Q2 2025 Louisiana-Pacific Corp Earnings Call
Thank you for standing by. My name is Jordan and I'll be your conference operator. Today at this time, I'd like to welcome everyone to the Louisiana Pacific Corporation second quarter 2025 earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you'd like to withdraw your question, press star 1 again. Thank you.
I'd now like to turn the call over to Aaron Holt VP of investor relations. Please go ahead.
Thank you, operator. And good morning everyone. Thank you for joining us to discuss elps results for the second quarter of 2025, as well. As our updated outlook for the full year. On the call. With me this morning, our Brad Southern elps, chief executive officer, and Alan hockey L's, Chief Financial Officer. As always after prepared remarks, we will take a round of questions.
During this morning's call, we will refer to a presentation that has been posted to elps IR web page, which is investor LPC corp.com.
Our 8-K, filing earnings, press release, sustainability report, and other materials are also available there.
Finally, I will caution you that today's discussion will contain forward-looking statements and non-gaap financial metrics as described on slides 2 and 3 of elps earnings presentation.
The appendix of that presentation. Also contains reconciliation that are further supplemented by, this morning's 8K, filing. All of those materials are Incorporated here in by reference and with that over to Brad.
Thanks Aaron, and thank you all for joining us today. For LP, second quarter earnings call. I will describe some highlights from the quarter before turning the call over to Alan for Segment details and our updated outlook for the second half of the year.
The siding segment. Once again, delivered growth in the second quarter despite an increasingly challenging Market backdrop.
US housing starts remained below long-term, average demand levels and the single family mix is softened which has contributed to steadily falling commodity OSB prices.
The general sentiment among repair and remodeling contractors is also more cautious than expected earlier in the year.
Our strategy and achieve a record quarter for volume revenue and ebitda.
We did this by delivering value for our customers across new construction, R&R. And all site construction with durable. Beautiful, sustainable, and labor, savings smart side and expert finish Trend and siding.
Page 5 of the presentation shows a summary of highlights for the second quarter.
Sighting Revenue, grew by 11% compared to last year partially all setting a negative 102 million impact from lower OSB prices.
The result was $755 million in sales, $142 million in EBIT, and $0.99 of adjusted earnings per share for LP in the quarter.
Both segments continue to improve operating efficiency, which we measure as Overall Equipment Effectiveness, or OEE.
Citing oee in the second quarter reached 78% and OSB hit 79%.
Oee drives value by unlocking incremental, capacity and siding and increasing operational flexibility in OSB. I want to thank our operations teams for their dedication, to running our meals safely and maintaining our assets and delivering OSB, and siding with industry-leading quality.
Current market conditions are difficult for our OSB segment but LP has been here before and we have demonstrated that our teams and execute our strategy. Come What? May
Sighting is obviously not immune to the softening Market, but the unique value proposition of smart side, the diverse Market, exposure and Home, Building RNR sheds and manufactured housing that are ongoing customer focused new product development. Leave us confident that we have a long Runway of growth ahead of us.
I believe that in the long run, a good markets and bad, smart side will continue to capture share from other siding substrates, and grow above the underlying markets. We serve.
I believe this because of the culture we have built.
so before I turn to Allen, let me close by mentioning some examples of how LPS cultures driving results in being recognized,
LP learned in June, which happens to be national Safety month that we want to. Once again, were named the safest company in 2024, by APA, the engineered wood Association
This is a third year in a row and the 13th time in the awards 17-year history that LP has earned this honor.
Elps New Waverly, Transportation. Team received the Platinum award for Highway Safety from the Great West Casualty Company.
This was new waverly's, fourth consecutive year to win that award. In 2024, our team logged, 10 million miles without a single preventable dot reportable accident.
2024 was also the fourth consecutive year for LP to be named a top workplace in Middle Tennessee by the Tennessee newspaper.
All of these facets of our strong culture, as well as other aspects of our sustainable business model, are detailed in LPS's 2025 Sustainability Report, which we recently published.
