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Louisiana-Pacific (LPX) to Sell 50% Stake in I-Joist JVs
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Louisiana-Pacific Corporation (LPX - Free Report) — commonly known as LP Building Solutions (LP) — recently announced its intention to sell half a stake in two of its I-joists producing joint ventures to Resolute Forest Products Inc. . The deal, which is valued at $50 million, is expected to close in first-half 2022, subject to regulatory approvals and certain closing conditions.
Per the agreement, both LP and Resolute Forest Products will have a 50% interest in each entity — Resolute-LP Engineered Wood Larouche Inc. in Larouche, Quebec and Resolute-LP Engineered Wood St-Prime Limited Partnership in Saint-Prime, Quebec. Currently, Resolute Forest Products operates the facilities and LP sells the products.
Meanwhile, LP will continue to exclusively distribute the engineered wood products manufactured at the two operations to Resolute Forest Products.
Solid Business Transformation Strategy to Drive Growth
LP is gradually transforming from a commodity producer into a more stable cash-generative business by increasing revenues and EBITDA mix. From January 2019 till 2020, the company achieved $178 million in cumulative EBITDA from growth and efficiency. It exceeded its three-year target of $165 million in cumulative EBITDA in fourth-quarter 2020. During the first nine months of 2021, adjusted EBITDA increased by $1.2 billion to $1.7 billion, primarily due to growth in Siding Solutions revenues and higher OSB prices.
This apart, the company has been focusing on three areas — increasing the efficiency of mills by improving productivity, run time and quality through overall equipment effectiveness or OEE initiatives; applying best practices to its supply chain; and optimizing infrastructure costs.
In a bid to reduce costs, LP lowered the cost structure of its facilities through Lean Six Sigma efforts, the sale or shutdown of underperforming mills and manufacturing facilities as well as investments in technology. It resorts to a strategy of curtailing production at selected facilities to meet customer demand and optimize portfolio as well as margins. During the first nine months of 2021, SG&A expenses — as a percentage of net sales — contracted 340 basis points on a year-over-year basis, attributable to persistent cost-effective techniques implemented by the company.
Image Source: Zacks Investment Research
Shares of LPX have surged 52.3% in the past year compared with the Zacks Building Products – Wood industry’s 14.6% rally. Earnings estimates for 2021 have moved up 0.3% in the past 30 days, indicating 214.2% year-over-year growth. The company has a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in the trailing seven quarters. This trend reflects bullish analyst sentiments. Its impressive VGM Score of A is a testimony to the fact.
Weyerhaeuser Company (WY - Free Report) is one of the leading U.S. forest product companies. The company has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.
Weyerhaeuser has gained 22.4% in the past year.
Boise, ID-based Boise Cascade Company (BCC - Free Report) — which makes wood products and distributes building materials in the United States as well as Canada — is aided by factors like favorable commodity wood products, pricing, and robust construction activity.
Boise Cascade has gained 60.1% in the past year.
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Louisiana-Pacific (LPX) to Sell 50% Stake in I-Joist JVs
Louisiana-Pacific Corporation (LPX - Free Report) — commonly known as LP Building Solutions (LP) — recently announced its intention to sell half a stake in two of its I-joists producing joint ventures to Resolute Forest Products Inc. . The deal, which is valued at $50 million, is expected to close in first-half 2022, subject to regulatory approvals and certain closing conditions.
Per the agreement, both LP and Resolute Forest Products will have a 50% interest in each entity — Resolute-LP Engineered Wood Larouche Inc. in Larouche, Quebec and Resolute-LP Engineered Wood St-Prime Limited Partnership in Saint-Prime, Quebec. Currently, Resolute Forest Products operates the facilities and LP sells the products.
Meanwhile, LP will continue to exclusively distribute the engineered wood products manufactured at the two operations to Resolute Forest Products.
Solid Business Transformation Strategy to Drive Growth
LP is gradually transforming from a commodity producer into a more stable cash-generative business by increasing revenues and EBITDA mix. From January 2019 till 2020, the company achieved $178 million in cumulative EBITDA from growth and efficiency. It exceeded its three-year target of $165 million in cumulative EBITDA in fourth-quarter 2020. During the first nine months of 2021, adjusted EBITDA increased by $1.2 billion to $1.7 billion, primarily due to growth in Siding Solutions revenues and higher OSB prices.
This apart, the company has been focusing on three areas — increasing the efficiency of mills by improving productivity, run time and quality through overall equipment effectiveness or OEE initiatives; applying best practices to its supply chain; and optimizing infrastructure costs.
In a bid to reduce costs, LP lowered the cost structure of its facilities through Lean Six Sigma efforts, the sale or shutdown of underperforming mills and manufacturing facilities as well as investments in technology. It resorts to a strategy of curtailing production at selected facilities to meet customer demand and optimize portfolio as well as margins. During the first nine months of 2021, SG&A expenses — as a percentage of net sales — contracted 340 basis points on a year-over-year basis, attributable to persistent cost-effective techniques implemented by the company.
Image Source: Zacks Investment Research
Shares of LPX have surged 52.3% in the past year compared with the Zacks Building Products – Wood industry’s 14.6% rally. Earnings estimates for 2021 have moved up 0.3% in the past 30 days, indicating 214.2% year-over-year growth. The company has a solid earnings surprise history, having surpassed the Zacks Consensus Estimate in the trailing seven quarters. This trend reflects bullish analyst sentiments. Its impressive VGM Score of A is a testimony to the fact.
Zacks Rank & Other Stocks to Consider
LP currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Weyerhaeuser Company (WY - Free Report) is one of the leading U.S. forest product companies. The company has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.
Weyerhaeuser has gained 22.4% in the past year.
Boise, ID-based Boise Cascade Company (BCC - Free Report) — which makes wood products and distributes building materials in the United States as well as Canada — is aided by factors like favorable commodity wood products, pricing, and robust construction activity.
Boise Cascade has gained 60.1% in the past year.