Louisiana-Pacific Posts Loss on US Housing Slump

Louisiana-Pacific Corp., the biggest U.S. maker of oriented-strand board, reported its fourth consecutive quarterly loss as U.S. housing construction slowed and the Canadian dollar rallied.

The third-quarter net loss was $67.8 million, or 65 cents a share, compared with net income of $9.5 million, or 9 cents, a year earlier, Nashville, Tennessee-based Louisiana-Pacific said today in a statement. Sales fell 10 percent to $472.5 million.

North American makers of oriented-strand board, known as OSB, are shutting higher-cost mills and opening more efficient plants. Louisiana-Pacific said Oct. 18 it would permanently close an OSB mill in Quebec. The company plans to open a new mill in Alabama at the end of the year.

“The industry faces an overhang of both new projects and existing idled facilities waiting to re-start as soon as pricing permits, thus precluding a material rebound in pricing,” Kevin Cohen, a debt analyst at Banc of America Securities LLC, said in a note to clients on Oct. 23.

U.S. housing starts, a barometer of demand for building materials, fell in September to the lowest rate in 14 years, the Commerce Department said Oct. 17. OSB is a substitute for plywood used in floors, roofs and walls in home construction.

Earnings Estimates

Excluding one-time items, Louisiana-Pacific had a loss of 24 cents a share. Thirteen analysts surveyed by Bloomberg expected a loss of 15 cents, on average.

Executives of Louisiana-Pacific played down suggestions today on a conference call that the company may build more OSB mills or plans to acquire companies weakened by the decline in panel prices and demand.

“With what we’re through, I don’t have our next OSB mill on the drawing board right now,” Chief Executive Officer Rick Frost said on the call. “Our stock value, where it is now, is not a very good currency.”

Louisiana-Pacific fell 84 cents, or 5.2 percent, to $15.33 at 4:03 p.m. in New York Stock Exchange composite trading. The shares have fallen 25 percent in the past year.

The average price of OSB fell 1.2 percent in the quarter from a year earlier, to $177.05 per 1,000 square feet. Oriented- strand board is made by compressing layers of wood strands and resin into panels that are valued for their strength and rigidity.

Canadian Dollar Effect

Canada’s advancing currency erodes the value of U.S. dollar sales from Louisiana-Pacific’s operations in Canada when the U.S. currency is converted back to pay costs in Canada. The Canadian dollar has strengthened 22 percent against the U.S. currency this year.

“Producers in Canada who export their products into the United States are at a significant disadvantage,” Frost said on the conference call.

Louisiana-Pacific said its operating loss on sales of OSB widened to $31.7 million, from a loss of $9.3 million a year earlier as sales fell 17 percent to $228 million. Profit from architectural siding fell 41 percent to $11.3 million as sales fell 11 percent to $122.2 million.

Earnings from engineered-wood products, such as structural beams, plunged 60 percent to $3.3 million as sales slipped less than 1 percent.

Louisiana-Pacific makes wood products in the U.S., Canada and Chile.

Louisiana-Pacific Posts Loss on U.S. Housing Slowdown
by Christopher Donville | Bloomberg News