Louisiana-Pacific Corporation — Earnings Call Q3 2026

Operator: Good day, and thank you for standing by. Welcome to Q3 26 Louisiana Pacific Corporation Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bob Hopkins, Treasurer of Louisiana Pacific Corporation. Please go ahead. Bob Hopkins: Thank you, operator, and good morning, everyone. Thank you for joining us to discuss LP Building Solutions results for the third quarter of 26. And our updated guidance for the remainder of the year. My name is Bob Hopkins, LP's Treasurer. Joining me this morning are Jason Ringblom, our Chief Executive Officer and Aaron Howald, our Chief Financial Officer. Following these prepared remarks, we will be happy to take a round of questions. During today's call, we will reference a presentation that is available on LP's Investor Relations website at investor.lpcorp.com. Our 8-K filing, earnings press release and other materials are also available there. And as always, today's discussion and materials contain forward looking statements and non GAAP financial metrics. As described on Slides 2 and 3 of the earnings presentation. The appendix of that presentation also contains reconciliations, which are further supplemented by this morning's 8 k filing. Rather than reading those materials, I will incorporate them here by reference. And with that, I will turn the call over to Aaron. Jason Ringblom: Thanks, Bob. Good morning, everyone, and welcome to LP's third quarter earnings call. We are glad you could join us. As expected, LP Siding business returned to year over year growth in the third quarter. Siding volumes grew by 2% and net sales grew by 7%, setting a new record for siding net sales and exceeding the high end of our guided range. We delivered that growth despite a 2% decline in single family housing starts continuing our long term track record of gaining share in the markets we serve. Higher starting volumes and prices generated modest EBITDA growth in Siding despite a very challenging backdrop particularly for raw materials and freight inflation. In OSB, we continue to execute our strategy and manage our capacity with discipline. Evidenced by our utilization rate of 81% in the quarter and announced curtailments at our Jasper and Maniwaki mills. Slide 5 of the presentation highlights our financial performance for the quarter. LP generated $691 million in net sales an increase of $28 million compared to the third quarter of last year, driven by siding growth. Total EBITDA was $82 million which was flat with the prior year despite significant inflationary headwinds. LP generated $112 million in operating cash flow in the quarter of which we invested $56 million in capital expenditures to maintain our assets and support growing demand for SmartSide and Expert Finish. And then finally, we returned $21 million to shareholders through dividends. Before I turn the call over to Jason for a closer look at LP's financial results, I would like to highlight a few of the accomplishments and recognition our teams earned during the quarter. Safety is a core value at LP, and I am extremely proud to share that LP earned the engineer Wood Association's safest company award for the 4th consecutive year. We continued this momentum for safety in the third quarter, achieving a total incident rate or TIR of just 0.4. I am particularly proud to say that LPs expert finish facility in Roaring River, North Carolina achieved the incredible milestone of 1 million work hours without a recordable incident. Safety is foundational to our culture here at LP, and these achievements are the result of our focus on continuous improvement. With the ultimate goal of creating an injury free workplace each and every day. With that said, our people are fundamental to LP's success. Great people strengthen our culture, drive innovation, help us deliver strong results. that is why we work hard to attract and retain exceptional talent and make LP a place where we can all be our best. During the third quarter, we were proud to be recognized by Newsweek as 1 of America's greatest companies. The recognition considers financial performance, innovation, workplace culture, and environmental sustainability. 1 of our most important achievements this quarter is just beginning to show its impact. And we believe it positions LP exceptionally well for continued growth and share gains. As we announced in early October, we have significantly transformed LP's siding distribution network. Expanding our market presence, product support, and geographic reach. Under the new model, specialty building products, will provide expanded nationwide coverage for SmartSide and Expert Finish serving professional dealers, 1-step distributors, and retail customers, complemented by distribution partners and designated regional markets. Those include existing LP partners, BlueLinx, Coastal Forest Products, J. M. Thomas Forest Products, Minot Builders Supply, Sherwood Lumber Supply, Tyga Building Products, Wausau Supply Company, Weyerhaeuser, and WS Building Materials. Many of whom will grow their coverage at SmartSide. We are also pleased to welcome new partners, Forest Products Supply Company and Palmer Donovan. These distributors will carry the full line of LP SmartSide products. Including expert finish in the naturals collection, and transition away from competing siding products. Our SmartSide distribution partners share LP focus on long term growth. Customer service, and market development. They bring dedicated sales teams sophisticated logistics networks, and a shared passion for providing installers, and homeowners with the best siding and trim products in the industry. And finally, further demonstrating our siding growth and share gains with America's