On Wednesday, Louisiana-Pacific (NYSE:LPX) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
Access the full call at https://edge.media-server.com/mmc/p/8op8bzjm/
Summary
Louisiana-Pacific reported a decline in Q1 net sales due to lower OSB demand and falling commodity prices, but exceeded EBITDA guidance expectations.
The company highlighted strong safety performance and progress in expanding its Expert Finish siding line, with new capacity in Green Bay and planned expansions in New York and Minnesota.
Management remains cautious about the housing market’s recovery, lowering full-year guidance due to expected volume declines and potential crude oil price impacts on raw materials and freight costs.
Notable strategic efforts include growing market share in off-site construction and new residential construction, with two new builder partnerships secured in 2026.
Management emphasized the importance of maintaining pricing discipline and expressed confidence in the long-term growth potential of the Smartside product line despite current market challenges.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Q1 2026 Louisiana-Pacific Corporation earning Conference call. At this time, all participants are in a listen only mode. After the speaker’s presentation there will be a short question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Erin Howeld. Please go ahead.
Erin Howeld
Thank you Operator and good morning everyone. Thank you for joining Louisiana-Pacific (LP) Building Solutions to discuss our financial results for the first quarter of 2026 and our updated guidance for the second quarter and the remainder of the year. Hosting the call with me this morning are Jason Ringblom and Alan Haughie, who are LP’s chief executive officer and Chief Financial Officer respectively. After prepared remarks, we will take a round of questions. During today’s call we will be referencing a presentation that has been posted to LP’s IR website which is investor.lpcorp.com.. our 8-K filing, earnings, press release and other materials are also available there. Finally, today’s discussion contains forward looking statements and non GAAP financial metrics as Described on slides 2 and 3 of the earnings presentation. The appendix of the presentation also contains reconciliations that are further supplemented by this morning’s 8-K filing. Rather than reading those materials, I will incorporate them by reference and with that turn the call over to Jason.
Jason Ringblom
Thanks, Erin. Good morning everyone and welcome to LP’s earnings call for the first quarter of 2026. We appreciate you joining us. I’m proud to say that in first quarter LP navigated the challenges of a complex market exceptionally well. Against an increasingly volatile macro backdrop and despite significant impact from winter storms and the conflict in Europe, we delivered on our guidance. Price realization both in siding and OSB exceeded our expectations, partially offsetting lower volumes and contributing to EBITDA performance above the high end of our guided range. I’ll discuss our results for the quarter at a high level before describing what we are seeing in the various markets that we serve. One highlight that we are incredibly proud of is our safety performance in the quarter. LP team members in North America worked over a million and a half hours with a world class total incident rate of only 0.26. I also want to recognize our newest siding mill in Sagola, Michigan. For achieving two years without a recordable injury, our goal will always be zero injuries, but I want to personally thank every LP team member who contributes to our award winning safety culture from a macroeconomic perspective, Given the trajectory with which the housing market weakened over the course of 2025, we expected the first quarter would be a challenging comparable. Accordingly, as you can see on page five of the presentation, our net sales were down compared to the prior year quarter, driven largely by softer OSB demand and lower commodity prices which fell below ebitda breakeven for Q4 of last year and Q1 of this year, OSB price softness accounted for a $66 million reduction in net sales and EBITDA. By contrast, the pricing power of Smartside helped offset lower sales volume moderating revenue declines LP delivered EBITDA in the quarter of $82 million, representing an $80 million decline year over year, primarily from $66 million in lower OSB prices which I mentioned earlier. Siding EBITDA was only $5 million lower despite 10% lower net sales, with the remaining roughly 9 million attributable to other factors including South America operations and higher corporate unallocated expenses. For the quarter, L.P. delivered $0.38 in adjusted earnings per share and returned $21 million to shareholders via dividends. I’m pleased to share that we saw minimal impact from crude oil price volatility in the first quarter. This reflects both near term agility of our supply chain and operations teams as well as the longer term algorithmic structure of many of our strategic supply contracts. We did see modest increases in freight rates, which was not surprising given how quickly diesel prices respond to crude oil supply disruptions overall, however, other inflationary impacts were minimal in the quarter. Alan will share some sensitivity analyses later to help model the direct and indirect impacts of crude oil price volatility on our raw material costs in the second quarter and beyond. Next, I will go a layer deeper and spend a few minutes describing how the quarter unfolded across the three market segments that the siding business serves, each representing roughly one third of siding volume. I will start with off site construction which includes both sheds and manufactured housing. While currently largely consisting of shed volume, opportunities are plentiful to grow market share in manufactured housing as well. As discussed in our prior call, pre buys in advance of our annual price increase resulted in elevated channel inventories. This was not exclusively a shed phenomenon, but the impact was disproportionately felt in this segment in February. We anticipated that this would be a drag on first quarter volumes while expecting channel inventory to normalize in Q2. I’m pleased to say that this has played out more or less as we expected, while shed volumes were off significantly in the first quarter, sell through rates held up quite well and channel inventory is now back within seasonally normal ranges. Another third of LP’s sadding volume goes into the repair and remodeling market, with pre finished Expert Finish being our fastest growing product line within this segment. In the first quarter, expert finish accounted for 12% of our siding volume and 18% of siding revenue. We believe that Expert Finish has a long Runway for growth and continued share gains and we are investing accordingly to support that demand. Our newest Expert Finish line in Green Bay, Wisconsin, which adds approximately 50 million square feet or 25% to annual capacity,
Alan Haughie
