Q1 2022 Louisiana-Pacific Corp Earnings Call
Hello, Thank you for standing by and welcome to the first quarter of 2022, Louisiana Pacific Corporation Earnings Conference call. At this time, all participants are in a listen only mode. After the speaker presentation there'll be a question and answer session. That's a question. During the session you will need to press star one on your tell us.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your Speaker today, Eric Wold, Vice President of Investor Relations and business development. Please go ahead.
Thank you operator, good morning, everyone and thank you for joining LP building solutions today to discuss our results for the first quarter of 2022, and our updated outlook for the second quarter and the full year. My name is Erin how well and I'm Lp's, Vice President of Investor Relations and business development.
I'm joined this morning by Brad Southern Lp's, Chief Executive Officer, and Allen Hockey Lp's, Chief Financial Officer. During this morning's conference call and webcast. We will refer to an accompanying presentation that is available on <unk> Investor Relations webpage, which is www dot investor Dot L P corporate dot com or.
Our 8-K filing is also available there along with our earnings press release and other materials, we expect to file our 10-Q in a few days.
It's two and three of the earnings presentation provide notices and detail regarding non-GAAP financial metrics and forward looking statements. The appendix of the presentation also contains some necessary reconciliations that are further supplemented by this morning's 8-K.
Rather than reading those statements I incorporate them by reference.
That I will turn the call over to Brad.
Thanks, Aaron Good morning, everyone and welcome to <unk> earnings call for the first quarter of 2022.
<unk> is off to a very strong start for LP with record quarterly net sales of $1 $34 billion.
And EBITDA of $636 million.
Pes ongoing share repurchases have reduced the share count by a note that the resulting quarterly adjusted diluted earnings per share of $5.08 was a record.
I'll begin our segment review by recognizing and thanking our siting solutions business team for operating during Q1 with no recordable injuries.
Financially, citing solution set another quarterly sales record of $330 million in Q1.
This represents a year over year revenue growth rate of 17% and this is the combined effect of 12 percentage points of price, including mix effect, which you will get to in a moment.
And 4% volume growth.
Sales volume exceeded 420 million square feet with an average selling price of $784 per thousand square feet.
So I think EBITDA margin was 25% in the quarter, despite raw material inflation freight cost increases simultaneous capacity expansion projects.
So at what rate of growth in siding has been remarkable so let me put these results in a long term context Q.
Q1 of 2019, much earlier and LP strategic transformation Smart sidestream generated $187 million in net sales on 284 million fee volume at an average sales price of $659 per thousand square feet.
Past three years has seen compound annual growth rate of 14% for volume and 6% for price, resulting in 21% compound annual revenue growth.
EBITDA for the siding segment has doubled in three years, which is a CAGR of 25%.
Yeah.
A significant component of this growth is a shift in product mix to higher value added siding products.
You can see on slide seven of the presentation.
Bert finish smooth corners shakes and builder series, all new since Q1 of 2019.
Counted for 11% of total volume this past quarter and are the fastest growing subset of the smart side product portfolio. This growth is driven by strong customer demand and new residential construction and especially with the addition of expert finish increasingly strong demand in repair and remodeling applications to.
To meet this demand L P as making ongoing investments in capacity I am happy to announce that Holton started smart Sop production in March on schedule and is shipping a great smart side as we speak.
We are on schedule for Q1 2023 start up for our next mill conversion in <unk>, Michigan.
There is a long runway of future capacity options after scola, including conversions expansions of existing facilities and Greenfield siding mills.
We'll share details about future capacity additions soon.
We're also adding expert finish capacity by expanding our existing facilities by building a new one in <unk> New York <unk>.
The Bath facility is ideally located to received prime smart side from Holton finish it and distributed regionally to a market with huge potential for smart side.
I'll add that while this demand is gratifying it is not surprising.
We think the smart side as the best siding product available and a growing number of homeowners builders and contractors seem to agree.
We announced last year Smart side is also carbon negative and recognition of which green builder media recently named it the most sustainable product and the siding category.
The OSB segment driving growth in the value added structural solutions portfolio supports lp's ambition to be recognized as a leading producer of specialty building products.
