Louisiana-Pacific Corporation Aktie

Good day, and thank you for standing by. Welcome to the Q1 2026 Louisiana-Pacific Corporation's Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Aaron Howald. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining LP Building Solutions to discuss our financial results for the first quarter of 2026 and our updated guidance for the second quarter and the remainder of the year.

Hosting the call with me this morning are Jason Ringblom and Alan Haughie, who are LP's Chief Executive Officer and Chief Financial Officer, respectively.

After prepared remarks, we will take a round of questions. During today's call, we will be referencing a presentation that has been posted to LP's IR website, which is investor.lpcorp.com. Our 8-K filing, earnings press release and other materials are also available there.

Finally, today's discussion contains forward-looking statements and non-GAAP financial metrics, as described on Slides 2 and 3 of the earnings presentation. The appendix of the presentation also contains reconciliations that are further supplemented by this morning's 8-K filing. Rather than reading those materials, I will incorporate them by reference.

And with that, I'll turn the call over to Jason.

Thanks, Aaron. Good morning, everyone, and welcome to LP's earnings call for the first quarter of 2026. We appreciate you joining us. I'm proud to say that in the first quarter, LP navigated the challenges of a complex market exceptionally well. Against an increasingly volatile macro backdrop and despite significant impact from winter storms and the conflict in Iran, we delivered on our guidance. Price realization, both in Siding and OSB exceeded our expectations, partially offsetting lower volumes and contributing to EBITDA performance above the high end of our guided range. I'll discuss our results for the quarter at a high level before describing what we are seeing in the various markets that we serve.

One highlight that we are incredibly proud of is our safety performance in the quarter. LP team members in North America worked over 1.5 million hours with a world-class total incident rate of only 0.26. I also want to recognize our newest siding mill in Sagola, Michigan, for achieving two years without a recordable injury. Our goal will always be zero injuries, but I want to personally thank every LP team member, who contributes to our award-winning safety culture.

From a macroeconomic perspective, given the trajectory with which the housing market weakened over the course of 2025, we expect that the first quarter would be a challenging comparable. Accordingly, as you can see on Page 5 of the presentation, our net sales were down compared to the prior year quarter, driven largely by softer OSB demand and lower commodity prices, which fell below EBITDA breakeven for Q4 of last year and Q1 of this year. OSB price softness accounted for a $66 million reduction in net sales and EBITDA. By contrast, the pricing power of SmartSide helped offset lower sales volume, moderating revenue declines. LP delivered EBITDA in the quarter of $82 million, representing an $80 million decline year-over-year, primarily from $66 million in lower OSB prices, which I mentioned earlier. Siding EBITDA was only $5 million lower despite 10% lower net sales, with the remaining roughly $9 million attributable to other factors, including South America, and higher corporate unallocated expenses. For the quarter, LP delivered $0.38 in adjusted earnings per share and returned $21 million to shareholders via dividends.

I'm pleased to share that we saw minimal impact from crude oil price volatility in the first quarter. This reflects both near-term agility of our supply chain and operations teams as well as the longer-term algorithmic structure of many of our strategic supply contracts. We did see modest increases in freight rates, which was not surprising given how quickly diesel prices respond to crude oil supply disruptions. Overall, however, other inflationary impacts were minimal in the quarter. Alan will share some sensitivity analysis later to help model the direct and indirect impacts of crude oil price volatility on our raw material costs in the second quarter and beyond.

Next, I will go a layer deeper and spend a few minutes describing how the quarter unfolded across the three market segments that the Siding business serves, each representing roughly 1/3 of siding volume. I will start with off-site construction, which includes both sheds and manufactured housing. While currently largely consisting of shed volume, opportunities are plentiful, to grow market share and manufacture of housing as well. As discussed on our prior call, prebuys in advance of our annual price increase resulted in elevated channel inventories. This was not exclusively a shed phenomenon, but the impact was disproportionately felt in this segment. In February, we anticipated that this would be a drag on first quarter volumes, while expecting channel inventory to normalize in Q2. I'm pleased to say that this has played out more or less as we expected, while shed volumes were off significantly in the first quarter, sell-through rates held up quite well and channel inventory is now back within seasonally normal ranges.

Another 1/3 of LP siding volume goes into the repair and remodeling market, with pre-finished ExpertFinish, being our fastest-growing product line within this segment. In the first quarter, ExpertFinish accounted for 12% of our siding volume and 18% of siding revenue. We believe that ExpertFinish has a long runway for growth and continued share gains, and we are investing accordingly to support that demand. Our newest ExpertFinish line in Green Bay, Wisconsin, which adds approximately 50 million square feet or 25% to annual capacity is now ramping up and making excellent progress. We also plan to add a further 20 million square feet of capacity at our Bath New York facility later this year. And finally, in late April, we acquired a piece of land in North Branch, Minnesota, where we intend to build additional ExpertFinish capacity to support growing demand over time. The final 1/3 of LP Siding is used in new residential construction. One of our most significant growth opportunities is with the national homebuilders, where we remain relatively underpenetrated. We believe we are uniquely well positioned to build mutually beneficial partnerships with these homebuilders by leveraging SmartSide's labor-saving value proposition together with our integrated portfolio of OSB in siding.

So far, in 2026, we have secured two new builder partnerships, and we continue to actively pursue additional opportunities. Just to give you a sense of scale for the business we recently secured with the nation's largest homebuilders as well as the magnitude of the opportunity ahead, I'll share some specifics. We currently expect to supply about 100 million square feet of SmartSide in total to 15 of the top 25 U.S. homebuilders. We estimate that this represents a high single-digit share of the total exteriors market for these builders and a similar high single-digit percentage of our overall SmartSite volume. Again, we believe that the unique value proposition we can offer these homebuilders gives us significant opportunities for additional growth in the years to come.

Finally, before I turn the call over to Alan, I want to recognize Dusty McCoy and Ozey Horton, both whom retired last week from LP's Board of Directors. Personally, and on behalf of the entire LP team, I want to thank Dusty and Ozey for their insights, their thoughtful counsel and their contributions to LP's culture and strategic transformation.

With that, let me turn the call over to Alan for a more thorough review of LP's financial results and our updated guidance.

Thank you, Jason. I'd also like to add my thanks and congratulations to the whole LP team for a very strong quarter for safety. And to Dustin and Ozey for their service on LP's Board of Directors, I know I have certainly benefited from their wisdom and guidance over the last 7 years.

Okay. The first quarter performance for Siding is shown on Page 8 of the presentation. In line with expectations, unit volumes were down by 18% year-over-year. And as discussed on the last earnings call, in addition to a slowing market, we exited the fourth quarter with increased channel inventory following the announcement of our January price increases disproportionate amount of that inventory was held by distributors serving our shared customers where elevated inventory led to volume declines both sequentially and year-over-year. ExpertFinish, on the other hand, continues to be the best-performing product category within siding, which in this market means volumes are flat. The 9% increase in selling prices partly mitigated the decline in volume with prime prices increasing by 8% and ExpertFinish prices increasing by 10%.

Now there are a few moving parts within all of this, so let me briefly unpack it. The largest single contributor to the reported 9% price increase is naturally our January 1st list price increase, which averaged 4 to 5 points. The remainder, let's call it 4.5 points is roughly 2.5 points from favorable mix and around 2 points from rebate refinements. Now the mix dynamics are the result of lower volume of shared products within the prime product category and relatively strong volumes for ExpertFinish, including the two-toned natural subcategory, which we launched in the second quarter of 2025. And what I refer to as rebate refinements include the final recognition of lower-than-expected rebate payments relating to the fourth quarter of last year as well as modestly lower rebate accrual rates in 2026, and both factors are, of course, volume related. As we look towards the second quarter, we expect list price realization to remain steady, of course, while mix and rebate impacts will probably normalize somewhat.

So price and volume combined for a revenue reduction of $42 million, but an EBITDA hit of only $8 million. The $2 million reduction in selling and marketing cost is merely timing, and while inflationary costs have been mailed so far, I'll discuss this subject further in a moment. The other bar includes the non-recurrence of the EBITDA benefit of last year's OSB production at Siding mills, more than offset by some inventory build in anticipation of maintenance outages later in the year. The resulting EBITDA margin of 28% for Siding was, of course, helped by the rebate and inventory dynamics I mentioned earlier and would be closer to last year's 26% without these factors. But in the long run, the roughly 50% incremental EBITDA on volume, albeit on a decline this quarter, shows the significant leverage that this business will deliver as and when growth resumes.

For OSB on Page 9, prices once again the dominant element. In 2025, OSB prices were their highest in the first quarter, fell significantly in the second and have been mired net EBITDA breakeven for the past several months. As a result, prices are 28% lower than the first quarter of last year, resulting in $66 million less revenue and EBITDA. Lower OSB volumes for both commodity and Structural Solutions reduced sales and EBITDA by a further $30 million and $10 million, respectively.

Now the operations team did an outstanding job of controlling what they can, operating efficiently, minimizing costs and prioritizing safety. As a result, mill overhead and SG&A contributed $5 million in year-over-year savings and the $3 million negative shown in the Siding waterfall from lower OSB transfers is offset here with income. All of this results in a $12 million EBITDA loss, better than our guidance amidst a very challenging demand and price environment.

Cash flow on Page 10 shows net operating cash outflow of $38 million compared to an inflow of $64 million last year, reflecting the $80 million reduction in total EBITDA and a somewhat larger-than-usual buildup of log inventory. Cash ended the quarter at $164 million, and we have $900 million in liquidity, including our undrawn revolver.

Now before I conclude with our updated guidance, let me address the impact of crude oil prices on LP's raw material and freight costs, as shown on Page 11. Starting with freight. Roughly speaking, we estimate that each $10 per barrel increase in crude oil corresponds to a $0.03 per mile increase in LP's variable freight costs on a blended basis, assuming current rail trip mix and refinery margins. LP experienced total freight usage of the order of 30 million miles in 2025. So the full year freight cost impact of each $10 per barrel increase in crude oil prices, all else equal, would be an annual impact of about $1 million. In OSB, freight is generally passed through while Siding is priced on a delivered basis, so that the EBITDA impact to LP would be mitigated by that dynamic. I should also add that LP Siding is lighter and more durable than some competing alternatives, which allows us to ship by rail and transport much more volume on a truck than these competitors can.

For raw materials, excluding logs, many of our inputs have crude oil as feedstock including resins, primate and paint. And of course, the delivered cost of these materials include some freight. For raw materials across LP's North American business, we estimate that the total annual cost impact of each $10 per barrel increase in crude oil is of the order of $1.5 million to $2 million per quarter or $6 million to $8 million per year, all else equal. And this would be split roughly 75-25 between Siding and OSB given sidings more raw material-intensive recipe. LP can experience a slight cost impact for logs when higher diesel prices impact harvesting and delivery costs, but compared to the freight and raw material costs, the log cost impact is small enough to be immaterial for modeling purposes. Now bear in mind that these are estimates of annual impact. Many of our raw material supply contracts have trailing algorithm at adjusted prices with varying update cycles, so the specific timing of these various impacts is more variable. We saw minimal impact in the first quarter. But if prices stay elevated, we will trend towards these annual run rate over the next 2 quarters or so.

Our raw material cost estimates are incorporated in our updated guidance, as shown on Slide 12, unlike our approach to OSB guidance, we will explicitly avoid any attempt to predict future crude oil prices. Frankly, we're less concerned about the cost impact of higher crude oil prices than we are about the broader macroeconomic and demand impacts and the general volatility driving them. You will recall that our full year guidance was predicated on housing starts being flat year-over-year. Mathematically flat starts would require a rebound in the second half. Now we made no attempt to predict the timing or trajectory of that rebound but expected that improving consumer confidence, moderating interest rates and seasonal increases in OSB pricing demand would be the bell weathers that would signal its approach. And as you are all aware, especially following the conflict in Iran, not only are those market indicators not improving, but they continue to erode. Now while our order files in siding give us a good bit of visibility into the second quarter, high input costs fall in consumer confidence and increasing interest rates are magnifying uncertainty about demand in the back half of the year. As a result, we feel it's prudent to temper our expectations for the second half.

Current lower levels of market activity, we anticipate signing volume declines year-over-year in the second quarter of about 10%, with sequential improvements through year-end. Within this, ExpertFinish is expected to continue to outperform prime products as we gain share relative to competing prefinished alternatives, we therefore expect full year export finished volume growth in the mid-single digits range. List prices should remain very steady, of course, but the very strong price/mix effect of the first quarter is expected to moderate as shed mix increases now that the channel inventory of shed products has normalized. As a result of these volume and price dynamics, we currently expect Siding revenue in the second quarter between $435 million and $445 million and EBITDA between $115 million and $120 million. For the full year, Siding revenue and EBITDA are now expected to be between $1.64 billion and $1.66 billion with EBITDA between $410 million and $425 million.

For OSB, we're applying our normal methodology, assuming prices remain flat for last Friday's printed level. Unfortunately, Friday's print included a significant drop in the Southeast and Southwest regions, bringing OSB prices back under EBITDA breakeven levels. As a result, we now expect OSB EBITDA in the second quarter to be a loss of about $10 million. Now we don't plan to really plug doggedly ahead should these prices persist in an oversupplied market. But again, for modeling purposes, extrapolating current prices forward, the third and fourth quarters will deliver similar results as reflected in the revised full year guidance.

And finally, while our modeling approach has generally been to assume that LP South America and unallocated corporate expenses net to zero, the economic situation in Chile is similarly depressed and uncertain at the moment the softer results in South America are reflected in the total adjusted EBITDA guidance. So in conclusion, the housing market and general consumer sentiment aren't showing the hope for signs of recovery yet, and this is most acutely felt in OSB demand and prices. But we remain confident in the SmartSide value proposition and in the long runability of our Siding business to gain share in all the segments we serve.

And with that, we'll be happy to take a round of questions.

[Operator Instructions] Our first question comes from the line of George Staphos with Bank of America Securities.

I wanted to ask a point of clarification if maybe it's a two-parter for my first question. Alan, I just want to make sure your guidance does not include any assumption on oil pricing per se, correct? So if so, can you tell us what the change in oil was relative to your fourth quarter so that we could somewhat calibrate to your adjustment in guidance relative to the cost? And the second part of that question is, is there a way to give us [indiscernible] a change in oil, how much hits percentage-wise on cost of manufacturing in siding, and how much hits on the freight side?

Well, Alan is most of the heavy lifting on this. I'm going to let Aaron attempt to answer that question with the level of detail that we're willing to share.

