Louisiana-Pacific Corp. is restructuring its plastic building products group and said it will break ground on two major facility expansions by the first half of 2004.
The Portland, Ore., building products conglomerate will embark on expansions at extrusion sites in Selma, Ala., and Meridian, Idaho, as it restructures its plastics building products segment into a new category called outdoor living products. Its vinyl siding segment has been realigned under an exterior siding group, which includes the firm's wood siding products. Its plastics division operates as L-P Specialty Products, based in Huntersville, N.C.
``We anticipate breaking ground on Meridian in the fourth quarter and for Selma, the first or second quarter of 2004,'' said John Sooker, newly named business director for outdoor living products. Sooker was business director for exterior plastics.
``We're really looking to build upon a platform,'' he said in a Sept. 18 telephone interview. ``Decking is an entree to that.''
Officials see the outdoor living products category growing to $400 million in the next three to five years for Louisiana-Pacific alone. The publicly held firm has restructured during the past year to focus on segments that will provide growth, profit and a good cost position, officials said.
``We are nearing the end of that restructuring process, including asset sales and product line divestitures, along with debt reduction,'' said Curt Stevens, chief financial officer and executive vice president of administration, during a presentation at UBS Investment Bank's Global Paper & Forest Products Conference, held Sept. 17-18 in New York. ``The result of that restructuring is that we have a very focused business model on four segments. The critical elements in those four segments that remain are that we have scale in those segments, we have a low-cost position and a path to a lower-cost position and we have opportunities for growth.''
The firm's core business is oriented strand board, but it's looking toward major growth in outdoor living products.
``When I talk about outdoor living products, this is the plastic composite market,'' Stevens said. ``Today, it's about a $600 million market. It's expected to triple by the end of the decade. About half of that is decking. It's also siding, railings, windows and the other category would include fencing, so it's a very large market opportunity for these products.''
In addition, Stevens said the firm has a profitable and growing extruded moldings business. That product is manufactured in Middlebury, Ind. Its vinyl siding is extruded in Acton, Ontario, and Holly Springs, Miss.
``We have an early-stage composite decking program that we believe puts us in the No. 3 position, but growing there,'' Stevens said of its Weatherbest product line. ``We have a product line that gives us a good/better/best strategy, so we are in the home center channels as well as the independent distributor channels.''
Consolidation in distribution channels demands that producers deliver multiple product lines, officials said.
``The big builders, the top 20 builders, are now over 20 percent of the market,'' Stevens said. ``The big boxes continue to grow at one new store a day. When they open up a new store, a Menard's, a Lowe's or a Home Depot, there's $80 million worth of inventory that goes into that box. At the same time, consumption of our overall building products goes up.
``We believe that there will be continued strong demand for building products coming from both the repair/remodel and the new housing markets,'' Stevens said. ``As we look at the forecast through the next three to five years, we see things staying in line with the 1.5 million starts and on the repair/remodel side, we see that growing at 4-6 percent per year.''
On the same day that Stevens gave his presentation, the Washington-based National Association of Home Builders reported that single-family housing starts clocked in at a seasonally adjusted rate of 1.48 million for August.
Analysts from equity research firm D.A. Davidson & Co. in Denver said L-P's yearlong divestiture program will reduce net debt toward zero.
``The company is enjoying record-setting prices for its key commodity, oriented strand board, and should therefore generate the best earnings and cash flow in years,'' wrote analyst Steven Chercover in an Aug. 18 report.
Despite those fundamentals, D.A. Davidson downgraded L-P stock from buy to neutral in the report.
``The decision to downgrade L-P was particularly difficult, since we believe that the company has both the best balance sheet and best product-specific fundamentals in our coverage universe,'' Chercover said. ``Why cut the rating at this point? Despite the significant progress the company has made, we still expect L-P to be perceived and perform as a cyclical and seasonal business.''
In Plastics News' 2003 ranking of pipe, profile and tubing makers, the firm reported $195 million in profile extrusion sales, with 350 employees and 36 extrusion lines.