The actual solutions volume exceeded $500 million paid in Q1, an all time record.
Youll solutions accounted for 55% of total OSB volume, which is eight percentage points higher than last year.
The OSB segment released two new specialty products in the first quarter, both of which will contribute to the structural solutions mix. The first is legacy premium sub floor suite, which is designed to contribute to installation efficiency and improve the quality and durability of flooring systems.
The second is novacor insulated sheeting, which combines the structural integrity of OSB sheathing with thermal and acoustic insulation, adding a layer of expanded polystyrene installation.
<unk> can be used as a direct substitute proceeding with standard stub spacing and other framing processes.
OSB prices climbed sharply through Q1, ending the quarter at nearly double the level at year end.
This produced just over $500 million in EBITDA second only to Q2 of last year and better than most prior full year results for the OSB segment.
Obviously this generated extraordinary cash flow, which LP will continue to return to shareholders.
I want to congratulate Jimmy Mason, who has been named executive Vice President and General manager of the OSB business. After several years as the vice President siding manufacturing.
I am confident that Jimmy will sell in this role as he has so consistently done in the past and I am very proud that lp's bench strength allows us to promote internally to fill such a critical leadership position.
Engineered wood in South America also had strong quarters.
W. P generated $170 million of revenue and $38 million in EBITDA on strong demand for I joist and laminated veneer lumber.
With America delivered $67 million in sales and $25 million in EBITDA.
It should come as no surprise, so they'll pay continues to face headwinds from raw material cost inflation as well as logistics challenges with box car and truck availability in Canada as the most acute gaps.
For freight availability is the key issue with call secondary.
We are working with customers and logistics providers to get through this but we expect these challenges to persist for some time so.
So far freight availability has had limited impact on siding, but logistics challenges for some detriment to downtime at our Canadian OSB Mills.
Alan will provide more detail on these cost pressures and their impacts.
And with that I will turn the call over to Alan for a more detailed review of Lp's financial results and an update on our capital allocation strategy before we take your questions.
Thanks, Brad and thank you all for joining us this morning.
As Brad said, the first quarter was exceptionally strong.
Story fundamentally is that the things LP can drive and control, namely, 17% siding growth and 55% structural solutions mix.
More than offset the negative impacts of raw material and freight inflation.
And the OSB price climbed during the quarter generated significant cash.
Which we continue to attend to shareholders.
But before discussing the siding and OSB segments in more detail I'll give a brief overview of total company performance.
Despite my love for round numbers I must point out that the $1 $3 billion of revenue is actually a $11 million higher than the same one 3 billion. We reported in the second quarter of last year, making this technically a record quarter for sales.
EBITDA of $636 million was an increase of $174 million over the last year of which $130 million was the result of higher OSB prices.
We generated operating cash flow of $425 million and spent $92 million of it on capex.
Less obvious is that a record adjusted earnings per share of $5 eight.
It would have been nearly a dollar lower but for lp's significant share repurchases, which would reduce the share count by more than 20% over the last 12 months.
The waterfall on page eight details of the quarter for siding.
The selling price increase of 12% added $30 million in both revenue and EBITDA.
<unk> increased by 4% to 421 million square feet.
Given that we were already operating basically at full capacity this time last year.
This record performance was only made possible by impressive system wide operations, including logistics.
Naturally having just started up holton shipped minimal volume in the first quarter, but it did start on time and it is ramping up quickly.
Investments in growth of $12 million includes $9 million of Olson and $3 million of increased selling and marketing spend.
The rising cost of crude oil and derivative chemicals drove up the price of resins and overlays as well as the cost of transporting logs to the mills.
Result in $26 million of inflationary costs was however, more than offset by the aforementioned price increases.
The resulting EBITDA of $83 million at a margin of 25% is remarkable given the combined impacts of inflation and the simultaneous expansion projects at houlton. So golar.
This demonstrates that even in periods with significant investments in growth high inflation on a mill startup.
The siding segment can deliver both long term growth and long term margin expansion.
The OSB waterfall on page nine shows a $205 million year over year increase in revenue about two thirds of this came from higher OSB prices.
Bulk of the remainder is driven by the combined impact of higher volumes from increased capacity at peace Valley and an eight point increase in structural solutions mix.