Of course the question...

So in reverse order, the cost of manufacturing through the raw materials is a much larger impact than freight. The full annualized impact of freight is relatively small, as Alan detailed, and we have more miles of transport for OSB just given the volume. So you can you can basically anticipate most of the costs hitting on the raw material side and in the manufacturing side. Within that, about 75% of the impact to cost of manufacturing will land in siding just because of the more raw material intensive recipes of Siding relative to OSB. And the last thing I'll say is our guidance makes our best attempt to reflect our current understanding of what the actual annualized impact will be, meaning that we have baked in what we have seen near term in terms of those material inputs and also our understanding of the various dynamics of the contracts themselves, the supply contracts that is with regard to their pricing algorithms and methodologies, and that's about as specific as we're going to get on that rather than diving too deep into nuts and bolts of those individual contracts. So short answer, yes. The guidance for margin does reflect of what we're seeing in the market, and what we anticipate seeing in the back half of the year. And if prices go significantly higher or lower, you've got the sensitivities to give it some Kentucky windage.

Okay. The second question is on the 100 million square feet of siding across the 15 of the top 25 builders. Is that the '26 actual volume that you expect, or is that a run rate? And what was the base in '25, if you could share that?

Yes, I'll touch on that, George. The 100 million feet that we specified is, in fact, where we think we'll land in '26. Obviously, with the wins that we've communicated in recent calls, the prior year volumes were lower. What I would say about the programs, we're not going to give specific names, but each one of these meets a material threshold for us and add several thousand homes to our portfolio. And in both cases, these programs that we talked about really provide us access to new markets where we're underpenetrated, specifically in the Southeast and Southwest markets. And because of that, it's allowing builders and contractors to really experience the benefits of using SmartSide and in many cases, for the first time with respect to installers.

Jason, I get that, is there any way to size is that 1/3 increase, a 25% increase, a 2% increase. Any granular would be helpful?

Yes, I would say it's above 10%.

Our next question comes of Mike Roxland of Truth Securities.

One quick one, just -- I believe the gap between vinyl and engineered was has narrowed. Vinyl seeing increases due to oil. I think there's been a price increase announced for May, 3% to 8% of most products. So where does the price spread currently stand between vinyl and engineered wood? And how does that compare to, let's say, 3 or 6 months ago? And have you seen any switching to engineer wood or let's say, even not switching itself where indications of interest to switch to engineered wood as a result of this narrowing spread.

Mike, I'll touch on that. I mean, as you noted, we're hearing from our customers that there are some manufacturers going up on the vinyl side. That just makes SmartSide more attractive with regard to that specific comparison. So that's something we're keeping a close eye on. But I do think most of that has taken place over the course of the last 30 days, essentially. So we haven't felt anything material in our order file as it relates to some of the changes in pricing dynamics in the market.

Got you. But in terms of your customers themselves, not in the oral just yet, but indications that there could be some increasing orders or better demand should this spread continue to narrow?

Yes. I think anytime that spread narrows, it presents an opportunity, and we're positioned well to capitalize on that. So we like the narrowing of that spread, and we'll take advantage of it where we can.

And just one quick follow-up. Where does that spread currently stand relative to 3 months ago, 6 months ago?

I mean, it's tough to really put your finger on that. I mean what we're hearing is price increases in the neighborhood of 6% to 12% depending on who it is. So I mean, the spread has narrowed by that much.

Got you. One last one, I'll turn it over. Just any update just on the potential conversion at Milwaukee?

Yes. I can touch on that, Mike. As of today, we have roughly speaking, about 400 million to 500 million feet of capacity to support our growth on the prime side. We've explained our options for expansion on prior calls, so I won't get into that. But what I will say is that the engineering work continues on a couple of different paths, including [ Maniwaki. ] So nothing new there to share, but I would expect we'll be in a position to share some more information in the coming quarters.

Our next question comes from the line [indiscernible].

[indiscernible] on for Matt today. So first off, I guess, just staying on capacity. So I guess, even if volumes come in softer than expected, our understanding is that the Green Bay line would still support margin expansion given its higher efficiency. Do you guys have a sense of the magnitude of the potential margin benefit if this were the case? And then how is that contemplated in the guidance?

Yes. Thanks, [indiscernible]. Good question. It is contemplated, but the margin benefit really accrues to us more when the facility is fully ramped up early in its ramp up, which is where we are now. That effect is less pronounced, both by virtue of lower efficiency in the early days of operations and a smaller amount of volume as it goes through. So I think very roughly speaking, if you think about the margin improvement for expert finishes being on a similar trajectory than it was last year. I think that puts you in the right ballpark. And then as we get more volume through that facility, we'll really be able to see the effect of that efficiency and get more specific about its actual effect in subsequent quarters.

We'll certainly bleed about it as and when it happens.

Okay. Great. That's really helpful. And then, I guess, second, so back to the new construction opportunity, when we think about the siding volume of the 15 of the top 25 builders, where can this high single-digit number get to as we think of maybe a more normalized starts environment? And then just so I think more broadly, longer term for your new construction strategy, how are you growing in that channel? Is it more thinking about growing wallet share? Is it building up the number of builder partnerships?

Yes, I appreciate the question. What I would say is in the new construction segment, specifically with the top 25 builders, we still have a relatively small share position in the high single digits as we noted earlier. So there's a ton of opportunity there. At the end of the day, we're trying to be very disciplined or strategic in terms of where we leverage these enterprise programs. It's really about getting access to markets where we're historically underpenetrated building a stocking dealer base around those programs and then obviously, building our business around some of those wins. So it's something we're excited about and really leveraging as we go forward. In terms of the growth opportunity, I mean, at high single digits, the opportunity is very significant for us, and that will be a focus going forward.

Our next question is from the line of Ketan Mamtora of BMO Capital Markets.

Maybe just coming back to the full year siding guidance. It just backing into the numbers, it feels like the guide is $32 million below kind of what you all had talked about as we look at the midpoint of guidance, but Q1 was kind of a solid beat about $18 million higher, but it almost feels like a $50 million swing for the remaining three quarters. Can you sort of highlight maybe two or three key points that would help us sort of think about the key pieces here?

Yes, sure, Ketan, the drop in guidance -- were you referring to EBIT, the line cut out a bit. Were you referring to the EBITDA impact?

I was sorry. Yes, I was.

Yes. So yes, you're right. It's about a $50 million drop from the midpoint. High level, you've got to assume that the majority of this reduction is volume related, let's call it, $70 million worth of volume, which comes through at a 50% variable margin. So that accounts for about $35 million. And to sort of triangulate into one of the other questions, there's then about $15 million roughly, $15 million to $20 million of impact from oil in the back half of the year, concentrated more in the second half than it is in the second quarter. So that $50 million is roughly $35 million from volume, $50 million from oil-based costs.

I see perfect. This is very helpful. And then, Jason, you talked about expanding the dealer network. You -- there's a recent partnership as well with [indiscernible] here out on the East Coast. Can you talk about sort of how you are thinking about your existing distribution partnerships? Obviously, I'm not asking you to name them, but just in terms of how you are thinking about them of these relationships? And where do you think you've got opportunity to sort of penetrate more?

Appreciate the question, Ketan. So I think about our distribution network, I think I've mentioned on prior calls that we have really good access to market through our traditional two-step distributors. And those folks typically in most markets, we have two distributors and some, there might be some overlap where we have three. So those two steppers provide supply to many of the pro dealers and one steppers. So that is where our access to market, I would say, could be improved in some regions and really is the focal point of our enterprise program strategy to really build out that pull-through demand in those markets where we're underpenetrated. So we can build our stocking dealer network with those pro dealers, one steppers, et cetera, to grow our business with contractors and builders beyond those programs.

Your next question comes from [indiscernible].

I wanted to think about the cross-selling to builders. Clearly, it seems like success winning share with builders. I'm curious if you could parse out how much of that is success cross-selling OSB and Siding, or is this pure guiding wins?

Yes. Thanks for the question, Steven. What I would say is it's both. I think at the end of the day, I do believe that the integration of our two businesses that occurred roughly a year ago here at LP is allowing us to be, I would say, more creative, more flexible, more responsive when it comes to addressing the needs of our customers. These programs aren't cookie cutter in nature. They're really tailored in a way to meet the needs of each respective customers. So again, we're in the early stages, but we have, I believe, one of the most robust portfolios of products or solutions in the industry, and we're in a unique position to leverage that to drive value for all of those targets in the marketplace.

Okay. That's great. And then looking at Siding, seems like the implied second half margin a bit lower than the first half. Can you parse out how much of that is more builder series from these builder wins or higher expert finish volume, which I know is a mix negative for margin, even though it's on an upward trajectory on itself. So maybe you could talk through the second half dynamics of siding margin.

Yes, Steven, I'd say both of those factors are relatively small compared to the overall volume decline and the raw material price increases that Alan mentioned earlier.

Our next question will come from Sean Steuart from TD Cowen.

A couple of questions. The $200 million earmarked for strategic growth CapEx was consistent quarter-over-quarter. Can you remind us how much of that is ExpertFinish growth? And how much, if any, would be earmarked for [ Maniwaki ] work as you are presuming you advance that project. Is any of that total earmarked for that project?

Yes. There's close to $100 million in here for ExpertFinish expansion. Not all of it, the new mill, some of it New York continuation of completion the New York facility, New York upgrade. So about $100 million there. And there is $20 million to $30 million on the next major siding mill. So call it, $130 million of siding capacity expansion euro it is ExpertFinish.

Okay. And then, Alan, you touched on the log inventory build in Q1, which, I guess, is Canada and the Northern U.S., that seems to be a bit larger than normal. Can you go into some of the factors there? And how we should think about the unwind through the remainder of the year?

Yes. The unwind will be just the normal course of consumption. We did do some forward logging as oil prices rose. So very pleased with the efforts of the team there to get ahead of some of the freight costs because obviously, once we get the spring breakup, there's very little we can do. So we got a little bit ahead of that. And the majority of the remainder is very much in anticipation of citing maintenance projects that will that mean to mean that we need to get a little bit ahead on finished goods as well. So it's actually a good piece of cost mitigation that really triggered it.

;

Our next question will come from Kurt Yinger from D.A. Davidson.

Just wanted to sort of unpack the full year guiding sales outlook? I mean, my math kind of high single-digit decline in volume. I think maybe a couple of points of that would have been the destock in Q1. And I guess, how does kind of that underlying mid-single-digit volume decline compared to what you're expecting from the overall market, and I guess, what should we infer from that in terms of market share expectations?

It's an interesting one. You've got -- the really high level, like we think we're going to perform relatively well as in growth in both off-site and ExpertFinish. This is fundamentally gaining market share. And then the rest of the market -- the rest of the product lines, everything else that's not off-site and ExpertFinish is going to be down high teens. And that's where you see the greatest impact of the, let's call it, the market reaction, our reaction to the underlying weak market. So assume offsite and ExpertFinish are going to have modest growth and high teens decline in everything else. That's kind of the shape that we see a merger. PSP61441147 Got it.

And I guess on expert finish, the flattish volumes in Q1 and the mid-single-digit outlook for the year, is that a function at all of just kind of the capacity constraints that you've seen? Or how do we unpack that deceleration versus what we saw last year?

Yes, Curt, I'll take that one. So we are still dealing with a little bit of the expert finish allocation hangover, if you want to call it that. we came off allocation, what was it in February-ish, something like that. And now that we have visibility into channel inventories, we have noticed that they're a little bit higher than where we would like them to be, which is an uncommon when he come off of a managed order file. So we do believe the first half is going to be maybe a little bit weaker than the second half just due to our channel partners bleeding down inventories to more normal levels.

Our next question will come from Mark Weintraub from Seaport Research Partners.

Just wanted to follow up on the last question. And Alan, you mentioned it's for primed and for some of the other businesses, some growth, but down in the mid- to high teens and some of the other businesses, is that because customers in part are moving from the businesses where you see yourself being down high- to mid-teens into the areas where you are flat or growing, or are there two different dynamics going on here.

I think the -- Mark, I'll take that one. I think the biggest dynamic we're dealing right now -- well, we're mostly through it, was just related to the shed segment, and how much inventory carried over into the new year. I would say we're 85% of the way through that. There's still a little bit of excess inventory there. We have really good visibility into our order file into Q2. But beyond that, there's just a tremendous amount of uncertainty looking out into the back half of the year. So we feel good about what we're doing in the new construction segment. I feel like we can outpace housing starts in that segment. And then in repair/remodel. We touched on ExpertFinish being up mid-single digits, and that will be reflective of, we think, a better performance than the R&R segment as a whole.

Okay. So it sounds like it's really shed is where the source of -- the relative performance is going to be, you think, soft this year versus your historical algorithms against overall market? SP-4 Growth. Is that fair?

Yes, I agree with that. I mean we pay close attention to sell-through rates in that segment. So we get data from our distributors, and we're pleased to see that those sell-through rates have held up quite well. So it is really just an inventory dynamic that is playing out in '26.

Okay. Great. And then one last real quick one kind of related to all this, too. The [ Manawaukeee, ] can you remind us, is that particularly well positioned if the growth in prime continues to be prime continues to be a main focus or not necessarily?

Yes. Maniwaki is certainly an option for us. If we went that direction, it would be the largest OSB plant that we've converted to Siding, it would end up being our largest prime sitting facility. But again, we're still in the process of assessing all of our options and are pursuing parallel paths in some cases.

And our next question comes from Susan Maklari from Goldman Sachs.

My first question is on the Siding side of the business. Can you talk a bit about how you're thinking of price elasticity. And how within that growth that you're expecting in mid-single digits and ExpertFinish, is that reflecting the -- how much of that is the underlying strength of the consumer relative to your share gains and some of those new products that you're introducing that also seem to be gaining momentum.

Thanks for the question, Susan I'll talk a little bit about price elasticity. I mean we've -- if you look back at our history, we typically go up have a price increase one time annually. There may be a few times in our history, COVId being one where we had a second price increase. But we really monitor both raw materials, along with the broader competitive dynamics in our space to determine where we need to position pricing. As it pertains to the current environment, I would say we're taking a wait-and-see approach, kind of no different than we did with our approach to tariffs last year. We don't want to make a knee-jerk decision due to what could be short-term circumstances that we're dealing with right now just in terms of raw material pricing. But our focus is going to be on playing the long game and being as consistent and predictable as possible for our customers amidst all the factors impacting our pricing decisions for Siding. But we're pleased with what we've realized in terms of the annual price increase that Alan spoke to earlier, and right now, we're just holding steady.

