LP Building Solutions Reports Fourth Quarter and Full Year 2022 Results

Louisiana-Pacific Corporation (LP) (NYSE: LPX) today reported its financial results for the fourth quarter and year ended December 31, 2022.

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

• Net sales from continuing operations decreased by 16% to $705 million, including 14% from lower oriented strand board (OSB) prices
• Siding Solutions net sales increased by 38% to $385 million – a fourth quarter record
• OSB net sales decreased by 45% to $257 million, including 34% from lower OSB prices
• Income attributed to LP from continuing operations decreased by $180 million to $(10) million ($(0.14) per diluted share), inclusive of a non-cash pension settlement charge of $78 million
• Adjusted EBITDA⁽¹⁾ was $100 million, a decrease of $178 million
• Adjusted Diluted EPS⁽¹⁾ was $0.61 per diluted share, a decrease of $1.36 per diluted share
• Cash provided by operating activities was $41 million

Key Highlights for the Full Year, Compared to Prior Year

• Net sales from continuing operations decreased by 2% to $3.9 billion
• Siding Solutions net sales increased by 26% to $1.5 billion
• OSB net sales decreased by 14% to $2.1 billion
• Income attributed to LP from continuing operations decreased by $0.4 billion to $0.9 billion ($11.34 per diluted share)
• Adjusted EBITDA⁽¹⁾ was $1.4 billion, a decrease of $0.5 billion
• Adjusted Diluted EPS⁽¹⁾ was $11.77 per diluted share, a decrease of $1.47 per diluted share
• Cash provided by operating activities was $1.1 billion

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

Capital Allocation Update

• Paid $414 million in capital expenditures in 2022, including $193 million on Siding capacity expansions
• Paid $900 million in 2022 to repurchase 14.4 million of its common shares, leaving 71.7 million common shares outstanding at December 31, 2022 and $200 million of share repurchase authorization remaining
• Paid $69 million in cash dividends in 2022
• Received $264 million of pre-tax proceeds for Engineered Wood Products (EWP) segment divestitures in 2022
• Declared a quarterly cash dividend of $0.24 per share

“The fourth quarter was a strong end to another record year for the Siding business, with 38% sales growth compared to Q4 of last year,” said Chair and CEO Brad Southern. “Inflationary pressures continue to present headwinds, housing starts have softened, and OSB prices remain depressed after falling steeply in the fourth quarter. However, LP has managed through challenges like these before. I am bullish about the long-term fundamentals for housing, and very confident that LP’s strategy of growth specialization will continue to deliver value in 2023.”

“LP ended the year with over $900 million of liquidity, comprising $383 million of cash and $550 million undrawn revolver,” said EVP and CFO Alan Haughie. “With significant flexibility in our capital and operating plans, I am confident that LP’s balance sheet leaves us very well positioned to withstand near-term headwinds and execute our growth and transformation strategy.”

Q1 2023 Outlook

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 first quarter of 2023 revenue is expected to decrease year-over-year by up to 5%
• OSB revenue in the first quarter of 2023 is expected to be sequentially lower than the fourth quarter of 2022 by approximately 20%, assuming that OSB prices published by Random Lengths remain unchanged from those published on February 17, 2023. This is an assumption for modeling purposes and not a price forecast
• Under these assumptions, adjusted EBITDA⁽²⁾ for the first quarter of 2023 is expected to be at least $35 million

^{(2) This is a non-GAAP financial measure. With respect to Adjusted EBITDA for the first quarter of 2023, certain items that affect net income on a U.S. 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 U.S. 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 U.S. GAAP measures, without unreasonable effort. As such, LP is unable to provide a reasonable estimate of U.S. GAAP net income, or a corresponding reconciliation of Adjusted EBITDA to net income.}

Fourth Quarter 2022 Highlights

Net sales for the fourth quarter of 2022 decreased year-over-year by $130 million (or 16%) to $705 million, including a decrease in OSB prices of $120 million and a decline in OSB volume of $92 million (production curtailments and conversion of the Sagola OSB mill to siding production), partially offset by Siding Solutions revenue growth of $106 million (15% pricing, 20% volume).

Income attributed to LP from continuing operations for the fourth quarter of 2022 decreased year-over-year by $180 million to $(10) million or $(0.14) per diluted share, which reflects a $178 million drop in Adjusted EBITDA and non-cash pension settlement charges of $78 million, partially offset by $62 million lower income tax provisions.

Income from discontinued operations, net of income taxes, for the fourth quarter of 2022 decreased year-over-year by $22 million to $2 million, or $0.03 per diluted share, due to the sale of the EWP segment assets in the third quarter of 2022, offset by lower income tax provisions.

