Louisiana-pacific Corporation · NYSE:LPX
Louisiana-pacific — Goldman Sachs Basic Industries Conference 2005
26 slides from Louisiana-pacific's conference presentation, May 16, 2005
Slide 1: Louisiana-Pacific Corporation Investor Presentation
Louisiana - Pacific Corporation Investor Presentation Goldman Basic Industries Conference May 16th, 2005
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains statements concerning Louisiana-Pacific Corporation’s (LP) future results and performance that are forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The accuracy of such statements is subject
Slide 3: Market Outlook – Demand
Market Outlook – Demand • New construction housing demand: – Positive trends and demographics including: household formations, immigration, low interest rates – Sustainable at 1.85 – 1.95 million starts per year (2005-2015) Source: The State of the Nation’s Housing – 2004, Joint Center for Housing S
Slide 4: Home Building Demand Indicators
Home Building Demand Indicators Housing Starts (single and multi-family) JCH 3.0 Actual Demand 1995 - 2004 New Housing Starts (mm) 2.5 Rolling 5 year Average Average 2.0 1.5 1.0 0.5 0.0 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: US Department of Commerce, RISIand the State of the
Slide 5: Marketplace Dynamics – Customers
Marketplace Dynamics – Customers • Consolidation of customers and end-users will continue: – “Big boxes” … price pressure, margin compression, electronic business systems and demand for more services – Builders … consistent pricing, logistics support, ease of use – Pro dealers … price pressure, lock
Slide 6: LP's Newly Aligned Business Segments
LP’s Newly Aligned Business Segments OSB OSB Siding Siding Commodity SmartSide OSB siding panels Vinyl siding Tech Shield Exterior Hardboard Flooring siding Engineered Wood Other OtherBuilding Building Products Products Products Laminated Composite Decking veneer lumber Moulding
Slide 7: Business Characteristics
Business Characteristics • Commodity – OSB: – Primarily new construction – Price volatility – Traded daily – Cost is king – Demand / capacity management critical • Specialty – EWP, Siding, Other: – Relatively stable pricing – “Demand creation” versus “trading” – Ongoing new product development to sa
Slide 8: Oriented Strand Board (OSB)
Oriented Strand Board (OSB) • #1 North American OSB producer with about 25% market share … about 15% share of structural panels • Best geographic coverage allows for lowest delivered cost • Growth through existing mill investments and new mills Mill capacities: 13 mills – 5.8 billion square feet 7
Slide 9: OSB Investment Priorities
OSB Investment Priorities • Brownfield plan - $250 million investment in existing mills • Greenfield “opportunities: – Canada – British Columbia … Canfor-LP JV (800 mmsf) under construction … startup Q4 2005 – Alabama … site selected and planning underway for a 700 mmsf mill with start-up in late 20
Slide 10: OSB – Build or Buy?
OSB – Build or Buy? • Why Build? • Why Buy (Consolidate)? – Least expensive – Grow market share alternative – Buy existing customer – Cost leaders base – Leading edge technology – Buy knowledge – Log & markets: If you – Captures raw materials don’t, someone else will – Immediate contribution (voids
Slide 11: North America Structural Panel Manufacturers
North America Structural Panel Manufacturers 2004 GP Other 18% 38% LP 15% WY 7% 14% Ainsworth NBD 8% Source: RISI 10
Slide 12: OSB Market Share
OSB Market Share 1999 2004 Forex LP Other 25% 20% LP Other Huber WY 6% 15% 15% IP WY 11% Norbord – 8% 13% Potlatch Ainsworth 6% GP Huber – 6% Norbord GP – 9% Ainsworth Source: RISI 11
Slide 13: Structural Panel Demand
Structural Panel Demand North America Structural Panel Demand MMSF 50 100% 45 90% 40 35 80% 30 70% 25 20 60% 15 50% 10 OSB Plywood OSB Share 40% 5 0 30% 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: RISI 12
Slide 14: Favorable OSB Supply Outlook