Okay. That's helpful. And then maybe shifting gears to OSB. Can you talk about your plans for production there? And do you still expect that the industry will see capacity come online this year, or has the housing backdrop perhaps changed those plans? And could we see the being shift in terms of OSB supply as we move through the balance of 2026.

Yes, Susan, I would say you're just as good as mine in terms of new capacity coming online. I mean, I can speak to, obviously, one of our competitors taking out a plant or plants coming offline kind of as we speak right now in Western Canada. As it relates to OSB here at LP, I would just say our strategy really hasn't changed. And as we noted in our opening comments, we're proud of the way our team is navigating the current OSB environment, just focused on operating with discipline and agility, and I think over time, we've proven our ability to manage or control costs and continue to improve OEE or efficiency in the business. So it's a cyclical business, but I'm confident that we'll be ready to take advantage of the next upward cycle whenever demand improves.

And our next question will come from Adam Baumgarten from Vertical Research Partners.

Can we get some color on how siding sell-through trended throughout 1Q and into 2Q so far? Any major change in trend?

Yes. So I'll touch on that, Adam. I appreciate the question. We get data from our distributors on sell-through rates. We talked a lot about the inventory build from Q4 to Q1, and that Q1 was going to look a little bit weaker just due to the amount of inventory that we felt was held up at the two-step level. That ended up being largely true, and most of that inventory, as I mentioned earlier, has been depleted. Sell-through rates have more or less mirrored what we saw this time last year is down slightly as it relates to the underlying market conditions in the new residential construction segment. But no concerning trends at this point as it relates to sell-through rates, seeing the normal seasonal uptick in those rates, and hopefully, that will continue.

Okay. Great. And then just when we were chatting at the builder show, I think there was some commentary around being pleasantly surprised about the interest about ExpertFinish on some of the builders. Did that play any role in the new partnerships that you guys mentioned?

Yes. Adam, what I would say is it's playing more of a role than ever, but it's still a relatively small percentage of the business that's ending up going -- are bundled in these programs. But it is -- it's a macro trend there that's in our favor. Labor is tight, and it's expensive. Builders are focused on job site cycle times, and I think all of that plays into our favor as it relates to ExpertFinish and the new ExpertFinish naturals two-tone line. So we do believe that will be a trend that continues. And it's obviously why we're investing more in Green Bay [indiscernible] and North Branch, Minnesota going forward.

And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Aaron Howald for any closing remarks.

Okay. Thanks, everyone. With no further questions, we'll bringing the call to a close there. And as usual, be available for follow-ups. Stay safe, and we'll look forward to connecting again in the next quarter. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a wonderful day.

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Louisiana-Pacific Corporation Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded.

I would now like to hand it over to your speaker, Aaron Howald, Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone. Thank you for joining us from the International Builders Show in Orlando to discuss LP's financial results for the fourth quarter and full year of 2025 as well as our outlook for 2026.

Hosting the call with me this morning are Jason Ringblom, Chief Executive Officer; and Alan Haughie, Chief Financial Officer. After prepared remarks, we will take a round of questions, and then we will be available for follow-up calls and visits to LP's booth at IBS.

During this morning's call, we will refer to a presentation that has been posted to LP's IR web page, which is investor.lpcorp.com. Our 8-K filing, earnings press release and other materials are also available there.

Finally, I will remind you that today's discussion contains forward-looking statements and non-GAAP financial metrics as described on Slides 2 and 3 of the earnings presentation. The appendix of that presentation also contains reconciliations that are further supplemented by this morning's 8-K filing. Rather than reading those materials, I will incorporate them herein by reference.

And with that, I'll turn the call over to Jason.

Thank you, Aaron, and thank you all for joining us.

First of all, let me start by offering thanks and congratulations on behalf of the entire LP team to Brad Southern for a well-earned retirement after more than 25 years of transformative leadership at LP. It's truly an honor be succeeding Brad as LP's next CEO, and I'm confident that LP has the right strategy and the right team to make a seamless transition.

We remain fully committed to driving growth, gaining market share, delivering product and process innovation and generating shareholder value in the years to come. 2025 was a difficult year for homebuilding and aspiring homeowners. Tariffs, economic policy uncertainty and deteriorating consumer confidence all contributed to affordability challenges. Housing starts decelerated throughout the year. In fact, single-family starts, a key demand indicator for both Siding and OSB were down roughly 10% in the third quarter according to the Census Bureau. Unfortunately, the Census Bureau has yet to publish fourth quarter housing data, but I suspect when that data is available, it will confirm further weakness.

Despite these challenges, LP grew the Siding business by 8% for the full year, while expanding margins, particularly in ExpertFinish. In the fourth quarter, LP delivered $567 million in net sales, $50 million in EBITDA and $0.03 in adjusted diluted earnings per share. LP Siding business showed resilience in a weakening market. For the full year, we achieved 4% higher net selling prices and 4% higher sales volumes, resulting in 8% revenue growth. This allowed us to deliver a 26% EBITDA margin.

Major contributors to these results were growth in the Shed segment, which reinforces the power of LP's diverse end-use applications and ExpertFinish, where not only has product innovation helped us expand the addressable market to reach new repair and remodel customers, but as Alan will describe in a few minutes, we have also seen significant margin improvement.

2025 saw a significant volume growth with our largest shed customers, particularly in the first half of the year. It's hard to be precise given the broad range of uses for SmartSide lap, trim and panels. But we estimate that shed volumes were up slightly more than 20% year-over-year. We estimate that products sold into new residential construction saw volumes decline by roughly 1 to 3 points, which significantly outpaced the decline in single-family starts. LP's repair and remodel sector was likely flat to up a 1 or 2 with impressive 18% growth in ExpertFinish.

To be fair, Siding also enjoyed some geographic advantages in 2025. We have stronger market presence in the Upper Midwest, where construction activity remained comparatively strong and we were modestly insulated from softer markets in the Southeast due to our lower market penetration in this region. One consequence of recent market uncertainty is that dealers adopted a more cautious stance with regard to their inventory positions, holding fewer weeks of supply than normal.

This adjustment coincided with a volume allocation prior to LP's price increase that we now realize was somewhat larger than necessary. Unfortunately, the combined effect of these phenomenon appears to have resulted in some pull forward at year-end, leading to elevated channel inventories with some of our 2-step distribution partners.

Consequently, and as Alan will detail in the guidance section, Siding order files have been a bit weaker than anticipated to begin 2026. OSB results tracked housing demand more closely as they generally do with commodity prices softening alongside housing starts. Unfortunately, at their trough, OSB prices adjusted for inflation were the lowest we've seen in 20 years at LP.

Despite that, LP's OSB mills operated safely and efficiently in the fourth quarter. We managed costs and capacity with care and discipline. And while we did not break even for the quarter, we did overcome softness in the second half of the year to achieve a positive EBITDA for the full year.

As you all know, we can't control OSB prices, so we focus our efforts instead on executing our strategy. Speaking of strategic execution, the integration of LP under a Chief Commercial Officer and Chief Operating Officer structure rather than 2 business general managers is also beginning to show its value. For example, aligning OSB and Siding go-to-market strategies has enabled unique sales synergies that provide new pathways for ongoing Siding growth.

Integrating operations has improved best practice sharing, uncovering opportunities for enhanced safety, OEE and system-wide capacity utilization. Operating efficiency in the OSB business increased by 1 point to 79%, which is remarkable given the operating challenges of a soft-demand environment. While total Siding OEE was flat year-over-year at 77%, OEE at LP's ExpertFinish facilities improved significantly. This not only contributed to our ability to come off of a managed order file a bit earlier than previously anticipated, but as Alan will detail in a moment, the extra volume helped deliver margin expansion.

LP also executed our capital investments efficiently and flexibly, adjusting in response to slowing demand and accelerating ExpertFinish expansion to meet strong demand. And most importantly, we operated safely and responsibly. LP achieved a total incident rate of 0.62 in 2025, which was incrementally better than 2024's level. We also had 2 mills, Newberry, Michigan in Siding and Jasper, Texas in OSB reached 3 years without a recordable injury in 2025. As a result, LP earned the APA's Safest Company Award for the third year running.

And with that, I'll turn over the call to Alan Haughie for a more detailed review of LP's financial results for the quarter and the year as well as a discussion of our outlook, after which we will take a round of questions.

Thanks, Jason.

Slide 7 of the presentation shows the fourth quarter year-over-year waterfall for Siding. Revenue increased by 6% with prices, including mix effects, up 8% on a 2% volume decline. And while these price increases added $24 million to sales and EBITDA year-over-year, some of that benefit came from volume rebate thresholds not being met. But within this modest volume decline, ExpertFinish jumped 35%, while Primed volumes fell by 5%. And this creates a slight adverse mix effect within EBITDA because ExpertFinish still has a lower margin than Primed products. Having said that, ExpertFinish margins have improved by about 8 points year-over-year, thanks to leverage on increased volume and manufacturing efficiencies.

The only other items to note for Siding in the fourth quarter chart are the absence of tariffs on the ExpertFinish we're importing into Canada and the nonrecurrence of last year's effects from production and cost timing due to the delayed maintenance project last fall. As a result, the EBITDA margin for the quarter was 25%, up 5 points year-over-year.

For the full year, on Slide 8, net sales were up 8%, evenly split between price and volume, as Jason said, adding $131 million to revenue and $91 million to EBITDA. Selling and marketing expenses increased by about $11 million, while raw material cost tailwinds mostly offset freight and labor cost headwinds. SG&A increases, tariffs and other factors totaled about $23 million. As a result, Siding finished 2025 with $444 million in EBITDA, which is $54 million higher than 2024 with a 1 percentage point rise in the EBITDA margin to 26%.

The OSB charts on Pages 9 and 10 are dominated by price as they so often are, sadly, this time to the negative. In the fourth quarter, unfavorable supply-demand dynamics resulted in multiyear price lows and volume reductions across the OSB portfolio. Now volume and price movements are harder to pass in OSB than they are in Siding, given its commodity nature, and they combined for a year-over-year decrease of $129 million in revenue and $95 million in EBITDA.

Given these headwinds, the OSB operations team made the best of a very difficult market and found every opportunity for savings and efficiency. Their efforts and diligence allowed the segment to achieve $7 million of EBITDA for the year as detailed on Slide 10.

So to summarize the financial results for the full year, we had $2.7 billion in net sales, $436 million of EBITDA and adjusted earnings per share of $2.65. These were the net effect of Siding growth and margin expansion, offset by lower OSB prices.

As you can see on Slide 11, we consistently executed our capital allocation strategy. Adjusted EBITDA of $436 million generated $382 million of operating cash flow after $42 million in cash taxes and a small increase in working capital. We invested $291 million in sustaining maintenance and growth capital, and this was about $25 million less than we anticipated spending on the last call, made possible by the deferral of some of the nonessential projects in OSB as well as the decision to slow down capacity investments in Siding.

We returned $139 million to investors through $78 million in quarterly dividends and $61 million in share repurchases. And at year-end, LP's cash balance was $292 million. And with an undrawn revolver of $750 million, LP has over $1 billion in liquidity. And just for the sake of housekeeping, we have $177 million of Board authorization remaining to repurchase shares, which finally brings us to guidance.

LP's OSB guidance is algorithmic and relatively straightforward. So let me dispense with that first. Random Lengths prices have climbed recently to levels that are near enough to OSB breakeven that should we extrapolate current prices for the full year, OSB results will be very similar to 2025. I should also note, just for sensitivity modeling purposes, that we currently anticipate LP's utilization rate for the OSB to be a few points below our longer-term average rate of 85%.

For the first quarter of 2026, LP's realization has lagged the rising market price, which is typical. So assuming prices hold at current levels, OSB EBITDA in the first quarter should be a loss of between $25 million and $30 million. Unlike OSB, our Siding guidance is not algorithmic. Rather, it is informed in the near term by our order file and in the longer term by macroeconomic data and customer sentiment.

As Jason said in his remarks, an acute lack of that data, particularly housing starts, added uncertainty to our planning for volume allocations following the announcement of our 2026 price increase last October. So despite our best intentions, we overshot, resulting in some pull forward of demand from the first quarter of this year into the fourth quarter of last year, especially with our shed customers.

Now to be fair, it's difficult to precisely separate this impact from that of a severe winter storm that hit the Southeast in late January. But suffice to say, as a result, our order file is weaker today and inventories are higher. So far in the first quarter, our order files contained significantly weaker shed activity than we experienced this time last year, with demand in the new residential construction and repair and remodel sectors roughly in line with the year-over-year decline in single-family housing starts, but exacerbated by our current inventory position.

Accordingly, we currently anticipate total volumes in the first quarter will be down 15% to 20%, with shed volumes down 25% to 30% and new res construction and R&R volumes down about 10% to 15%, consistent with single-family starts.

However, we expect average selling prices in the first quarter to be up 6 to 8 points as a result of list price increases and the positive mix effect of ongoing ExpertFinish. This would result in a first quarter year-over-year decline in net sales of 11% to 13% with the EBITDA margin coming in at between 23% and 25%.

Now given the exit rate from Q4 of last year, flat housing consensus for 2026 implies meaningful improvement after a difficult first quarter. So presuming the consensus is correct and that starts do indeed end the year flat to 2025, we would expect to see demand improve sequentially, especially as shed demand returns to prior year cadence as inventories normalize. As such, by the year-end, we would expect Siding volumes to be down low single digits, selling prices to be up mid-single digits and a result, net sales to be up low single digits for an EBITDA margin of around 25% to 26%.

With regard to capital expenditures, consistent with the same general market assumptions I just mentioned, we currently anticipate investing about $400 million, split equally between sustaining maintenance and strategic growth. The spending will probably be back-end loaded with about 60% of the investments occurring in the second half.

Now should the market demand environment diverge meaningfully for better or worse, we have significant flexibility in our plans such that we could accelerate investments somewhat or reduce them substantially. And as I said a moment ago, LP certainly has the balance sheet to weather further market weakening or support accelerated investment as needed.

We're facing a very uncertain market backdrop at the moment. However, rather than dwelling on what we do not know, LP's teams will focus on what we do know. LP SmartSide has consistently gained share with innovative products that expand the addressable market. That growth, coupled with the pricing power that comes with a premium specialty product brings leverage and margin expansion.