is now ramping up and making excellent progress. We also plan to add a further 20 million square feet of capacity at our Bath, New York facility later this year. And finally in late April, we acquired a piece of land in North Branch, Minnesota where we intend to build additional Expert Finish capacity to support growing demand over time. The final third of LP siding is used in new residential construction One of our most significant growth opportunities is with the national home builders, where we remain relatively underpenetrated. We believe we are uniquely well positioned to build mutually beneficial partnerships with these home builders by leveraging smartside’s labor saving value proposition together with our integrated portfolio of OSB and siding. So far in 2026 we have secured two new builder partnerships and we continue to actively pursue additional opportunities. Just to give you a sense of scale for the business we recently secured with the nation’s largest home builders, as well as the magnitude of the opportunity ahead, I’ll share some specifics. We currently expect to supply about 100 million square feet of Smartside in total to 15 of the top 25 US homebuilders. We estimate that this represents a high single digit share of the total exteriors market for these builders and a similar high single digit percentage of our overall SmartSat volume. Again, we believe that the unique value proposition we can offer these homebuilders gives us significant opportunities for additional growth in the years to come. Finally, before I turn the call over to Alan, I want to recognize Dusty McCoy and Ozzie Horton, both whom retired last week from LP’s board of directors. Personally and on behalf of the entire LP team, I want to thank Dusty and Ozzie for their insights, their thoughtful counsel and their contributions to LP’s culture and strategic transformation. With that, let me turn the call over to Alan for a more thorough review of LP’s financial results and our updated guidance. Thank you Jason. I’d also like to add my thanks and congratulations to the whole LP team for a very strong quarter for safety and to Dusty and Ozzie for their service on LP’s board of directors. I know I have certainly benefited from their wisdom and guidance over the last seven years Okay,, the first quarter performance for siding is shown on page eight of the presentation. In line with expectations, unit volumes were down by 18% year over year and as discussed on the last earnings call, in addition to a slowing market, we exited the fourth quarter with increased channel inventory following the announcement of our January price increases. The disproportionate amount of that inventory was held by distributors serving our shared customers, where elevated inventory led to volume declines both sequentially and year over year. Expert finish, on the other hand, continues to be the best performing product category within siding, which in this market means volumes are flat. The 9% increase in selling prices partly mitigated the decline in volume, with primed prices increasing by 8% and expert finished prices increasing by 10%. Now, there are a few moving parts within all of this, so let me briefly unpack it. The largest single contributor to the reported 9% price increase is naturally our January 1st list price increase, which averaged 4 to 5 points. The remainder, let’s call it 4.5 points, is roughly 2.5 points from favorable mix and around 2 points from rebate refinements. Now the mix dynamics are the result of lower volume of shared products within the primed product category and relatively strong volumes for expo finish, including the two toned natural subcategory which we launched in the second quarter of 2025. And what I referred to as rebate refinements include the final recognition of lower than expected rebate payments relating to the fourth quarter of last year, as well as modestly lower rebate accrual rates in 2026. And both factors are of course volume related. As we look toward the second quarter, we expect list price realization to remain steady. Of course, while mix and rebate impacts will probably normalize somewhat. So price and volume combined for a revenue reduction of $42 million but an EBITDA hit of only $8 million. The $2 million reduction in selling and marketing costs is merely timing, and while inflationary costs have been mild so far, I’ll discuss this subject further in a moment. The other bar includes the non recurrence of the EBITDA benefit of last year’s Oriented Strand Board (OSB) production at siding mills and more than offset by some inventory build in anticipation of maintenance outages later in the year. The resulting ebitda margin of 28% for siding was of course helped by the rebate and inventory dynamics I mentioned earlier and would be closer to last year’s 26% without these factors. But in the long run, the roughly 50% incremental EBITDA on volume, albeit on a decline this quarter, shows the significant leverage that this business will deliver as and when growth resumes for Oriented Strand Board (OSB) on page 9 price is once again the dominant element in 2025. Oriented Strand Board (OSB) prices were at their highest in the first quarter, fell significantly in the second, and have been mired near EBITDA break even for the past several months. As a result, prices are 28% lower than the first quarter of last year, resulting in $66 million less revenue and EBITDA. Lower Oriented Strand Board (OSB) volumes for both commodity and structural Solutions reduced sales and EBITDA by a further $30 million and $10 million, respectively. Now the operations team did an outstanding job of controlling what they can, operating efficiently, minimizing costs and prioritizing safety. As a result, mill overhead and SGA contributed $5 million in year via savings, and the $3 million negative shown in the siding water pool from lower Oriented Strand Board (OSB) transfers is offset here with income. All of this results in a $12 million EBITDA loss better than our guidance amidst a very challenging demand. Cash flow on page 10 shows net operating cash outflow of $38 million compared to an inflow of $64 million last year, reflecting the $80 million reduction in total EBITDA and the somewhat larger than usual buildup of log inventory cash ended the quarter at $164 million and we have $900 million in liquidity, including our undrawn revolver. Now, before I conclude with our updated guidance, let me address the impact of crude oil prices on LP’s raw material and freight costs as shown on page 11. Starting with freight, roughly speaking, we estimate that each $10 per barrel increase in crude oil corresponds to a $0.03 per mile increase in LP’s variable freight costs on a blended basis. Assuming current rail truck mix and refinery margins, LP experienced total freight usage of the order of 30 million miles in 2025. So the full year freight cost impact of each $10 per barrel increase in crude oil prices, all else equal, would be an annual impact of …
This post was originally published here
