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

News provided by LP Building Solutions

Nov 01, 2022, 06:00 ET

NASHVILLE, Tenn., Nov. 1, 2022 /PRNewswire/ — 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

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.

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.

Segment sales and Adjusted EBITDA for this segment were as follows (dollar amounts in millions):

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.

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

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