And while not linear, that growth has, over time, outperformed the underlying markets we serve. We are confident that these fundamentals remain intact and that we have a long runway ahead of us and the right strategy to guide us.

And with that, we'll be happy to take a round of questions, after which we look forward to seeing you at LP's booth at the International Builders' Show.

[Operator Instructions] Our first question comes from line of Matthew Bouley from Barclays.

Anika Dholakia on for Matt today. And first off, Brad, congrats and Jason, look forward to working with you.

So first off, just wondering with 1Q Siding revenue guidance, it implies a step-up through the rest of the year to get to that $1.7 billion guidance, maybe somewhere in the mid-single-digit range. And so I know you guys talked about shed normalizing. Is that kind of the main factor that you're looking at in the year-over-year comps, or just any details around how you're thinking about the cadence of revenues?

Yes. Yes, it's -- there is -- we are expecting some improvement in shed. That's probably the dominant piece, but really, we're expecting improvement across the board as housing normalizes.

Okay. Got it. And then I'm curious on the affordability pressure today. Are you seeing any risk of maybe mix down to vinyl or other Siding materials that have a lower upfront cost? What are you hearing maybe from contractors? And if there's any differences in the builder by channel, either builder, R&R, if you're seeing differences in affordability there?

Thanks for the question. Yes, I would say, obviously, affordability remains a primary headwind and all the builder customers that we're working with are focused on meeting a price point that will obviously allow them to turn more homes. So there's been some -- a little bit of a move to vinyl, but we think with the broad product offering that we offer with SmartSide that there's tremendous value there. And with a relatively low share position, there's plenty of opportunities for us to continue on our growth trajectory.

[Operator Instructions] Our next question comes from the line of Ketan Mamtora from BMO Capital Markets.

Coming back to Siding, Jason, can you talk a little bit about what you are seeing in terms of demand in your ExpertFinish product? I saw volumes were pretty good in Q4. Are you still in allocation on that business? Any trends you can talk to?

Thanks, Ketan. Appreciate the question. In regards to ExpertFinish, what I would say is macro trends remain in our favor here. Labor is tight, labor is expensive. Homeowners expect a durable and resilient solution when -- that comes with a warranty. So our value proposition for ExpertFinish and ExpertFinish naturals really addresses all of those needs. And as a result, we're continuing to see this product category outperform in both new construction and repair and remodel.

In regards to the allocation question, we did come off allocation, I believe, February 1, so a couple of weeks ago. That's really due to the OEE improvements that we were able to realize across our network. We thought that we would have to wait until our new Green Bay facility came online in early Q2 of this year. But through great work from our operations folks, we've been able to come off slightly in advance of what we had planned on.

Understood. That's helpful. And then can you remind us on how you are thinking about sort of additional capacity in Siding. Last quarter, you talked about sort of Maniwaki as being one of the options. How should we think about sort of time line on that? And in the meantime, how are you all thinking about managing production in OSB?

Yes. I'll start with Siding and just say we're very excited to be ramping up our new 70-million-foot line in Green Bay in early Q2. Very excited about that. In regards to broader capacity expansion opportunities, what I would say is we are continuing the detailed engineering work for future ExpertFinish and Primed capacity expansion projects. And some of that capital spend is in the figures that Alan shared with you earlier, obviously, a little bit more back-end loaded.

But big picture, we want to be prepared to execute with projects that are essentially ready for plug and play when the timing is appropriate with a heavy bent towards being early versus late.

And the second question, Ketan, I believe, was around how we're managing OSB capacity. And I would say largely consistent with what we've done in prior years, very focused on managing capacity to demand. We're very pleased to see the nice rebound in prices that we've realized to begin the year. We've been able to additionally keep a healthy order file across our network. So it certainly feels more optimistic that supply and demand are a little bit more in balance than they have been for the majority of last year.

Our next question will come from the line of George Staphos from Bank of America Securities.

This is Brad Barton on for George. And Jason, congrats on the new role. We look forward to working with you.

Thanks, Brad.

Just starting off, I know you touched a little bit on vinyl and affordability concerns and maybe some shifts there. But could you speak to more of the broad competitive environment that you're seeing in Siding right now?

Yes. What I would say, Brad, is broadly, we're very confident that we are gaining share in all of the segments that we focus on. I think there's strong evidence of that. If you look back at the last couple of years with '25 supporting that as well. Right now, obviously, with starts checking up the back half of 2025, there's -- it comes with its challenges.

But again, we feel like in the new construction and Repair and Remodel segments, in particular, we've got a relatively low share position and a very large field sales organization that's focused on winning new customers. And that doesn't stop in a softer market, and we believe there's plenty of those opportunities in front of us.

Great. And just a follow-up. As you bring ExpertFinish capacity online here, can you speak to how you'll have to ramp your marketing spend and investments, both in terms of the time line and the magnitude maybe compared to the $11 million investment that you saw in 2025?

Yes. So what I would say is over the course of the last several years, you've seen an increase in both, I guess, marketing spend as well as the addition of additional field sales resources to support the growth of ExpertFinish. We did not put in any of that on pause as we experienced allocation back in September of -- or October of last year. So those investments will continue going forward. And again, we're very pleased with the growth we're seeing in ExpertFinish and excited to bring on one of our newest state-of-the-art lines in Green Bay, Wisconsin.

Great.

[Operator Instructions] Our next question will come from the line of Mark Weintraub from Seaport Research Partners.

So last year, you mentioned sheds up a little bit better than 20% by your best estimate, obviously slowed in the first quarter. Just wondering what are you embedding for sheds for the full year in '26 versus 2025? And maybe to the extent that you have information on where would you say your shed business was relative -- last year relative to, say, the last 10 years or whatever you think would be an appropriate time frame given there's been lots of ups and downs with the pandemic, et cetera?

Yes. I'll start with the first part of the question. What I would say is in regards to shed, there's always been a bit of a lumpiness to our order intake. And although inventories are higher than we anticipated. What we are hearing anecdotally from several of our largest shed fabricators is that underlying demand in the segment remains on a firm footing and trending very similarly to 2025 levels.

So this positive news also coupled with some new product innovations, specifically our everyday flooring series and SilverTech roofing that we launched to begin the year, we feel like we can get back to a normal trajectory pretty quickly once inventories are depleted throughout the first quarter of this year.

And so I'm just -- because you're up 20%, I think you suggested last year. So was that just getting you to what you consider to be normalized? Or was that substantially better than what you consider normalized to be?

Yes. So last year, I would say it was a little bit of an anomaly because our shed distributors came into '25 with inventories very lean. So we had an inventory build throughout Q1 and Q2, and then obviously overshot the allocation prior to the 2026 price increase. So we feel like the underlying demand, again, is very stable in shed. And with some of the new products that we brought to market, we feel like there's growth opportunity in that segment, even though we own a relatively high share position.

[Operator Instructions] Our next question comes from the line of Steven Ramsey from Thompson Research Group.

I wanted to start with higher Siding EBITDA in the guidance and then breakeven OSB. Does that point to operating cash flow being somewhat near the 2025 results? And if that's so, the CapEx points to free cash flow being roughly breakeven. Maybe you can talk to the assumptions there on free cash generation.

No, no, no. I can add to that. That's about right. Yes. You nailed it.

Okay. Sounds good. Appreciate that. And then I wanted to think about if there's an expected pace on the Siding margin ramp through the year, make sure I understand this last year or 2, Q1 and Q2 EBITDA margin were in the same zone. Is it expected to be a steeper ramp upward going through '26?

Yes. Think of it as more seasonal. So we had very strong Q1 and Q2 last year. Hence, the seasonality was tilted towards that first half -- I'm sorry, the seasonality of the volume. And so volume provides such huge leverage that the cadence of the EBITDA margin while being on a modestly rising curve will follow the seasonality of volume. And it's really -- that's really the factor that most influences it. It's the leverage we get from the volume.

[Operator Instructions] Our next question will come from line of Kasia Trzaski from TD Cowen.

It's Kasia. Great effort though. So I'm on the call for Sean Steuart from TD Cowen.

First question is around Siding. Can you comment what kind of Siding volume pull-through you're seeing from the homebuilder channel right now? And just provide broader commentary about how any specific homebuilder relationships might be evolving.

Sorry, Kasia, you cut out a bit on the -- the keyword [indiscernible] of the sentence. Could you repeat the question please?

Can you hear me better now?

That's much better, yes. Thank you.

Okay. Great. Question was around Siding. I'm curious about any thoughts on what kind of Siding volume pull-through you're seeing the channel build up notwithstanding from your homebuilder channel? And then just if any you can provide any broader commentary about how any specific homebuilder relationships might be evolving?

Yes, I'll take that one. Thanks for the question, Kasia.

What I would say is just speaking to the homebuilder community, it's very different depending on what region we're talking about. I mean, certainly more strength in the northern markets where historically Siding has been strongest and softer in the Southeast Texas, some Western markets as well. So it depends on geography.

What I would say just in terms of where we're at with our relationships, I mentioned earlier the integration of LP. We are really focused on leveraging our full portfolio of solutions to drive growth in the Homebuilder segment. And we know we're a very relevant supplier to this market. And that strategy is allowing us to offer greater value, be more creative and responsive to our customers' needs. So we're still in the early stages, but we're very encouraged by the reception that we've received from builders in response to the integration of LP.

Okay. And I just want to make sure I didn't mishear earlier. Did you say that the inventory buildup in the channel right now, you expect that to unwind over the course of Q1, bringing us back to more of a normalized steady state in Q2?

Yes, I'll shed a little bit of light on that. So we believe that the dealer channel, those closest to the builder did not necessarily increase inventories throughout the fourth quarter. They're focused more on working capital. However, our 2-step customers, which is the folks we transact with most, they took advantage of the allocation in advance of the price increase. And we see that in terms of their inventory reporting requirements looking backwards.

So based on what we see, roughly 2 to 3 -- 2 to 4 weeks of inventory at the 2-step level, we do believe that, that can be consumed heading into Q2 just with the traditional or historical uplift in seasonal demand heading into the building season. So yes.

Okay. Got you. That's helpful context. And last one for me on OSB. The segment EBITDA margins of negative 29%, is that largely attributable to the low mill operating rates in Q4, which presumably would have had a significant impact on your overall mill cost structure? Or are there any lumpy items in there? And in particular, what I have in mind is any onetime inventory write-downs, things of that nature?

Well, there is a -- the only inventory write-down that occurs is a mark-to-market on inventory that we carry on the books because the selling price is at times lower than the standard carrying cost, but nothing exceptional or out of the ordinary or that hasn't occurred at any various points over the last 20 years.

We did have a couple of reasonably large maintenance projects in the quarter that added a bit of expense, but I think it was mostly utilization rates and price that drove it.

Yes.

[Operator Instructions] Our next question will come from the line of Susan Maklari from Goldman Sachs.

My first question is staying on OSB. Can you talk a bit about how you're thinking of the outlook for demand? The builders have largely talked about their starts this year being up low single digits. What does that imply in terms of the potential ramp for OSB in there? And then can you talk about your approach to capacity relative to that?

Thanks, Susan. Appreciate the question. What I would say, I hate to sound redundant, but I mean, our focus really truly is on matching our supply with customer demand. As I mentioned earlier, we've seen a nice rebound to begin the year, but we do feel like it's a supply-driven rebound. A couple of our competitors announced mill closures in Canada. There's also been some maintenance outages and some unscheduled downtime associated with the winter storm that I think is playing into the favorable pricing environment.

So I do think looking forward that we'll need an improvement in demand to stay in balance as we head into Q2 and Q3. But I'm optimistic that, that will carry through as we head into the building season.

Okay. That's helpful. And then maybe turning to the margin in the Siding segment there. Can you talk a bit about what you're seeing just in terms of input costs, freight? And how should we think about any start-up costs that are associated with Green Bay and how that will flow through as well?

We certainly are -- in our guidance for the full year Siding EBITDA margin, we've included some significant inflation. It's about $20 million of raw material inflation, which is on our resin and paper overlay, largely contractual, so I mean at this time.

So $20 million of raw materials plus about $7 million of labor and then some modest freight inflation. So that inflation is baked into the full year margin. We'll see some of that already baked in, in Q1. What was the other part of the question?

Ramp-up costs for Green Bay.

Nothing significant.

[Operator Instructions] Our next question will come from the line of Kurt Yinger from Davidson.

Great. Appreciate it. Jason, you had referenced the portfolio solutions approach. I was just hoping maybe you could talk about a couple of examples of how you're marketing that with the Siding business and kind of the value-add component of that go-to-market strategy.

Yes, I'll touch on that. So really, the approach is to leverage our entire portfolio in a way to continue to drive growth of LP, but more specifically our Siding business. The focus primarily is on the New Construction segment to start with, but we also see opportunities within the Shed segment and Repair and Remodel segment as well.

So we are in the early stages. We have a couple of builder wins that I think came as a result of this focus, and there's a few more on the horizon that I'm not prepared to speak to today, but I do believe within the next quarter, we'll be able to highlight as material wins that were a result of an enterprise approach to the segments we play in.

Okay. That's very helpful. And then just in terms of the outlook, I mean, it sounds like at least in Q1, R&R versus kind of the new resi pieces within Siding were performing similarly. Is that how you kind of expect the whole shape of the year? Or would you think that R&R could perhaps be a little bit more stable, notwithstanding the weather here in the first 1.5 months? Can you just talk a little bit about that, please?

Yes. I feel like definitely, the Repair/Remodel segment is the most stable for us right now, followed by shed, but shed is obviously a challenge for us in Q1 as we work through the channel inventory situation. Where we need to see a rebound is in the New Construction segment right now. Obviously, it's softer than it was this time last year, and we are planning for an improvement throughout 2026.

This concludes the question-and-answer session. I would now like to turn it back over to Aaron for closing remarks.

Okay. Thank you, everyone, for joining us to discuss LP's results for 2025, fourth quarter and the full year. For those of you who are at IBS in Orlando, we look forward to seeing you in our booth later this afternoon and available for follow-up calls for those who aren't able to join us in-person.

Thanks, everyone. Stay safe, and we'll talk to you soon.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Good day, and thank you for standing by. Welcome to the Third Quarter 2025 Louisiana-Pacific Corporation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Aaron Howald. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us to discuss LP's results for the third quarter of 2025 as well as our updated outlook for the full year.

On the call this morning are Brad Southern, Alan Haughie and Jason Ringblom, who are LP's Chief Executive Officer, Chief Financial Officer and President, respectively. As always, after prepared remarks, we will take a round of questions. During this morning's call, we will refer to a presentation that has been posted to LP's IR web page, which is investor.lpcorp.com. Our 8-K filing, earnings press release and other materials are also available there.

