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Louisiana-Pacific Corporation (LPX - Snapshot Report) reported adjusted earnings per share (EPS) of 41 cents from continuing operations in the second quarter of 2013, surpassing the Zacks Consensus Estimate of 31 cents by 32.3%. Earnings also improved significantly from the prior-year quarter earnings of 2 cents, attributable to improved pricing in the OSB segment and increased demand for LPX products.

Net sales in the quarter improved 34% year over year to $572.6 million, owing to volume and price increase across all segments except the South American segment. Revenues also beat the Zacks Consensus Estimate of $550 million by 4.1%.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were $122 million much higher than $37 million in the prior-year quarter, driven by a significant increase in net sales.

Segment Details

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

Sales in the segment surged 57.1% to $306.2 million in the quarter, driven by a 59% increase in pricing. Improved housing starts also resulted in volume growth of 2% for the segment. The segment recorded adjusted EBITDA of $108 million, much higher than $28.0 million in the prior-year quarter, attributable to pricing benefits. Peace Valley, which was acquired in May this year, contributed $7.8 million to OSB’s adjusted EBITDA, compared to $3 million in the prior year quarter.  

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 OSB.

Sales in the Siding segment improved 11.5% to $152.7 million benefiting from improved pricing and volumes in the quarter. Driven by the improvement in housing starts and penetration in retail, repair and remodel markets and sheds, SmartSide volumes improved 8% year over year. SmartSide average sales prices increased 2% year over year. On the other hand, CanExel siding volume was up 4%. CanExel prices were up 2% in Canadian dollar, due to favorable mix, whereas it was down 2% in U.S dollars.  The segment recorded adjusted EBITDA of $32 million in the quarter, up 33.3% from the prior-year quarter, driven by increased 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 Lumber (LSL).

Engineered Wood Products sales increased 17.8% year over year to $60.9 million in the quarter. Owing to improving housing demand, volumes of I-Joists were up 2% and volumes of LVL and LSL were up 15% year over year. Pricing was up 13% in I-Joists and 5% in LVL and LSL due to price increases across all product lines. The segment reported decline in adjusted EBITDA.

South America: The segment manufactures OSB structural panels and siding products in Chile and Brazil. Segment sales grew 3.7% to $44.3 million. Volumes in Chile were down 5% due to decline in sales of imported products. Volumes in Brazil were down 10% year over year due to decline in export sales. Including the changes in foreign exchange rates, prices increased 6% in Chile and 9% in Brazil. In terms of local currency, however, prices improved 5% in Chile and 10% in Brazil. The segment’s adjusted EBITDA of $9 million was higher than $6 million in the prior-year quarter.

Outlook

Despite recent headwinds like weather, labor and financing issues in the housing market, Louisiana-Pacific continues to be optimistic about the housing market recovery and believes that the company is well prepared to meet the resulting extra demand.

Louisiana-Pacific carries a Zacks Rank #3 (Hold).  

Some other companies from the construction sector that are doing well and deserve a mention include Potlatch Corporation (PCH - Snapshot Report), Rayonier Inc. (RYN - Snapshot Report) and Universal Forest Products Inc. (UFPI - Analyst Report). All the three companies carry a Zacks Rank #2 (Buy).


 

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