And with that, I will ask Alan to share more details on segment results. Cash flow. And our updated outlook for the year.
Thanks Brad. Um, I'd also like to add my congratulations to everyone who contributes to elps strong safety culture.
Safety is, of course, its own reward, but a full trophy case is a nice bonus.
Okay. Um, on page 17 of the presentation, you'll see that the second quarter of the sighting was one of continued growth. But beyond that, there are many moving pieces.
Revenue increased year over year by 11% with 2% from price and 8% from volume.
The volume increase added 35 million in Revenue at nearly a 50% incremental ibid down, margin,
But the housing and repairing of model markets are softer than off-site Construction.
which includes sheds and manufactured housing, and this mixed shift slightly dampened the price benefit of another record quarter for expert finish
But, the pure price bar on the waterfall is really the only place where this adverse mix shows up, because it was actually margin accretive in the quarter.
We invested $2 million more in sales and marketing and saw another trillion dollars in minor inflationary costs with Freight and labor inflation. Offsetting improved material costs.
And of course, the Tariff situation remains unchanged from the first quarter and it is tariffs that comprise the bulk of the former million dollars in the other bar.
Looking through the Fairly straightforward waterfall. It was a record quarter for smart side, volume revenue, and ibida with growth and leverage generating margin expansion.
The EBITDA margin of 27% was not a record.
Because elps, siding Mills are still not fully utilized.
I utilization rates should all our SQL. Try to margin increases.
That is until they are temporarily dampened. Again by the cost and lower utilization associated with the starting of the next Mill.
In the grand scheme. This is, of course, a good thing but it's a phenomenon we like to describe as the rising sine wave of sighting margins.
The OSB waterfall on page. 8 is once again dominated by commodity OSB prices, which as I'm sure you're all aware have fallen to multi-year lows.
Even the 7 million of other in the far right bar on the waterfall is mostly the the impact of price on inventory valuation, so price by another name.
However, IBA dove $19 million in the quarter, meaningfully outperformed, helped algorithmic guidance, mostly due to exceptional cost control measures at the Mills and the lag effect in price realization induced by our order file dynamics.
In other words when prices fall steadily as they did in the second and third months of the quarter, this lag provides a small but temporary silver lining.
The current demand and pricing environment. For OSB is unusually difficult, likely exacerbated by tariffs uncertainty, and elevated interest rates.
And we obviously have no control over commodity OSB prices. But as Brett said, we've consistently demonstrated that LP has a strategic Clarity and operational efficiency to manage our capacity with discipline and Agility and we'll do our best to navigate this soft OSB Market.
as we have done in many previous down Cycles,
So the cash flow side on page 9 is also pretty clean with seasonal reductions in working capital, net of tax payments, adding 20 million to the 142 million of ibida for operating cash flow of 162 million.
This cash flow just opposed against commodity OSB. Prices is a remarkable Testament to elps transformation and highlights the value of sightings consistent. Growth pricing power and margin expansion through operating leverage. And we use this cash for consistent execution of our Capital, allocation strategy. We invested 68 million in capex in the quarter and returned, 19 million to shareholders through dividends.
With 1.1 billion in the liquidity, including 333 million of cash, as of June, the 30th LP is Comfortably positioned to invest as needed in new. Siding press capacity, increased pre-finishing capabilities or other options to support and accelerate growth in sighting. And
Execution in OSB.
Which brings me to our updated guidance on page 10?
based on the order file we see before us today we are reaffirming our 4 year sighting guide of about 1.7 billion in revenue and about 4 1 3,
We continue to anticipate a normal-ish seasonal demand pattern, with volume roughly flat to last year's third quarter, which, you recall, was the peak demand quarter in 2024, plus about 3% higher price. This would produce about $430 million in third quarter sales revenue for 3% growth, despite housing and repair remodel outlooks that remain quite challenging.
Even now, about $110 million would result in any bit down margin of roughly 26%.
As for OSB. Well,
Commodity prices are exceptionally low, especially for this time of year which would generally be the peak of the building season.
In fact.