And despite the restart of peace Valley, the volume of commodity OSB sold in the quarter fell by 4% our structural solutions volume grew by over 30% to reach 55% of total OSB volume.
This shift to structural solutions consistent with Lp's strategic transformation.
<unk> $78 million of revenue and $47 million of EBITDA.
As in the siding business raw material inflation presented a $21 million headwind in the quarter.
But while citing is sold the delivered prices OSB freight has largely passed onto customers, meaning that increases in freight costs have minimal impact on OSB segment EBITDA.
So another incredible quarter of cash generation in the OSB business, the bulk of which we are in the process of returning to shareholders.
Page 10 summarizes the quarter for LP as a whole.
As already mentioned the $130 million of OSB price impacting North America.
A similar dynamic added $20 million in sales and EBITDA in South America.
But I want to direct your attention to the middle section, which aggregates the impacts of Lp's controllable strategic efforts and the less controllable inflationary impacts.
<unk> growth of $47 million structural solutions growth of $78 million offset by a decrease in commodity OSB volume of $12 million resulted in a net revenue increase of $113 million that is 47, plus 78 minus 12.
The corresponding EBITDA impact was $76 million.
That is $34 58.
$76 million not only offsets, but is nearly double the negative impact of inflation in North America $44 million.
Now, we can't control or predict future costs, and we do expect continued headwinds for some time, but the best defense is a good offense as the saying goes in in Lp's case that offense is our relentless drive towards specialty products, which is of course, the core of Lp's transformation strategy.
Page 11 summarizes cash flow.
We started the quarter with $371 million in cash the $636 million generated by EBITDA was partly offset by a $180 million increase in working capital.
Largest component of which at $127 million is the effect of rising prices on accounts receivable balances.
The normal effect of seasonal log inventory increase and inevitable inflationary increase in the unit value of inventory accounts for the remainder.
After minimal other stuff LP generated $425 million of operating cash flow.
We spent $92 million in the quarter on maintenance and growth capital and returned $123 million to shareholders.
The $59 million in business divestitures as the proceeds from the sale of about 50% stake in the I joist joint venture with Resolute Forest products as a side note the associated $39 million gain has of course been excluded from both adjusted EBITDA and adjusted net income.
The net result of all this is a $266 million increase in cash raising it to $637 million at quarter end.
Which brings me to capital allocation.
$104 million spent on share repurchases lowered our share count from $86 million to $84 5 million shares.
As of Monday morning, we spent a further $182 million to repurchase $2 9 million more shares, bringing our share count as of yesterday morning to $81 6 million.
This leaves $214 million remaining under the pre existing $500 million authorization.
And we continue to believe that LP shares remain significantly undervalued. Accordingly, Lp's board of directors has approved a further $600 million for share repurchases, bringing our total authorization as of yesterday morning to $814 million.
Which brings me to page 12, and Lp's updated second quarter and full year guidance.
Capex for 'twenty to 'twenty, two will be in the $400 million to $430 million range.
Given this remarkable first quarter in the ongoing ramp up of Fulton, we're raising both our second quarter and full year siding revenue guidance to year over year growth of at least 20%.
As for OSB without providing a price predictions, we will offer guidance predicated on a price scenario.
Should random lengths prices remain unchanged from last friday's levels, and assuming no significant worsening of logistics availability. The OSB segment would generate about 7% less revenue in the second quarter than it did in the first quarter.
Now, but siding and OSB continue to invest in growth, including projects in the second quarter to add premium flowing capability to peace valley and improve the reliability of Clark counties emissions control technology.
Of course, both businesses continue to face headwinds from raw material and freight cost inflation.
On that basis, and assuming no sudden reversals in demand or dramatic increases in costs Lp's consolidated EBITDA for the second quarter of 2022 should be at least $540 million.
And with that we will be happy to take any questions.
Thank you as a reminder.
A question you will need to press star one on your telephone to withdraw your question, Chris the pound key.
Our first question comes from John Babcock with Bank of Bank of America. You May proceed with your question.
Good morning, and thanks for taking my questions.
I guess starting out it would be great. If you could just talk about hasnt repairing and repair and remodel markets and what Youre seeing there and then also.
