Share prices of
) dropped 6% in the trading session on Aug 5 after the company
reported loss in the second quarter 2014. However, the company
gained 4% the following day.
Louisiana-Pacific Corporation posted second-quarter 2014 adjusted
loss per share of 3 cents against the Zacks Consensus Estimate of
earnings 2 cents. The quarterly loss of this premier supplier of
building materials was a massive drop from the year-ago quarter
earnings of 41 cents per share.
The weak bottom line was due to lower pricing in Oriental Strand
Board (OSB) and lower earnings before interest, taxes, depreciation
and amortization (EBITDA).
Net sales in the quarter decreased 9% year over year to $519
million owing to a decline in pricing in the Oriental Strand Board
segment. Revenues however surpassed the Zacks Consensus Estimate of
$497 million by 4.4%.
Adjusted EBITDA from continuing operations of $26 million declined
from $122 million in the prior-year quarter owing to a rise in
operating costs and 93% decline in OSB segment EBITDA due to lower
The company recorded $3.8 million in foreign exchange gain during
second quarter 2014, compared to huge losses incurred in the prior
quarter and the prior year quarter.
Oriental Strand Board (OSB):
The OSB segment manufactures and distributes OSB structural panel
Sales in the OSB segment decreased 26.8% year over year to $224
million in the second quarter of 2014 due to a 36% decline in
pricing partially offset by a 11% increase in volume. Volumes
increased since the company resumed production at the Dawson Creek,
British Columbia mill and the Clarke County, AL mill.
This segment reported an operating loss of $6.0 million in the
second quarter of 2014 that compared unfavorably with operating
earnings of $95.0 million in the year-earlier quarter, owing to a
decline in pricing. The segment recorded adjusted EBITDA of $8
million, down from $108 million in the year-ago quarter due to
Composite Wood Products/Siding:
The Composite Wood Products/Siding segment is engaged in the
production and marketing of siding products and related
accessories, hardboard siding and accessory products, and vinyl
siding products and accessories. These products are used for new
constructions as well as for repair and remodeling. It has three
categories: SmartSide and CanExel siding products and commodity
Sales in the Siding segment improved 11% year over year to $170
million, gaining from the rise in pricing as well as volumes in the
SmartSide category. With continuous penetration in retail, repair
and remodel markets and sheds, SmartSide volumes improved 15% year
over year. SmartSide average sales prices also increased 9% year
On the other hand, CanExel siding prices declined 6% year over
year, owing to unfavorable foreign translations. CanExel volumes
were down 10%, owing to a decline in Canadian and international
The segment recorded adjusted EBITDA of $30 million in the quarter,
down 6% year over year, due to lower OSB pricing.
Engineered Wood Products (EWP):
The EWP segment produces goods used in new constructions like
I-Joist (IJ), Laminated Veneer Lumber (LVL) and Laminated Strand
Engineered Wood Products sales increased almost 33% year over year
to $81 million in the quarter, driven mostly by higher volume
growth in IJ, LVL and LSL. Volumes of IJ increased 27% year over
year and 26% for both LVL and LSL, benefiting from higher market
Pricing was up 8% in IJ and 4% in both LVL and LSL due to price
increases implemented across all product lines.
The segment's adjusted EBITDA of $2 million was an improvement, up
by $1 million from the prior-year quarter, due to increased
Operating loss of $5 million remained flat in the quarter.
South America Segment
Segment sales reduced about 5% year over year to $42 million, owing
to a decline in volume and prices in Chile. Volumes in Chile and
Brazil decreased 9%. Volume declined in Chile due to slowing
housing demand, fueled by unfavorable political trends. Including
the changes in foreign exchange rates, prices decreased 16% in
Chile and 2% in Brazil. In terms of local currency, prices declined
4% in Chile and improved 1% in Brazil.
South America segment's operating income of $4 million in second
quarter 2014 declined from the year-ago figure of $6 million. The
segment's adjusted EBITDA of $7 million declined from $9 million in
the prior-year quarter. The decline in operating income and
adjusted EBITDA was due to weaker volume and pricing in Chile.
Louisiana-Pacific is cautiously optimistic about the improving
macroeconomic parameters. The company intends to maintain
debt to capital ratio in the range of 25% to 30% in 2014.
Louisiana-Pacific carries a Zacks Rank #5 (Strong Sell).
Key Picks from the Sector
Better-ranked stocks in the building/construction sector include
PGT, Inc. (
), Quanex Building Products Corporation (
) and Boise Cascade Company (
). All these companies carry a Zacks Rank #2 (Buy).
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