Q3 2020 Louisiana-Pacific Corp Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Louise.
The Corporation Q3 2020 earnings call.
This time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question Jordan, especially me the press star one on your telephone if you're acquiring further assistance. Please press Star then zero.
Your children. This conference call Mr., Aaron <unk> director of Investor Relations you may begin.
Thank you, Kevin and good morning, everyone.
You for joining us today to discuss Lps results for the third quarter of 2020 as well as our Q4 outlook. My name is there a wall I know he's director of Investor Relations I'm joined today by Fred Southern No Hockey Oh piece, Chief Executive Officer, and She's Chief Financial Officer, respectively.
As we've done in the past we are hosting a simultaneous webcast. In addition to this conference call.
Ordered a presentation, which we will refer during this morning's comments. We also filed our 8-K. This morning with some additional information all of these materials are available on our IR website Www Dot that's true LT core dot com.
I want to remind everyone on the call about forward looking statements and the use of non-GAAP financial metrics during today's discussion.
It's two or three of the accompanying presentation provide more detail. The appendix of the presentation also has necessary reconciliations that are supplemented by this morning's form 8-K filed.
Rather than reading those statements I incorporate them you're in by reference and now I'll turn the call over to Brian.
Thanks, Aaron and thank you all for joining US. This morning, we spoke with many of you to go at our Investor Day. This morning, I will focus mostly on what has changed since then starting with the market then moving toward transformation.
Well the market is showing continued strength in our transformation is ahead of pace.
This was an all time record quarter for Smartside volume and revenue.
Fair to Q3 of 2019 Smartside revenue grew by 22% 19.
19% higher volume, 3% higher prices.
Cost of production was also a multiyear lows and of course record always be prices produce significant cash flows.
As a result, and as I'm sure you saw in the 8-K were released this morning. We finished the quarter comfortably ahead of our most recent guidance the $273 million in EBITDA and a Buck 56, and adjusted diluted earnings per share.
There are more housing starts of the U.S. in Q3 than in any quarter since 2007.
So just single family starts was higher than in any other quarter since 2011, creating strong demand for our products.
Mortgage Reits are at historic lows over sentiment is at all time highs and the inventories existing homes measured in months of supply is.
Is at an all time low.
Although these are strong leading indicators for continued strength in new construction, which LP as well position.
We're also seeing continued evidence of ongoing preference for multifamily to single family and away from say these urban and rural areas. This.
This is very positive for LTC since building a single family home concerns on average about three times as much more upside in our west be as multifamily.
Since our Investor day, what speed prices to stabilize with random lengths price is flat and intervening weeks well.
Well it was pay prices remained unusually high and they will surely normalize eventually relative price stability is a sign that supply and demand may be approaching near term equilibrium.
We are confident that our transformation strategy of growing Smartside and managing go West Bay with efficiency and agility will continue to drive long term value.
Slide six shows our progress toward our strategic transformation goals or targets. This 165 million incremental EBITDA impact by 2021.
We're well ahead of our progress accelerated in Q3, we.
We have achieved more EBITDA impact through three quarters of 2020, and we did all that we might see small.
Smartside growth, it's the largest single contributing factor closely followed by Oh, we eat games in Smartside, you know unless they been strategic sourcing.
As a result was 137 billion of cumulative benefits achieved we're almost a year ahead I used to get our 2021 targets.
These improvements were normalized for whats the prices our strategic transformation is driven by sustainable growth and efficiency improvements is in no way inflated our current I wish the prices.
Given our results for the last two quarters as well as the sustainable guys produce our strategic transformation, we announced the resumption of share repurchases at Investor day.
I won't give you a more detailed update of our capital allocation strategy in a few minutes.
As you may have heard by now empty guy resin production in the U.S. has been constrained by the impacts of hurricanes floor in downtown suppliers, a precursor chemicals LP.
He is taking steps to secure alternate sources of supply and shift to different resin types where possible.
Due to lack of supply we have curtailed production of laminated strand lumber at already W.P. facility in Houlton, Maine from four weeks we're.
We're working with customers to minimize the impact of this disruption would.
Do not currently anticipate production impacts to smartside or west.