On that point are you seeing any indications of a slowing in demand with rising rates higher home prices and some of the other factors that exist out there in the marketplace.
Good question, John and I would say all three of our North American businesses were not seeing any letup in order activity.
Our order files are strong all the way across the three businesses.
I would say generally speaking.
More than generally specifically speaking inventories are still lean across the across the different.
Distributor types that we have.
It was a little I think a little buildup in pro retailing for OSB is the prices fell, but we're still across the board lean on inventories.
The outlook that we're hearing from our builder partners are still very positive similar outlook for our distributor partners and our pro retail partner so.
I do believe there is housing headwinds with mortgage rates and affordability, but it's certainly not impacting our order file today or or are near term and near term outlook.
Got it thanks for that.
And then just on the signing growth outlook, you raise that obviously from greater than 15% to greater than 20%.
You might have touched on this maybe I missed it but can you just talk about what's driving that increase and then also.
How does that new growth outlook impact your plans for the next site in project if at all.
Well, yes, I'll start with the last part of it it doesn't impact the plans for the next siding product project. So go because we view that as quickly as possible and I would say also the one after that which might've been the one you were referencing John we're full steam ahead on.
The planning for the the one after <unk>.
And then the one after that so we still we are.
<unk> engaged in mill conversions, just as quickly as we can do them.
Parts order because of the growth that we're seeing.
From our outlook standpoint, I mean, it's really pleasing to have such a good startup in houlton. So they will have that extra capacity to sell beginning right now and certainly.
Growing.
Volume availability as we get confident they're lacking a great production throughout the year.
With the Golar, rather large mill it will be a large mill for our system coming on in Q1, you were expecting to see good volume growth next year as well as a result of that conversion.
And we're still own manage or fall in our siding business. It's been over a year since we've been on managed order file I could see us standing staying on managed order file the rest of this year and then as we get into the <unk> production next year, hopefully no more capacity can catch demand a little bit and we can get a little bit ahead.
So that our distributors can build some much needed inventory, but.
It's all it's all of the growth has been.
Mark will be strong and resilient as we've moved through the last.
The last four quarters or so.
Okay. Thank you.
And then just last question before I turn it over just on South America could you just talk about how market conditions field down there relative to a quarter ago.
The market has remained strong.
While LP.
LP South America pricing is not there.
Rechtlich correlated with North America, obviously has an impact.
Imported volumes, South America moves in and out of the market.
We've seen good demand down there and pricing has been more resilient than we were planning for Fortunately so that resulted in a really good quarter, we are putting some capacity some capital into that.
Chile to grow our capacity there with the with our full expectation that will be continue to grow that volume over the next couple of years. So despite all the kind of the political turmoil down there and across South America. The OSB market has been pretty it's been really resilient.
Okay, great. Thanks for all the questions all of the answers I appreciate it.
Yes.
Thank you and as a reminder to ask a question you will need to press star one please limit yourself to one question and one follow up our next question comes from Tom Alonso.
<unk> with BMO capital markets. You May proceed with your question.
Thank you and congrats on a strong quarter.
Just very quickly on the.
You've seen that's pretty strong growth on the <unk>.
Products the iden in the siding business.
I'm curious how.
How do you see.
<unk> products as a percentage of your portfolio in siding as you look out over the next couple of years from the current 11%.
Yes, Keith and obviously achieved or.
Continued growth is our ability to innovate around new products.
We see tremendous upside with our expert finish.
<unk> portfolio of products.
Obviously, the market is moving that way and as we build capacity and have.
More substrate to sell will be focused on expert finish as a growth platform for us.
And then the other the other.
A key driver for future growth as our builder series.
That's a product that's been tailored for installation with the.
With large builders are national and regional builders dusk.
It does come with a price point that can be attractive there and so those two are kind.
Be the work horse innovative products that can drive incremental.
Volume for Us, but then we have a myriad of other ancillary products included.
Trim pieces, the whole smooth product offering that is also maybe not as not have.
Much volume, but are certainly key to us being able to be a preferred subsiding supplier or contractor and distributor base. So it is a really important part of what we're doing as you mentioned, we're at 11% right now as far as the innovators and we see that.
