Louisiana-Pacific Corp. (LP) announced today that its net loss deepened in the third quarter to $111 million on sales of $390 million. That pushed net losses for the year to $238.3 million.
"The declining activity in the housing market, in both new construction and repair and remodeling, caused lower demand for our products at very challenging price levels," Rick Frost, LP's CEO, said in a statement. "Business fell off even harder in September and remains basically paralyzed as a result of the banking and financial market crisis." Later, speaking to analysts, he said the fourth quarter looks likely to be remembered as "an anticlimactic ending to a very poor year."
Continuing operations accounted for $100 million of the loss in the July-September period, while losses involving discontinued operations added another $11 million. During the quarter, LP indefinitely closed OSB mills in Athens, Ga., and Chambord, Quebec, and has delayed the re-start of its newly constructed OSB mill in Clarke County, Ala.
The latest losses compare with a $67.8 million net loss and $54.6 million loss from continuing operations in the third quarter of 2007. Net sales were down 17.5% from $472.5 million in July-September 2007. For the first nine months of this year, net sales have fallen 15.2% to $1.13 billion from $1.33 billion.
Looking at LP's financials by major product group:
- OSB sales fell 22% from 2007's third quarter to reach $178 million, yielding a loss of $28 million. Production volume dropped 24% but the price of those goods increased 5%.
- Siding sales slipped 4% to $111 million, cutting profits 58% to $5 million. Volume for the SmartSide project was unchanged on a 2% rise in price, while LP's Canexel product had a 20% drop in volume and a 6% decline in sales.
- Sales of engineered wood products sank 31% from the year-ago period to $63 million as the company swung to a $4 million loss from an $11 million profit in 2007. The volume of I-Joist sales shrank 30% on a 2% drop in sales, while the volume of LVL/LSL products receded 22% on a 9% fall in sales.
LP's balance sheet saw a sharp drop in total cash and investments to $441 million as of Sept. 30 compared with $746 million on Dec. 31, 2007. Working capital also shrank to $384 million from $587 million.
During a conference call with analysts, Frost said preserving cash and reducing operating costs are priorities as the company shrinks to meet market realities. "Most of our mills will be down more than they will be run in Q4," he said.
Frost said he's managing LP in what he called a "bottom-up mode," which he defined as "doing just what is necessary to reach the rebound." He said he has eliminated four officer-level positions, reduced research and development spending, "reprioritized" marketing and sales expenditures and now is in the process of cutting the ranks of salaried employees "significantly."