The situation is fluid and I am proud of the agility with which our supply chain operations and logistics teams have managed through this disruption.
Housing market continued its strong recovery and always be prices are high but L.P.'s performance was not merely the result that mark.
Our teams overcame and adapted to many challenges in the quarter and help our customers to the site multi.
Multiple hurricanes right at our mills, our employees communities and the core.
Our teams also help our customers work through the challenges of tightening truck and rail availability shrinking inventories and lead times increase by unprecedented.
And of course, we're all still dealing with the ongoing cobot night.
Some of our mills are located near Cobot hot spots.
We have seen a slight uptick in the number of employees cases, but things like all impacted employees covered by our recovery.
Our teams continue to take necessary precautions to minimize the spread of COVID-19, safeguard themselves and each other.
We have yet to have any mill closures calls by COVID-19 outbreaks and we will maintain these precautions for as long as necessary to keep our employees vendors in customer sites.
Despite these challenges we executed who relentlessly on our strategy of course high that was big prices generate lots of cash.
Oh, smartside growth, 22% ongoing growth in structural solutions.
Additional 10 billion dollar and efficiency gains in the quarter all of which are sustainable our results were driven by much more the high speed prices in fact, given our growth and efficiency improvements.
Opinion always be prices had been flat to last year EBITDA would still be nearly double that of Q3 of last year as a result of our growth and efficiency initiatives.
Well, we celebrate record results in a very challenging year I am inspired by the adaptability and determination of Lps employees and grateful that by working together, we achieved outstanding results, while staying safe.
And with that I will turn the call over to Alan hockey for more details on our results before we take your questions.
Thanks, Brad and good morning, everyone.
As Brad said, the housing and repair and remodel markets have continued the steep recovery and Lps strategic transformation has accelerated.
Brazil is performance for the quarter that exceeded every aspect to the guidance, we provided on Investor day.
This morning, I'll detail those results update you on our capital allocation strategy and offer some insight into the fourth quarter.
Slide seven is a total company third quarter rolled forward revenue and EBITDA 2019 to 2020.
It is a summarized view highlighting the elements, we believe characterized the quarter.
Starting with revenue of the $192 million increase.
$179 million due to higher speed prices alone.
The remaining revenue growth of $13 million include smartside growth of $47 million.
Partly offset by a $37 million reduction fiber and kind of saw revenue.
But while small side gross add its $23 million of EBITDA strategic exits from fiber reduced EBITDA by just $6 million.
Which brings us to EBITDA, which increased overall by $224 million and if we back out the LSB price impact than everything else not related to always be prices contribute.
Contributed an impressive $45 million of increased EBITDA, including the $23 million of Smartside growth I mentioned, a moment ago.
So to repeat the point and put it in perspective, if I must be prices and no reason the tool then all other things being equal our EBITDA would have almost doubled to $94 million.
At this point is easily lost in the current always be price climate, but it vividly demonstrates the difference between the admittedly powerful cash generation of how high LSB prices in the long term value creation of.
Well almost everything else in our portfolio.
One last point on this slide before I move on.
South American business had an outstanding quarter negative currency movements revenue and EBITDA increased by $9 million $4 million, respectively, absent currency fluctuations, they increased by $60 million and fight, but who knows.
Slide eight shows the third quarter PNM compared to 2019.
As I said, although the majority of the $192 million increase in revenue was price related the remainder is volume and mix.
So the fact that cost of sales fell by 5% or $26 million reflects outstanding performance on a we sourcing savings and general cost control. Additionally, SGN expenses were reduced by 10% or $6 million.
Income from operations was up $234 million, reaching $242 million, resulting in net income of $177 million and adjusted diluted earnings per share of $1.56 cents better than last year by $1.48 cents.
Slide nine shows the third quarter revenue and EBITDA waterfall for siding.
Cumulative transformation impact $71 million was driven by impressive smartside revenue growth of 22%, that's an incremental margin.
He just said.
Now, it's not obvious from the waterfall, but the segment presented here today is almost entirely smartside.
EBITDA margin of 28% is more reflective of incenting power than at any point in the company's past.