Going into <unk>.
<unk> 20, 20% to 30% as we continue to innovate and we continue to find success with these high potentially high growth platforms like builder series and export finish.
Okay, and then just as my follow up as you.
Demand continues to remain strong and you mentioned you are not full steam ahead.
Thinking about the Golar capacity.
Is there any update inbounds.
You had laid out.
Option.
Capacity is.
Is there any update for us in terms of what might make more sense at this point given how strong demand is.
No.
There is not I mean, we continue to work on it since we've talked about on the last call.
As I've mentioned before and I will be repetitive unless I get a specific question around that but we've got a myriad of options in each of those options have different pros and cons, let's say as far as capital intensity or regional locations ability of the particular press to make a certain product offering and so were we.
We're continuing to do engineering, we're continuing to secure long lead time items, but we're not we're not we don't have to make that decision today and because as we see how our customer base shifts from a product preferences shift and we want we want to wait a little bit just to.
Make sure that that next decision fits the current situation of the business. So we.
We got tons of options, we're working on it.
But there is not a reason to make a decision today as to where we want to continue to study the order file in order patterns before we make that call.
Got it I'll jump back in the queue. Good luck for the rest of the year.
Thank you Keith.
Thank you. Our next question comes from Susan Macquarie with Macquarie.
Goldman Sachs. You May proceed with your question.
Thank you good morning, everyone.
My first question is you know.
On the siding side thinking about the volumes there as well and does ramp can you just talk to how you're thinking of the cadence of growth, especially as we think about some of the comps that you face over the upcoming quarters relative to the incremental ramp that will come through as this new facility fully comes online.
Yes, Susan good morning, so the capacity of that.
That line for siding is about 220 million square feet.
Plan.
Expect to be running at that rate by the end of the year. So there is a ramp up curve that goes from basically.
Zero in February to full capacity.
December pretty linear and that ramp up and then we would be at full capacity obviously for all of next year. So that's how we're thinking about it we're certainly planning on having in selling that volume it's much needed.
So I hope you found that.
<unk> helpful.
Yes, no that's good.
Helpful. That's that's good. Thank you and then my next question is when we do a lot of our channel checks around the homebuilders, especially as it relates to AWP and even for OSB. It sounds like inventories are exceptionally lean on the ground.
You've got a lot of producers, especially on the AWP side that I think are still on allocation there.
You think about some of those bottlenecks that you are continuing to face on the transportation side.
Do you potentially start to ease as we get into the spring and the summer and some of that volume starts to come through how do we think about those different kind of pushes and pulls as it relates to disappoint demand dynamics and what that might mean for pricing as we look to the back half of this year.
I would say I'm not going to give a specific price outlook, but just let me speak to the two.
Product flows I think the nature of your question I believe look the OSB market in the AWP market, our big markets. As you know builders are very busy busy very active have a nice backlog for the rest of the year.
And as so as the logistics challenges free up if they do as we move through the year and they will.
Channel inventory is so lean.
<unk>.
Good bit of production could just go into restocking.
Distribution.
And look even even the warehouses at our mills.
Get to some kind of normal service level.
Before before demand capacity would be out of kilter.
And then any kind of growth in housing if other supply chain bottlenecks free up in the second half of the year. So the builders can even build at a higher pace that would be on even more of a poll on OSP in AWP volume. So I really expect the market remain.
Passenger demand standpoint.
For the rest of the year.
When we get to the winter.
Typically that has been a period of time, where we see some inventory restocking happening, particularly on the OSB side. Some of that is dependent on homebuilding slowing drawing joined that that part of the year.
I'm, just really struggled to see us getting too much of an imbalance situation until we get to November that's just my personal outlook on the capacity demand ratio right now in the industry.
Yeah, No I appreciate that color that's very helpful. Thank you and good luck with everything.
Thank you Susan.
Yes.
Thank you. Our next question comes from Mark Weintraub with Seaport Research you May proceed with your question.
Sure. Thank you congrats on another phenomenal quarter.
In.
A couple of mix questions too on the OSB side.
That's a big move towards structural solutions can you share with us what impact does that have on the business financially does it more reduce volatility or does it more increased margins for what type of color as you're increasing that percentage of the business to structural solutions can we see over time.