Adjusted for translation, using the CPI, today's OSB. Prices are the lowest in at least 20 years.
Now, while we cannot control prices, we are doing everything we can to control costs and manage our capacity with agility and discipline.
Current prices are well below our eBay down Break Even level. And while we certainly hope that the price assumption in our algorithmic OSB guidance does not play out.
We also think there is value in maintaining a consistent approach to OSB guidance, in order to provide as much clarity as we can.
So,
In the event, that random lengths, prices, remain flat, the current record low-level through the year end.
The OSB segment will see negative e but Neva around 45,000 and the third quarter and a bit worse than that in the fourth quarter as the price benefits of the time like dissipates.
Which would bring ibida the full year for OSB to a negative 255 million.
Now, I'd like to stress that this is a model, not a prediction and certainly not a signal.
That we're anything. But Relentless in our efforts to reduce costs across our OSB Network. In fact, part of the cost control effort to now is be
will show up in reduced Capital expenditures in the second half of the year.
For a full year total of 350 million which is about million dollars lower than our prior capex guidance.
Before taking questions, I would like to close with this.
The demand environment is weakening somewhat most acutely in OSB.
But this only highlights the value of our piece siding segment where growth driven by material, conversion product, Innovation and share gains. Let smartside continue to outperform the market rain or shine.
And with that, I'll open the call for questions.
At this time, I'd like to remind everyone in order to ask a question. Press star, then the number 1 on your telephone keypad will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of George Stauros from Bank of America Securities. Your line is live.
Thanks very much. Hi everyone. Uh, good morning. Uh, congratulations on the progress, uh, year to date, uh, gentlemen. Um, first question and, you know, you've been, you know, quite consistent in in maintaining a, you know, conservative and balanced outlook for siding and, uh, outperforming that over the course of the year, when we
Look at 3 Q, it suggests a little bit of a, a decrement in margin and and progress. Is there anything discreet that we should be mindful of their or is that Alan? Just you know trying to keep some cushion for the unknowable at this juncture uh in the quarter and that a couple of follow-ons
well, put, um,
I'm not going to admit to the existence of a cushion quite quite, but I'd like to point out that, you know, the third quarter of last year was was the peak.
Quarter last year. Um, and it is, you know, it's reasonable. I think
Particularly in this climate to expect it Q2. Um, might prove to be that Peak this year. And so, if you look at what we're really doing is looking at Q2 and Q3 combined kind of, um, I like to say the word ish a lot, so kind of ish. Yeah. Um, and so if you look at those 2 quarters combined, that's a revenue growth of about 7% year-over-year which I think is pretty, pretty healthy. Um, there are some other minor Dynamics, um, shed shed volumes or panel volumes were certainly very strong in Q2. Um, we're not necessarily expecting that to persist quite as strongly as it did. Um, going forward. So I would say it's um it's a sort of balanced approach on the revenue line and a very safe approach on the ibid dial line.
Okay, appreciate that Alan. And, you know, you gave us, um, a fair amount of color for a third quarter.
I don't know if it's worth it, but to the extent that you can comment about early Trends and third quarter with the exit rates are on volume for deciding that would be helpful and then my last question I'll turn over and come back into Q. Um, the capex numbers came down, it sounds like it's largely an OSB but was there anything on the siding side that we should be paying attention to relative to?
Ultimately, you know, the growth Outlook, the next, uh, conversion. Uh, with Halton Etc. Thanks guys, I'll turn it over.
I'll I'll take the capex question then in Brad I'll take the the sort of Market facing question. Yeah. The the
You're right. That the majority of the capex reduction is in OSB. Uh, and arguably, if we weren't trimming, OSB capex, I probably have left the whole capex Guidance the same. It's hard to land that such a thing, on a dime. So the majority of the trimming is in, is in OSB. There's a little bit in siding, um, but uh, nothing nothing significant.
Yeah, George on the Q3 order file. I, you know, we came into the Q2 order file, really, really strong carryover from q1 into Q2, and we saw some, you know, some, some weakening of that order file. As we went through the quarter, and it's kind of stabilized where we were consistent with the guidance that Alan has given for the quarter. So, it's, it's good. Um, but not as good as it was going into the beginnings of
Q2.