Finally, I will caution you that today's discussion contains forward-looking statements and non-GAAP financial metrics as described on Slides 2 and 3 of LP's earnings presentation. The appendix of the presentation also contains reconciliations that are further supplemented by this morning's 8-K filing. Rather than reading those materials, I will incorporate them herein by reference.

And with that, I will turn the call over to Brad.

Thanks, Aaron. Good morning, everyone. Thank you for joining us. As usual, I'll discuss some highlights from the quarter before Alan shares more detail about our results and updated guidance. After that, Jason, Alan and I will be happy to take your questions.

As expected, Siding volume in the third quarter was flat. This result in a softening market, especially compared to the difficult comp from last year reinforces our confidence in our ongoing share gains. 5% growth in Siding sales revenue, driven primarily by price and a strong mix, exceeded our expectations and guidance. While we anticipated the normalization of demand in the shared component of our Siding business, our ExpertFinish, prefinished siding product primarily designed for R&R applications saw sales volumes increased by 17% year-over-year.

The April launch of our ExpertFinish naturals collection, which is a new line of nature inspired 2-tone colors has contributed materially to a beneficial price mix effect. ExpertFinish accounted for 10% of overall Siding volume and 17% of overall Siding revenue in the quarter showing once again the power of SmartSide innovation to drive price, volume growth and share gains.

Inventory levels and sell-through rates held steady through the quarter, consistent with servicing seasonally normal demand levels. The only exception is ExpertFinish, which remains in such high demand that we have implemented a managed order file until new capacity comes online early next year.

Total sales in the quarter were down 8% compared to prior year and EBITDA of $82 million was also down significantly. The extended trough in OSB prices was the main drag on both metrics. While we obviously cannot control OSB prices, we can manage the OSB business effectively, and our teams did that exceptionally well in the face of what remains a difficult market.

The OSB business achieved 80% overall equipment effectiveness or OEE in the quarter, up 2 points from last year. Increasing OEE is never easy, and it can be particularly challenging when we are also managing our capacity with discipline to balance supply and demand. I want to congratulate and thank everyone on the OSB operations team who contributed to this impressive achievement.

Our results are only possible because of our teams and the strong culture we have built. In the third quarter, LP was named one of the 50 Best Manufacturers in the United States by IndustryWeek, debuting on the list at #24, and one of very few specialty building products manufacturers to be recognized. We were also named by Newsweek as one of America's Most Admired Workplaces.

Finally, as you saw, I informed LP's Board of Directors of my intention to retire this coming February after more than 25 years of service. It has been the honor of my career to lead LP's 4,300-person team. Ultimately, the job of a CEO is to build an engaged culture focused on safety, growth, innovation and execution to deliver value long after her or she has gone.

When we launched LP's transformation strategy, I was daunted by the challenges we faced and the aggressive goals we've set for value creation. I am proud to say that we exceeded those goals. As LP's team and strategy have evolved, the magnitude of the opportunity before us has only grown and our confidence that we can continue to execute our strategy and achieve our ambitious goals has never been stronger.

Jason Ringblom and I have been friends and colleagues for over 20 years. He was instrumental in the development and execution of LP's strategic transformation. He led LP's OSB and EWP businesses for 5 years and for the last 3 led LP Siding business before being named President. This perspective makes him uniquely suited to serve as LP's next CEO. I have total confidence that with Jason, LP's future has never been brighter.

And with that, I will turn the call over to Alan.

Thanks, Brad. Before discussing the results, I do want to take a moment to say that working for Brad has been a personal and professional highlight for me. And while they may be tough shoes to fill, I can think of no one better suited for this task than Jason.

And with that, Slide 7 of the presentation shows Sidings results for the quarter. As expected, the bulk of growth came from price. Average selling prices were up 5% with prime products of 3% and ExpertFinish prices up 12%. And there were 2 mix phenomena helping this along. First, as Brad mentioned, shed segment volumes normalized after a very strong first half. And as I'm sure you'll recall, strong shed volumes have been a drag on prices earlier in the year. So part of the 5% year-over-year price performance this quarter is simply the lower mix of shed relative to prime and ExpertFinish products.

The other mix factor was within ExpertFinish itself, where demand for LP's 2-tone naturals and other higher-priced prefinished products drove outsized year-over-year price gains. This mix shift is also evident in the year-over-year volume column which shows relatively flat volumes in total, but within which prime volumes were down 1% and ExpertFinish volumes were up 17%.

Selling and marketing investments, raw material inflation and other factors were fairly typical but there are some moving pieces in the other column that they're mentioning. You may recall that the third quarter of last year saw an unusually high EBITDA margin, in part because of delays in maintenance projects and the resulting inventory build. Impacts, which then reversed in the following quarter.

So much of what you see in the $20 million of other costs in this waterfall is the nonrecurrence of those events from last year. Among them, inventory absorption is actually a double hit, i.e., we built inventory in the third quarter of last year, which boosted EBITDA, whereas this year, we've reduced inventory, which temporarily hurts EBITDA. But in the long run, it's all just timing, viewing the second half of the year in total simplifies the year-over-year comparisons considerably.

The $2 million tariff impact is the retaliatory tariffs LP had been paying to import ExpertFinish into Canada. Those tariffs were ascended in late August, so we are not currently incurring that expense. Also, as I'm sure you're aware, the Section 232 tariff announcements did not impact LP's OSB or siding manufactured in Canada and imported into the U.S. So other than minor tariff impacts on some of our raw materials, LP is currently bearing minimal tariff costs.

The OSB chart on Slide 8 tells a simplest bleak story of soft OSB prices in a challenging demand environment. OSB prices spent most of the quarter barely above variable cost driven by sluggish demand, particularly in the Southeast. Price realization fared somewhat better than expected due to a combination of the lag in contractual prices and structural solutions mix. And while the small nonprice variance is masked rather well, the OSB operations team played the hand they were dealt exceptionally well. Overall efficiency hit 80%, up 2 points from last year, and aggressive cost control helped the OSB segment outperform our algorithmic guidance.

Now superficially, this waterfall suggests that price is the only thing that matters in OSB. Perhaps a more accurate reading is that it prices this low, everything matters. So I tip my hat to the OSB team for making the best of a very difficult market.

Slide 9 shows cash flow for the quarter of which, while straightforward, very much continues to reinforce the value of LP's transformation. $82 million of EBITDA translated to $89 million of operating cash flow after minor puts and takes for working capital, taxes and interest. We invested $84 million in CapEx to support growth of ExpertFinish and Structural Solutions as well as to ensure that our plants continue to operate safely and efficiency. And after $19 million in dividends, we ended the quarter with $316 million in cash and over $1 billion of liquidity, including our undrawn credit facility.

Which brings us to guidance on Slide 10. Regrettably, OSB prices have scarcely moved since the last call, so our fourth quarter OSB guidance has only slightly improved. The beneficial lag factors that helped the third quarter have dissipated given how long prices have remained in the doldrums. So all else equal, price realization in the fourth quarter will likely provide less of a tailwind than it did in the third. The resulting $45 million of EBITDA loss in the fourth quarter and breakeven for the year are, as always, algorithmic projections of current prices and utilization.

For Siding, we reaffirm our full year EBITDA guidance of $430 million. However, for the fourth quarter, the market has continued to weaken, so we anticipate slightly softer growth. We still expect a year-over-year revenue increase in the coming quarter, but of about 3% and this mostly from price. And much like the third quarter, we expect an outsized contribution from ExpertFinish to both volume and price. We are, therefore, guiding to fourth quarter revenue of about $370 million and to EBITDA of about $82 million.

Now this slightly reduces our full year revenue growth rate from 9% to 8% for revenue of roughly $1.68 billion, while increasing our full year EBITDA margin guide to about 26%. Now our South American business is also struggling with a sluggish economy and its results are not fully offsetting our corporate overhead at the moment. Therefore, total company EBITDA for the fourth quarter and full year are both expected to be about $5 million lower than the sum of the Siding in OSB.

Nonetheless, our expectation for full year total company EBITDA has actually risen by $20 million from $405 million 3 months ago, to $425 million today. But we're also cutting our CapEx guidance, and there are 2 factors in play here. First, given the current emphasis on capacity management and cost discipline in OSB, we are deferring even more projects in OSB. In Siding, we're balancing steadily improving OEE and initiatives to optimize LP's entire manufacturing portfolio against the backdrop of persistent market softness.

As a result, the sense of urgency that motivated Houlton's expansion as the fastest route to additional capacity is now somewhat diminished. And this makes our OSB mill in Maniwaki, Quebec a viable candidate for conversion to Siding an option we are now exploring. So should we ultimately proceed down that path, it would most likely still provide additional Siding capacity in advance of market demand and would likely do so at a larger scale and with greater capital efficiency. So while we weigh these options, we have paused any further mill-specific spending while continuing the longer lead time mill-agnostic investments.

And with that, we'll be happy to take your questions.

[Operator Instructions] Our first question comes from the line of George Staphos with Bank of America Securities.

I appreciate all the details everyone. And I know everyone will say it, congratulations, Brad and Jason on the news, and we wish you continued progress and success in the next chapters.

I guess the first question I had, Alan, if you could just give us a bit more detail in terms of the potential shift from Houlton to Maniwaki, what's behind it? How will we ultimately see it, one, manifest itself versus the other in terms of operations and performance?

And the second question I had maybe more for Jason and Brad, there have obviously been some headlines in the last couple of days about -- in the last couple of weeks about marketing battles, some of your peers extending relationships with some of the building products distributors to push product. That maybe is a more competitive backdrop. Would you agree with that? Does that change the way you market? Or does that actually help you because your peers might have some other things that they're focused on relative to the Siding business?

George, thanks for the questions. Before I will address your 2 questions. But before we get to that, I just realized that I did misspeak slightly in my prepared remarks a moment ago when I was describing the impact of LPSA on the full year EBITDA guide. In the fourth quarter, the difference between LPSA and corporate unallocated expenses is indeed $5 million. For the full year, as you'll note from the published materials that went out this morning, the difference isn't $5 million, but it's $10 million.

So just to be clear, the full year EBITDA is expected to be $420 million about $10 million lower than the sum of Siding and OSBs breakeven, but still an increase on the previous guidance. So I've got a fog in my thought, hold on.

And now I'm going to turn over the question on Maniwaki to my friend and colleague, Jason.

Yes. Thanks for the question, George. I'll touch a little bit on mill conversion options. I guess when you think about it holistically, the beauty of our position here at LP is that we have multiple options. I'll go through those just quickly. We've mentioned them on previous calls, but we have the opportunity to expand existing Siding plants.

So imagine a line parallel to an existing line at a current Siding plant also had the opportunity to convert additional OSB facilities and Aspen wood baskets. So Maniwaki, as Alan mentioned, is an option along with Peace Valley and then also the potential for a greenfield that would leverage sites that we own today in Wawa, Ontario or Cook, Minnesota.

With that said, what I would say is the decision on the next mill will really come down to timing and capital efficiency, really coupled with the network optimization benefits that any given option has the potential to add. So we're still assessing all of those options that I mentioned. But as Alan stated, Maniwaki has surfaced to the top here more recently, just given the OSB market.

And then the second part of your question just around the competitive dynamics. What I would say is, generally, we have not seen a whole lot of disruption within the channel. I mean, this is the time of year where new programs are being put in place. We're navigating RFPs with different customers. But right now, we're just -- we're focused on our strategy and really trying to minimize the noise and continue to focus on gaining share.

Jason, just a quick one, and I'll turn it over. Aside from the fiber basket for Maniwaki, what else makes it potentially rise to the surface more quickly?

Yes. So Maniwaki is a large OSB facility. So it's got the ability to produce 600 million to 650 million feet of OSB, which translates to, call it, $400 million-ish of Siding. So just the scale and relative cost position of that facility, coupled with just the network optimization opportunities that it presents will all be factored into the analysis.

The next call comes from the line of Susan Maklari with Goldman Sachs.

And let me have my congrats to both Brad and Jason as well, looking forward to working with you.

My first question is talking about the pricing environment in Siding. You've traditionally announced an increase late in -- or sometime in the fourth quarter for effective in early the following year. Just given the world that we're in and the varying dynamics around housing and the consumer, how are you thinking about pricing as we look to 2026?

Thanks for your question, Susan. I'll take that one. So as of -- I guess, within the last 7 to 10 days, we did announce a price increase, very consistent with what you've seen us do in prior years.

Along with that, we are managing our order intake to really minimize any sort of inventory build in the channel in advance of our price increase. So really, those orders that are placed throughout December and in our January order file will come at the new price list. So nothing unusual here. What I would say is increases vary by product category and geography, but we are really targeting the net somewhere between 3% and 4% in '26.

Okay. And then turning to OSB. When you think about the environment that the builders are facing and the commentary we're hearing, especially from the big publics around pulling back on start to end this year and then even into early 2026. How are you thinking about balancing that capacity? The near-term pressures that are there relative to the longer-term outlook for housing and just adjusting the cost structure on a relative basis given those factors?

Yes. So demand for OSB has certainly been soft for the better part of the year. And as a result, our focus has really been on matching capacity to demand. No different than what we've done in prior years where we've experienced soft markets.

What I would say today is our utilization rate for OSB is in the high 60s, which is essentially -- which essentially matches our committed volumes for the business. So what we felt is if we sell open market wood or bring cash wood to the market. Largely, it ends up in lower prices. So right now, we're focused on really managing costs and optimizing our network relative to the demand we see today.

The next question comes from the line of Ketan Mamtora with BMO Capital Markets.

Brad, I wanted to extend my congratulations as well. I mean it's been a remarkable transformation. This is a much different company today than what it used to be even 10 or 15 years back. So congratulations.

Thank you, Ketan.

And Jason looks forward to working with you. Maybe to start with, can you talk a little bit about you mentioned shed volumes are normalizing in Q3. Can you talk about sort of what you saw there in Q3? And what's contemplated by way of volume as you think about Q4?

So I would say, Ketan, and I'll take that one. I mean, throughout Q3, our order intake and sell-through rates were pretty consistent. In fact, I would say they held up better than maybe we anticipated given the broader softening in the housing and repair/remodel markets.

And I think that's a testament really to our commercial team and our focus on innovating around the needs of our end user customers, specifically ExpertFinish, smooth Siding, naturals, as Brad mentioned, being great product additions that have helped offset the weakness in some of the market segments we play in.