Two things you mentioned both but.
Markets more improved and resilient margins. So what are so one of the goals of our structural solutions push is to move into into products that have a more sustainable incremental margin.
And the point there is that so so that in a down OSB market.
Have some margin resiliency around the structural solutions portfolio.
It does second as a secondary effect decrease volatility.
But candidly, we don't have enough of our structural solutions today that is disconnected in any significant way from random lengths commodity as a base pricing for the for that volatility to be impacted as much as we'd like it to be and so it's more it's more of a march are resilient.
Origin play than it is.
Pricing volatility place. So there is some of that flying block for.
For example, we do price off the price list.
Some of the products that we have.
And our innovation pipeline, including this notebook core product.
We will try to position it off a random up I mean.
Disconnected from random, but for our big flooring, Skus and protects shield.
To get disconnection.
Okay. Thank you.
Engineered wood products.
Really nice pickup in earnings there.
Any update on your thoughts on what's going on vis vis the potential sale of the business <unk> change in thought process.
No change in thought process, we are running a process and we are.
Making progress on that process is.
So more to come on that more.
Okay Super.
Ill limit myself to one more and then ill get back in queue.
But you you talked about the smart side being carbon negative.
Can you give us a sense as to is that differentiated from alternative products.
Yes that go into siding and then also is the OSB product would that also be carbon negative.
Yes, so mark we have a really good carbon story.
It's more than a store it's reality when it comes to capturing carbon in nailing it up on the wall for a long time in the case of siding with a fifth year guarantee in the case of OSB is there as long as the home is there.
And so.
Being in this.
Composite wood business.
We arent carbon capture business and we are very from a carbon standpoint, our manufacturing process is rather friendly to that because we use almost all of the material 98 plus.
Percent of materials that come in comes into the facility in the form of wood.
And obviously that is.
Remarkably better than PBC siding for fiber cement.
So from a from a from a carbon friendly standpoint.
Most of our competitors in the wood products business, we've got a really good story.
To tell there and we think ultimately that will provide us a good competitive advantage as well.
I appreciate it.
Thank you. Our next question comes from songs Stewart with TD Securities. You May proceed with your question.
Thanks, Good morning, everyone couple of questions.
With respect to input cost inflation, you gave us general trends for OSB and siding.
For.
Overall year over year inflation can you give us a bit more granularity on how much of it was resin versus wood.
And on resin specifically.
Are there any issues securing supply right now we are hearing that for other chemical inputs across the industry haven't heard anything with respect to resin, but its security of supply of concern at all.
I'll start with the security of supply and while things are tight.
Say as we crossed into this quarter, we have not had any.
<unk>.
Supply.
Input challenges that we could manage through.
We feel like availability is good is good right now of course better than it's been in a while.
Obviously, a hurricane in the Gulf can change that pretty quickly, but we haven't really had any any supply chain issues as far as procuring.
Securing the material that we need from a from an inflationary standpoint.
Most of that inflation has happened with resin.
Because its an oil derivative and most of those materials that we see.
Big increases.
That we've reported is due to the relationship to the old derivative and that driving that mostly through index pricing. So on the on the Woodside, we haven't seen significant stumpage price increases in North America, but obviously from.
To get the material into the facility the haul distances. The fact that it's on truckload primarily on trucks. Some rail diesel fuel pricing is impacted by that.
But.
But.
I don't I don't know if you want to add some more color to that.
The primary source of the raw material increase is anything that is fundamentally oil oil based so.
Hi.
<unk> resin costs.
55% or so.
<unk> that we use in siding is up 30%. So it's almost anything that is that is fundamentally oil based is driving up.
The costs there are some some modest increases in the cost of fiber, but really it's the majority of it is oil based on the impacts as I said.
The overlays the papers the waxes resins fundamentally oil.
That's useful detail thanks very much.
Second question I, just wanted to follow up on the structural solutions element of the OSB business and you touched on.
The the margin economics.
Just trying to get a sense of the 55% of the mix that you reached in Q1.
Is there a target for the ceiling for that or the objective for that ratio and how fast do you anticipate getting there if you could remind us of those dynamics.