Okay, understood. Thanks Brad. I'll turn it over.
Your next question comes from the line of Mike roxland from truist Securities. Your line is live.
Yeah, thank you. Brad Allen. All right, if you're taking my questions and congrats on a nice quarter, despite the backdrop,
Thank you. Thanks. Mike.
Forecasting for the quarter, any color, you can share on what, what you'd actually did, how the businesses ran what cost, they were management more efficiently. What what they did to make sure that they were operating as effectively as possible during the quarter, despite the, the the price the week pricing backdrop. Thanks. Yeah. To sew 2, 2 key drivers to that as, as I mentioned, the oee, really outstanding performance, for the quarter.
You know in kudos to our operations teams because it's it can be difficult at times to maintain efficiency when you when the you know kind of markets slowing down in front of you.
But we ran just from an efficiency standpoint, the operations particularly you know, with speed ran really really well which means high up time high, a grade yield um and then and then good speeds when we were running the presses and then second to that is we have, you know, been pretty aggressive on Cost Containment in that business as we saw the market Fall Away. Uh, and so that those 2 combined, you know, really was significant contributor to our ability to, you know, to beat some of the, you know,
algorithms around where, uh, marketing should be in that business given where pricing is
Got it. Thanks Brad. And then just 1 quick followup, love to get your thoughts, you know, around shrinking home sizes and implications for siding. You know, I I have to believe that even with home sizes, shrinking that the currently low penetration rate of of which brand is sighting and on the potential for an upcoming, let's say resigning cycle would more than offset shrinking home sizes, but they call you have on on. That would be great. Thank you.
Totally agree with what you said and we'd rather home advertised as bigger, rather than smaller for both of our businesses.
But you know, giving the market share opportunities, we have across all our different segments. Um you know we still I mean we believe securing, you know, either a new homes to to put our signing on or
A growing market share and repair and remodel will overwhelm any reduction in housing sizes that we see as a, you know, as the industry, combats just affordability issue.
So, um, yeah, it would be a slight headwind for us. But overwhelmingly, we have enough Tailwind to where that should not be a significant factor in our in our volume growth story for siding.
Your next question comes from the line of Keaton Mentora from BMO Capital Markets. Your line is live.
Uh thank you uh and good morning. Um, I'd like to come back to um deciding guidance for back half and if I heard you right, you said volumes in the third quarter would be flagged there over here. Um, but if I just think about, you know, sort of the implied post quarter, uh, that should assume kind of, you know, revenues up kind of low double digits.
Can you just help us understand? You know, kind of the nuances here in terms of what's going on in Q3 Q4 and if you are, you know, sort of baking in some recovery as we get into, um, Q4
Well, if you sort of, I'm going to sort of duplicate the math, that's implied. You know what we're looking at a year that's kind of symmetrical.
You know, revenue of 400 million is in q1 and Q4 and then something north of that, you know, 460 in in Q2 and 430 in Q3. So it is a c, it is a seasonal pattern with really just that shift between Q2 and Q3. Um, so yeah, we're we're assuming, um, sort of healthy volume growth Q4 of this year, but I think q q in a 4 of last year was relatively low certainly compared to Q3. Um so uh yeah I think it's I think it's a reasonably safe um volume Outlook.
Understood. Okay. And then, you know, Alan can you just, um, remind us in terms of your operating rates? Um, in the second quarter and both OSB and siding, and sort of what's your approach, especially in OSB, um, given where prices are? You talked about kind of, you know, uh, doing everything you can on the cost side, but I'm just curious, you know, sort of your approach, um, on, on the production side,
All right. What are you doing this? Yeah. Okay. Thanks, morning, Keaton. Um, so for OSB in the second quarter, we were sort of in the mid-80% range, operating rates; a bit lower than that in, you know, maybe a hair lower than that in siding as we ramp up new capacity.
