BCC Q2 2025: Pricing headwinds loom as EWP runs at 80% capacity
- Resilient Engineered Wood Products (EWP) Position: Management emphasized EWP’s competitive advantage in reduced cycle times and design flexibility, supported by a robust two-step distribution network, which positions BCC well to capture demand even amidst inventory and pricing pressures.
- Strong General Line Performance and Inventory Management: Q&A responses highlighted that the general line segment performed solidly with increased warehouse sales and effective inventory strategies, underscoring market resilience.
- Operational Flexibility and Efficient Production Alignment: Leadership detailed tactical adjustments—such as shifting veneer to plywood production—to maintain strong operating rates and adapt to demand fluctuations, demonstrating operational resilience amid market challenges.
- Competitive Pricing Pressure: Q&A responses highlighted expected sequential declines in EWP pricing and challenges in maintaining margins amid destocking efforts, indicating that ongoing pricing pressure could further erode profitability.
- Labor Disruption Risk: The ongoing strike at the Billings facility, involving 19 union employees, poses an operational disruption risk if it escalates beyond its currently limited scope.
- Demand Weakness and Inventory Adjustments: Discussions about lower operating rates and shifts in production due to destocking measures suggest that ongoing demand softness may force further production adjustments, impacting revenue growth.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Wood Products EBITDA Estimates | Q3 2025 | no prior guidance | $20,000,000 to $30,000,000 | no prior guidance |
BMD EBITDA | Q3 2025 | no prior guidance | Approximately 3% below Q2 sales pace of $25,200,000 per day | no prior guidance |
Market Conditions | Q3 2025 | no prior guidance | Headwinds for residential construction activity; uncertainties from trade and tariff policy changes | no prior guidance |
EWP Volumes | Q2 2025 | Expected to increase by mid- to high single digits sequentially | no current guidance | no current guidance |
EWP Pricing | Q2 2025 | Anticipated to experience low single-digit sequential declines | no current guidance | no current guidance |
Plywood Volumes | Q2 2025 | Expected to see mid-single-digit sequential volume increases | no current guidance | no current guidance |
Plywood Pricing | Q2 2025 | Quarter-to-date realizations consistent with the Q1 average | no current guidance | no current guidance |
Impact of Oakdale Facility | Q2 2025 | Expected negative impact of approximately $5 million | no current guidance | no current guidance |
BMD Daily Sales Pace | Q2 2025 | April 2025 daily sales pace was 13% higher than the Q1 pace of $22.3M per day, reaching $25M per day; potential Q2 revenue $1.6B | no current guidance | no current guidance |
Gross Margin Percentage for BMD | Q2 2025 | Expected to improve with EBITDA margins returning to the mid-5% range | no current guidance | no current guidance |
Depreciation and Amortization | Q2 2025 | Expected to be approximately $38 million | no current guidance | no current guidance |
Effective Tax Rate | Q2 2025 | Estimated at 26% | no current guidance | no current guidance |
Shareholder Returns | Q2 2025 | $0.21 per share quarterly dividend | no current guidance | no current guidance |
Capital Expenditures | FY 2025 | Projected to be between $220 million and $240 million | no current guidance | no current guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
EWP Dynamics | Q1 2025, Q4 2024 and Q3 2024 discussions highlighted EWP competitive advantages, modest price erosion and volume shifts (e.g., LVL and I‑joists pricing declines, sequential price adjustments, and stable operating rates) | Q2 2025 emphasized LVL resiliency with volumes up 818% and noted mixed performance for I‑joists with sequential improvements despite pricing pressures | The focus on EWP remains consistent with continued strong LVL performance but persistent competitive and pricing pressures affecting I‑joists |
Two‑Step Distribution & Inventory Management | Q1 2025 and Q3 2024 stressed the importance of the two‑step distribution model and inventory management for channel support and working capital management; Q4 2024 did not mention this topic | Q2 2025 re‐emphasized the model’s value in “distribution‑friendly” environments and highlighted importance of inventory visibility and sales out-of‑warehouse | The emphasis remains steady across periods with consistent operational advantages even though it was not discussed in Q4 2024, reinforcing its strategic importance |
Margin Performance & Pricing Challenges | Previous periods (Q1, Q3, Q4 2024) described mixed margins – with BMD margins generally improving through incremental gross margin gains despite commodity and EWP pricing erosion, while Wood Products experienced significant EBITDA declines | Q2 2025 reports showed a 15.4% BMD gross margin (up 60 bps YoY) and modest rebounds in EBITDA margins despite continued price declines in commodity and EWP segments | Recurring discussions reveal that margin sustainability is under pressure from competitive pricing yet benefits from strong BMD execution; sentiment is cautiously optimistic |
Demand Trends & Inventory Adjustments | Q1 and Q4 2024 described declining housing starts, seasonal sales fluctuations, builder destocking and increased inventories, while Q3 2024 noted modest housing improvements and seasonal slowdowns | Q2 2025 noted an 18% decline in housing starts YoY but also sequential sales growth (15% increase) and strategic inventory adjustments focused on distribution channels | Market dynamics remain volatile with seasonal and demand‐side challenges; however, adaptive inventory strategies are maintained to address ongoing uncertainty |