Sure Sean.
Sean weight in 2017, we set a target of 50% as part of our strategic plan.
In November we revise that with our board to 75% of structural solutions.
That's a three year target from from last year setting it with our board. So so we're full steam ahead on getting the 75 and.
And then when we get to 75, we'll raise it again and it would be.
It would be awesome for LP to be in a position, where we're only run in commodity OSB is basically between order changes at our facilities and we're way out from that but Thats certainly.
What we're focused on achieving ultimately.
We want to add value.
OSB is a great substrate.
Obviously, we all know Barry <unk>.
Boehner, both commodity price swings, but it's a good it's a good substrate to build value off of and as I've mentioned before on this call. When you add a overlay or sanded or beef up the resin in the case of flooring you can get value. There. So we're really looking on the incremental margin is a value enhancer for our for our business.
<unk>.
That's great detail, thanks, very much Brad that's all I have.
Thank you. Our next question comes from Paul Quinn with RBC Capital markets. You May proceed with your question.
Yes, thanks, very much morning, guys just wanted to start with siding.
Signing with 17% growth is pretty impressive given the managed order file just wondering what youre seeing.
That growth on a retail basis, which areas are growing fastest and which areas are growing a little bit slower.
Off the board.
Paul.
Except for one exception, we've seen really good growth year over year. So it's not there's not a regional component.
Any significantly stronger than another and for most of the channel.
Evenly distributed we did see.
Softening off of the Super good volumes last year.
Consumer retail.
No concerns. They have is just that we had such tough comps.
Compared to Q1 of last year, but the strength is across the order file.
Both geographically and channel wise or segment wise.
Q1 is a good is a good inventory build for sure and so that we saw that.
So it's been it's been a.
Really across the board.
Paul if we had more volume to sell.
With this allocation issue it could be even stronger maybe we don't have enough volume to see you'll be able to find for the different strengths and weaknesses are its just that.
The board our customers are taking all that we can allocate to them.
Okay, and then just on the whole startup so it sounds like it's going well.
And the linear projection I guess, what that 220 million square foot capacity, you expect to maybe produce.
Around 100 million square feet. This year does that.
Is it is it that gets you to the 20% growth in siding in 'twenty, two or is it that plus running your existing mill start here as well.
Theres two things certainly the houlton volume helps in your ballpark right on your estimate for what the volume will be this year, but we've done a really good job too Paul.
Getting all we can out of our system and Thats come from.
Because we're on allocation.
We can be a little more.
Ron optimal as far as the Skus and the way we operate the facilities the way we match, what we produce to our ability to ship trucking rail and to certain regions.
So we're optimizing our mill system to try to get just as much volume out incrementally as we can.
Even though we're kind of I mean, we're running at capacity with everything we have is running 24, seven except for scheduled maintenance or capital downtime, but our our siding solutions team is doing a really good job of finding ways to get incremental volume out of the system through optimizing the order flow through the facilities.
That's where we're seeing volume growth.
Other than of course, what we're going to get out of holding.
Okay. So obviously this growth inside and it's going extremely well what to what competition areas are you running into in terms of other substrates is at vinyl in some markets is it fiber cement, whereas the competition for you.
Yes, both of those I mean look it and share it.
And in DIY Theres still plywood to 111, we compete against every day.
Particularly in shared as I mentioned, and then from a lap siding standpoint, its vinyl in fiber cement and then owner from trim.
It's primarily actually solid sawn.
Some PVC some fiber cement, but solid sounds a big part of the market that we compete against.
It depends a little bit on on the product, but yes, it's plywood for the panels and then fiber cement in PV PVC for the our vinyl for the lap and trim.
Okay and then just last question just on <unk>, what's the capacity of that can you remind us again.
Hey, Paul This is darrin, it's about $4 20 for OSB and siding.
In the neighborhood of $3 to $3 20.
Okay, well that would be good to have that one online.
Definitely wish you had it right now.
Yes.
Maybe.
Thank you. Our next question comes from Keith.
<unk> with BMO capital markets. You May proceed with your question.
Thank you.
Now can you give us a quick update on how <unk> performing.
Yes.
<unk> <unk>.
