LPX Q1 2025: ExpertFinish Record Book Fuels Siding Growth, Margin Gain
- Robust Siding Order File & Product Innovation: The Q&A highlighted a highly resilient order book for siding, driven by strong demand in both repair/remodel and new construction channels along with record-breaking ExpertFinish results, which supports the sustainability of future revenue growth.
- Margin Improvement Potential: Management indicated that while ExpertFinish margins currently lag slightly, proactive pricing initiatives and product innovation are expected to narrow the margin gap, leading to overall operating leverage improvement in the siding segment.
- Diverse Revenue Channels & Market Share Gains: With approximately two-thirds of the siding business deriving from non-new construction sources and significant progress in capturing market share among large builders, the company is positioned to decouple from housing market volatility, paving the way for consistent, long-term growth.
- Tariff Uncertainty Impact: The discussion highlighted that if current tariff conditions persist, Siding could face an estimated $12 million EBITDA headwind, creating margin pressure and uncertainty in cost forecasting.
- OSB Market Vulnerabilities: Falling OSB prices amid increased capacity and inflationary pressures, coupled with a tougher demand environment for structural solutions due to affordability concerns, may continue to pressure margins in the OSB segment.
- ExpertFinish Margin Drag: Despite record volume and revenue in ExpertFinish, margins remain below other Siding segments, posing a risk if pricing or mix dynamics worsen.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | 0% (flat at $724 million) | Q1 2025 revenue remained unchanged compared to Q1 2024, reflecting a normalization after the strong FY24 performance driven by higher volumes and prices in the siding and OSB segments; the earlier gains did not persist into Q1 2025, leading to offsetting effects across segments. |
Net Income | –16% (dropped from $108 million to $91 million) | Net income fell by about 16% in Q1 2025. This decline is likely due to the absence of nonrecurring benefits (such as the OSB patent-related claim non-recurrence and business exit credits) that bolstered FY24, combined with potential cost pressures impacting margins in the current quarter. |
Gross Profit | Declined from $214 million to $197 million; margin fell from 29.6% to 27% | Gross profit and margins declined in Q1 2025 despite prior period improvements. The favorable pricing and product mix that boosted FY24 gross profit were less effective in Q1 2025, possibly due to rising input costs or competitive pressure on pricing, reducing the overall margin. |
Operating Cash Flow | –39% (fell from $105 million to $64 million) | Operating cash flow dropped sharply by about 39% in Q1 2025. This reduction was driven by lower net income and adverse working capital changes, along with increased outflows in financing activities, contrasting with the robust performance seen in FY24. |
Cash and Cash Equivalents | Increased modestly from $244 million to $256 million | Cash levels improved slightly in Q1 2025 despite the operating cash flow decline. The modest increase is attributed to favorable exchange rate effects and prudent liquidity management, which helped offset higher cash outflows from other financing and investing activities. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Siding Revenue | FY 2025 | $1.65B to $1.7B | $1.7B | raised |
Siding EBITDA | FY 2025 | $425M to $450M | $425M to $435M | lowered |
Tariff Impact on EBITDA | FY 2025 | no prior guidance | $12M headwind | no prior guidance |
OSB EBITDA | FY 2025 | no prior guidance | $110M to $120M | no prior guidance |
Siding Revenue Growth | Q2 2025 | no prior guidance | 9%–10% (yielding $445M to $455M) | no prior guidance |
Siding EBITDA Margin | Q2 2025 | no prior guidance | 26% | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q1 2025 | $390 million to $400 million | $724 million | Beat |
EBITDA | Q1 2025 | $95 million to $105 million | ~$155 million (derived as $120 million+ $35 million) | Beat |
EBITDA Margin | Q1 2025 | ~25% | ~21% (calculated from $724 millionAnd ~$155 million) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Siding Demand Growth & Order Book Resilience | Discussed consistently in Q2 2024 ( – ), Q3 2024 ( ) and Q4 2024 ( – ); emphasis was on volume growth, robust order files, and strong performance across segments. | Q1 2025 highlights record numbers, 11% YoY revenue growth with strong contributions from new products (e.g., ExpertFinish, shed market) and a resilient order book poised for record volume and revenue ( ). | Consistent strength with continued robust growth and expanding new product contributions. |