Specific to shed, what I would say is, yes, business has normalized in that segment, but we were up year-over-year. So we're very pleased with the progress we continue to make in that particular segment. And we see that continuing going into Q4 as well. Really where the softness resides is more in the new construction segment, particularly in the southern markets. And we see a little bit more resilience in repair remodel especially in the northern markets where we have a more dominant share position.

Jason, I'll just add to that. Sorry, Ketan. I'll just add, that historically, we've kind of seen a bit of seasonality in the shed business where our distributor partners and the shed builders tend to build some inventory in anticipation of spring and summer sales.

And that kind of backing off as we get through the summer. And I think what we saw seasonally in shed is pretty consistent with the historic trends that have driven our order file in the past.

Got it. That's helpful. And then just one more question. It seems like you are also sort of -- in the way you are selling sort of your Siding products and your OSB product, it seems like there is some transition happening where you're trying to align both these products and sell it kind of more as a bundle.

Can you talk to sort of what is driving that move? And what kind of reception you're getting with your customers?

Yes. I'll take that one, Ketan, and I appreciate the question. So back in April, we announced the integration of our OSB and Siding businesses. And really, the main reason for that was to better leverage our resources and better leverage the breadth of our product portfolio in the marketplace.

So you're right, we are working on some bundling of programs to help us execute our segment strategies in all areas that we play in. But I would say we're still very much in the infancy stage of that process. We've made some good progress in the big builder segment, but it's still an area we're exploring largely.

The next question comes from the line of Sean Steuart with TD Cowen.

I'll extend my congratulations to both Brad and Jason as well.

I want to follow up on the Maniwaki pivot. Can you give us a sense of the time line to at least start this project and when you think it might be producing Siding product?

And attached to that question, does the Section 232 determination, which exempts OSB and Siding from Canada. Does that factor into the decision at all? And I guess, broader perspective, the determination on Section 232 sort of left it open-ended, that the administration can consider changes to the assessment as time unfolds. I guess the short question is, are you comfortable that this will be an extended -- a permanent exemption for OSB in Siding from Canada. I'll leave it there.

Yes, Sean, this is Aaron. I'll take the 232 component of that question.

I don't think anybody is comfortable that policies are current in the current administration. But I will say that the decision to shift to Maniwaki should we make it, will be a long-term decision based on our long-term expectations about the evolving OSB and Siding markets. The current situation for the 232 tariffs is that neither of those products is subject to a tariff importing it from Canada into the United States.

And perhaps a less understood component of the 232 discussion is that the importation of some heavy equipment categories into the United States is less favorable than it is into Canada currently. So for example, if we were to acquire a press or other large equipment for a conversion of an OSB plant in Canada, we would be able to import that equipment at a lower cost into Canada than into the U.S. because of those tariffs.

I would like to stress, though, that, that would be a potential benefit, but it's not a reason...

Exactly. Yes. The 232 issue is not the decision maker. It is noise that currently is a net benefit. But the long-term reasons for Maniwaki should we make that decision would be the fundamental market dynamics and the efficiencies that, that mill would bring.

Sean, the process is, as you can tell, as we've gone, we try to be transparent on these calls and talk about the different options. And some rise to the top and in some fade from the top. And so it is certainly dynamic. But the valuation that we do is financially driven, long-term financial driven, as Aaron said, and there are components specifically to tariffs or -- but when you look at wood cost, you look at particularly network optimization, Maniwaki is in a really interesting place for us when you align it with our existing infrastructure, including what we're doing around ExpertFinish growth.

And so -- but as we continue to do the evaluation over the next several quarters, we'll continue to evaluate all options in the face of a good strong financial analysis. And then when we get ready to present to our Board, that's when the rubber hits the road around crystallizing around 1 facility and being able to explain from a return standpoint while that was chosen. So more to come on that, but we did think it was worth mentioning Maniwaki as a prime candidate or might perhaps the prime candidate right now, given that we haven't talked about that much in the past.

Understood. And then maybe just one follow-up there, Brad. Part of this reordering of the options is the extent to which OSB markets unraveled here the last several months. I mean you've positioned this as it's a long-term decision based on optimization of the fiber basket, the portfolio you have. Is there any read-through on you view this OSB downturn as potentially extended beyond what we would normally see? And you're considering Maniwaki in that context as well. This could be a longer trough than we're accustomed to seeing for OSB?

No, we were not intending to signal that at all. Certainly, the near-term outlook for OSB is pretty abysmal, but we believe in the business in the long term.

Really what put this one up was, as Jason mentioned or I mentioned in the prepared remarks, the timing -- we were leaning on Houlton because we felt that we could get there faster with a conversion. And so when really it's the overall softening in the housing outlook overall gave us, say, another year of capacity in our existing network, which allowed us to take a step back and say, if we're not in much of a hurry as we thought we were in 6 months ago, what are other options. And that's really when we started focusing in on Mani. It's not OSB-related that drove...

I believe your mic just went out for a minute.

[Technical Difficulty]

And Sean, you're still there?

I am. I'm all good guys, you can go onto the next.

Did you hear? I mean it was such a great -- it's probably the best answer in my CEO career and I got cut off in the middle.

You're leaving on a high note. I think I got the gist of it.

The next question comes from the line of Mark Weintraub with Seaport Research Partners.

I don't know, Brad, I don't know if I should ask any more questions after that. That high note. But congrats to all, of course.

So maybe just a little bit more on the thinking on the Maniwaki Houlton. So I mean your volumes this year aren't that different from what you were expecting. So I mean, it seems to suggest that you're taking a little bit more of a cautious perspective on next year. And obviously, it's pretty early. Maybe help us think that through a little bit. And when you say several quarters, does that mean you're kind of thinking it's like -- you don't need it for close to a year later than what you would have initially anticipated wanting the volume up?

Mark, it's really the key driver is we were forecasting internally, improving housing starts at a pace higher than the current forecast is. And so when we were looking at, I don't know the industry adding 75,000 to 100,000 new starts each year, year over year over year. That was got us on a path of sooner rather than later on this conversion. But as we've looked at the most recent starts forecast that we follow, it seems pretty flat or low single-digit growth year-over-year.

And so that difference in outlook for housing has given us some degrees of freedom on timing for it. I will say it's been really nice to see Sagola operating at the level that it's operating at now, which has provided a good bit of near-term headroom on that. And so -- but I do feel like the -- I mean, I know that the reason we were able to take a breath on expediting a mill conversion is Houlton as we just looked at the housing forecast that folks are putting out there. And as we aligned with that, we felt like we had another year of time to make a conversion versus being very rushed.

And rush caused us to go to Houlton because it would be the quickest, but it also rush would have significantly increased the capital expense, too. So I think we're in a good place to where we still got headroom that we need if housing was to get stronger than forecasted, which we certainly hope happens, but we feel really good about having options other than Houlton, which will be a little more capital efficient for us.

Super. And maybe could you expand a little bit on that in terms of capital efficiency, recognizing you're still in the evaluation stage, but order of magnitude, how much capital might be required for a Maniwaki conversion? And also, does this mean that your cap spend in 2026 is actually going to be more reduced than maybe what some of us would have been thinking previously?

Great questions, Mark. None of which we're really in a position to answer with sufficient reliability or confidence yet. We'll deliver more on this topic on our full year earnings call in February. Great question. Sorry, we're just not in the position to answer.

Understood. And then just last, if I could. So with the sheds business, obviously, it had been quite weak last year, much stronger this year. Can you give us any sense as to like where the sheds business, and I recon even you guys don't have perfect visibility on this, but your best estimate is where that business is now relative to kind of trend line? Or I mean, did we have some catch up this year so that there is downside risk to next year in a normal environment? Or is it more that it was just so bad last year, this really strong growth just got us back up to what you'd consider to be kind of a typical year?

Yes, I'll take that one. So what I'd say there is a fair amount of pull-forward demand in shed during COVID. So our business was very strong in those years. And to some extent, we supported that segment to a higher degree than others while we were on a managed order file.

That pullback that we felt in late '23, '24, I think, was a result of that. We've seen the shed business return back to normal levels. If not, maybe a hair better. A lot of the fabricators that we talk to are saying their business is up a couple of points relative to kind of a normal rate. So we feel good about that business, and it's been very consistent for us through the years and feel good about opportunities we have to improve our share position there as well.

Next question comes from the line of Kurt Yinger with D.A. Davidson.

Congrats, Jason and Brad. I just wanted to go back to some of the comments, just around the fourth quarter Siding volumes. Can you just talk about, I mean, what you're hearing from your customers in terms of maybe a little bit of demand degradation? And then how perhaps managing inventory levels and the price increase factored in, if at all?

Yes. Thanks, Kurt. What I guess I said this earlier, but I mean the process is very consistent with what we've done in prior years. We look at historical purchases, kind of where demand is trending and then come up with allocations for our distributor partners and then obviously work with them closely through that process. If they're communicating that they're going to short a customer on the other end by no means will we hold them to that allocation specifically.

So it is pretty fluid in nature with the end goal being not to increase channel inventories as we go into the new year and work through a price increase. So far, I think that's been well received. And there are customers that are certainly asking for more. but that's something that we closely manage on a week-to-week basis.

Okay. That's helpful. And then just looking forward to 2026 a little bit. I mean, what areas of the Siding portfolio do you maybe have the highest conviction or visibility to at this stage in terms of delivering kind of above-market growth and continuing the momentum?

And separately from a marketing or channel standpoint, kind of what are you most focused on there in terms of strengthening your position with different channel partners and whatnot?

Kurt, I'll take that one as well. What I would say is we've got very focused segment strategies for new construction, repair, remodel and then off-site, which includes shed and manufactured housing segment. And those are 3 segments that we will be relentlessly focused on improving our share position.

And we're investing resources in all 3 pretty equally, maybe a little bit heavier in repair/remodel. But we feel like there's an opportunity to continue to take 0.5 point to 1 point of share of the addressable market on an annual basis as we think about the future.

The next question comes from the line of Adam Baumgarten with Vertical Research Partners.

Just on ExpertFinish, can you kind of update us on where margins are there especially with the managed order file currently?

Margins still have -- they're good, but they still have a long way to go under this kind of circumstances. So again, I'd still see both outsized. We've certainly had outsized price increases on ExpertFinish, and we're making progress on the cost side. So I think the future is bright for continued margin increase, but they're still lagging our -- fundamentally, our prime offering. So there's nothing but opportunity there.

Our last call comes from the line of Steven Ramsey with Thompson Research Group.

This is Kathryn Thompson on for Steven today. Answered many good questions, but I wanted to follow up just on a few on ExpertFinish and have been taking some share gains.

Like I suppose for the quarter and as you think about the year, can you parse out the drivers between channel versus winning shelf space and end market demand? And then against the second part of this is against a pretty challenging R&R market. How sustainable do you feel these market share gains are on a go-forward basis?

I'll take that one, Kathryn. So we're very pleased with the growth that we've seen an ExpertFinish after getting into the prefinished business, I think it was back in 2020. We are on a managed order file right now, but we have incremental capacity coming online at the end of Q1, early Q2 next year in the neighborhood of 50 million to 70 million feet.

We believe that we've got a very strong value prop with our ExpertFinish line and we've only added to that with the naturals collection that was launched in April. And that repair remodel contractors really enjoy using that product. So we think the demand is sticky. Obviously, you need to get the contractor to get placement in the channel with our dealer partners. And that's really our focus going forward is getting downstream as much as possible to pull that demand through for our dealer partners.

Kathryn, I'll just add to Jason's answer that the -- keep in mind that our market share in that segment is tiny relative to the opportunity. And as our product gets accepted, as Jason mentioned, as contractors get to use. And as you mentioned, as we secure shelf space with the one-step distribution network, there's just a ton of upside in our ability to continue to grow that ExpertFinish line. And have a higher -- a much higher market share of a large repair and remodel market.

And do you need to step up marketing expenses next year keep being that share gainer or are there other ways beyond to increase stickiness?

Marketing is a big component. It's in-home selling to consumers primarily. And so as -- if you parse our sales and marketing budget, particularly the marketing budget, it is skewed toward support of the repair and remodel segment more than any other segment but a pretty large margin. But I think what you'll see next year in our budgeting will be consistent with our guidance to be consistent with the kind of spend we've had historically, especially if you like a percent of revenue or anything like that.

And since you brought up distribution, given the ongoing changes in the distribution landscape in the U.S., are you seeing any type of behavior changes for you as a supplier to the distribution market, given some of the fundamental changes in distribution?

Yes. I would say right now, we're very pleased with the partners we have from a 2-step distribution perspective and that those relationships are on very solid footing, and we look forward to continuing to work with our partners. But no real significant disruption, no.

One additional question comes from the line of Mike Roxland with Truist Securities.

I'll just echo what everybody else has said, Brad, congrats on your upcoming retirement, well deserved. And Jason, congrats on the new role.

A lot of my questions have been addressed, but I just wanted to ask if you could give us some more color around volume growth by end market in terms of single-family R&R and sheds in manufactured housing in 3Q?

And how should we think about Siding volume growth as you look into 2026? I know it was asked recently, but just trying to get a sense of whether you think volumes will be flat to slightly up next year versus low single digits?

So I'll touch on the first part of the question. Just looking at Q3 versus prior year by segment. As I mentioned earlier, even though shed volume came off slightly versus Q2, it was up over year-over-year, more than the other 2 segments. Repair/remodel was second strongest as evidenced by our performance in our ExpertFinish business or line. And then single-family, I think it was a mixed bag.

We had decent volume in some of our core markets, but in the southern markets that are dominated a little bit more by the big builder and our stress by some affordability challenges and just consumer confidence in general, we have -- that was our weakest segment in the quarter.

I'm going to address the second question briefly. I think it's too early for us to make a sort of convincing call on 2026. As you know, we have pretty good visibility within a quarter. And when we get to February, what we see within the first quarter behavior will, of course, color our view of 2026 at which point we'll provide some full year guidance.

Understood. And then just one quick follow-up. If you see housing rebound more quickly next year than you're now expecting, what levers do you have available to meet that increased size in now that you're pushing out some of your capital projects?

Plenty of capacity. We can add shifts in existing facilities. So yes, we will have no problem responding to almost any imaginable demand scenario over the next couple of years in either of our businesses or South America.

This does conclude the question-and-answer session. I would now like to turn the call back to Aaron for closing remarks.