This is what a cleaner simpler siding segment looks like on but not in the photos of the mill conversion. When we are enjoying returns on our investments in selling and marketing.
When we're running flat out.
This ability to profitably grow gives us confidence smartside alone can support and sustain a growing dividend.
Slide 10 is a similar presentation for the LSB segment and is not surprisingly dominated by high speed prices.
Not only is the average random lengths price for the third quarter Twentytwenty record. The depressed. This time last year. It was well below the psych leverage against the large year over year impact.
But if we return to the theme of cash generation from higher speed prices versus value creation than I was being played its part b on pricing there was a further $11 million of EBITDA improvement.
All the more impressive on the back of low volumes and a richer mix of high value added products.
So we're continuing to transform this business through structural solutions growth and a relentless drive for efficiency, which is creating long term value regardless of always be prices.
Which brings us to cash flow on slide 11.
Operating cash flow for the quarter was $219 million compared to $59 million 2019.
Note that in the third quarter, we paid $45 million in cash taxes, including a catch up from the second quarter.
Our capital allocation strategy of course remains unchanged.
Two we tend to show holds at least 50% of cash from operations in excess of capital expenditures required to execute our strategic transformation.
Accordingly late in the third quarter and given our significant free cash flow generation, we resumed buying back shares.
We spent $29 million buying back shares in the quarter. In addition to making $16 million in dividend payments and ended the quarter with $420 million in cash.
As of today, we have spent $100 million about $200 million board authorization for share repurchases.
Given our strong balance sheet <unk> cash generation expectations for the fourth quarter we.
We expect to complete the remaining authorization for share repurchases by the end of the year.
So lets cover those fourth quarter expectations.
Much uncertainty still surrounds coated the us election underway as we speak the broader economy and even housing.
However, our order files give us enough visibility into the quarter to provide some limited guidance.
Assuming no unforeseen events, we expect the fourth quarter in aggregate to look a lot like the third.
Smartside revenue will likely see the typical seasonal slowdown revenue growth is still expected to be in the neighborhood 20%.
Yeah.
So this would result in full year smartside growth of about 12%.
Oh, it must be prices have held steady since investor day in contrast to the steady climb over the third quarter.
At this point and absent the sudden and steep drop after which I will speak prices in the fourth quarter should be higher than in the third.
Subject to these assumptions, resulting EBITDA for the fourth quarter should be within $10 million third quarter levels.
We do plan to spend a little more heavily on capital projects in the fourth quarter as circumstances permit bringing spending for the year to about $80 million compared to the $70 million previously communicated.
As Bret said.
Almost a year ahead of pace relative to our strategic transformation goals.
We targeted a cumulative EBITDA impact by the end of Twentytwenty, one of $165 million through the third quarter of this year, we have achieved cumulative impact of $137 million.
So its appeal the operational aspects of the fourth quarter Pan out as I've just outlined we.
We expect to hit that $165 million target by the end of the year.
And for the avoidance of doubt, let me reiterate that these transformation impacts no way benefit from high always be prices, although raw material costs.
And with that must be price is at an all time high it would be tempting to ascribe LP is outstanding quarter to that fact alone.
To be sure you have us be segment generates impressive cash flows at these prices.
We often talk about the hidden value of LP Smartside business.
No. They haven't small size growth trajectory. Its revenue was routinely overshadowed by that of the MSP segment profitability was clouded by the other products in the siding segment.
But if we apply the third quarter always be volume and price realization to historic always be prices I puts this situation in context. Since 1995 that are being only eight quarters will always be prices were high enough that at current volumes and realizations. The aerospace segment would have been more revenue than small sites third quarter record of 261.
He does.
So, it's getting harder and harder to hide this incredible growth story.
Smartside approach the billion dollars in revenue with high and stable margins.
No I think very much in plain sight.
With that we'll be happy to take your questions.
As a reminder to ask a question you will need to press star wanting your telephone to withdraw your question press the pound key please stand by while we compile the culinary roster.
Our first question comes from the line.
Mark Connelly of Stephens, Inc.
Your line is open.
Hey, Good morning. This is John rider on for Mark up.