Product Innovation & Siding Technology Evolution | Addressed in Q2 2024 ( ), Q3 2024 ( ) and Q4 2024 ( – ) with focus on innovations in ExpertFinish and efficiencies in SmartSide. | Q1 2025 details new introductions (e.g., two-tone ExpertFinish Naturals), strong customer response, and strategic investments aimed at closing the margin gap for ExpertFinish and further differentiating SmartSide ( ). | Increasing emphasis on aesthetic innovation and margin improvement opportunities while building on established technology evolution. |
Margin Dynamics & Pricing Strategy | Q2 2024 ( ), Q3 2024 ( ) and Q4 2024 ( ) discussed sustainable margins, mix effects, and planned pricing increases with noted margin drag from ExpertFinish growth. | Q1 2025 reports a strong 26% EBITDA margin (27% excluding tariffs), acknowledges ExpertFinish’s current margin drag but expresses confidence in future parity, and notes the effects of a recent price increase ( ). | Steady margin expansion with cautious optimism on overcoming ExpertFinish margin drag and leveraging pricing initiatives. |
Capacity Expansion & Capital Investment Risks | Q2 2024 ( ), Q3 2024 ( ) and Q4 2024 ( – ) highlighted plans for significant capacity increases, parallel expansion projects, and associated capital investment risks with long lead times. | Q1 2025 states that recent capacity investments (e.g., Houlton expansion) will impact profits no earlier than 2027, with margin expansion expected in 2026 and conservative short‐term guidance amid inflation concerns ( ). | Ongoing heavy investments with clearly communicated long-term timelines and risk management, maintaining consistent strategic focus. |
Raw Material Inflation & Tariff/Cost Uncertainty | Q2 2024 mentioned a raw material tailwind ( ); Q3 2024 addressed tariff risks around MDI sourced from China ( ); Q4 2024 discussed inflation pressures of around $20 million and tariff uncertainties without specific numbers ( ). | Q1 2025 reflects that unidentified inflationary costs have not materialized, while tariff impacts ($2 million Q1, $12 million annualized if persistent) remain a cost challenge; pricing adjustments are in place ( ). | Persistent tariff risks remain while inflation fears are subsiding, leading to slightly more optimistic sentiment on material costs. |
OSB Market Vulnerabilities & Operating Rate Trends | Q2 2024 noted an 86% operating rate with price pressure concerns ( ); Q3 2024 discussed utilization in the high 70–80% range and potential impacts if US–Canada trade policies change ( ); Q4 2024 focused on commodity pricing sensitivity and efficiency improvements ( ). | Q1 2025 reports vulnerability due to tariff uncertainty, a weaker housing market affecting structural solutions, and overall price softness, but maintains long‑term bullishness on recovery ( ). | Consistent recognition of market vulnerabilities with ongoing efforts to optimize production and operate efficiently amid external headwinds. |
Sales & Marketing Channel Expansion with Key Partnerships | Q2 2024 ( – ) emphasized BuilderSeries and expanding partnerships with Home Depot and large builders; Q3 2024 ( ) and Q4 2024 ( – ) detailed strengthening relationships with big builders and contractor training initiatives. | Q1 2025 accentuates aggressive expansion into large-builder segments beyond traditional small builders, highlighting key partnerships and significant opportunities with the top 10–50 builders to increase market share ( ). | Consistent multi-channel expansion with a sharper focus on securing larger, high‐value partnerships and leveraging contractor networks. |
Competitive Pressures from Alternative Siding Producers | Q3 2024 ( ) acknowledged competition from fiber cement and vinyl siding with emphasis on LP’s superior value proposition; Q2 2024 and Q4 2024 had little or no mention. | Q1 2025 addresses competitive pressures by reaffirming LP’s strong market share gains, high value proposition, and confidence in its competitive positioning, particularly in repair & remodel and new construction segments ( ). | Steady acknowledgment of competitive pressures with reassurance based on product quality and market share improvements, maintaining positive sentiment. |
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Siding Margin Outlook
Q: How will Siding margins evolve in H2/2026?