largest homebuilders, Taylor Morrison named LP its new strategic vendor of the year. We are proud of this recognition and most importantly, proud of our growing partnership with Taylor Morrison and their trust in LP SmartSide and OSB products. After a difficult start to the year, SmartSide is back on a growth footing. And we intend to stay here. As Aaron will detail in a few minutes, anticipate year over year growth in Siding volume, and revenue in the fourth quarter. And while we are not providing guidance for 2027 yet, we believe we are set up for a strong start to the year in all siding markets segments. Our return to growth reflects the strength of our strategic relationships with distributors and homebuilders, the outstanding quality, durability, and aesthetics of SmartSide siding and trim, and most importantly, the hard work of our incredible team. To everyone across LP who helps us execute our satin growth strategy, Thank you. I am grateful for all that you do and very excited about what we can achieve together. And with that, I will turn the call over to Jason for a more detailed review of LP's financial results for the quarter and our updated Q4 and full-year outlook. Aaron Howald: Thanks, Jason. And thank you all for joining us this morning. Slide 7 of the presentation shows Siding results for the third quarter in more detail. Average selling prices were up 5% from prior year, $23 million in revenue and EBITDA. With the large rebate and mix benefits from earlier in the year normalizing as expected, higher prices in Q3 were driven primarily by list price increases. As Jason mentioned, Siding sales volume increased by 2% overall, while expert finish volume dipped slightly. Expert finish represented 10% of Siding volume and 16% of Siding revenue in the quarter. Higher volumes added $8 million of revenue and $4 million of EBITDA, consistent with our historical incremental EBITDA margins for volume. As you are all aware, inflation remains a significant headwind for LP and for our customers. Many of LP's raw materials have petrochemical inputs, and higher diesel prices impact inbound and outbound freight. The year over year increase in raw materials resulted a negative $12 million EBITDA impact for Siding in the third quarter, primarily driven by MDI resins and paper overlay. Freight costs added a further $6 million of negative impact due to higher fuel prices, as well as higher freight rates as trucking capacity remains tight. Raw material costs were modestly higher than we expected on our last call, but more or less in line with the sensitivities we have provided as crude oil prices increased. Despite these inflationary pressures, siding remained modestly price cost positive in the third quarter. The remaining $9 million in other costs primarily reflect the impacts of planned maintenance projects and falling inventory levels during those outages. Record net sales of $473 million exceeded the top end of our guidance range Jason mentioned. However, higher than expected raw material costs kept EBITDA just under the top of our range at $119 million The resulting adjusted EBITDA margin for Siding was just over 25%. Turning to OSB, results are summarized on slide 8. Average OSB selling prices climbed in September, they averaged modestly lower than prior year, resulting in a $7 million year-over-year decline in both revenue and EBITDA. Given the timing of price increases late in the quarter and LP's typical lag as prices move, we expect higher realizations in Q4. OSB volumes increased by 7% in the quarter, but unfavorable mix effects reduced EBITDA by $1 million Raw material and labor inflation remained a challenge in OSB as well, resulting in a negative $7 million EBITDA impact year over year. Finally, let me spend a minute unpacking the $17 million of other EBITDA benefits. 14 million of this is a result of inventory valuation adjustments. Higher prices at quarter end resulted in favorable lower of cost or adjustments to our inventory. EBITDA benefit of those adjustments was magnified by the fact that prices and inventory valuations moved in the opposite direction in the third quarter of last year. Operational excellence and cost discipline contributed another $3 million in savings for SG&A and other items. The net effect of all these factors resulted in revenue of $180 million and an EBITDA loss of $24 million both slightly above prior year. As you know, LP announced that we would indefinitely curtail our mill in Jasper Texas and temporarily idle our mill in Maniwaki, Quebec in the fourth quarter. These capacity reductions were an unfortunate but necessary response to ongoing softness in market demand, and they are consistent with our long standing capacity management strategy. This was in no way a reflection on the excellent teams at those mills, and we are grateful for all their contributions to LP. We are working to minimize the impacts of these curtailments on our team members and we look forward to restarting both mills when market conditions support doing so. Turning to cash flow on slide 9. Reductions in working capital contributed $48 million in cash in the quarter, primarily from lower inventories of logs and finished goods. This is typical of LP's seasonal working capital cycle. As Jason said, we generated $112 million in operating cash flow, spent $56 million for capital expenditures, returned $21 million to shareholders through dividends and ended the quarter with $265 million in cash. That left LP with just over $1 billion in liquidity at quarter end, including our undrawn revolving credit facility. This brings me to our updated guidance for fourth quarter and the full year. As Jason said, we expect modest volume growth to continue for Siding in the fourth