Full Year 2022 Highlights

Net sales for 2022 decreased year-over-year by $61 million (or 2%), including a decrease in OSB prices of $400 million and a decrease in South America revenue of $24 million due to lower volumes and unfavorable currency movements, partially offset by Siding Solutions growth of $305 million (14% pricing, 11% volume) and an increase in OSB volume of $53 million.

Income attributed to LP from continuing operations decreased year-over-year by $418 million to $888 million, or $11.34 per diluted share, reflecting a $488 million drop in Adjusted EBITDA and non-cash pension settlement charges of $82 million, partially offset by $128 million lower income tax provisions.

Income from discontinued operations, net of income taxes, increased year-over-year by $126 million to $198 million, or $2.52 per diluted share, primarily due to the $118 million gain on the sale of EWP assets and a $39 million gain on the sale of the equity interests in two joint ventures that produced I-joists, partially offset by a $27 million increase in income tax provision.

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 Outdoor Building Solutions^® (collectively referred to as Siding Solutions).

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

	Quarter Ended December 31,		Year Ended December 31,
	2022		2021		% Change		2022		2021		% Change
Net sales	$386		$281		37%		$1,469		$1,170		26%
Adjusted EBITDA	88		48		83%		339		289		17%

	Quarter Ended December 31, 2022 versus 2021		Year Ended December 31, 2022 versus 2021
	Average NetSelling Price		UnitShipments		Average NetSelling Price		UnitShipments
Siding Solutions	15%		20%		14%		11%

List price increases and positive product mix effects drove year-over-year increases in the average net selling price for the three and twelve months ended December 31, 2022. The volume increases for the three and twelve months ended December 31, 2022 are attributable to steady customer demand and production increases made possible by the ramp-up of the Houlton facility and the non-recurrence of production downtime in the prior year for a major scheduled maintenance project.

The year-over-year increase in Adjusted EBITDA of $40 million for the three months ended December 31, 2022 reflects revenue growth partially offset by $27 million of raw material, freight & wage cost inflation, and $5 million of discretionary investments in capacity and sales & marketing. For the full year, Adjusted EBITDA increased $50 million year-over-year, reflecting revenue growth largely offset by $123 million of raw material, freight & wage cost inflation, and $31 million of discretionary investments in capacity and sales & marketing.

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, LP NovaCore™ Thermal Insulated Sheathing, 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):

	Quarter Ended December 31,		Year Ended December 31,
	2022		2021		% Change		2022		2021		% Change
Net sales	$257		$470		(45)%		$2,062		$2,387		(14)%
Adjusted EBITDA	13		231		(94)%		1,034		1,531		(32)%

	Quarter Ended December 31, 2022 versus 2021		Year Ended December 31, 2022 versus 2021
	Average NetSelling Price		UnitShipments		Average NetSelling Price		UnitShipments
OSB – Structural Solutions	(30)%		(31)%		(11)%		8%
OSB – Commodity	(34)%		(8)%		(20)%		(3)%

The year-over-year net sales decrease of $214 million (or 45%) for the three months ended December 31, 2022 includes a $120 million drop in OSB prices and a $92 million drop in volume due to production curtailments and conversion of the Sagola mill to Siding production. For the full year, OSB net sales decreased year-over-year by $326 million (or 14%) including a $400 million decrease in OSB prices, partially offset by an increase in Structural Solutions sales volume.

Adjusted EBITDA for the three months ended December 31, 2022, decreased by $218 million due to the decrease in OSB prices and volumes, and $14 million of raw material cost and wage inflation. The full year Adjusted EBITDA decrease of $497 million reflects the decrease in OSB prices and $79 million of raw material cost and wage inflation.

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):

	Quarter Ended December 31,		Year Ended December 31,
	2022		2021		% Change		2022		2021		% Change
Net sales	$51		$63		(18)%		$241		$265		(9)%
Adjusted EBITDA	12		22		(45)%		77		113		(32)%

	Quarter Ended December 31, 2022 versus 2021		Year Ended December 31, 2022 versus 2021
	Average NetSelling Price		UnitShipments		Average NetSelling Price		UnitShipments
OSB – Structural Solutions	3%		(23)%		5%		(10)%
Siding	(4)%		10%		(6)%		(28)%

South America net sales decreased year-over-year for both the fourth quarter and full year 2022 largely due to lower volumes and unfavorable foreign currency movements, partially offset by higher local OSB prices. The year-over-year decreases in Adjusted EBITDA of $10 million and $36 million for the three and twelve months ended December 31, 2022, respectively, reflect the impacts of the lower revenue and higher raw material costs.

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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