So in the more recently, you've said that Prefund, our siding is a strategic priority and if we remember correctly, you said that it could be almost a third of your sales.
To acquire your way to that sort of market shares clearly undertake while.
And you are probably going to end up with a hodgepodge of assets. How do you balance the present cons of acquisition against building your own purpose built standardize network of Prefund the schurz.
What does that ultimately cost and on a related note what is a pre finishing operation like that mean for for working capital.
Okay, John I'll try to.
Correct me if I missed some of those sub questions in there, but I do want to cover them. All so let me just provide an update on where we are now we have three pre finished facilities and operations two of which were acquired.
One of which was on home grown at our facility in Red River North Carolina.
From a capital.
From a.
Capital standpoint, as far as equipment. These are relatively small investment single digit.
Millions of dollars to to build or convert.
They're also expandable kind of in a modular way so as we grow the business unit basically had a pipeline.
Which again is is very low.
Capital at least in scheme of things when it relates to always be in siding businesses.
We do see we will need continued growth the geographies that we're in today with pre finishing his green Bay, Wisconsin, Saint Louis, Missouri, and remember North Carolina.
So as we build out the eastern a capability there there is a.
Possibility that we were acquired or built another facility or two but we certainly have the capacity in place or the partnerships in place an order. So that production is not a constraint on our ability to grow our pre finished business over the next couple of years.
Now as it relates to working capital. It's a great question and pre finished pre finishing is a significant departure from our efficient working cap arrangements. We currently have or have that list.
Smartside just think about this if you offer 12 colors.
You are about eight inch flat skew that used to be only in prime now is all.
Offered in prime and those 12 colors.
And servicing the market just as important so there needs to be sufficient inventory both at our locations in the channel in order to accommodate.
Good customer service now we do rely on our distributor partners to carry the load on that but it does require.
Working capital build internally for us to be able to serve our district distributor base.
Okay. There was there another part of that question that up but I didnt answer.
No no I think Oh actually started just one last one how do you balance the present concept acquisition versus building around Hum.
Ground pre finishing business yeah, great question so the.
But the one that we did not acquire the one that is homegrown was in North Carolina.
Where we had a cardboard mill that had a history of doing pre finished so it was rather logical for us to to incorporate smartside pre finishing there I would say in most other areas, it's not necessarily optimal for us to bid on bill location would rather be more end market. So I would.
I'm biased future growth the acquisition and home grown up for each scenario you know we'll look at both.
The best decisions, but as far as forecast in the future I would say, there's probably more more leaning towards the acquisition strategy in a home grown.
Think about acquisition, you're buying a competency.
Two.
Day, one versus having to build that internally. So we don't we.
Yes.
Benefitted from the two acquisitions that we did.
To get us into the business.
Great.
Well, we'll turn it over thank you.
Thank you John.
Thank you. Our next question comes from John Babcock of Bank of America. Your question. Please.
Hi, good morning. Thanks.
Thanks for taking my questions I guess, just starting out I was wondering if you can talk about whether you're seeing much in the way of substitution of plywood promoted speed, particularly with the price cap staying where it is now.
No I have heard some anecdotal.
I don't know if it's actually evidence for speculation that that could be happening, but we have not seen that at genie meaningful way.
Certainly no and its impact on our call.
Okay.
And then lets you talked earlier about the impact on the <unk>.
And and how that's when that I guess are going to win it perhaps not the old facility.
Has there been any impact to your costs Pritchard at the mills in the U.S. out for I know, it's been all there.
And then also and it kinda talk very briefly about that's revenue sort of anecdotal evidence about that impacting.
Any LSB production region.
So first on the cost side, you know what we're doing is substituting phenolic resin.
For India high so from a cost standpoint, it's immaterial the difference between the two.
Immaterial to our results no no impact there and you would really.
Industry overall is handled this india situation pretty well, so we've not heard of any signal.
Significant.
Restrictions and production anywhere as it relates to empty out.
Limits.
I'll just speak for ourselves we retained most of our facilities.
Weve retained.
Capability to switch back between empty on phenolic resin. So that's what we've done and I assume thats, while some of our competitors have done as well.