Uh, in the in the third quarter for sighting for OSB, we're always hesitant to specifically discuss volume for all the obvious reasons. Um, but but I'll just say, is that we are executing our strategy, which is to supply the amount of wood that the market demands uh and current prices are telling us now that, uh, that that, that demand is not very high. Um,
When customers want more wood will supply it.
Yeah, let me just let me just to be repetitive to Aaron. We, we'll, we really have the finger on demand for our customers, um, you know, given given who we are in the OSB business. And we, we're very, um, you know, very cognizant of the of when our customers need would, we want to supply it? But, uh, we certainly are, you know, do not want to build any inventory in the channel or at our our mail locations and uh, and and and in order to avoid that, that leads to downtime to make sure we matching capacity and and production with demand. And we'll continue to do that um indefinitely in our OSB business.
I'm just so that's very helpful perspective. I'll jump back in the queue. Good luck.
Thanks, thank you.
The next question comes from the line of Susan, emclaire is from Goldman Sachs. Your line is live.
Thank you. Good morning everyone.
My first question is on the sighting good morning. Aaron is is on sighting. Can you talk a little bit about the sell through that? You saw into the second quarter and how Channel inventories are positioned coming into the back half of this year? What gives you the confidence that you can see that level of growth that Alan mentioned in the fourth quarter.
Susan, we feel that way because we did have good sale through in Q2, you know, as we continue to ship or turned out to be record volumes, our customers continue to order, uh, we we, you know, inventories in the channel around siding or right, where we'd expect them to be this time of year. Um, and so, you know, the good, the good, um, pull through was very reassuring. Um, and I would say, somewhat surprising giving given some of the economic and housing data that we were looking at throughout the quarter.
so, we feel good about, uh,
Really really, really good about.
In use demand in Q2 being consistent with what we saw in our order file and what we shipped. And and while as demand has moderated a little bit compared to where we were this time last quarter we do believe. What's going. What we're selling today is also ending up, you know, with a contractors and being installed on homes rather than um being put in inventory.
Um, so, uh, we we we feel like it's the pull through throughout this year's been really good and we have reasonable inventories in the channel giving where we are in the year.
Great to hear Brad. Thanks for the call and then following up on sighting. Can you talk a bit about the mix that you're seeing? And any thoughts on how that will move in the back half? What are you seeing in terms of sheds Builder series expert finish and just the implications there?
So, you know, if you look at this year, uh, and it was more extreme in q1 than it was in Q2. But but then rather consistent, we are strongest product and and therefore in use has been our panel business, where we've had really good, pull throughs for s*** in our shed.
Segments, both in Q1 and Q2, and also good pulls in the Home Centers, which is primarily a panel play, though we do have other SKUs there as well.
Uh, secondly, our pre-finished businesses. We've talked about, uh, the record volumes there for expert finish is, is, I mean, that is a
And what we're seeing today is, we'll continue to see strength and expert finish which means repair and remodel, you know, could be a good, a good driver for us, Q2 a Q3 and Q4. And then as we continue to execute with Builder, series with our new, uh, new construction, National Partners. Uh, you know, we we we see that as steady as we go through the year, um, and, and, you know, but certainly if, if we were to see any kind of strengthening in use there with the large National builders that that could, you know, be another driver for us.
To play that answer your question. Yeah.
Yes. No, that's, that's great color. Thank you. And good luck with the quarter.
Your next question comes from.
The line of Sean Stewart from TD, Colin, your line is live.
Thank you. Good morning.
Um, a couple of questions I want to follow up on OSB dynamics. I guess we typically think of the industry cost curve as flat.
Can you reference?
Cost or margin variance across LPS portfolio. And, and how that could inform
Uh downtime closure decisions, trying to get offensive the margin differential from your your best to worst Mills.