quarter. I should stress that this growth is not merely the result of inventory load in support of our enhanced distribution network. On the contrary, sell through rates were robust in Q3 as channel inventory contracted, and we believe our order intake in the fourth quarter is reflective of true end use demand. Roughly 3% growth will be mostly price with some negative mix effect. And we anticipate revenue in the range of $390 million to $400 million We expect inflationary pressures to continue in both businesses and are planning seasonal maintenance outages, both of which present cost headwinds. As a result, we expect Siding EBITDA in the range of 80 million to $90 million for fourth quarter. We are increasing the lower bounds of the ranges for anticipated revenue and EBITDA for the full year. We now expect Siding revenue for the year to land between $1.66 billion and $1.67 billion down about 1% compared to prior year, with higher prices almost completely offsetting lower volumes. We expect full year Siding EBITDA to land between $415 million and $425 million dollars For OSB, we will offer our usual algorithmic guidance predicated on prices remaining flat at current levels. Assuming prices remain flat through year end, we would expect the OSB segment to lose about $35 million in EBITDA in the fourth quarter. As most of the favorable other impact in Q3 is non recurring. Full year EBITDA outlook has improved to about a $95 million loss with lower volumes and higher input costs partially offsetting increased selling prices. I should mention as a housekeeping note relative to OSB guidance, that the volume and price sensitivities have been updated to reflect anticipated Q4 sales volumes and raw material costs. We now anticipate full year EBITDA for LP of between $270 million and $280 million reflecting both the Q3 results and recent improvements in Siding and OSB outlook compared to prior guidance. In conclusion, LP's team members are effectively executing our strategy. Against what remains a very challenging backdrop for housing affordability and raw material inflation. And I want to echo Jason's comments and add my appreciation for everyone at LP who contributes to our progress and helps grow our culture of safety, sustainability, and operational and commercial excellence. And with that, we will be happy to take your questions. Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. Please press 1-1 again. Our first question comes from the line of Matthew Bouley with Barclays. Your line is now open. Matthew Bouley: Good morning, everyone. Thank you for taking the questions. I will start out with a question here on kind of the volume outlook and the new distribution and all that. I think I heard you say that the fourth quarter guidance is not due to sort of an extra inventory load in. Maybe you can kinda separate out the sort of sell through trends to date, and any kind of quantification around that load in and, I guess, along those lines, maybe if you could just kind of expand, you know, how your geographic coverage more broadly has changed as a result of these distribution changes? Thank you. Jason Ringblom: Thanks, Paul. I will touch on that kind of broadly from a distribution perspective. So the overarching goal as we kind of approach this initiative was to really simplify and expand our distribution network with partners that really desire to be exclusive to LP SmartSide as their heart cladding solution. And you know, as we have gone through. As we went through this process, we were very fortunate to have multiple options and, you know, ultimately are very pleased with where we landed. You know, we do expect the changes to result in a distribution network that is fully aligned to our commercial strategy, which we believe has tremendous potential to enhance our focus, to enhance collaboration, and then ultimately sales execution over the long haul. As it relates to the load in, that is something that is in process right now. We are executing a phased in approach. So, really, to minimize the impact of a 1-time event So this will be over the next, I would say, 2 quarters, maybe even 3. So we are working with our current and new distribution partners to do that the best way we know possible, knowing that it is more of an art than a science. The first part of your question was around sell through rates, I believe. Maybe I will touch on Expert Finish first. Yes. Volumes right now for the year are anticipated. Our ship are anticipated to be flat year over year. But you may recall that we were on a managed order file to begin the year And based on our history being on a managed order file, it does take some time to change market perceptions on supply. So we went through that. But our distributors are reporting sell-through rates that are positive year over year. Versus the prior year quarter, we are up 8%. And then when you compare Q3 to Q2, 13%. So seeing a nice trend there. And then on the prime side, we are also seeing sell through rates that are comparable to prior year. Which is encouraging just given the softness in the market. Matthew Bouley: Got it. Okay. Well, thank you for all that in addressing my, I guess, multipart question there. Secondly, sticking with siding, given the inflationary backdrop and presumably, it is kind of choppy end market demand, in my words. How are you thinking about pricing into early 2027 and kind of what do you think you need to do from here in order to offset the level of inflation we are seeing out there? Thank you. Jason Ringblom: Yeah. So that is something, obviously, we have kept an eye on. For the majority of the year. We have been fortunate to be price cost positive up until the beginning of Q4. Obviously, that is turning around on