Louisiana-Pacific Corp (LPX) Q1 2025 Earnings Call Highlights: Siding Growth and OSB Challenges
Q : Congrats on a strong quarter in Siding. Can you talk about the key drivers for this out-performance versus single-family starts? How is the R&R demand holding up? A : We saw strength across our entire order file, particularly in shed orders compared to last year. The R&R sector showed improvement, evidenced by the volumes of ExpertFinish sold. Our new construction and two-step distribution business also held up well.
The company faces challenges from inflationary pressures and potential impacts on margins, particularly in the OSB segment.
OSB segment experienced a mix shift from structural solutions to commodity, resulting in a net reduction of $13 million in revenue and $7 million in EBITDA.
The EBITDA impact of tariffs in the first quarter was about $2 million for Siding, with an expected $12 million impact for the full year if current tariffs persist.
Tariff uncertainty has weakened consumer sentiment and contributed to a 6% decline in single-family starts in the first quarter.
The company is seeing strong order files and expects record volume and revenue for Siding in the second quarter.
Siding business delivered a 26% EBITDA margin in the first quarter, with expectations for similar performance in the second quarter.
The company introduced new specialized products, such as the two-tone ExpertFinish products, which have received enthusiastic customer responses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
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Q: How do you feel about inventories in the channel given the uncertainty around tariffs and the macro backdrop? A: Home center inventories were pulled down in Q1, but are now normal. Channel inventories are seasonally appropriate. We are prompt on our Siding order file, allowing distributors to get shipments in two to three weeks, so there's no need for them to build inventory.
Q: In terms of your Siding margin, how should we think about the progression of that margin in the back half of the year and into 2026? A: We always provide a safe forecast. The non-materialization of inflationary fears and the way the order file is progressing suggest potential margin expansion in 2026. The Houlton expansion won't impact profits until at least 2027.
Q: With OSB capacity being added, what are your thoughts on shifting more towards value-add over commodity OSB? A: The competitive dynamics are challenging due to weaker housing markets and new capacity. However, we remain bullish on OSB long-term. Our focus is on growing Siding and converting facilities when possible, while maintaining optionality in the OSB business.
Q: How much of the success in your order file reflects marketing investments? A: The investment in repair and remodel, particularly with ExpertFinish, has been ongoing since post-COVID. We're seeing returns from this investment, especially in the R&R sector. Marketing is less of a factor in new construction, where direct engagement with builders is key.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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