A: Management noted that while Q2 guidance was conservatively set due to inflation concerns that did not materialize, they expect margin expansion in 2026 as new capacity investments won’t impact profits until later. -
ExpertFinish Margins
Q: How are ExpertFinish margins trending?
A: They reported record ExpertFinish sales with excellent pricing, though margins remain a slight drag; management is optimistic about eventually bringing them close to parity with overall Siding margins. -
Houlton Returns
Q: What is the return profile for Houlton expansion?
A: The Houlton project continues to offer strong returns well above the cost of capital, even though most of the capital commitment remains open and subject to further market developments. -
Siding Pricing Mix
Q: How do mix and tariffs affect Siding pricing?
A: A price increase effective January has already begun to lift net pricing; mix effects such as stronger ExpertFinish sales are expected to yield a modest year-over-year pricing uplift in Q2, offsetting tariff impacts. -
OSB Capacity Impact
Q: How does rising capacity impact OSB pricing?
A: Increased OSB capacity and softer commodity prices have pressured margins, with management noting that while current pricing is weak, the long‐term fundamentals, particularly in structural solutions, remain intact. -
Order File Drivers
Q: What drove the strong order file performance?
A: The robust order file was primarily driven by solid shed demand and high volumes from ExpertFinish as well as ongoing strength in the repair and remodel segment. -
Marketing’s Impact
Q: Is marketing fueling order file strength?
A: Long-term investments in repair and remodel, alongside product innovation, have helped generate a healthy order file, particularly in channels like DIY and home centers. -
Inventories Status
Q: What is the current inventory situation?
A: Inventories are reported as normal—with home centers reducing levels due to strong sell-through and seasonal channel inventories maintained at appropriate levels thanks to prompt deliveries. -
Siding Decoupling
Q: Is Siding decoupling from housing starts?
A: Yes, roughly two-thirds of Siding volume now stems from repair and remodel and other non-new construction segments, reducing its direct dependence on new housing starts. -
OSB Value Trends
Q: How are OSB trends evolving amid affordability?
A: With builders focusing on affordability, there’s been a shift toward commodity OSB products, while sales of higher value structural solutions have faced headwinds. -
Competitor Decking Deal
Q: Does the competitor’s decking deal affect LPX?
A: Management expressed confidence in their market position, stating that the decking deal poses no new risk to their Siding business, given their strong quality and growth trajectory. -
New Resi Large Builders
Q: What progress is seen with large builder market share?
A: Gains among large builders occur in chunky, deal-by-deal increments, but overall market share is growing as LPX secures larger programs over time. -
New Resi Channel
Q: How is the new residential channel performing?
A: Growth in the new construction channel is emerging gradually on a regional basis, with steady progress despite some variability across programs. -
Decking Synergy
Q: Is there a plan to pursue decking synergy?
A: Management confirmed that they are not actively pursuing decking synergy; their focus remains on scaling their core Siding and OSB businesses. -
Merger Impact
Q: Can a competitor merger boost market share?
A: While a competitor merger may create some market share opportunities, management did not provide specific forecasts and remains focused on organic growth. -
Section 232 Impact
Q: Will Section 232 affect OSB or Siding?
A: Management sees no expected impact from Section 232 investigations on either the OSB or Siding segments. -
Shed Demand Sustainability
Q: Is the recovery in shed demand sustainable?
A: Management believes the recovery in shed orders reflects a genuine, sustainable trend driven by increased demand for extra space amid a volatile housing market.
Research analysts covering LOUISIANA-PACIFIC.