us in Q4. So all of that was factored into the price increase that we announced in early October. As of today, we are anticipating netting roughly 3.5% to 4% on a similar mix to 2026. With Prime SmartSide being a hair higher than what we are anticipating on the expert finish side. And in terms of, you know, when we expect to realize those price changes. Right now, based on our order file, we are expecting shipments to go out with the new prices sometime in early to mid January. Thank you. Operator: Our next question comes from the line of Ketan Mamtora. With BMO Capital Markets. Your line is now open. Ketan Mamtora: Good morning, Jason, Aaron. Just a follow-up to Matthew's question. Do you have any sort of prebuy built into Q4 In the past, it used to be, like, a 110% of what we typically buy. Is that sort of still the case in Q4 volumes? Jason Ringblom: Ketan, thanks for the question. What I would say about Q4 of this year is it is a little bit more complex than prior years because obviously, we are working through the distribution changes. So we are working with those partners that will be exiting us throughout the quarter to manage their inventories down, get as much of that transferred to our new distributors. And then looking at historical both. Historical demand by region to manage the load in appropriately with our new partners. So it is a little bit more complex than what we have done in recent years, but we are keeping a very close eye on those channel inventories and working with current and existing distributors as we go through the process. Ketan Mamtora: Understood. Okay. And then just as a follow-up, you know, recognizing that you all are not giving 2027 guidance at the moment, But, you know, if you just look at you know, turn to 2027, with the housing backdrop and the interest rate, where they are, can you give us some framework in terms of how you think about you know, kind of volumes next year if start, let's say, down mid single digit, is there a way for us to think about, you know, sort of outperforming. the broad housing market Yeah. Aaron Howald: I will take that 1, Ketan. We are. As you said, we are not giving guidance for 2027 yet, but on the last call, we did update everyone on a multiyear historical performance for SmartSide for both volume and revenue relative to single family starts. Admittedly, not a perfect proxy for our business given the diverse markets that we serve, but we have pretty consistently outperformed those markets by you know, call it, about 4% on volume, quite a bit more on price given both mix and our pricing power. While nobody knows what starts are going to be in 2027 yet, so that is not a is not a hint at an algorithmic guidance, but it is merely a reflection of our historical performance and that is what gives us confidence in the product and our teams to deliver. Ketan Mamtora: Thank you. Operator: Our next question comes from the line of Phillip Ng. With Jefferies. Your line is now open. Hey, guys. Phillip Ng: You talked about this new partnership with Taylor Morrison. Can you explain, what that exactly entails? Is it Siding, is it OSB, a bundling effort, and perhaps, any early look in terms of the contribution and potential ramp for next year? Jason Ringblom: Yeah. Thanks, Phillip. I will touch on that briefly. So we have done business with Taylor Morrison for a number of years, and, you know, on prior calls we have talked a fair amount about our enterprise programs and how we are really leveraging the breadth of our entire portfolio to position programs with builders of scale in a way that will allow us to get greater access to markets where we have historically been underpenetrated. So, you know, we work closely with TM over the course of the past year or so to structure a program that you know, met their needs and ours and are just very pleased with the progress to date and really look forward to, growing the partnership again in those markets where it is beneficial for Taylor Morrison and LP over the long haul. Phillip Ng: Okay. Helpful. And then Jason, you provided some helpful insights in terms of your order book and visibility. It sounds, you know, generally pretty constructive, particularly on siding. But, clearly, you know, more and more mortgage rates are at and builder sentiment deteriorating. How does that play into. How does that play into your outlook, what you are seeing? Have your customers talked about working down inventory? And then on the flip side, R&R is certainly a little more murky. Any color in terms of your contractors, your dealers, what they are saying on the R&R side of things? As we kinda look out to 2027. Jason Ringblom: Yeah. So maybe I will just touch on the first part of the regarding the outlook and where channel inventories stand. So from a prime SmartSide perspective, we are seeing channel inventories actually come down versus prior quarter and prior year. Same with Expert Finish, but I would still classify them as you know, seasonally normal, but, again, trending a little bit lighter. You know, this is obviously fluid with some of the changes going on with our distribution network, but we are gonna manage that closely as we work through the load in. You know, in terms of looking ahead to next year, I mean, really what we are paying close attention to is the sell through rates that our distributors report to us on a monthly basis. And that gives us confidence that you know, the share gains that we are after in the segments we play in off-site repair, remodel, and new construction, are going to carry out, into the new year. You know, we are doing our best to minimize, you know, all the noise that you mentioned earlier and just focus on the long term and driving share gains in all the