LP Building Solutions Reports Fourth Quarter and Full Year 2020 Results and Provides Q1 2021 Outlook

Louisiana-Pacific Corporation (“LP”) reported its fourth quarter and year ended December 31, 2020 financial results and announced strategic updates.

Key Highlights for the Fourth Quarter

– Net sales increased by 60% to $860 million

– LP® SmartSide® net sales increased by 30% to $257 million, bringing full year SmartSide net sales growth to 15%

– OSB net sales increased by $256 million to $428 million, $246 million of which was due to OSB prices

– Net income attributed to LP was $256 million ($2.34 per diluted share)

– Adjusted Diluted EPS(1) was $2.01 per share

– Adjusted EBITDA(1) was $328 million

– Cash provided by operating activities was $321 million

– For the full year, net sales increased by 21% to $2.8 billion, net income attributed to LP was $499 million ($4.46 per diluted share), Adjusted EBITDA(1) was $781 million, cash provided by operating activities was $659 million, and Adjusted Diluted EPS(1) was $4.31

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

Phased and Integrated Capacity Expansion Strategy

– Houlton, Maine mill to be converted to SmartSide manufacture with production beginning in early 2022

– Next siding conversion after Houlton likely to be Sagola, Michigan mill

– Initiating process to restart our Peace Valley OSB mill in Fort St. John, British Columbia

Capital Allocation Update

– Completed $200 million share buyback authorization in the fourth quarter

– $300 million buyback authorization remains

– Declared a 10% increase in quarterly cash dividends to $0.16 per share

“LP ended 2020 having exceeded our 3-year transformation targets for growth and efficiency, with a cumulative EBITDA impact of $178 million. We reached this milestone a year early, largely as a result of exceptional SmartSide sales growth, which reached 30% in Q4,” said LP Chairman and Chief Executive Officer Brad Southern. “In order to meet growing customer demand for SmartSide and OSB, LP will convert our mill in Houlton, Maine to the manufacture of SmartSide, with production beginning early in 2022, and we have begun the process to restart our OSB mill in Peace Valley, British Columbia. COVID made 2020 a difficult year for LP employees, our customers, their families, and the communities we all serve. Our results are a testament to their resilience and determination, and I am extremely proud of the results we achieved in the face of these challenges.”

Fourth Quarter 2020 Highlights

Net sales for the fourth quarter of 2020 increased by $323 million (or 60%) over the prior year to $860 million. SmartSide revenue increased by $59 million (or 30%) and OSB prices increased by $246 million. LP South America revenue increased by $12 million, net of $4 million in unfavorable currency movements. The strategic exits from fiber and CanExel™ products reduced net sales by $21 million and $7 million, respectively.

Net income attributed to LP for the fourth quarter 2020 increased by $307 million over the prior year to $256 million ($2.34 per diluted share). In addition to the growth in SmartSide sales and increases in OSB prices, raw material costs (primarily wood fiber and resin) were favorable to the prior year by $9 million. During the fourth quarter of 2019, we recognized pre-tax impairment charges of $86 million related to certain operating and non-operating assets.

Adjusted EBITDA for the fourth quarter 2020 increased by $279 million to $328 million from $49 million in the fourth quarter of 2019, primarily due to SmartSide revenue growth and higher OSB prices.

Full Year 2020 Highlights

Net sales for full year 2020 increased by $478 million (or 21%) over the prior year to $2.8 billion. SmartSide revenue increased by $118 million (or 15%), and OSB prices increased by $481 million, partially offset by 5% lower sales volume. LP South America revenue was $10 million higher than the prior year, net of $27 million in unfavorable currency movements. EWP net sales were lower by $7 million and the strategic exits from fiber and CanExel products reduced net sales by $65 million and $32 million, respectively.

Net income attributed to LP for the full year 2020 increased by $504 million over the prior year to $499 million ($4.46 per diluted share). In addition to the growth in SmartSide and increased OSB prices, raw material costs (primarily wood fiber and resin) were favorable to the prior year by $32 million. Fiber discontinuance costs of $20 million were recognized during the year. Pre-tax impairment charges of $92 million related to certain operating and non-operating assets were recognized in 2019.

Adjusted EBITDA for the full year 2020 increased $572 million over the prior year to $781 million, due to SmartSide growth, $481 million of OSB pricing, and favorable raw material prices.

Segment Results

Siding

The Siding segment serves diverse end markets with a broad product offering including LP® SmartSide® Trim & Siding, LP® SmartSide® ExpertFinish® prefinished siding, and LP® Outdoor Building Solutions® products for premium outdoor buildings. Our SmartSide products consist of a full line of engineered wood siding, trim, soffit, and fascia. Our LP CanExel® prefinished siding was reclassified from Siding to our Other segment during the year ended December 31, 2020. All prior periods presented have been adjusted for comparability.

