) recently entered into an agreement with Canfor Corporation to
acquire the latter's 50% share in the Peace Valley Oriented
Strand Board (OSB) mill, which both the companies jointly own.
Louisiana will pay $75 million for this mill and will thereby
become the sole owner.
The Peace Valley mill is located in Fort St. John, British
Columbia. As part of their joint ownership, Canfor provides
labor, raw materials and administrative services and Louisiana
gives operational support. The Peace Valley facility can
manufacture up to 820 million square feet of OSB. The
products are sold under the LP brand name. After the completion
of the acquisition, Canfor will continue to provide raw materials
and carry on administrative services during the transition
The Peace Valley acquisition will strengthen Louisiana's OSB
segment, which manufactures and distributes OSB structural panel
products. Sales in the segment grew 63% to $227 million in the
third quarter of 2012 owing to an increase in housing activity.
During the third quarter of 2012, Louisiana's OSB segment
witnessed volume growth of 11% attributable to an improved
housing market and a pricing gain of 50% owing to strong
performance of OSB. The segment recorded operating income of $49
million, attributable to pricing benefits in the quarter,
compared to a loss of $16 million in the prior-year quarter.
A peer of
), Louisiana-Pacific is optimistic about increasing construction
activity and overall price appreciation in the housing market.
However, the company is cautious about the slow global
macroeconomic conditions, uncertainty of the US economic
recovery, sluggishness of the remodeling industry, the European
crisis and slowing Chinese market.
We appreciate the growth in price and volume, exhibited by the
OSB segment and expect segment volumes to grow in the near
future. The recent acquisition will add to the growth of this
segment and help the company take advantage of the housing market
We currently have an Outperform recommendation on
Louisiana-Pacific. The stock carries a Zacks #2 Rank (short-term
LOUISIANA PAC (LPX): Free Stock Analysis
POTLATCH CORP (PCH): Free Stock Analysis
To read this article on Zacks.com click here.