LP Building Solutions Reports Second Quarter of 2022 Results, Provides Capital Allocation Update and Q3 2022 Outlook

Louisiana-Pacific Corporation (LP) today reported its financial results for the three and six months ended June 30, 2022.

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

• Completed the sale of the Engineered Wood Products (EWP) segment on August 1^st. Second quarter of 2022 results reflect the EWP segment as discontinued operations
• Net sales from continuing operations decreased by 3% to $1,130 million
• Siding Solutions net sales increased by 24% to $356 million
• OSB net sales decreased by 14% to $673 million
• Income from continuing operations attributed to LP decreased by $138 million to $348 million ($4.28 per diluted share). Income from discontinued operations increased by $26 million to $37 million ($0.45 per diluted share).
• Adjusted EBITDA⁽¹⁾ was $491 million, a decrease of $174 million; Adjusted EBITDA including discontinued operations⁽¹⁾ was $535 million, a decrease of $149 million
• Adjusted Diluted EPS⁽¹⁾ was $4.19 per share, a decrease of $0.44 per share; Adjusted Diluted EPS including discontinued operations⁽¹⁾ was $4.57 per share, a decrease of $0.17 per share
• Cash provided by operating activities was $483 million, an increase of $26 million
• Received gross proceeds of $210 million on August 1, 2022 from the sale of the EWP segment, which will result in a pre-tax gain on the sale of between $120 million to $125 million in the third quarter

(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 and “Reconciliation of Income from discontinued operations to Non-GAAP Adjusted EBITDA from discontinued operations. Non-GAAP Adjusted Income from discontinued operations, and Non-GAAP Adjusted Diluted EPS from discontinued operations” below.

Capital Allocation Update

• For the quarter, LP paid $471 million to repurchase 7.3 million of its common shares, leaving 77.2 million common shares outstanding at June 30, 2022
• Paid $103 million for capital expenditures during the second quarter
• Paid $18 million in cash dividends during the second quarter
• Cash and cash equivalents of $517 million as of June 30, 2022
• Declared a quarterly cash dividend of $0.22 per share
• After quarter-end and as of August 8, 2022, LP has paid a further $197 million to repurchase 3.4 million common shares, leaving $329 million remaining under the pre-existing $600 million share repurchase authorization
• Common shares outstanding as of August 8, 2022, 73.9 million

“Including the EWP segment, the second quarter of 2022 was another record sales quarter for LP,” said LP Chair and Chief Executive Officer Brad Southern. “Despite ongoing raw material inflation and logistics challenges, LP’s teams consistently executed our strategy to meet sustained customer demand. The new Siding mill in Houlton, Maine, is ramping up ahead of schedule, and contributed to Siding reaching a quarterly sales record of $356 million. With Structural Solutions mix exceeding 50% for the first six months of 2022, we believe LP is now the leading producer of specialty OSB, offering the widest array of specialty OSB building solutions. While we are monitoring inflation and interest rates closely, so far we see few signs of diminished demand for our products.”

Second Quarter 2022 Highlights

Net sales for the second quarter of 2022 decreased year-over-year by $38 million (or 3%). This included a $105 million (or 14%) decrease in OSB revenue (22% lower OSB prices on 10% higher volumes, primarily driven by the Peace Valley mill restart), offset partially by Siding Solutions revenue growth of $68 million (or 24%).

Income from continuing operations attributed to LP for the second quarter of 2022 decreased year-over-year by $138 million (or 28%) to $348 million, or $4.28 per diluted share. This reflects a $174 million decrease in Adjusted EBITDA, $13 million of insurance recoveries received in 2022, and a decrease in the provision for income tax of $27 million driven by lower pre-tax income in the current year.

Income from discontinued operations for the second quarter of 2022 increased year-over-year by $26 million to $37 million, or $0.46 per diluted share, primarily due to better realization of EWP prices.

First Six Months of 2022 Highlights

Net sales for the first six months of 2022 increased year-over-year by $235 million (or 11%). This included a $100 million (or 8%) increase in OSB revenue (11% higher volumes, primarily driven by the Peace Valley mill restart on 3% lower OSB prices) and Siding Solutions growth of $116 million (or 20%).

Income from continuing operations attributed to LP for the first six months of 2022 decreased year-over-year by $33 million (or 4%) to $770 million, or $9.19 per diluted share. The decrease primarily reflects a $30 million decrease in Adjusted EBITDA.

Income from discontinued operations for the first six months of 2022 increased year-over-year by $85 million to $99 million, or $1.18 per diluted share, primarily due to better realization of EWP prices and a $39 million gain associated with the 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).

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

 

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 six months ended June 30, 2022. Additionally, the production ramp-up of the Houlton facility was ahead of schedule and contributed almost half of the year-over-year sales volume increase during the three months ended June 30, 2022.

Adjusted EBITDA increased for the three months ended June 30, 2022, reflecting price and volume growth largely offset by $29 million of raw material and freight inflation and $7 million of discretionary investments in support of future growth, including siding mill conversions and sales and marketing costs. The decrease in Adjusted EBITDA of $8 million for the six months ended June 30, 2022, reflects price and volume growth offset primarily by $55 million of raw material and freight inflation and $19 million of discretionary investments in support of future growth, including siding mill 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.

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 22% on 10% higher OSB sales volume for the three months ended June 30, 2022, resulting in a 14% decrease in net sales. OSB average net selling prices decreased year-over-year by 3% on 11% higher OSB sales volume for the six months ended June 30, 2022, resulting in an 8% increase in net sales.

The decrease in Adjusted EBITDA of $162 million for the three months ended June 30, 2022, reflects $195 million from lower prices and $22 million of increased raw material inflation offset partially by $54 million from higher sales volume. The decrease in Adjusted EBITDA of $11 million for the six months ended June 30, 2022, reflects $65 million from lower prices and $45 million of increased raw material inflation offset partially by $96 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.

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

 

Net sales in South America decreased year-over-year by 5% for the three months ended June 30, 2022, predominately due to 6% lower sales volume. Net sales increased year-over-year by 8% for the six months ended June 30, 2022, due in large part to higher OSB prices.

The year-over-year decrease in Adjusted EBITDA of $8 million for the three months ended June 30, 2022, reflects lower sales volume and higher costs for raw material costs. The year-over-year decrease in Adjusted EBITDA of $3 million for the first six months of 2022 reflects the net effect of lower sales volume, higher raw materials costs, and higher OSB prices.

Q3 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 third quarter of 2022 year-over-year revenue growth expected to be approximately 20%
• OSB revenue in the third quarter of 2022 expected to be sequentially lower than the second quarter of 2022 by approximately 40%, assuming that OSB prices published by Random Lengths remain unchanged from those published on August 5, 2022. This is an assumption for modeling purposes and not a price forecast
• Adjusted EBITDA⁽²⁾ for the third quarter of 2022 expected to be approximately $200 million
• Siding Solutions full-year 2022 expected year-over-year revenue growth continues to be greater than 20%
• Given our current outlook, capital expenditures for 2022 are expected to be in the range of $400 million to $430 million, including $200 million to $210 million for the mill conversions, $120 million to $130 million for sustaining maintenance, and $80 million to $90 million for other strategic growth projects

(2) This is a non-GAAP financial measure. With respect to Adjusted EBITDA for the third 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, and 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 shareholders build lasting value. 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 – Aaron.Howald@lpcorp.com – (615) 986-5792

Source: LP Building Solutions