Yeah, Sean calls curve is flat, especially, you know, at at, at the Mill level. So most times are downtime decisions are driven by, you know, geographic location Transportation cost. And then the, the local demand that is that is, you know, the the outlet for most of that production.
so it's it's it's really not necessarily that we line up variable costs stack that and decide where to take down time it's more dependent on delivered margin uh based on where the Mills located and based on the customer base it's serving and and somewhat based on contracted volume that is that is you know, kind of in in that Mills basket which could could keep the milk operating so
Um, you know, obviously we we do that trying to maintain a higher margin as we can, um, but it's not necessarily.
Correlated strongly to like, cost out of the press though, that although that is a factor.
Factor understood. Thanks for that Brad. And then revisiting the, the capex guidance, I, it sounds like this is mostly OSB related to the reduction to the the 2025 spend guidance. Any updated perspective on the Hulton expansion. I assume, you know, a chunk of what you're, you're delegating to.
Discretionary capex. This year is getting started on that. Um broader perspective on when we can get more context on what the economics of that project might look like.
So so we are continuing to do the detailed engineering for that project. Um, you know, I'm trying to absorb, you know, all the inflationary impact that it has had on on some of the cost estimates that we had done earlier. Uh, so the work continues there. Um, I would say Sean in the next quarter or 2, we'll be able to get more specific on, uh, tying down the cost and the returns. I will say, despite the inflationary impact on steel and construction, you know, if you factor in the price increases that we've gotten over the last couple years of returns are still really healthy, uh, for a project like that. Um, and um, and we continue to work on it diligently but just not, not ready to uh, you know, to provide, um, any detailed information yet because we don't have it.
Got it.
Okay. Uh, that's all I have for now. Thanks very much. Thank you.
Your next question comes from the line of Mark Weinrub from Seaport.
Research Partners, your line is live.
Thank you. Um, so so obviously, you know, a really strong, uh, performance still in sighting. And, you know, your volumes are, are, are good. Um, there's been some kind of mixes in the some, you know, you talked about sheds being, uh, pretty strong and prefinished being pretty strong. I mean, 1 Thing, uh that that strike me is that your your estimated price using kind of a crude Revenue divided by um by shipments is you know is is is still up, but maybe not quite as strong as um I I might have thought but how much of that is what's going on mix? How's that affecting pricing? And you know or or how much of it is just kind of the reality of the environment that we're in.
Oh, makes them than any, any sort of uh headwind. Um, like I said, like we said, panels are
Sort of a lowest, some of our lowest priced products high margin but lowest priced. Um, I kind of didn't explain it that well in my prepared remarks, I guess. Um, so and expert finish, of course, is among the highest priced but among some currently under temporarily among some of the lowest margin. So yeah, we I mean, I remember when we actually gave guidance for the Year, this this question came up and we had at that point um in the early part of the year, we were anticipating relatively healthy.
Oh s***, shed panel, uh growth uh and hence um sort of signaled that dampening of the net price that you're going to see. But the fundamental price increases that we have across our portfolio are, are are all strong. So this really is it's a strong mixed factor. And, and, you know, at times we've had, you know, 9%, uh, pricing, which has been, you know, 3 points of price to 6 points of mix. And we're we're seeing some some
Of that that uh, the opposite effect in 2025.
22 got it. It it is believe it or not. It really is mixed. Right? So, so shed is outweighing expert finish at the end of the day, in terms of. Oh yeah, yeah, yeah. The impact on mix. Yeah. Okay. And then I mean, are you making other adjustments? Um, you know, obviously you pull capex and it's primarily in in OSB. Um, I mean it it again, not wanting to split hairs, but like the marketing expense maybe wasn't up as much as um.
It. It had, you know, it was actually down a little bit in this quarter. I mean, are you making other adjustments and sort of what can you just sort of just color in?
Kind of the, the bigger thought process, look, it's a very difficult environment. And so, so what what are what's sort of the the strategy at this point? Yeah, so so Mark, we're we're really focused on um, you know, Cost Containment and and management in our OSB business every penny. Looking at every penny looking at, allocated costs to that business. So that's uh, you know, um, an environment where we are very conservative on on cost on siding. You know, when you have the kind of growth that we've had the last 6 quarters, uh, and some, you know, and and a lot of that can be attributed to the increased sales and marketing investment that we've made over the last couple years, we talked about
Adding a Hilton, um, uh, you know, incremental capacity. Just converted Sagola. We're going to continue to invest in sales and marketing. You know it won't be.