Competitive Pressures in EWP & General Products | Across Q1, Q3, and Q4 2024 there was emphasis on intense competition within EWP (modest price erosion and internal market rivalry) and competitive pressures in general line product markets | Q2 2025 reaffirmed competitive pressures through significant sequential declines (32%) in LVL/I‑joist pricing and persistent challenges in the general building products market, balanced by strong distribution capabilities | Competitive challenges remain a key recurring theme, with similar pricing pressures across periods although defensive distribution strengths consistently help mitigate impacts |
Operational Flexibility & Adaptive Production | Q1 2025 and Q3 2024 highlighted the ability to shift veneer production to plywood (especially during the Oakdale outage and for capacity adjustments) and stressed capacity utilization adaptability | Q2 2025 reiterated flexible production strategies, including shifting veneer to plywood production when EWP demand is weak, and aligning downtime with holidays for minimal disruption | The company’s adaptive production capacity remains a stable strategic asset, with continuity in flexibility initiatives across periods |
Labor Disruption & Facility‑Specific Risks | Q1 2025 and Q4 2024 noted planned outages (notably at Oakdale) and facility risks from modernization projects, while Q3 2024 discussed labor flexibility without specific strikes | Q2 2025 introduced a localized strike at the Billings facility and mentioned planned outages (e.g. Kettle Falls), though impacts are contained and managed | While facility-specific risks persist, the emergence of a strike in Q2 adds a new caveat; overall, risks remain manageable through continuity protocols |
Capital Allocation Focus | Q1, Q3, and Q4 2024 detailed active share repurchases, regular dividends, significant capital spending, and selective M&A opportunities supporting balanced growth | Q2 2025 maintained the balanced approach with ongoing share repurchases, dividend increases, and capital investments (e.g. facility upgrades and distribution expansions) | The strategic focus on capital allocation is consistent over time with no evidence that priorities (share repurchases, dividends, M&A, organic growth) have faded |
Tariff Impacts & International Trade | Q4 2024 and Q1 2025 discussed tariff uncertainty, modest impacts on costs, and the preparedness to pass through cost increases; Q3 2024 did not mention this theme | Q2 2025 briefly touched on trade uncertainties creating forward pricing volatility for commodity products, without major operational disruption | Tariff and trade themes emerged earlier and remain on the radar at a modest level in Q2, suggesting a receded but monitored impact |
BMD Sales Momentum & Revenue Projections | Q1, Q3 and Q4 2024 provided detailed commentary on daily sales pace improvements, seasonal adjustments and revenue projections for BMD, emphasizing acquisitions and increasing SKU intensity | Q2 2025 provided less explicit commentary on emerging BMD sales momentum, focusing more on detailed segment financials rather than forward projections | While previous periods stressed a growth outlook in BMD driven by operational and acquisition strategies, the focus in Q2 is more on maintaining current performance, indicating a slight softening of the emerging momentum narrative |
Investor Sentiment on EWP Performance & Margin Sustainability | Q3 2024 and Q4 2024 emphasized bullish long‑term views supported by resilient LVL demand and stable margins amidst competitive pressures, while Q1 2025 expressed caution due to pricing and volume declines | Q2 2025 maintained an optimistic tone regarding strong BMD margins and robust LVL performance, although acknowledging ongoing pricing pressures in EWP segments | Overall investor sentiment remains cautiously optimistic with long‑term bullishness on EWP stability and margin sustainability, tempered by current pricing challenges |
Economic Uncertainty & Builder Affordability | Q1 2025, Q3 2024 and Q4 2024 highlighted affordability challenges due to high home prices, elevated mortgage rates and macroeconomic uncertainty, leading to moderated housing starts and cautious builder sentiment | Q2 2025 continued to note constrained underlying demand and affordability concerns affecting housing starts, but also reported sequential sales growth driven by seasonal recovery and improved distribution | Persistent economic uncertainty and affordability concerns remain a headwind in the near term, while long‑term structural demand drivers offer optimism; sentiment remains cautious yet balanced |
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Operating Rates
Q: How are operating rates and EWP pricing trending?
A: Management noted they planned to run full early in Q2 but ended with low 80% operating rates for EWP and around 70% for plywood, with pricing expected to decline in the low-to-mid single digits sequentially, reflecting market destocking and demand variability. -
Cost Efficiency
Q: How is production aligning to control costs?
A: They are shifting production from veneer to plywood when needed and expect improved operating rates at Oakdale and Kettle Falls to reduce manufacturing costs and boost margins. -
EWP Destock
Q: What is the impact of EWP destock activity?
A: Management explained that customer ordering patterns are shifting from mill direct orders to distribution, suggesting noticeable destocking in Q3 that could extend into Q4 as builders adjust their purchasing strategies. -
Strike Impact
Q: What is the update on the Billings strike?
A: They reported that 19 union representatives at one of 38 BMD locations initiated a strike that is being managed with continuity protocols, so no material impact is expected. -
General Line Performance
Q: How is the general line part of the business faring?
A: Management highlighted that despite market pressures, general line sales have held strong with robust distribution support as customers lean on inventories amid uncertainty. -
EWP Competition
Q: How does EWP fare competitively?
A: They remain confident in EWP’s competitive position, noting that product advantages like reduced cycle times and strong distribution support help maintain market share even as competitive pressures persist.
Research analysts covering BOISE CASCADE.