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Louisiana-Pacific Loss Wider than Expected, Revenues Soft - Analyst Blog

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Share price of Louisiana-Pacific Corporation ( LPX ) declined 2.44% on Feb 11, after the company posted disappointing fourth-quarter 2014 financial numbers. The lackluster performance can be attributed to lower Oriental Strand Board (OSB) prices, log outages affecting siding production and softer Engineered Wood Products (EWP) sales.

Louisiana-Pacific posted fourth-quarter 2014 adjusted loss per share of 23 cents, wider than the Zacks Consensus Estimate of loss of 15 cents a share. The quarterly loss incurred by this premier supplier of building materials was also significantly wider than the year-ago quarter loss of 6 cents per share.

The weak bottom-line performance was due to reduced prices of OSB and lower earnings before interest, taxes, depreciation and amortization (EBITDA).

Net sales in the quarter decreased 5% year over year to stand at $454 million and lagged the Zacks Consensus Estimate of $457 million by 0.7%. Revenues were affected by poor performance at the OSB and South America segments.

Adjusted EBITDA loss from continuing operations was $17 million in the quarter, down from adjusted EBITDA of $24 million in the prior-year quarter. Selling and administrative expenses decreased 12.5% year over year to $40.8 million in the final quarter of 2014.

Segmental Analysis

Oriental Strand Board (OSB): The OSB segment manufactures and distributes OSB structural panel products.

Sales in the OSB segment decreased 11.6% year over year to $203.2 million in the fourth quarter owing to a 12% decline in pricing and 1% decrease in volume.

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 construction as well as in repair and remodeling. The division has three categories: SmartSide, CanExel siding products and commodity OSB.

Sales at the Siding segment improved 1.9% year over year to $140.9 million, gaining from the rise in volumes and price in the SmartSide category. With continuous penetration in retail, repair and remodel markets and sheds, SmartSide volumes improved 4% year over year. Meanwhile, SmartSide average sales climbed 4% year over year.

Meanwhile, CanExel siding prices declined slightly in U.S. dollar terms and increased 6% in Canadian dollars. CanExel volumes were up 11% owing to higher Canadian and international demand.

Engineered Wood Products (EWP): The EWP segment produces goods used in new constructions like I-Joist (IJ), Laminated Veneer Lumber (LVL) and Laminated Strand Lumber (LSL).

Engineered Wood Products sales decreased 2.7% year over year to $65.6 million in the quarter, driven mostly by higher pricing growth in IJ, LVL and LSL. On a year-over-year basis, volumes of IJ decreased 9% and 3% for both LVL and LSL.

Pricing was up 3% at IJ and 5% at both LVL and LSL owing to price increases implemented across all product lines.

South America Segment

Segment sales declined 11.6% year over year to $35.9 million owing to softer volume in Brazil and lower prices in Chile and Brazil. Volumes in Chile increased 16%, driven by higher demand, partially offset by lower export. Volume in Brazil declined 27%, owing to lower exports in Fareast markets. Pricing declined 16% in Chile and 6% in Brazil. In local currency, Chile pricing dropped 5% year over year owing to the persistent pricing pressure from North American imports. In local currency, prices in Brazil improved 1%.

Fiscal 2014

The company's full-year 2014 adjusted loss per share of 42 cents decreased significantly from earnings of 90 cents a share in the year-ago quarter. The figure was also wider than the Zacks Consensus Estimate of loss of 35 cents a share.

FY14 net sales decreased 7% year over year to $1.94 billion and also lagged the Zacks Consensus Estimate of $1.95 billion by 0.5%.

Louisiana-Pacific carries a Zacks Rank #4 (Sell).

Key Picks from the Sector

Better-ranked stocks in the building materials /construction sector include TRI Pointe Homes, Inc. ( TPH ), Boise Cascade Company ( BCC ) and Graña y Montero SAA ( GRAM ). While TRI Pointe Homes sports a Zacks Rank #1 (Strong Buy), Boise Cascade Company and Graña y Montero carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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