Louisiana-Pacific Cuts Production

Louisiana-Pacific Corporation (LPX - Snapshot Report) recently announced the curtailment of oriented strand board (OSB) press production at its Dawson Creek mill, located in British Columbia, Canada. However, the mill will continue to manufacture LP TechShield Radiant Barrier Sheathing to support the demand of the product in the West Coast markets.

According to the company, the decision to cut down on the production of OSB was based on the poor performance by the construction industry. This will result in 88 layoffs out of 114 employees currently working in the mill, thereby leaving only 26 to continue with the production of the Radiant Barrier Sheathing.

Although the company is making efforts to grab opportunities in the international markets for its products, the condition at the local mills has little room for improvement as the overseas markets are not yet fully developed for the specific products these mills produce.

The company reported a loss of $33 million or 25 cents per share from continuing operations in the second quarter of 2011 compared with an income of $24 million or 17 cents per share in the year-ago quarter.

Net sales declined 19% year over year to $362.4 million, driven by a weak housing environment, poor demand for houses, rising inventories, high unemployment and lower consumer confidence. Each of the major segments of the company witnessed deterioration in terms of sales volume.

The Oriented Strand Board segment reported net sales of $140.6 million during the quarter, down 35.4% from $217.8 million a year ago. The Siding segment generated net sales of $118.6 million, down 9.2% from $130.6 million in the prior-year quarter. Net sales in the Engineered Wood Products segment declined 4.1% to $53.6 million from $55.9 million a year ago.

Operating loss in the reported quarter was $24 million versus an income of $49 million in the prior-year quarter.

Nashville, Tennessee-based Louisiana-Pacific, which holds a Zacks #5 Rank (Strong Sell rating) stock, manufactures and distributes building products for new home construction, repair and remodeling, manufactured housing, and light industrial and commercial construction.

The company offers its products to retail home centers, manufactured housing producers, distributors, wholesalers and building materials dealers in North America, South America, Asia and Europe. Louisiana-Pacific’s key competitors include Universal Forest Products Inc. (UFPI - Analyst Report) and Weyerhaeuser Co. (WY - Analyst Report).