<unk>, we continue to see good order intake for the facility, we are making progress operationally in the facility as well.
Though it's not where we want it to be so.
I think the progress is slower if there's progress being made it is slower than we would like to say we're learning as we go particularly.
Im kind of back to Paul's question on siding mix the mix, we run through that facility.
<unk> has a significant impact on efficiency and cost and so we're learning how to match that plant's capability to the reality of the market and the northern California area.
So I would I would say, it's it's okaky tuned, but it's slow progress towards a.
A business that we would be ready to plow more capital into in order to grow it we still got some more some more to prove on the operation side.
Got it.
A way to kind of.
We now have some numbers around kind of what the revenues look like at this point Brian .
Well, so we're talking around.
93 million.
12 months over the last 12 months trailing.
And that's not kind of it is actually $93 million for the fourth.
The last 12 months.
And we're losing a little bit of money on it.
Okay.
Understood that's helpful color I'll turn it over.
Thank you. Our next question comes from Mark Weintraub with Seaport Research you May proceed with your question.
Thanks, and three quick follow ups just.
On intact craft.
Are we still expecting green light red light sometime this year or not necessarily.
Yes.
We are really focused on understanding our position in that business. This year, Mark in making the call on Green light Red light yellow light.
That's totally focused on that okay and second on the go.
Should we use a similar type of linear and expect order magnitude 150 million square feet I realize it may start up a little bit later in the calendar of about 150 million square feet for next year or what would be a.
I'll say that's a good that's a good ballpark assumption for now and as we get to the next quarter to Mark we need to refine that we will but yes I would agree I agree that's a good number so far and then lastly, Alan I believe last quarter, you talked about siding.
Generally kind of maybe 25% EBITDA margins this year.
You, obviously came through that in the first quarter. Despite some of the headwind is that still a good number to use or might there be reasons for it to be better or worse.
At the moment I would say there is definitely a tailwind behind that.
That long term margin guidance, but I think that's the most of that I'm going to say.
Okay, and when you say that that was in terms of thinking about this year.
No. It was in terms of what our long term margins for this business side of the business maybe.
Okay, maybe I misunderstood what you had said last night I thought that was sort of a directional for 'twenty 'twenty, 225%.
How did you do.
I misinterpret.
But it's still not unreasonable.
Although I may have answered in the long term at the moment those on dissimilar.
Super Thanks very much.
Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from John Babcock with Bank of America. You May proceed with your question Hi.
Hey, So I just wanted to quickly touch on the structural solutions mix again, there was a pretty big jump just from last quarter alone and I was just wondering how much of this was driven by just the sheer lack of availability of other products.
I was wondering if that might have contributed to the mix this quarter or if there are any other factors that play here.
Also just wanted to generally get a sense for how we might think about this this makes sense of course go on I would assume we might see some pullback from that 55% range, but wanted to get any thoughts you could share there.
Well, yes. Good good question. So look to several factors that helped one is in these tight availability markets, we have the ability to push structural solutions.
Into the market people.
We will undertake what they could get.
We did restructure our contracts or modify our contract volume for this year again to emphasize the structural solution product offering and then also let's not forget that the John that Peace Valley.
It does have.
The really good capability around tax shield and Thats, a good product for the West coast. So as we've ramped into the peace Valley.
Ramp up curve, we're able to.
To ship.
Go back into some markets on the West Coast, where we had been strong in tech showed in the past now look pizza out is still makes a lot of commodity so certainly from an overall volume standpoint for structural solutions that didn't hurt, but it's really.
It's our strategy our product offering is extremely strong, but it is valid to say.
That in a tight market, we have some ability to distress the structural solutions portfolio and get that into the market, maybe a little more easily easily than we can in a down market.
I might add that.
As Brad said the size of the increase year over year obviously.
<unk> is coming on the back of last year's resin problems, but we shipped over 500 million square feet in Q1 that is a record and up.
Absolutely.
Okay understood Alright, that's all I have thanks.
Yes.
Okay, well see no further questions, we'll draw the call to a close there. Thank you everyone for joining US. This will conclude the first quarter earnings call for Louisiana Pacific.
Look forward to speaking with you again soon thank you operator.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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