Okay. Thanks for that and then just last question before I turn it over just on the siding side of things, obviously demands very strong it sounds like you're expecting.
Strong demand in Fourq here as well.
This demand were to continue into 2021, how will that impact your thinking around pricing and kind of your typical schedule around how you do that.
John was that question related to always stay or siding.
Hi.
Yeah, So John where we're working on a price increase that we implemented in Q1 now.
And so.
I don't we haven't made a decision on that so theres Theres Theres works.
To do there, but obviously, we're in a good position relative to underlying demand for the products, which puts us in a good position on pricing I do want to stress that we're really focused on volume growth given the expansion of our SKU offering with refinish and smooth than.
The ongoing strength as far as our bill into getting a prime product in the marketplace. Our focus is on a market share increases and you have to be competitive on right side in order to maintain that so we balance those two.
Competing needs within the business, but given the current margins that we have smart side, our focus is on growing the volume.
Yes. Thank you.
Thank you. Our next question comes from the line of Kimpton mentor BMO capital markets. Your question. Please.
Thank you first.
First question.
On siding I was just curious if you can give us some sense of how your volumes have trended in siding.
Thus far in Q4.
We have strong volumes in Q4, thus far.
I think I said I just as I said, we were looking at 20% revenue growth.
Yeah, obviously, the MAGEC vast majority of that is from volume and out of book.
Gives us the confidence to say that right now.
Got it Okay, and then so with volumes being released.
Really strong tool.
Twentytwenty how.
Are you pulling forward kind of timing on the next siding project at the end of September you already talked about this.
Decision sometime in early Twentytwenty, one I'm just curious if there is any v. pain, given how strong volumes have been.
I wouldn't call. It a re think list let me describe where we're at right. Now we are full steam ahead on the next siding conversion, we have begun to place a do planning in place some orders for long lead time items that can be set our sights agnostic. So in other words equipment that we're number one in.
The garden site.
And so that that all that is underway now we're still looking at our early next year announcement and board approval for the project.
She did I get I think you can understand that there is that impacts the community and employee base, where we choose and so were weak and we havent chosen yet but.
We want to be careful about kind of tipping our hand, there until we make sure we cover all the bases locally on where we'll end up with the silly, but we are in the process. If you wanted to.
Acquiring capital equipment.
And planning to do that as part of the process, where it's well underway at LP.
I just want to remind folks on the call are we just converted Dawson Creek last year. You know this time last year, we're still talking about the startup cost associated with that so we're in a good position for this year and next I mean, obviously, the inventories situation that us and our distributor by Scott into.
Covert related weeks, we've we've it's been catch up for the last couple of quarters, but I feel good about our ability to us to supply the market next year.
Especially if we can build a little inventory in the distributor base over the winter and then we'll be in a good position for another mill start up in 2022 and should be able to continue the kind of growth that we've seen over the last eight quarters or so.
Got it that's very helpful. And then Brad any rough sense on kind of the copper does that may be required I'm not looking at a precise number just sort of a rough ballpark.
Ballpark on the conversion.
Yes, just.
It does it is slide dependent keeping is I know you understand but I would say.
Based on what we've done in swine and Dawson Creek be thinking 80 to 120 million.
Thats a wide range, we'll get a little more we'll we'll narrow that range over the next couple of quarters as we talk about it some more but if you. If you plan around that that would be a good number start out.
None that say has stabilized on a door, but luck as you move into a 2021. Thank you.
Okay.
Thank you. Our next question comes from the line of Steve Chercover of D.A. Davidson. Your line is open.
Thanks, Good morning, everyone.
So first of all your operating rates in siding, you know must be are both in the upper eightys. So can.
Can you get to the mid Ninetys next year, assuming demand is there without really any additional expenditure beyond manpower and raw materials.
I think mid Ninetys would be pretty high for us given where we are right now in our OE journey, but I certainly believe we can be high eightys to low ninetys consistently and now that's that's not including scheduled maintenance downtime that we may we may have to do but while we're running.
We have across our system in both our spend siding.
Approached and Tom sustained 88% to 92% are we so I feel good about that 95 would be a stretch for us right now.
Okay. So actually are you talking about that over the entire year.