For the fourth quarter of 2020, Siding net sales increased by $37 million (or 17%) compared to 2019, primarily due to SmartSide revenue growth of $59 million or 30% (26% volume, 4% price). The strategic exit of fiber decreased revenue by $21 million compared to 2019. Adjusted EBITDA increased by $36 million (or 88%) from 2019, primarily due to the increase in SmartSide revenue growth, lower sales & marketing costs of $3 million, and lower raw material costs of $5 million.

For the full year 2020, net sales increased by $42 million (or 5%) compared to 2019, primarily due to SmartSide revenue growth of $118 million, or 15% (13% volume, 2% price). The strategic exit of fiber decreased revenue by $65 million compared to 2019. Siding Adjusted EBITDA increased by $77 million (or 46%) from 2019, primarily due to the increase in SmartSide revenue growth, lower sales & marketing costs of $9 million, and lower raw material costs of $12 million, partially offset by the strategic exit of fiber.

Oriented Strand Board (“OSB”)

The OSB segment manufactures and distributes OSB structural panel products, including our 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.

For the fourth quarter of 2020, net sales increased by $256 million from 2019, primarily due to $246 million of increased OSB prices and a 2% increase in shipments. Structural Solutions sales volume accounted for 49% of total OSB segment sales in 2020 compared to 46% in the fourth quarter of 2019. Adjusted EBITDA increased by $243 million from 2019, primarily due to the increase in OSB prices.

For the full year 2020, net sales increased by $443 million (or 57%) from 2019, primarily due to $481 million of increased OSB prices, partially offset by a 5% reduction in shipments. Structural Solutions sales volume accounted for 44% of OSB segment sales in 2020 compared to 43% in 2019. Adjusted EBITDA increased by $509 million to $519 million from 2019, primarily due to the increase in OSB prices.

Engineered Wood Products (“EWP”)

The EWP segment is comprised of LP® SolidStart® I-Joist, Laminated Veneer Lumber (LVL), and Laminated Strand Lumber (LSL) and other related products. This segment also includes the sales of I-Joist and LVL products produced by our joint venture and sales of plywood produced as a by-product of the LVL production process.

With the Houlton, Maine mill converting to SmartSide, we will cease the production of LSL during 2021, and we are exploring strategic alternatives to the remaining EWP business, including a possible sale in whole or in part.

For the fourth quarter of 2020, EWP net sales increased by $15 million (or 16%) from 2019, primarily due to increased shipments. Adjusted EBITDA declined by $1 million primarily due to higher input costs, partially offset by operating efficiencies.

For the full year 2020, net sales decreased by $7 million (or 2%) from 2019, primarily due a reduction in sales volume. Adjusted EBITDA declined by $3 million primarily due to higher input costs, partially offset by operating efficiencies.

South America

Our 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, Columbia, and Argentina.

For the fourth quarter of 2020, net sales increased by $12 million (or 32%) compared to 2019 due to higher prices and volumes across all products and regions. Adjusted EBITDA increased by $5 million (or 63%) from 2019 net of higher costs for imported resins.

For the full year 2020, net sales increased by $10 million (or 6%) compared to 2019 due to higher prices and volumes across all products and regions, partially offset by unfavorable foreign currency changes of $27 million. Adjusted EBITDA increased by $8 million (or 24%) from 2019 due to both higher prices and volumes, partially offset by higher costs for imported raw materials.

Q1 2021 Outlook and 2021 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.”

– SmartSide sales in the first quarter of 2021 to be more than 35% higher than the first quarter of 2020.

– OSB sales in the first quarter of 2021 to be sequentially higher than the fourth quarter of 2020 by more than 15% on similar volumes.

– Adjusted EBITDA(2) for the first quarter of 2021 to be greater than $380 million.

– Given our current outlook, we expect capital expenditures for 2021 to be in the range of $220 million to $230 million, including $80 million to $85 million for the Houlton conversion, $30 million to $35 million for other strategic growth projects, $10 million for Peace Valley, and $100 million for sustaining maintenance.

(2) This is a non-GAAP financial measure. With respect to Adjusted EBITDA for the first quarter of 2021, 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 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 full fourth quarter results, 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 worldwide. Its extensive offerings include innovative and dependable building products and accessories, such as ® SmartSide® Trim & Siding, LP Structural Solutions portfolio (LP WeatherLogic® Air & Water Barrier, LP Legacy® Premium Sub-Flooring, LP® TechShield® Radiant Barrier, LP® FlameBlock® Fire-Rated Sheathing and more), oriented strand board (OSB), LP® TopNotch® Sub-Flooring, LP, LP® Outdoor Building Solutions®, and LP Elements® Performance Fencing. In addition to product solutions, LP provides industry-leading service and warranties. Since its founding in 1972, LP has been Building a Better World™ by helping customers construct beautiful, durable homes. Headquartered in Nashville, Tennessee, LP operates 25 plants across the U.S., Canada, Chile and Brazil. For more information, visit LPCorp.com.

Contact:

Aaron Howald – Investor Relations – aaron.howald@lpcorp.com – (615) 986-5792

Source: Louisiana-Pacific Corporation