Consistent quarter to quarter. That's that stuff. Is can be seasonal or the weight, the way we time a marketing campaign or onboarding new sales assets is it can be rather lumpy. So you'll see volatility in that, um, but the, but the trend for us in sighting, is continued investment to drive growth. We just feel like we have so much available market share and
I hate to say this because I, you know, ran the business for
15 years and have been close to it for the last 5, but still not great. You know, name recognition and brand recognition across the national footprint of builders and contractors. So we just look out at the market and see lots of opportunity and and obviously, uh, we're trying to accelerate that with capacity and with new products but also, you know, we we do have to stay aggressive on sales and marketing as long as we see those opportunities in front of us. And we see as I think Allen's prepared remarks along runway for growth and we certainly believe that and will continue in to invest so that we can realize it in the future. Much, much appreciated Brad. Maybe just just follow up real quickly on, then on that. Are there any additional kind of markers on the growth uh that you can can highlight? That's going to sort of uh help feed the the machine and the the quarters come
yeah, well you you know the if you
Not to be repetitive to Prior marks for me. I mean, it's so under, and the expert finish.
There's so much opportunity. There, we launched brush brush, smooth product recently, just just now this year being now, getting that into the market and getting it, commercialized opens up.
Not hitting a thousand with them, but we got a pretty high batting average.
And the, in those everything I mentioned right there opens up markets.
Uh, that, you know, we were way under-penetrated in. So, um, yeah. So that's been—there's no question that our innovation over the, you know, the past five, well, say post-COVID, has been the key to driving our demand growth because it's just opened up, you know, the available market window. And we'll continue, and part of that investment market that we've made in SG&A and what we call marketing expense is around, you know, investment in our innovation teams.
Fantastic. Thanks very much.
The next question comes from the line of Matthew McCullough, from RBC your line is live.
Good morning. Um, a couple of related questions on how you're competing with other substrates, first in the new residential market in particular. Is it your sense that vinyl is still dominating the most share, or materials like brick? Now, any more pressure with more focus on affordability? And second, would you expect higher lumber prices on the back of increased duties and potential tariffs on non-U.S. supply to be meaningful for how you compete with sound wood siding in the U.S. market? Thanks.
So do I need to remind me if I missed 1 of those? But on the on the brick side? Yeah, I think there is an opportunity with
The cost of brick, the drive for affordability, the availability of Labor to to labor it. Um we you know, we hear hear about opportunities for conversion there and maybe some on some small.
Uh uh Builders have been able to, to do some of that. I don't want to make that. That's not a meaningful contributor right now, but it is something that uh May provide opportunity in the future. Yes, I do think that the biggest opportunity we have continued to have as as vinyl conversion, both in new construction and manufactured housing and with repair and remodel um uh you know, there there
Affordability, can drive people to a, a vinyl sighting. So we've got that as the, you know, as the constraint, maybe to conversion to converting more, but we certainly from a preference standpoint and from, you know, long-term value proposition. We see that as very fertile, uh, ground for us and and then, yeah, I I understand what you're saying around the, the trim. Uh, we do compete somewhat with, you know, solids on trim products. Um, uh, you know, our our pricing normally is higher than, than, than a solid song, uh, would because of the value prop there, but, uh, if we were
Courtesy pricing increase on, on solid. So on that would, that would be an advantage for us in, in our trim business. Um, so, um, it's but it's not, I would say once we've converted or or or, um,
once we've converted a contractor to our engineered wood trim.
Unless prices get really, really low. There's not a lot of conversion back to solid. So on in my experience,
That's great. Thanks for the detail. I'll pass it back. You're welcome.
Your next question comes from the line of Steven Ramsey from Thompson research group, your line is live.