Is it conceivable that if the demand grows the way you know housing looks poised to propel.
Propel it.
Both from starts and perhaps.
Perhaps size as we move more to the Burbs.
You could almost be on allocation.
Both siding you know SP.
Well.
So we yeah I don't I don't think we'll begins in allocation in siding and after we get through this winter in the <unk>, we're doing some allocation now because of the price increase that weve ramped.
Were implementing in Q1.
I believe the inventory.
Inventories will be built in Q4 and allow more open order files that go into the spring.
You know it is growth dependent so it's.
It's possible, but I don't I mean, my opinion is we won't be on allocation for next year in siding.
And then we really don't do allocation in our space because of our open market wood situation, it's really you're kind of on the market or off the market depending on availability.
And so I don't I don't see us be on allocation next year in any meaningful way. It doesn't mean that there's not times when you have to.
Ration your open market order file across our good customer base, but not for an extended period of time and I will be I don't foresee that and it's really not how we operate notwithstanding anyway.
Okay, and you know because you gave us such sufficient and upbeat.
It's on siding, let's be I'm, taking my questions elsewhere, but on E.W.P., which is not something you really talked about you know the results were pretty good and I'm. Assuming it was also absorbing some pretty high O us be pricing as an input. So was that you know operations or price and is there a price increase.
Pending E.W.P.
So that the primary driver for the results that you saw this quarter. This past quarter was our efficiency gains were always be improvements in E.W.P., a cloud just want to take a minute I'm really proud of the way our or either compete group over the last four years has really got to go after it on on an efficient. So we don't talk about that a lot on the calls but it has.
Been meaningful.
We are in the process of implementing price increases NRT WP business and look DWP is going to be impacted by this rising.
Oh, let's be in lumber, we were Q3 results our little.
No behind that I guess is the right way to put its caught US now which is the reason we've had to go out with a with a price increase along with other industry participants and the WP and so on.
I think what will be a little bit margin stressed in Q4.
We will focus on the efficiency side, and I will real say that the order file our order files Needham your really strong as well so we'll have the volume.
We'll be fighting some raw material price pressure as we work through the price increase for finished products on either in Q4.
Well, maybe to paraphrase paraphrase James bond they've earned the right to die another day, Okay last question.
You know similarly in South America, they're making a decent contribution to and there are only a 75% operating rate. So is it fair to say that they have significant upside assuming that the demand materializes, but.
So Nick significant us upsize, we do though a mill expansion down there a lot.
Last year, and we're still working through some constraints around thermal oil that will be that will be a unit will be installed.
In the next quarter or so in which really open up that that press line, we put in there to full capacity. So we're expecting to see good growth in our South America business next year, but call because of the continued.
Start up about that new press line that that has been in operation for about a year.
Great. Thanks for taking my questions.
Welcome.
Thank you. Our next question comes from Sean Stewart of TD Securities. Your line is open.
Thank you good morning couple of questions.
Capex for next year and.
I appreciate your you're still in the planning stages.
But if we're at 80 million this year and at the midpoint spending maybe.
Maybe 100 million for the next siding conversion.
Is it a 180 to 200 million a safe bet for Capex next year are there any other nuance.
He wants us to the projects, you're you're thinking about for 2021.
Hi, it's all in here. So you had about the right ballpark.
So.
Divided into a sort of base spend maybe $120 million plus whatever we end up spending in here on the next siding mill. So you know a reasonable.
Estimate, which will update when we announce Q4 results would be 120 basis, plus let's say Sara 80, as a as a 2021 spend on an exciting so maybe $200 million, yes insight as a reasonable number for next gen divided as to say two populations understood.
And.
Any other context, you can provide on the P. Sally restarts, we've had some positive single family housing data since your Investor day.
In late September or any details you can provide on the thinking for for that restart.
Well not a lot has changed since investor day other than as you pointed out continued.
Good good numbers on housing, which is what were we are following closely.
Our our strategy. Our plan is to continue to monitor outlook for housing and we're confident we've got to do at least a two year window in front of us.
Good and strengthening housing.
Thus when we feel like we could justify internally restarted that facility. So we're watching it closely but weve.