Favorable OSB Supply Outlook Net Additions and OSB Prices – Structural Panels Actual Forecast 30% $400 25% $350 $300 OSB Prices ($/msf - 7/16" basis 20% % of Total Capacity $250 15% $200 10% $150 5% $100 0% $50 -5% 1994 1996 1998 2000 2002 2004 2006 2008 $0 New Capacity as % of Total Capacity OSB Pr
Slide 15: Engineered Wood Products
Engineered Wood Products • #1 position in solid-sawn I-Joist • #3 position in LVL / I-Joist • Steady demand growth • Aligned and supportive customer base Mill capacities: LVL - 10.6 million cubic feet I-Joist - 106 million lineal feet - 60 million lineal feet (Abitibi JV) 14
Slide 16: EWP Demand Growth
EWP Demand Growth I joist - Billion Linear Ft. LVL - Million Cubic Ft. 110 1.4 100 90 1.2 80 1.0 70 60 .8 50 40 .6 30 .4 20 '98 '99 '00'01 '02 '03'04 '05 '06'07 '08 '09'10 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 Source: APA-The Engineered Wood Association 15
Slide 17: EWP Strategies
EWP Strategies • Significantly lower costs … progress on conversion but raw materials key • Maintain position as “supplier of choice” to the independent 2-step distribution channel • Provide growth opportunities to channel partners: – Additional solid-sawn I-Joist capacity – Searching for “bolt-on”
Slide 18: Siding
Siding • Smart Side product line exhibiting strong growth: – Family of products – lap, panel, trim, fascia, soffit – Lower installed cost than Fiber Cement, Aluminum, and Wood – Curb appeal / outstanding performance – Beginning Hayward conversion • Hardboard – lowest cost and broadest product line i
Slide 19: Exterior Siding Market – Market Share by Category – 2003
Exterior Siding Market – Market Share by Category – 2003 SmartSide 4.3% Hardboard 6.4% Vinyl 42.0% Fiber Cement 16.6% Other 4.6% Plywood 3.9% Natural Wood 2.9% Stucco Brick 9.8% 9.3% Total Siding Demand in North America in 2003 = 10 billion square feet LP currently participates in siding segments th
Slide 20: Other Building Products
Other Building Products • Mouldings – profitable / growing business, alliance partner opportunities • Outdoor Living – early stage, excellent decking products (good/better/best strategy) • Chile – small operation supporting early South American growth • U.S. GreenFiber – cellulose insulation joint v
Slide 21: Composite Growth Potential Exists
Composite Growth Potential Exists Overall Decking 3.5 BLF Composites 368 MLF AERT 100% 6% EPOCH Composites 5% 90% Other Fiberon 28% 80% 5% 70% LP 60% 11% 50% Pressure 40% Treated TimberTech 30% 11% 20% 10% TREX 34% 0% Source 2004 Principia, LP 20 1
Slide 22: What About the Cash?
What About the Cash? • Build appropriate cash reserves and fund debt retirement: – Operating cash balances maintained at $250 – 300 million – Retire 2005 maturing debt and make the call on remaining 2008 notes …$180 million • Returning cash to shareholders via appropriate dividend • Invest in existi
Slide 23: Conclusions
Conclusions LP has ... • Leadership position in OSB with exceptional geographic distribution • Specialty businesses with sales > $1 billion • A focused business model • Continuing drive to be the low cost producer • Growth opportunities in OSB (commodity and specialty), EWP and specialty exterior pr
Slide 24: Q1 Highlights
Q1 Highlights • Net Sales $680 million • Net Income $102 million … EPS $0.91 • All segments profitable • OSB pricing up 11% from Q4, down 36% from Q1 04 • EWP sales increased 37% • Siding … poor weather and operational issues • Spent $44 million in capital (includes JVs) 23
Slide 25: Annual Meeting Highlights
Annual Meeting Highlights • Increased dividend 25% to $0.125/share per quarter • Sold lumber mill in Gwinn, MI • Reelected E. Gary Cook and Paul W. Hansen • Announced retirement of Lee Simpson from the board • Announced appointment of John C. Kerr to the board 24
Slide 26: Questions
BUILDING PRODUCTS Questions 25 BUILD WITH US*
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