market segments that we play in. Phillip Ng: Thank you. Operator: Our next question comes from the line of Steven Ramsey with Thompson Research Group. Your line is now open. Analyst: Hey, good morning. This is actually Brian Biros on for Steven. Thank you for taking my questions today. First 1, I guess, your pricing moves in Siding and I guess the decisions you have made or not made, this kind of rising commodity input cost environment here. How do you assess the benefits in share capture at this point? Aaron Howald: Yeah. Brian, thanks. that is a good question. It is very hard to quantify what portion of our volume increases that we have seen in the third quarter and we expect in the fourth quarter to be the result of our decision not to take midyear price increases. It cannot have hurt you know, when the premium to move from vinyl to SmartSide, for example, collapses a little bit because of vinyl price increases that cannot hurt our share gain. it is very difficult for us to quantify. Analyst: Understood. And I guess maybe similar related question, I guess, just with the new distribution deals you have announced. Does this enable you to capture share in a maybe better way? Than before? Are you seeing any large builders or retailers kinda maybe more enticed to come to you for product? I mean, you talked a little bit about this in the prepared remarks and some of the other questions. I guess just what are you looking for in the near and medium term to, I guess, measure the difference and, ultimately, I guess, the benefits of these moves? Thank you. Jason Ringblom: Yeah. I will touch on that. I mean, I think the largest benefit is just gonna come from an alignment perspective to our strategy. If you think about our new distribution footprint I mean, it is over a 100 locations, what, 12 or 13 different partners If you add up their entire field sales organization, it is much larger than what we have here at LP. So it is an opportunity really for us to drive or to create an extension of our Salesforce, getting our distribution partners more dialed into our downstream demand creation efforts, and helping pull through new customers. So I think regardless of how you look at it, it is definitely going to be a net benefit as we think about the future. Analyst: Thank you. Operator: Our next question comes from Mike Rowland with Truist Securities. Your line is now open. Michael Roxland: Yes. Thank you, Jason, Aaron and Bob for taking my questions. Jason, you mentioned a phased in approach to the new distributors which could take the next 2 to 3 quarters. Can you talk about the cost impact as a result of that transition And also, what impact do you expect on Siding volumes? Aaron Howald: Sorry, Mike, could you repeat the question? Michael Roxland: Sure. You mentioned in terms of this whole with specialty building products, and all the other distributors you laid out there, a phased approach in terms of the transition, terms of working through with your existing distributors working through inventories, and then ultimately obviously, working with the new distributors. New distributors, excuse me, over certain period of time. You said this transition from old to new could take about 2 to 3 quarters. Is there a cost impact at all in terms of making this transition, and is there anything from a sliding volume perspective that we should be aware of as you make this transition as well? Aaron Howald: No. As Jason said, we are we are trying to phase it in so that there is not a large step function increase in volume. You know, we are we are trying to minimize that. In terms of a cost impact, it should be very minimal. So, no, I think that you know, our goal as we as we make this transition is to make it clear that the volumes that we ship are reflective of true end use demand, so that we do not so that we do not create more noise than is inherent in a process like this. Michael Roxland: Got it. Okay. Makes sense, Jason. And then just 1 quick 1. Maniwaki, did I hear you correctly when you said that it is going to be indefinitely curtailed as well, or is that a mill that you are just. You are taking down for Q4 and then it should restart next year? Aaron Howald: it is the latter. Jasper is an indefinite curtailment. Maniwaki is temporarily idled, and this has no impact whatsoever in terms of the attractiveness of Maniwaki as a potential future Siding location. Michael Roxland: Got it. Thank you very much. Thanks, Mike. Operator: Thank you. Our next question comes from Jeff Zekauskas with Loop Capital. Your line is now open. Analyst: Hi, thanks for taking my questions today. Can you talk about how shed sell through demand in your Siding business trended after a slow start to the year? And what your expectations are for end market demand as we move through the remainder of 2026? Jason Ringblom: Yeah. Happy to elaborate on that Jeff. When you look at our shed segment, obviously, we started the year a little rough. But we have rebounded nicely throughout the course of the second half of the year. After our distribution partners, along with the shed fabricators and dealers, went through a rebalancing act of their inventories. We do play close attention to sell through rates at a dealer level. You know, a lot of that is anecdotal feedback for us, but we do feel like the underlying segment as a whole is pretty flat year over year. So our focus is really continues to be on growing our share of wallet with all the Shed Fabricators that are partners of LP. So that would be opportunities to grow in flooring and roofing and trim beyond the panel market share that we enjoy. So we do believe that we will be back on a growth trend as we look to the future and are excited about the off-site segment. As it