Nothing has changed since we talked about on Investor day.
Okay. Thanks, very much I appreciate the time.
Welcome.
Thank you. Our next question comes from Mark.
Control of Seaport Global your line is open.
Thank you.
First question was on the siding business, if you could give us a little more color, perhaps on that strong growth both in the third quarter and what you've been expecting to what you've seen and expect to see in the fourth quarter I'm.
As we think of it through new residential repair remodel shed and or geography if.
If you could give us some color on what the big drivers are.
Markets all over but I will go through an item by item, so I'm going to home centers retail retail home centers or.
Just phenomenal growth as they report in their earnings releases, we're we're certainly.
At or above average even given there are good numbers on the pull throughs.
It's really been phenomenal and driven by just better volume through there, but weve also introduced.
Several new skews over the last year that we just really hit the timing on that really well.
Lapin trim in many of the stores now along with them and offering so I mean, certainly the the biggest growth area and as far as the segment's coach has been in retail.
Shed has been extremely strong as well and know our mineral.
The shoot Q2 call I got a question from somebody about shifting I said, we're not seeing a lot of activity there and let the next day it change and that's been a real phenomenal growth as well and we hear anecdotally I'm not anecdotally, we hear from our customers and share that.
The need for more space, and even using sheds as home offices, but orally to clear out an office by buying as she had putting your junk and answer you can have an office inside your house. That's all that's for real and its been a we've been as you know we've been will well position in that segment for a while so we're seeing really good growth there.
Single family is going as well going well as well across especially in the smile you ask about the regions. So in the southeast the mid Atlantic, Texas has been a great market for US single family perspective, very strong and then repair and remodel.
That has been you know.
For us more.
Establishing of distribution around our pre finish offering or I should say, maybe a re establishing a distribution. So we've seen good holes. There I don't have quite the visibility to be able to say you know.
Exactly how thats ending up because it's been more of a distributor play this year for us, but I were certainly building the network that we need to continue to drive good growth in repair and remodel as we look into the future, which is all a part of our plan that we outlined on him on Investor Day, and this just quickly on geography, you did ask that.
The Midwest is really very strong for us.
Central South Central region is extremely strong for us as well as the southeast and mid Atlantic and we have a good position on the west coast and in California. So obviously there has been something that's been a weaker housing market.
From a start standpoint, if I can just due to the cove. It in the fire situation out there it's been a kind of a tough summer for for homebuilding, but where we are we are where we are positioned in the west we've done well well there we've done it looks as good as the market out west.
Thanks, and I guess, that's what I was trying to get to and since you did really well everywhere, it's sort of hard to get to what I was trying to get a sense of which is.
How much is this the overall market improving versus where you may be seeing gains from you.
Your product initiatives et cetera, if you can provide a little color there that would be helpful. Well single family is improving and there is no question about that so that it's a crude improving overall and then we're proving in our market share gains there, but that single family market, It's very strong.
The ship market strong, but I will say I think there is I don't expect it to sustain that especially from a growth percentage.
Anything near what we've seen this year I think there's some temporariness to that and then retail is really to me. The question Mark because it's been very strong.
And I think there might be some stickiness to that because as people as small contractors.
The order online retail realign their credit around retail environment.
That that positioning that could be sticky from a market share growth and that's coming from somewhere no. That's not new demand, but I do think that there's been some competitive movement into retail from it from a distribution standpoint as part of this pandemic and the offering they have in the way you can order online.
Cetera. So.
So its fortunate that work up we've got a good position there that we can take advantage of that.
Without question Mark what's driving the strength if you will one answer its single family. It all comes from somebody buying a new home I think is a key driver from a more from a market tailwind standpoint, right now for us.
Great and just one more if I could on I'm kind of Capex on the on the capital allocation I mean, you talked about 50% beyond that the capex needs and if we look at the third quarter order of magnitude. It was you had a 100 million in the fourth quarter. If it's gonna look similar I think a big picture.
Another hundred million on you or your dividend for those two quarters would be 30 35 million.
So that would suggest that you know you you arguably gaut.
Round numbers, 100, 670 million, which could go to share repurchase based on those two quarters is a is that a way to think about it or is it not that discrete and and then how does the timing work could you it sounds like you've spent.
