Louisiana-Pacific Corporation (LPX - Free Report) has acquired a Green Bay, Wisconsin-based prefinished siding company, namely Prefinished Staining Product Incorporated (“PSPI”). This buyout enabled the company to boost the Siding business and transform itself into a leading building solution provider. However, the terms of the transaction are not yet disclosed.
How Will This Buyout Help Louisiana-Pacific?
Founded in 1999, PSPI has expertise of prefinished LP SmartSide Trim and Siding that Louisiana-Pacific will be able to make use of, in order to drive growth. The company will utilize PSPI’s existing facilities, capability and expertise to enter this market, and drive growth of the Siding business as well as LP SmartSide brand.
PSPI will operate as part of Louisiana-Pacific’s Siding business that current contributes more than 40% of the total revenues.
Louisiana-Pacific is gradually transforming from a commodity producer to a more stable cash-generative business by increasing revenues and EBITDA mix. To that end, it remains focused on improving business by growing the Siding segment and simultaneously reducing cost across businesses. The company has been making efforts to increase penetration of Siding products in repair/remodel and roll out SmartSide products.
Louisiana-Pacific expects strand Siding revenues to grow 12-14% in 2019, in line with the year-ago period, and EBITDA margin to be at least 20% in the long term. Also, it intends to continue investing in selling and marketing of the Siding business in 2019.
In first-quarter 2019, the segment recorded 4% revenue growth on the back of increased volumes and SmartSide strand product prices. Particularly, SmartSide strand siding revenues grew 13% year over year, with volumes up nearly 8% and price realizations increasing 5%.
In the view of increasing demand, the PSPI buyout is expected to prove beneficial for the company. Notably, it anticipates the prefinished Siding market to grow significantly over the next five years.
Share Price Movement
The company, which shares space with Rayonier Inc. (RYN - Free Report) , Universal Forest Products, Inc. (UFPI - Free Report) and Trex Company, Inc. (TREX - Free Report) in the Zacks Building Products – Wood industry, expects consistent growth in the remainder of the year on the back of sustainable improvement projects, consistent siding growth and instigation of new specialty products, among others.
Shares of Louisiana-Pacific have underperformed its industry year to date. That said, the acquisition of PSPI will help the company in its relentless efforts to improve the quality of products and increase market penetration.
Louisiana-Pacific currently currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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