Okay. Thank you, everybody, for joining the call. We'll look forward to continuing the conversation and follow-up calls later today and conferences throughout the quarter. Thank you very much.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Louisiana-Pacific Corporation Second Quarter 2025 Earnings Conference Call. [Operator Instructions].

I'd now like to turn the call over to Aaron Howald, VP of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for joining us to discuss LP's results for the second quarter of 2025 as well as our updated outlook for the full year. On the call with me this morning are Brad Southern, LP's Chief Executive Officer; and Alan Haughie, LP's Chief Financial Officer. As always, after prepared remarks, we will take a round of questions. During this morning's call, we will refer to a presentation that has been posted to LP's IR webpage, which is investor.lpcorp.com. Our 8-K filing, earnings press release, sustainability report and other materials are also available there.

Finally, I will caution you that today's discussion will contain forward-looking statements and non-GAAP financial metrics as described on Slides 2 and 3 of LP's earnings presentation. The appendix of that presentation also contains reconciliations that are further supplemented by this morning's 8-K filing. All of those materials are incorporated herein by reference.

And with that, over to Brad.

Thanks, Aaron, and thank you all for joining us today for LP's Second Quarter Earnings Call. I will describe some highlights from the quarter before turning the call over to Alan for segment details and our updated outlook for the second half of the year.

The Siding segment once again delivered growth in the second quarter despite an increasingly challenging market backdrop. U.S. housing starts remain below long-term average demand levels and the single-family mix has softened, which has contributed to steadily following commodity OSB prices. The general sentiment among repair and remodeling contractors is also more cautious than expected earlier in the year. However, once again, LP Siding segment executed our strategy and achieved a record quarter for volume, revenue and EBITDA. We did this by delivering value for our customers across new construction, R&R and all site construction with durable, beautiful, sustainable and labor-saving SmartSide and expert finished train and siding.

Page 5 of the presentation shows a summary of highlights for the second quarter. Siding revenue grew by 11% compared to last year, partially offsetting a negative $102 million impact from lower OSB prices. The result was $755 million in sales, $142 million in EBITDA and $0.99 of adjusted earnings per share for LP in the quarter.

Both segments continue to improve operating efficiency, which we measure as overall equipment effectiveness or OEE. Siding OEE in the second quarter reached 78% and OSB hit 79%. OEE drives value by unlocking incremental capacity in Siding and increasing operational flexibility in OSB. I want to thank our operations team for their dedication to running our mills safely and efficiently, maintaining our assets and delivering OSB and Siding with industry-leading quality.

Current market conditions are difficult for our OSB segment, but LP has been here before, and we have demonstrated that our teams can execute our strategy come what may. Siding is obviously not immune to a softening market, but the unique value proposition of SmartSide, the diverse market exposure in homebuilding, R&R shares and manufactured housing and our ongoing customer focused new product development leave us confident that we have a long runway of growth ahead of us. I believe that in the long run, in good markets and bad, SmartSide will continue to capture share from other siding substrates and grow above the underlying markets we serve.

I believe this because of the culture we have built. So before I turn to Alan, let me close by mentioning some examples of how LP's culture is driving results and being recognized. LP alarmed in June, which happens to be National Safety month, we once again were named the safest company in 2024 by APA, the Engineered Wood Association. This is the third year in a row in the 13th time in the award 17-year history that LP has earned this honor. LP's new Waverly transportation team received the Platinum Award for Highway Safety from the Great West Casualty Company. This was New Labor's fourth consecutive year to win that award.

In 2024, our team logged 10 million miles without a single preventable DOT reportable accident. 2024 was also the fourth consecutive year for LP to be named a top workplace in Middle Tennessee by the Tennessee and newspaper. All of these facets of our strong culture as well as other aspects of our sustainable business model are detailed in LP's 2025 Sustainability Report, which we recently published.

And with that, I will ask Alan to share more details on segment results, cash flow and our updated outlook for the year.

Thanks, Brad. I'd also like to add my congratulations to everyone who contributes to LP's strong safety culture. Safety is, of course, it's a reward, but a full trophy case is a nice bonus. Okay.

On Page 17 of the presentation, you'll see that the second quarter for Siding was one of continued growth. But beyond that, there aren't that many of the moving pieces. Revenue increased year-over-year by 11%, with 2% from price and 8% from volume. The volume increase added $35 million of revenue at nearly a 50% incremental EBITDA margin. Both the housing and repair and remodel markets were softer than offsite construction, which includes sheds and manufactured housing. And this mix shift slightly dampened the price benefit of another record quarter for ExpertFinish, but the pure price bar on the waterfall is really the only place where this adverse mix shows up because it was actually margin accretive in the quarter.

We invested $2 million more in sales and marketing and saw another $2 million in minor inflationary costs with freight and labor inflation offsetting improved raw material costs. And of course, the tariff situation remains unchanged from the first quarter, and it is tariffs that comprise the bulk of the $4 million in the other bar.

Looking through the fairly straightforward waterfall, it was a record quarter for SmartSide volume, revenue and EBITDA with growth and leverage generating margin expansion. The EBITDA margin of 27% was not a record because LPs sliding mills are still not fully utilized. Continued growth in share gains with the corresponding leverage from higher utilization rates should, all else equal, drive margin increases. That is until they are temporarily dampened again by the cost and lower utilization associated with the starting of the next mill.

In the grand scheme, this is, of course, a good thing, but it's a phenomenon we like to describe as the raising same wave of stating margins. The OSB waterfall on Page 8 is once again dominated by commodity OSB prices, which, as I'm sure you're all aware, have fallen to multiyear lows. Even the $7 million of other in the far right bar on the waterfall is mostly the impact of price on inventory valuation, so priced by another name. However, EBITDA of $19 million in the quarter meaningfully outperformed LP's algorithmic guidance, mostly due to exceptional cost control measures at the mills and the lag effect in price realization induced by our order file dynamics. In other words, when prices fall steadily as they did in the second and third months of the quarter, this lag provides a small but temporary silver lining.

The current demand and pricing environment for OSB is unusually difficult likely exacerbated by tariff uncertainty and elevated interest rates. But we obviously have no control over commodity OSB prices. But as Brad said, we've consistently demonstrated that LP has a strategic clarity and operational efficiency to manage our capacity with discipline and agility, and we'll do our best to navigate the soft OSB market as we have done in many previous down cycles.

So the cash flow slide on Page 9 is also pretty clean with seasonal reductions in working capital, net of tax payments, adding $20 million to the $142 million of EBITDA for operating cash flow of $162 million.

Net cash flow just opposed against current commodity OSB prices is a remarkable testament to LP's transformation and highlights the value of Siding's consistent growth, pricing power and margin expansion through operating leverage. And we use this cash for consistent execution of our capital allocation strategy. We invested $68 million in CapEx in the quarter and returned $19 million to shareholders through dividends. With $1.1 billion in liquidity, including $333 million of cash as of June 30, LP is comfortably positioned to invest as needed in new Siding crest capacity, increased pre-finishing capabilities or for the options to support and accelerate growth in siding and execution in OSB, which brings me to our updated guidance on Page 10.

Based on the order file we see before us today, we are reaffirming our full year Siding guide of about $1.7 billion in revenue and about $430 million in EBITDA. We continue to anticipate a normal-ish seasonal demand pattern with volume roughly flat to last year's third quarter, which you recall was the peak demand quarter in 2024, plus about 3% higher prices. This will produce about $430 million in third quarter sales revenue for 3% growth despite housing and repairment model outlooks that remain quite challenging. EBITDA of about $110 million would result in an EBITDA margin of roughly 26%.

As for OSB, well, commodity prices are exceptionally low, especially for the this time of year, which would generally be the peak of the building season. In fact, adjusted translation using the CPI, today's OSB prices are the lowest in at least 20 years. Now while we cannot control prices, we are doing everything we can to control costs and manage our capacity with agility and discipline. Current prices are well below our EBITDA breakeven level. And while we certainly hope that the price assumption in our algorithmic OSB guidance does not play out, we also think there is value in maintaining a consistent approach to OSB guidance in order to provide as much clarity as we can.

So in the event that random length prices remained flat and the current record low level through the year-end, the OSB segment will see negative EBITDA of around $45 million in the third quarter and a bit worse than that in the fourth quarter as the price benefit of the time like dissipates, which would bring EBITDA for the full year for OSB to a negative $25 million.

Now I'd like to stress that this is a model not a prediction and certainly not a signal there were anything, but relentless in our efforts to reduce costs across our OSB network. In fact, part of the cost control efforts in OSB will show up in reduced capital expenditures in the second half of the year. This will lower our total CapEx to roughly $180 million for growth, which is still mostly a signing, of course, and $170 million in sustaining maintenance for a full year total of $350 million, which is about $60 million lower than our prior CapEx guidance.

Before taking questions, I would like to close with this. The demand environment is weakening somewhat, most acutely in OSB. But this only highlights the value of our pace Siding segment, where growth driven by material conversion, product innovation and share gains, let SmartSide continue to outperform the market, [indiscernible]. And with that, I'll open the call for questions.

[Operator Instructions] Your first question comes from the line of George Staphos from Bank of America Securities.

Congratulations on the progress year-to-date, gentlemen. First question, and you've been quite consistent in maintaining a conservative and balanced outlook for Siding and outperforming that over the course of the year. When we look at 3Q, it suggests a little bit of a decrement in margin and progress. Is there anything discrete that we should be mindful of there? Or is that Alan just trying to keep some cushion for the unknowables at this juncture in the quarter? And then a couple of follow-ons.

Of course. I'm not going to admit to the existence of a cushion quite. But I'd like to point out that the third quarter of last year was the peak quarter last year. And it's reasonable, I think, particularly in this climate to expect that Q2 might prove to be that peak this year. If you look at -- what we're really doing is looking at Q2 and Q3 combined kind of, I'd like to say the word -- ish a lot, so kind of ish, and so if you look at those quarters combined, that's a revenue growth of about 7% year-over-year, which I think is pretty healthy.

There are some other minor dynamics shared volumes or panel volumes were certainly very strong in Q2. We're not necessarily expecting that to persist quite as strongly as it did going forward. So I would say it's a sort of balanced approach on the revenue line and a very safe approach on the EBITDA line.

Okay. I appreciate that, Alan. And you gave us a fair amount of color for third quarter. I don't know if it's worth it, but to the extent that you can comment about early trends in third quarter what the exit rates are on volume for Siding, that would be helpful. And then my last question, I'll turn it over and come back into queue. The CapEx numbers came down. It sounds like it's largely an OSB. But was there anything on the Siding side that we should be paying attention to relative to ultimately, the growth outlook, the next conversion with Houlton, et cetera.

Right. I'll take the CapEx question and then Brad will take the sort of market-facing question. You're right, the majority of the CapEx reduction is in OSB. And arguably, if we weren't trimming OSB CapEx probably have left the whole CapEx guidance the same. It's hard to land such a thing on a dime. So the majority of the trimming is in OSB. There's a little bit in Siding, but nothing significant.

And George, on the Q3 order file, we came into the Q2 order file, really, really strong carryover from Q1 into Q2. We saw some weakening of that order file as we went through the quarter and has kind of stabilized where we were consistent with the guidance that Alan has given for the quarter. So it's good, but not as good as it was going into the beginning of Q2.

Your next question comes from the line of Mike Roxland from Truist Securities.

Congrats on a nice quarter despite the backdrop. One kind of follow-up with you on the good cost control effects you mentioned OSB obviously, did $19 million in EBITDA, well above where we wound up -- we're forecasting for the quarter. Any color you can share on what you actually did, how the business is run, what cost they were managed more efficiently, what they did to make sure that they were operating as effectively as possible during the quarter despite the repricing backdrop?

So 2 key drivers to that, as I mentioned, the OEE, really outstanding performance for the quarter, and kudos to our operations teams because it can be difficult at times to maintain efficiency when the kind of market is slowing down in front of you. But we ran just from an efficiency standpoint, the operations, particularly [indiscernible], really, really well, which means high uptime, high grade yield and in good speeds when we were running the presses.

And then second to that is we have been pretty aggressive on cost containment in that business as we saw the market fall away. And so those 2 combined really was a significant contributor to our ability to beat some of the algorithms around where margins should be in that business given where pricing is.

Got it. And then just one quick follow-up. I would love to get your thoughts around shrinking home sizes and implications for Siding. I have to believe that even with home size is shrinking, that the currently low penetration rate of [indiscernible] and on the potential for an upcoming, let's say, resigning cycle would more than offset shrinking home sizes. But any color you have on that would be great.

Totally agree with what you said. And we'd rather home -- average home sizes be bigger rather than smaller for both of our businesses. But given the market share opportunities we have across all our different segments, we still -- I mean, we believe securing either new homes to put our signing on or growing market share and a parent remodel will overwhelm any reduction in housing sizes that we see as the industry combat is affordability issue.

So yes, it would be a slight headwind for us. But overwhelmingly, we have enough tailwinds to -- where that should not be a significant factor in our volume growth story for Siding.

The next question comes from the line of Ketan Mamtora from BMO Capital Markets.

I'd like to come back to the Siding guidance for back half. Alan, if I heard you right, you said volumes in the third quarter would be flat year-over-year. But if I just think about sort of the implied fourth quarter that would assume kind of revenue is up kind of low double digits. Can you just help us understand kind of the nuances here in terms of what's going on in Q3, Q4? And if you are sort of baking in some recovery as we get into Q4?

Well, if you sort of -- I'm going to sort of duplicate the math that's implied. We're looking at a year that's kind of symmetrical, revenue of $400 million-ish in Q1 and Q4 and then something north of that $460 million in Q2 and $430 in Q3. So it is a seasonal pattern with really just that shift between Q2 and Q3. So yes, we're assuming sort of healthy volume growth Q4 of this year. But I think Q4 of last year was relatively low certainly compared to Q3. So yes, I think it's a reasonably safe volume outlook.

Understood. Okay. And then, Alan, can you just remind us in terms of your operating rates in the second quarter in both OSB and Siding and sort of what's your approach, especially in OSB, given where prices are, you talked about kind of doing everything you can on the cost side, but I'm just curious sort of your approach on the production side?

Aaron can take this?

Yes. Okay. So for OSB in the second quarter, we were sort of mid-80% range, operating rates, a bit lower than that in maybe a hair lower than that in Siding as we ramp up new capacity. You can infer the operating rates from our volume guide in the third quarter for Siding. For OSB, we're always hesitant to specifically discuss volume for all the obvious reasons. But what I'll just say is that we are executing our strategy, which is to supply the amount of wood that the market demands. And current prices are telling us now that, that demand is not very high. When customers want more wood, we'll supply it.