relates to our siding growth strategy. Analyst: Great. No. that is very helpful. And then second, do you believe that margin pressure that production builders continue to see from ongoing buyer incentives could slow the pace of, you know, continued share gains for alternative siding products such as SmartSide in lieu of traditional materials like vinyl as they look to, reduce costs if we see another challenging year of single family starts, next year. Aaron Howald: Yeah. Maybe, Jeff, you know, with vinyl producers taking midyear price increases, that has probably blunted that effect somewhat. But there is a there is an offsetting potential benefit that we could see as well for the same reason. We are beginning to see more evidence of preference shift away from brick, because it is so labor intensive and so expensive. So you know, I think that there are some ways that, that LP could actually benefit from that ongoing margin pressure as well. So we are watching it. And we have certainly seen margin pressure and have historically outperformed the market. that is what we intend to continue to do. Thank you. Operator: Our next question comes from the line of Susan Maklari with Goldman Sachs. Your line is now open. Susan Maklari: Thank you. Good morning, everyone. My first question is going back to pricing and siding. Think you mentioned that you expect about a 3.5% to 4% price benefit in 2027 on top of mix. Can you talk a bit about what that assumes in terms of an inflationary backdrop and how you are generally thinking about price cost as we look to the next couple of quarters and how much mix could benefit you? Aaron Howald: Yeah. Sue, I will take that 1. Price cost is gonna be most challenged in the fourth quarter. Because raw materials continue to be a headwind and also because impacts we have been talking about all year in terms of you know, the disproportionately large positive price mix effect we saw in the first quarter due to low shed volumes and some rebate adjustments and things like that. All of those effects are normalizing a little bit into the back half of the year. But Jason mentioned our price increase for next year, I think under anything but very negative changes for raw materials next year. We should be healthily price cost positive as we head into the next year. Susan Maklari: Okay. Alright. That. that is helpful. And my second question is on with the-- think about the changes that you have announced on the production side there. Are there any implications from that to structural solutions And can you just talk more broadly about the demand environment for Structural Solutions given the slowdown in single family starts that we are seeing? Aaron Howald: Sure. Well, as Jason said, we picked the mills that we idled were a portfolio decision rather than a mill specific decision, and structural solutions mix was a component of that decision. But what I would say is that what we have been seeing in an environment where homebuilder margins have been compressed is there is been a bit of a preference shift to more commodity OSB products. it is a little counterintuitive absolute price for structural solutions is lower, but the percent premium to step up from commodity is larger. And so that has explained, the mix effect that you saw in the third quarter. But I would say our capacity decisions are much more related to overall demand. Than any kind of structural solutions dynamic. Susan Maklari: Thank you. Operator: Our next question comes from Sean Steuart with TD Cowen. Your line is now open. Sean Steuart: Thanks. Good morning, everyone. A couple of questions, and thanks for all the detail on the Siding market context. Aaron Howald: But, I am going to start with CapEx, Jason. You guys have lowered your 2026 guide, and it is on the maintenance side, the sustaining maintenance side. Should we view that as a deferral of maintenance projects or are there any read throughs in terms of the structure shift in how you are thinking about that expense? Jason Ringblom: No real structural changes. it is largely deferrals. 1 of the benefits of a flexible program is that we can adjust as we have for the past couple of years in response to market needs. But idling a facility indefinitely and another 1 a short period of time also lets us defer any of the projects that we had planned for those facilities. So no structural change to that, just pretty consistent with the way we try to be agile and flexible as we manage our CapEx. Aaron Howald: And I should reinforce no change in Branch. Sean Steuart: Understood. And you know, appreciating there is no urgency for whether it is Milwaukee or something else in terms of the next Siding conversion. But is there any. And we will get this, I imagine, with the February guidance for 2027. But is there any spending for preliminary work on a Siding conversion that would be anticipated? In the near and mid term? Aaron Howald: Not a significant amount. We will get to. We will get more detail when we get to the February call, as you said. What I wanna say is that we as always, we want to have siding capacity available a little bit before we need it, hopefully not too long before we need it. But wherever the next capacity is added, it will be a longer duration project than our previous conversions have been. And so that spend will start a little bit earlier relative to new capacity coming online than previous projects. But we will we will have a lot more detail for that as we head into next year and as we get closer to you know, to the project really being underway. Sean Steuart: Thank you. Operator: Our next question comes from the line of Kurt Yinger with David. Your line is now open. Kurt Yinger: Great. Thanks and good morning, guys. I believe