Louisiana-Pacific (LP) has you surrounded. The building materials company specializes in manufacturing products for floors, walls, and roofs. LP produces oriented strand board (OSB), siding products, and engineered wood products. It also makes decorative molding and cellulose insulation. Products are used in new home and manufactured housing construction and for repair and remodeling. The company sells its products to distributors, dealers, professional lumberyards, and retail home centers, including The Home Depot. It has production facilities throughout North and South America. After a difficult period during the recession and housing crisis, LP is poised to capitalize on the uptick in housing starts.
LP operates four business segments. The largest, oriented strand board (OSB), makes and distributes OSB panels and accounts for about 45% of sales. Siding products and related accessories represents about 30%, while engineered wood products (laminated veneer lumber) accounts for more than 10%. The company's South America business which manufactures and distributes OSB and siding products in South America and certain export markets, account for the rest. Other products include decorative moulding and a joint venture that makes cellulose insulation.
Nashville, Tennessee-based LP operates about 20 production facilities in the US and Canada. It also owns two facilities in Chile, and one in Brazil. The US is LP's largest market, accounting for nearly three-quarters of its sales. Canada is second with 18% of sales.
Sales and Marketing
LP's sales and marketing efforts are focused on traditional two-step distribution, professional building products dealers, home centers, third-party wholesale buying groups, and other retailers. The company's wholesale distribution channel includes a variety of specialized and broadline wholesale distributors and dealers focused primarily on supplying products used by professional builders and contractors. LP also supplies large retail chains and smaller independent retailers. The company's top 10 customers accounted for 46% of sales in 2012. The Home Depot was the company's single largest customer, representing 10% of sales.
Buoyed by improvement in the housing industry, LP's 2012 sales increased 26% versus 2011, to $1.72 billion. Net income swung from a loss in 2011 to $28.8 million in 2012. Indeed, 2012 was the company's first profitable year since 2006. All of the company's product categories posted sales gains, with oriented strand board posting a 50% increase year over year on higher pricing and volume. Siding sales rose nearly 17%. Sales in Chile jumped 26%.
LP is dusting itself off after enduring the tough market conditions that plagued operations during the economic downturn. Declining new home construction created low demand for LP's products from 2008 through 2010 and sales suffered and profits suffered. The company moved to cut costs, refinance debt, and improve operations. In order to reduce costs and adjust to lower demand for its products LP shut down plants in Alabama, Georgia, Maine, North Carolina, Tennessee, Texas, and other locations in the US and Canada. Production was curtailed at other plants.
Housing starts are slowly improving but demand is still not at pre-recession rates. In light of the challenges, the company remains focused on cash management, while at the same time preparing for the future.
Still, the recent rebound in sales and profits has LP looking to grow again.
Mergers and Acquisitions
In September 2013 the company agreed to acquire Canada's Ainsworth Lumber Company, a maker and marketer of oriented strand board (OSB) with a focus on value-added specialty products for sale in North America and Asia. Ainsworth operates four OSB manufacturing plants in Alberta, British Columbia, and Ontario with a combined annual capacity of 2.5 billion square feet. The pending deal is valued at $1.1 billion, including debt.