Let me just be repetitive to Aaron. We really have the finger on demand for our customers given who we are in the OSB business. And we're very -- very cognizant of when our customers need wood, we want to supply it. But we certainly do not want to build any inventory in the channel or at our mall locations and -- and in order to avoid that, that leads to downtime to make sure we're matching capacity and production with demand, and we'll continue to do that indefinitely in our OSB business.

Understood. That's very helpful perspective.

Your next question comes from the line of Susan Maklari from Goldman Sachs.

My question is on the Siding -- is on Siding. Can you talk little bit about the sell-through that you saw into the second quarter? And how channel inventories are positioned coming into the back half of this year? What gives you the confidence that you can see that level of growth that Alan mentioned in the fourth quarter?

Susan, we feel that way because we did have good sell-through in Q2, as we continue to ship or turned out to be record volumes, our customers continue to order. We've -- inventories in the channel around siding or right where we'd expect them to be this time of the year. And so the good pull-through was very reassuring and, I would say, somewhat surprising given some of the economic and housing data that we were looking at throughout the quarter. So we feel good about -- really good about end-use demand in Q2 being consistent with what we saw in our order file and what we shipped. And while demand has moderated a little bit compared to where we were this time last quarter, we do believe what's going -- what we're selling today is also ending up with contractors and being installed in homes rather than being put in inventory. So we feel like it's -- the pull-through throughout this year has been really good, and we have reasonable inventories in the channel given where we are in the year.

Okay. That's great to hear, Brad. And then following up on Siding, can you talk a bit about the mix that you're seeing? And any thoughts on how that will move in the back half? What are you seeing in terms of sheds, builders, series, expert finish and just the implications there?

So if you look at this year, and it was more extreme in Q1 than it was in Q2, but then rather consistent, we are strongest product, and therefore, end use has been our panel business, where we've had really good pull-throughs for share -- in our shared segments, both in Q1 and Q2 and also good pools in the home centers, which is primarily a panel play, though, we do have other SKUs there as well. .

Secondly, our prefinished business, as we've talked about, record volumes there for expert finish is -- I mean that is a strong indication that repair and remodel has been a strong business for us this year. We have invested considerably both in manufacturing and sales and marketing assets over the previous couple of years in order to build momentum there. So it's good to see that product and our penetration to repair and remodel being a significant driver to our results in Q2.

And then I would say, thirdly, the new residential construction, while obviously, overall demand for that is moderated as housing starts have kind of plateaued out. Our ability to gain market share over the last 12 months has been -- has made that a significant contributor to our growth as well.

Looking to the second half, we do -- I do think we'll see some moderation in shed. And in fact, we're seeing that now. But just given how strong it was in Q1 and Q2 -- and -- but I believe that we'll -- and what we're seeing today is we'll continue to see strength in expert finish, which means repair and remodel could be a good driver for us in Q3 and Q4, and then as we continue to execute with builder series with our new construction national partners, we see that as steady as we go through the year. And certainly, if we were to see any kind of strengthening end use there with the large national builders that could be another driver for us in the [indiscernible] that answers your question.

Yes. No, that's great color. Good luck with the quarter.

Your next question comes from the line of Sean Steuart from TD Cowen.

A couple of questions. I want to follow up on OSB dynamics. And I guess we typically think of the industry cost curve is flat. Can you reference cost or margin variance across LP's portfolio and how that could inform downtime closure decisions? Just trying to get a sense of the margin differential from your best to worst mills?

Sean, the cost curve is flat, especially at the mill level. So most times, our downtime decisions are driven by geographic location, transportation cost and then the local demand that is the outlet for most of that production. So it's really not necessarily that we line up variable costs, stack that and decide where to take downtime. It's more dependent on delivered margin based on where the mill is located and based on the customer base it's serving and somewhat based on contracted volume that is kind of in that mill's basket, which could keep the mill operating.

So obviously, we do that, trying to maintain as high a margin as we can, but it's not necessarily correlated strongly to cost out of the press. Although that is a factor.

Understood. And then revisiting the CapEx guidance, it sounds like this is mostly OSB related to the reduction to the 2025 spend guidance. Any updated perspective on the Houlton expansion? I assume a chunk of what you're delegating to discretionary CapEx this year is getting started on that broader perspective on when we can get more context on what the economics of that project might look like?

So we are continuing to do the detailed engineering for that project, trying to absorb all the inflationary impact that it has had on some of the cost estimates that we had done earlier. So the work continues there. I would say, Sean, in the next quarter or 2, we'll be able to get more specific on tying down the cost and the returns. I will say despite the inflationary impact on steel and construction, factor in the price increases that we've gotten over the last couple of years. Returns are still really healthy for a project like that. And we continue to work on it diligently, but just not ready to provide any detailed information yet because we don't have it.

Your next question comes from the line of Mark Weintraub from Seaport Research Partners.

So obviously, really strong performance still in Siding and your volumes are good. There's been some kind of mixes in some -- you talked about sheds being pretty strong and prefinish being pretty strong. I mean one thing that did strike me is that your estimated prices and kind of accrued revenue divided by shipments is still up, but maybe not quite as strong as I might have thought. But how much of that is -- what's going on in mix? How is that affecting pricing? Or how much of it is just kind of the reality of the environment that we're in?

It's more mix than any sort of headwind. I guess when we said panels are sort of our lowest -- some of our lowest-priced products, high margin, but lowest priced. I kind of didn't explain it out well in my prepared remarks, I guess. So -- and ExpertFinish, of course, is among the highest priced but among some currently, and temporarily among some of the lowest margin. So yes, I mean, I remember when we actually gave guidance for the year, this question came up. And we had, at that point, in the early part of the year, we are anticipating relatively healthy or shared/panel growth and hence, sort of signaled that dampening of the net price that you're going to see, but the fundamental price increases that we have across our portfolio are all strong.

So this really is -- it's a strong mix factor. And at times, we've had 9% pricing, which has been 3 points of price to 6 points of mix, and we're seeing something of that -- the opposite effect in 2025. It is, believe it or not, it really is mixed.

Right. So shed is outweighing ExpertFinish at the end of the day in terms of the impact on mix. And then, I mean, are you making other adjustments. Obviously, you pull CapEx and it's primarily in OSB. I mean, again, not wanting to split hairs, but like the marketing expense maybe wasn't up as much as [indiscernible] actually down a little bit in this quarter. Are you making other adjustments and sort of what can you just sort of give color in kind of the bigger thought process. Look, it's a very difficult environment. And so what are -- what's sort of the strategy at this point?

Yes. So Mark, we're really focused on cost containment and management in our OSB business, every penny, looking at every penny, looking at allocated cost to that business. So that's an environment where we are very conservative on cost. On Siding, when you have the kind of growth that we've had in the last 6 quarters and some -- and a lot of that can be attributed to the increased sales and marketing investment that we've made over the last couple of years. We talked about adding a Houlton incremental capacity, just converted Sagola. We're going to continue to invest in sales and marketing. It won't be consistent quarter-to-quarter. That stuff is can be seasonal or the way we time a marketing campaign or onboarding new sales assets is it can be rather lumpy.

So you'll see volatility in that. But the trend for us in siding is continued investment to drive growth. We just feel like we have so much available market share and I hate to say this because I ran the business for 15 years and have been close to it for the last 5, but still not great name recognition and brand recognition across the national footprint of builders and contractors. So we just look out at the market and see lots of opportunity. And obviously, we're trying to accelerate that with capacity and with new products, but also we do have to stay aggressive on sales and marketing as long as we see those opportunities in front of us. And we see, as I think Alan's prepared remarks, a long runway for growth, and we certainly believe that, and we'll continue to invest so that we can realize it in the future.

Much appreciate and maybe just to follow up real quickly on that. Are there any additional kind of markers on the growth that you can highlight that's going to sort of help feed the machine in the quarters to come?

Yes, if you -- not to be repetitive to prior remarks, but means the ExpertFinish, there's so much opportunity there. We launched brush smooth product recently, just now this year being now getting that into the market and getting it commercialized opens up swath of unavailable market that were smooth is the preferred texture. And then our natural series, which is the 2 tone in markets where that's a preferred look that provides opportunity as well.

I mean -- and then on the contractor side, we've got 3-dimensional corners now, which is a great labor Siding and ease of installation opportunity. So it's great for those who all have been to our booth at the IBS just to see every year, we're hanging new products up on those walls. And we don't hit -- we're not hitting 1,000 with them, but we've got a pretty high batting average. And those -- everything I mentioned right there opens up markets that we were way underpenetrated in. So yes, so that's been -- there's no question that our innovation over the past 5 -- we'll say, post-COVID has been the key to driving our demand growth because it's just opened up the available market window. And we'll continue. And part of that investment mark that we've made in SG&A and what we call marketing expense is around investment in our innovation teams.

Your next question comes from the line of Matthew McKellar from RBC.

A couple of related questions on how you're competing with other substrates. First, in the new residential market, in particular, is it your sense that vinyl is still doing the most share or materials like brick now under more pressure with more focus on affordability? And second, would you expect higher lumber prices on the back of increased duties and potential tariffs of non-U.S. supply to be meaningful for how you compete with San wood Siding in the U.S. market?

So let me -- remind me if I miss one of those. But on the brick side, yes, I think there is an opportunity with the cost of the brick, this drive for affordability, the availability of labor to lay brick. We hear about opportunities for conversion there and maybe witness that small builders have been able to do some of that. I don't want to make that is not a meaningful contributor right now, but it is something that might provide opportunity in the future. Yes, I do think that the biggest opportunity we have, continue to have is vinyl conversion, both in new construction and manufactured housing and with repair and remodel. Their affordability can drive people to a vinyl Siding. So we've got that as the constraint maybe to conversion to converting more, but we certainly, from a preference standpoint, and from a long-term value proposition, we see that as very fertile ground for us.

And then yes, I understand what you're saying around the trim. We do compete somewhat with solid sawn trim products. Our pricing normally is higher than a solid sawn wood because of the value prop there. But if we were to see pricing increase on solid sawn, that would -- that would be an advantage for us in our trim business. So it's -- but it's not -- I would say, once we've converted -- once we've converted a contractor to our engineered wood trim unless prices get really, really low, there's not a lot of conversion back to solid swan in my experience.

Your next question comes from the line of Steven Ramsey from Thompson Research Group.

I wanted to think about manufactured housing and sheds from a couple of angles. First, can you share high level where manufactured housing can be for the Siding business, thinking about how the affordability challenges may be pushing some buyers towards that product. And basically, if that can be an expanded TAM for your Siding products?

And then secondly, on sheds where demand is this year, how far it is off the prior peaks or where it compares to past levels and if we're at highs on that side of things? Or if there's more gains to be had in the next couple of years?

On the shed side, look, it was phenomenal during COVID, the shed demand. I don't know off the top of my head. And if Aaron, if you do, you can comment. I don't know if we're back to that peak, but what we saw was COVID peak, dip and now it's back to what I would call more normal type of volumes there, normal and strong, especially compared to prior periods, which is how we're gauging it. It's been a really good year for us. I don't think in any way is it overbuilt or there's pull-forward demand like we saw during COVID.

So -- I mean that is a really good piece of business for us, consistent panel volume that we run very efficiently, and it's been really good margin. So it's good to be in there.

On manufactured housing, that's an opportunity for us. It's -- I believe that one of the ways the industry is going to tackle affordability is through manufactured housing. When you have a modular building that is transported down the road, our siding is a great solution for that. It provides an aesthetic that is a step above what's currently the predominant product there, which is vinyl. We have a warranty. It can be prefinish, which could really help from an efficiency standpoint with the manufacturer and the structural, which can add some stability to the home. So we see that as an opportunity. We've always had some market share there through the years, but I do see that as -- that industry taking market share as affordability continues to be an issue, and we're well positioned to take advantage of that through the -- our long history serving that channel.

Okay. That's great color. And then shifting to Structural Solutions and OSB still half of volume and volume held flat, albeit low levels. Can you talk about where you're seeing demand within that portfolio and if there's anything to dissect between new product adoption or discretionary purchasing?

Yes. So the demand is kind of across the portfolio. Obviously, our strength in that from a volume standpoint, our strength comes from our flooring product, in our TechShield radiant barrier products. Both of those are tied to new construction. Look, especially with flooring, when affordability becomes an issue, people can tend to buy down the value chain as far as flooring. But those are the 2 products that drive volume for us. And we're pleased with where we are as far as the percentage. It is off some of the peaks we've had with Structural Solutions, but I think that is really because the price -- the affordability issue, the people are driving for lowest cost when they can get it.

So we'll continue to sell our value prop and still it's a significant part of what we do. But other than just reiterating the strength with our flooring and radiant barrier products, the rest of what we do there has been kind of steady to moderate growth over the last couple of years.

Your final question comes from the line of Kurt Yinger from D.A. Davidson.

Just one question on kind of the new residential opportunity set for Siding. Your largest peer has kind of announced a number of these multiyear kind of exclusivity agreements. And I was just hoping if you could help us understand whether with that the opportunity for share gains is kind of relegated to the smaller and medium-sized builders until those were sort of to expire or whether there's more nuance or kind of intricacy in terms of trying to drive penetration among those production guys given that?

It's nuanced. And so we pursue opportunities all the time. Those opportunities can come, for example, from the multifamily unit of builder whose business we don't have on the single-family side. And so there's a myriad of ways that we stay active with all of the large builders as far as being in the conversation around supplying their siding needs along with their OSB needs. And so -- and we continue to get wins. And so we see continued opportunity there. And as I mentioned before on this call, we don't win them all, obviously. But we've had some wins. Our builder series volume wouldn't be growing the way it's growing and will continue to be competitive. We went for many, many years, most of our time in Siding without a real value proposition for the large national and large regional builders. We have that now, and that value proposition plays well, especially when coupled with our OSB offering.

So, we're full steam ahead on growing in that segment and do see opportunities for continued growth as we look forward.

That concludes the question-and-answer session. I will now turn the call over to Aaron for closing remarks.

Okay. Thank you, Jordan. With no further questions, we'll end the call there. Thank you all for joining us to discuss LP's results for the second quarter of 2025. And as always, we'll be available for follow-ups throughout the day and the rest of the week. Thanks, everyone.

This concludes the meeting. You may now disconnect.