusted EBITDA year-over-year increase of $17 million for the three months ended September 30, 2022 reflects price and volume growth largely offset by $32 million of raw material, freight and labor inflation and $4 million of facility maintenance costs. The year-over-year increase in Adjusted EBITDA of $11 million for the nine months ended September 30, 2022 reflects price and volume growth, offset primarily by $89 million of raw material, freight, and labor inflation, $8 million of facility maintenance costs, and $19 million of discretionary investments in support of future growth, including siding mill conversions and sales and marketing costs.

Oriented Strand Board (OSB)

The OSB segment manufactures and distributes OSB structural panel products including the value-added OSB portfolio known as LP Structural Solutions (LP^® TechShield^® Radiant Barrier, LP WeatherLogic^® Air & Water Barrier, LP Legacy^® Premium Sub-Flooring, and LP^® FlameBlock^® Fire-Rated Sheathing) and LP^® TopNotch^® Sub-Flooring. OSB is manufactured using wood strands arranged in layers and bonded with resins.

OSB average net selling prices decreased year-over-year by 39% on 5% higher OSB sales volume for the three months ended September 30, 2022, resulting in a 35% decrease in net sales. OSB average net selling prices decreased year-over-year by 14% on 9% higher OSB sales volume for the nine months ended September 30, 2022, resulting in a 6% decrease in net sales.

The year-over-year decrease in Adjusted EBITDA of $268 million for the three months ended September 30, 2022 reflects $252 million from lower prices, $25 million of increased raw material and wage inflation, and $10 million facility maintenance costs, partially offset by $29 million from higher sales volume and the positive incremental margin generated by Structural Solutions products compared to commodity OSB products. The year-over-year decrease in Adjusted EBITDA of $279 million for the nine months ended September 30, 2022 reflects $325 million from lower prices, $68 million of increased raw material and wage inflation, and $12 million facility maintenance costs, offset partially by $140 million from higher sales volume.

South America

LP’s South America segment manufactures and distributes OSB structural panel and siding products in South America and certain export markets. This segment has manufacturing operations in two countries, Chile and Brazil, and operates sales offices in Chile, Brazil, Peru, Colombia, Argentina, and Paraguay.

Net sales in South America decreased year-over-year by 30% for the three months ended September 30, 2022, predominantly driven by lower OSB sales volumes and $10 million of unfavorable currency movements. Net sales decreased year-over-year by 6% for the nine months ended September 30, 2022, due in large part to lower Siding sales volumes and prices.

The year-over-year decrease in Adjusted EBITDA of $23 million and $26 million for the three and nine months ended September 30, 2022, respectively, reflects lower sales volumes, higher raw material costs, and unfavorable currency movements.

Q4 2022 Outlook and 2022 Capital Expenditure Guidance

Our guidance is based on current plans and expectations and is subject to a number of known and unknown uncertainties and risks, including those set forth below under “Forward-Looking Statements.”

• Siding Solutions fourth quarter of 2022 year-over-year revenue growth expected to be greater than 30%
• OSB revenue in the fourth quarter of 2022 expected to be sequentially lower than the third quarter of 2022 by approximately 30%, assuming that OSB prices published by Random Lengths remain unchanged from those published on October 28, 2022. This is an assumption for modeling purposes and not a price forecast
• Adjusted EBITDA⁽²⁾ for the fourth quarter of 2022 expected to be approximately $100 million
• Siding Solutions full-year 2022 expected year-over-year revenue growth continues to be approximately 24%
• Given our current outlook, capital expenditures for 2022 are expected to be in the range of $400 million to $420 million, including $190 million to $195 million for the mill conversions, $120 million to $130 million for sustaining maintenance, and $90 million to $95 million for other strategic growth projects

(2)

This is a non-GAAP financial measure. With respect to Adjusted EBITDA for the fourth quarter of 2022, certain items that affect net income on a GAAP basis, such as product-line discontinuance charges, other operating credits and charges, net, loss on early debt extinguishment, investment income, and other non-operating items, that would be required to be included in the comparable forecasted GAAP measures cannot be reasonably predicted at this time, and LP is unable to quantify such amounts that would be required to be included in the comparable forecasted GAAP measures, without unreasonable effort. As such, the Company is unable to provide a reasonable estimate of GAAP net income, or a corresponding reconciliation of Adjusted EBITDA to net income.

For the complete press release, click here.

About LP Building Solutions

As a leader in high-performance building solutions, Louisiana-Pacific Corporation (LP Building Solutions, NYSE: LPX) manufactures engineered wood building products that meet the demands of builders, remodelers, and homeowners worldwide. LP’s extensive offerings include innovative and dependable building products and accessories, such as Siding Solutions (LP^® SmartSide^® Trim & Siding, LP^® SmartSide^® ExpertFinish^® Trim & Siding, LP BuilderSeries^® Lap Siding, and LP^® Outdoor Building Solutions^®), LP Structural Solutions (LP^® TechShield^® Radiant Barrier, LP WeatherLogic^® Air & Water Barrier, LP Legacy^® Premium Sub-Flooring, LP^® FlameBlock^® Fire-Rated Sheathing, LP NovaCore^™ Thermal Insulated Sheathing,  and more), LP^® TopNotch^® Sub-Flooring, and oriented strand board (OSB). In addition to product solutions, LP provides industry-leading customer service and warranties. Since its founding in 1972, LP has been Building a Better World™ by helping customers construct beautiful, durable homes while our stockholders build lasting value. Headquartered in Nashville, Tennessee, LP operates 22 plants across the U.S., Canada, Chile, and Brazil. For more information, visit LPCorp.com.

Source: Louisiana-Pacific Corporation