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Louisiana-Pacific Says Reduced 2020 Capital Expenditure Plans By 50%
LP Building Solutions announced adjustments to operating schedules, reductions in capital expenditures, and steps to enhance an already strong balance sheet. LP also announced amended guidance consistent with these plans and the uncertainties surrounding the impact of COVID-19, governmental responses, and subsequent economic recovery.

"We are in the early stages of this pandemic," said LP Chief Executive Officer Brad Southern. "Much is still unknown about the magnitude and duration of health and economic impacts. LP is using the best available information to make sound decisions and act with integrity, agility, and resolve to protect our employees, customers, and shareholders."

LP Protects Employees, Helps First Responders

LP is committed to protecting our employees and supporting our communities. We are following national, state, and local guidelines, while also continuing to provide our products to support critical infrastructure needs. Employees able to work from home have been doing so since March 16. In our manufacturing facilities in North and South America that have been declared essential by the relevant authorities, LP has instituted rigorous cleaning and social distancing protocols as outlined by the Centers for Disease Control and Prevention (CDC) and World Health Organization (WHO).

"While LP's manufacturing processes do not lend themselves to the production of items needed to fight COVID-19, our mills do stock masks, gloves, and other personal protective equipment (PPE). Our mill leadership teams are donating PPE supplies to local healthcare providers and first responders," said Southern. "LP has a long history of donating products and supplies to assist with recovery efforts following natural disasters. While this pandemic is unprecedented, supporting our local communities is what we do at LP."

LP to Reduce Production in April to Match Supply and Demand and Optimize Working Capital

The broad economic slowdown has negatively impacted short-term demand for oriented strand board (OSB). In response, LP will cut OSB production by at least 100 million square feet (MMSF) in April, or about a third of total capacity, through a combination of curtailments and reduced schedules. This flexible approach is designed to maintain agility for further adjustments (up or down) as demand warrants, and to minimize the impact on our employees.

Before the pandemic, and in anticipation of a robust Q2, the siding segment built finished goods inventory in January and February. Given the current outlook, and with sufficient finished goods inventory on hand, production schedules for LP® SmartSide® will be reduced by roughly 50 MMSF in April, with minimal disruption to customers.

LP Enhances Already Strong Balance Sheet

LP has reduced its 2020 capital expenditure plans by 50 percent to roughly $70 million for the year, or an average of $15 million per quarter from Q2 to Q4. LP is also closely scrutinizing all discretionary spending. As with operating schedules, LP has the agility to flex capital and other spending up or down as demand and market conditions warrant.

"Liquidity will be key to weathering this uncertain economy," said LP Chief Financial Officer Alan Haughie. "We have a strong balance sheet. We have taken steps to maximize liquidity by drawing on our revolving credit line early, cutting capital spending, and minimizing working capital through inventory reduction and reduced production. As of the close of business on Friday, March 27, we had a global cash balance in excess of $480 million, a net-debt to book-capital ratio of 18 percent, and no debt maturities before 2024. With our strong balance sheet and liquidity position, the Company is well-positioned to manage through a variety of down-side scenarios, including substantially lower revenue throughout 2020 and beyond."

LP Amends Long-Term and 2020 Guidance as Follows:

Long-Term Guidance:

Reaffirm 10-12 percent growth rate for SmartSide strand revenue
Reaffirm 20 percent or higher Adjusted EBITDA margins for Siding
Reaffirm $165 million target for growth and efficiency gains, extending timeframe to account for duration of COVID-19 disruption
Reaffirm 50 percent target for OSB volume from Structural Solutions
Reaffirm long-term capital allocation strategy

2020 Guidance:

Reduce capital expenditures 50 percent to $70 million
No share repurchases in 2020
Suspend SmartSide strand revenue growth guidance for 2020
LP Well Positioned to Weather the Economic Slowdown and Thrive

"This is a fluid situation," said Southern. "Forecasts vary widely about the nature and duration of the negative economic impacts of this pandemic. That said, long-term housing fundamentals remain strong. I am confident that our strong balance sheet and operational agility will allow LP to effectively manage through this period of uncertainty and thrive once the health and economic effects of COVID-19 have passed."


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