these winter months are typically pretty active in terms of RFPs from the big builders. So just love to hear maybe some initial thoughts about the potential to kind of build off existing or adding new enterprise partnerships as we move into 2027? Jason Ringblom: Thanks, Kurt. Yeah. You are right. We are in the midst of RFP season now and having a handful of programs that we are working on with builders of scale, and that includes manufactured housing producers as well. What I would say, Kurt, is that, you know, these programs are progressing nicely. They look promising at this point. We are hopeful to have a little bit more to share at the next call. But the main point I would say as it relates to our enterprise approach is that the bundling of our broad portfolio is truly resonating with these customers. They value the installation efficiencies, the durability, the quality that the SmartSide brand is known for. And then the other benefit is you know, we are beginning to see evidence of a halo effect from the expanded positions, with dealers and underpenetrated markets for SmartSide. So we are we are very excited about the opportunity to build our business around those stocking dealer positions in new markets. So progressing nicely. You never know how these programs are gonna unfold. But we should have more information over the course of the next 30 to 60 days. Kurt Yinger: Okay. that is great. Thanks for that, Jason. And Jason, maybe just on OSB. I mean, I know there is a lot of moving pieces with the inventory adjustment and you know, prices by region are up different amounts. But if we just look at the composite, I mean, it is seen a pretty big move the last couple months, and just wondering if there are any other kind of big offsets in the Q4 guide related to the curtailments or maintenance that might be you know, eating into that otherwise more favorable pricing dynamic? Aaron Howald: I think I mentioned most of them in the prepared remarks. Obviously, our volumes are going to be lower in the fourth quarter as a result of those curtailments. Also within price, we have seen a larger increase in thinner products than in thicker products. Floor. Flooring prices have not gone up as much, which is a little bit of a drag for us. And, of course, raw materials continue to be a bit of a headwind. So no, I think we covered most of the big moving pieces in there. Jason Ringblom: Operator, do we have another question? Operator: Thank you. Our next question comes from the line of Trey Grooms. of Wolfe Research. Your line is now open. Analyst: Hi, good morning. Thank you for taking my questions. 1 is on your 4Q Siding revenue guidance. It does seem like it is a bit below normal seasonal trends. But it sounds like from your commentary here that demand remains pretty healthy. So is that a little bit lower than seasonal number just driven by some of the channel inventory dynamics that you were talking about those moving a bit lower? Is it just some conservatism reflecting a very uncertain macro? Any color you can provide there on the sequential trends? Aaron Howald: Well, I mean, there is perhaps a little bit of conservatism in there, but within the normal range of seasonal fall off as we head into the into the winter months. Jason, I think reinforced what we are seeing from a sell-through rate standpoint. And we have seen pretty consistent end use demand, which is very encouraging. You know, we are. 1 of the effects of trying to phase in the inventory is we are avoiding we are trying to avoid a large load in, which, of course, would show up as revenue. So we are trying to be cautious not just about, levels of conservatism, but also we do not wanna perturb the inventory channel any more than necessary as we transition to a new distribution network. So I really think it is the result of all of those factors, Trey. Jason Ringblom: Yeah. 1 point there. I mean, we learned a hard lesson Q4 of last year, and, you know, ultimately, we are trying not to repeat that. So maybe a little bit of conservatism in there, but you know, it is a tough balancing act given the distribution changes. Okay. Yep. Makes sense. Thanks for that color. And then second question is just on your views on your own OSB capacity here and industry capacity. You made the Jasper announcement before rates jumped, but now you have since made a Maniwaki announcement. How are you thinking about your own OSB capacity currently in light of housing starts potentially being down next year? And then a similar question, just kind of industry if you think there needs to be any more moves there. Yeah. I will touch on that 1. So if you think about our operating position leading up to the Jasper and Maniwaki curtailments you know, we were operating roughly in the 75%-ish range from a network utilization standpoint. So we were doing everything we could to balance our capacity with LP customer demand while keeping a close eye on projections for the future. And as the year went on, and single family starts retracted further, we felt the need to really look at our network and optimize it to the extent we needed to position the business for a further down cycle in OSB. So we think we are set up nicely going into 2027 and are going through the committed volume process currently to, you know, shore up our contract strategy and figure out how much open market wood we will have to sell in 2027. Analyst: Thank you. Operator: Our next question comes from the line of George Staphos with Bank of America. Your line is now open. George Staphos: Jumping on the line here late at an industry conference. This may have been already asked. First of all, Jason, congratulations, and looking forward to working with you now in the role. Congrats on the