Goes first, can you share high-level where manufactured housing can be for the siding business, thinking about how the affordability challenges may be pushing some buyers towards that product? And basically, if that can be an expanded item for your siding products? And then secondly, on sheds, where is demand this year? How far is it off the prior peaks, or where does it compare to past levels? Are we at highs on that side of things, or if there's more gains to be had in the next couple of years?
On the s*** side, look, it was phenomenal during co uh the shed demand.
Um, you know, I don't know off the top of my head, and if Aaron, if you do, you can comment. I don't know if we're back to that peak.
Business for us, consistent panel, volume that we run very efficiently and has been is really good margin. So it's good to be in there on manufactured housing. That's an opportunity for us. Um you know it's um I believe that 1 of the ways the industry is going to
affordability is through manufactured housing.
If when you have a mod a modular
Building, that is transported down the road. Our siding is a great solution for that. Um, it provides an aesthetic, that is a step above what's currently the predominant product there, which is vinyl. Uh, we have a warranty, it can be pre-finished, which could really help from a, from a, uh, efficiency standpoint with the manufacturer and its structural, which can add some stability to the home. So, we see that as an opportunity, um, that it's, we've always had some market share there through the years, but I do see that as, um,
That that industry taking market share uh as affordability continues to be an issue and we're well positioned to take advantage of that, you know, through through the our long history, um, serving that channel.
Okay, that's great color. And then shifting to, to structural Solutions, in OSB, still half of volume and volume held flat of be at low levels. Can you talk about where you're seeing demand within that portfolio? And if there's anything to dissect between new product, uh, adoption or discretionary purchasing,
Yeah, so the demand is is kind of across the portfolio. Obviously, our our strength in that from a volume standpoint. Our strength comes from floor, our flooring product, and our Tech Shield Radiant Barrier products. Uh, both of those are tied to new construction. Uh, look
you know, especially with flooring, when affordability becomes an issue, people do can tend to
You know, buy down the value chain, as far as flooring. Um, but those are the 2 products that drive volume for us.
Um, and uh, and and you know, we're pleased with where we are as far as the percentage it is off. You know, some of the Peaks we've had with structural Solutions, but I think that is really because the price you know, is the affordability issue and the people are driving for lowest cost when they can get it. So we'll continue to to sell our value prop and um, and I still, you know, where it's a significant part of what we do. Um, but the other than, you know, just reiterating the strength with our flooring and Radiant Barrier products.
The rest of what we do. There has been kind of steady to moderate growth over over the last couple years.
Great. Thank you.
Your final question comes from the line of Kurt, Jinger from DA Davidson. Your line is live.
Great, thanks, and good morning, everyone. Um, just one question on kind of new residential opportunity set for siding. Um,
You know, your your largest peer is, kind of announced a number of these multi-year, kind of exclusivity agreements. And I was just hoping if you could help us understand, you know, whether with that.
The opportunity for share gains is is kind of relegated to the smaller and and medium-sized Builders until those were sort of to expire or whether there's, you know, more nuanced or kind of intricacy and and terms of, you know, trying to drive penetration among those production guys.
Given that.
It's nuanced. Um, and so we pursue opportunities all the time.
Uh, those opportunities can come for example from the multi family unit of a of a builder whose business we don't have on the, on the single family side. And uh, so there's a myriad ways that we stay active with all, uh, of the large Builders, as far as um, being in the conversation around supplying, their siding needs along with their OSB needs
And so you know, we we and we continue to get wins. Um and so we see continued opportunity there and uh,
As well, especially when coupled with our OSB offering. So,
Um, we're we're full steam ahead on growing in that segment and um, and and and do see opportunities for continued growth as we look forward.
Okay, that's helpful. Appreciate the color. Thank you. You're welcome.
That concludes the question-and-answer session.
I will now turn the call over to Aaron for closing remarks.
Okay, thank you Jordan with no further. Questions, we'll end the call there. Thank you all for joining us to discuss elps results for the second quarter of 2025. And as always, we'll be available for follow-ups throughout the day and and the rest of the week. Thanks everyone.
This concludes the meeting. You may now disconnect.
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