Building products firm Louisiana-Pacific Corp. of Nashville, Tenn., soon will have a new leader who plans to act as a consolidator in the plastic building products sector.
``Two years ago, it was a $600 million market for plastic decking and railing and windows and doors and fence,'' said Rick Frost, who will become chief executive officer Nov. 1. ``We project that by the end of this decade, it will be a $1.8 billion market. So the opportunity is quite large. But there are too many players.''
Current CEO Mark Suwyn will cede his title to Frost, the company's executive vice president of commodity products, procurement and engineering. Frost provided his outlook for the company and the building-products industry at the annual Global Paper and Forest Products Conference, put on Sept. 22 by UBS Investment Bank in New York.
In his role as CEO, Suwyn saw the company through a restructuring, moving it from a focus on forest products to a company diversified in four segments. Its Specialty Products division includes vinyl siding, interior moldings and exterior products like decking and railing.
``We have completed the guts of our restructuring,'' Frost told attendees. ``Our retained businesses have scale, and either they are low-cost producers, or we think we have the opportunity to make them so and provide us opportunities for growth.''
In the vinyl segment, Frost said LP needs to gain more access to the market through the one-step, manufacturer-to-contractor distribution channel.
``We have a sales force that's out working on that right now,'' he said. ``And we think we have better logistics capabilities than several of our competitors. But in vinyl, we are not a low-cost producer. We are having to make some decisions right now on what we can do to get ourselves in a better cost position, because you're not going to win in vinyl if you can't reduce your costs.''
He did not elaborate on what those decisions might entail. For its outdoor living products, LP's goal is to establish a recognized brand and develop and maintain access to large home centers.
``People are making this stuff differently. There are actually about 35 players in the industry right now. ... It's a new, emerging business and it's going to grow rapidly, and a couple people have to win.''
Builders themselves also are consolidating. The top 10 in the United States now build more than 20 percent of the houses. In 10 years, LP predicts that will rise to more than 40 percent. LP plans to invest in its own facilities, Frost said, and will make appropriate capacity additions.
``We are looking at acquisitions,'' he said. ``But as we've said ... we will do this extremely deliberately, and there is a right time and a right price to make acquisitions, and we will exhibit great diligence in terms of what we buy or what we don't buy.''
At the end of its second quarter, the publicly traded firm had working capital of $1.2 billion and its cash exceeded its debt by about $700 million.