30 million in the third quarter, and 40 million since with the expectation of completing.
Completing the 100 million, which I think would be another 30 million from getting my math right, but then there would be to.
Extra earnings you've had that don't seem to be covered by the what you've got on authorized today.
Yes, So let me let me clarify my comments familiar we spent.
$30 million in the third quarter as of today so.
Since the end of <unk>.
September we've spent another 70.
And we're also going to spend another hundred between today as it was at the end of the year, which means fourth quarter.
Share buybacks will be less than 70 million perfect I missed that matured that that's great. It fits nicely. Thank you.
Thank you.
Thank you again to ask a question. Please press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone to ask the question.
Our next question comes from the line of Paul Quinn of RBC capital markets. Your line is open.
Yes, Thanks, Brad Barton got just a question on the building to the recent transformation.
Great to see every year ahead, what do you think you actually have this done as you know the one.
65 is at the end of the program is that when the market will give you sort of a hearty like multiple.
Okay. Let me just talk about structural solutions for talk about the Hardy like multiple so our near term target is 50% and we will not stop there. We believe we are.
The ability to generate new products, we believe weve got tonnage growth opportunities, particularly with legacy flooring, R.W.R. b offering flameblock proclaim locked in there as well and so we're.
You know Paul I would read out I hope one day, we're 100% structural solutions.
That may not happen as much that you Yoshida, but that's certainly going to be a target for us the cost of the value add opportunities.
Our key.
I mean, just to kind of.
You talk about the multiple good question I think the key for US is continuing to growing growth siding, which is.
Our siding business is better than parties. So.
Yes.
Arguably could have a higher multiple machines.
My personal view of that and then if we can.
Continue to grow that structural solutions, especially on the higher value add items like I mentioned legacy so if youre being flameblock.
That is part of that was the commodity production to move that into more stable and certainly higher margin.
You know panels and so that's the key for us to that's what we're focused on Paul as you know that's what we've come to work every day.
Focus on doing and executing at plans around and budgets around to spend marketing dollars on and I think we've been I think we've done a good job over the last three years getting worse.
We are but I work into that another way of looking at is we're just getting started but only had wkrp really in the market for about a year legacy for two years pre finished for six months smoothed for 12 months. So we've got a contract really valuable this differentiated products.
That helps a lot of room for growth and market share gains and so I think we're positioned well and Dom and but the conversion story for us be including.
As it relates to converting mills to siding is not over LP.
Okay. Thanks for that and it's not even in the middle of the book yet.
Okay.
Would you ever consider monetizing selling peace valley to accelerate the transformation and maybe you could give us a quick update on the tech right over the last month.
Yes so.
Consider selling yes.
You know I like that mill from a standpoint of now that were converted to Austin its our only.
Western Canadian mill, which got access to western market at the U.S.
So we.
Our plan is to retain it that need to be candid with you, Paul but I wouldn't say.
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I'm kind of the mindset. Despite everything you have is for sale for the right price, but that's not our near term plans is to at the right time restart that facility in and use it to reestablish some better pipelines into the west coast that part of the market right now since we converted to Austin were serving out of Texas.
So there would be some freight advantages to having that facility in our system.
The update on INTECH crop is.
We've seen continued growth in the order file even since Investor day.
I'm really encouraged by market acceptance of the technology I'm really.
I'm happy about the quality of the order file from a customer standpoint.
No change you would recognize or in our order file.
And we're in and we're working through the startup of that.
But the big facility Modesto, so that if there were still from an operation standpoint, very much in startup mode from.
Reliability standpoint of it.
Delivering.
Kids all time for our customer base, we are doing a good job with that.
And though we're trying to build up credibility in the marketplace that could be a reliable alternative to stick built framing and I mean, so far so good there is a lot we are not keep it in check one and that story, but from a market standpoint from a waterfall quality. It is very encouraging what's going on.
And with the Tech right now.
Excellent that's elect.
Thanks, Paul.
Thank you, ladies and gentlemen that does conclude the Q and a portion and our conference for today. Thank you for participating you may now disconnect.
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