first conference call. I would say as regards inflation, have you adjusted any of your sensitivity rates that you provided in the past relative to what we have seen in the last you know, 9 months, 6 months, and for that matter, your operating stance? And how that might have impacted your sensitivity to oil and the like Relatedly, have you been working on ways to maybe engineer the product differently or adjust your supply chain so that maybe you do not have quite the same you know, cost sensitivity with oil and the like, or is it just about raising pricing? And then I had a follow on. Aaron Howald: Yes. Thanks, George. I will take some of that. In terms of sensitivity to crude oil prices, no. Those really have not been adjusted. Crude oil prices themselves have been pretty volatile as everybody understands. I think the October average was up about $20 relative to the price point on our August call, and it is fallen about 5 or $6 since that in the past few days. But, so that explains some of the of the headwinds we have seen. In terms of our guidance sensitivities, yes. We made some adjustments that we did describe in the prepared remarks and are detailed in the footnote on the guidance slide to reflect lower expected volumes in the fourth quarter because of the curtailment. And also, slightly lower margins, than in the guide because of because of raw materials. In terms of engineering the product, there are some opportunities there, and we have got you know, excellent teams in our operation team that are that are looking at opportunities there. We use MDI resins exclusively in siding because it performs really, really well. And so, you know, we do not have too many opportunities there, and we certainly do not wanna dial down the dosage rate or do rash things like that in the near term. But, yeah, I would say broadly, we are looking at opportunities, but there is not a whole lot we can do to offset most of most of the fluctuations in crude oil and similar inputs. George Staphos: Okay. And then again, if this sort of came up in the dialogue happy to look at the transcript. But if not, have you been getting any more commentary questions from your customers regarding class a fire certification? And whether you are at some point you will wanna have that in the market you know, sooner than later, or is it really not a factor at this juncture? Obviously, it is only going to be a big deal in certain regions, if it is a deal at all. But how would you have us think about it? What are your customers asking about that? And when would you be ready perhaps with a class a rated product? Thank you. Good luck in the quarter. Jason Ringblom: Yes. I would say there is been more of a focus on some of the WUI codes, really because of some of the changes that were made in the state of Colorado. You know, what I would say about, you know, our sales specifically is you know, when you look at our sales so far out West year-to-date where WUI has been a factor for many years. We have yet to see any sort of change in sell through rates relative to housing. Starts. So it is something that we are keeping a close eye on. We are also doing everything we can to defend our position through educating local authorities on the value proposition of SmartSide, while in parallel to your point working on NPD initiatives that would potentially open up new markets for LP in the future with a fire solution. But what I would say is, you know, these codes apply to you know, a very small portion of the addressable market. it is something we are keeping a close eye on, but has not affected our growth trajectory. George Staphos: Thank you. Operator: Our next question comes from the line of Adam Baumgarten with Vertical Research. Good morning. Your line is now open. Adam Baumgarten: Hey, guys. Good morning. Just Aaron, back to your prior comment around price cost into next year, Just to clarify, you said that with the pricing you expect to execute and I am assuming where inputs are today rolling that forward, you expect to be price-cost positive or price-cost positive for the year. Does that include the early part of the year when these price increases go effective? Aaron Howald: Yes. They will as Jason said, we expect to be realizing those price increases early mid January. So, so yes. Adam Baumgarten: Okay. Got it. And then just on MDI, there is been some chatter out there that maybe prices are moderating a little bit. Sequentially with some of the force measures coming off and capacity coming back up. Are you starting to see that or hear that from your suppliers as you move through the fourth quarter here? Aaron Howald: We see the same news you do, and of course, we are optimistic about that. But we as we have discussed on prior calls, our supply contracts tend to have lagging algorithmic adjustments in them. We do not pay spot for many of these raw materials in the short term. So if those trends continue and if MDI prices. If MDI spot prices stay lower for some period of time, then we will certainly see that in our purchase prices. So we are, you know, fingers crossed those trends continue. Adam Baumgarten: Okay. Got it. Thanks. Best of luck, guys. Thank you. Thanks, Adam. Operator: Thank you. Our next question comes from the line of Mike Weintraub with Seaport Research Partners. Your line is now open. Mark Weintraub: Thank you. Thank you. So you. You have articulated that with the musical chairs going on in distribution, you feel it is a net positive. that is certainly how I have interpreted it. But, presumably, there are puts and takes. Can you sort of help us understand where the benefits are that are gonna outweigh any possible negatives. Jason Ringblom: Yeah. There are certainly puts and takes, Mike. Sorry, But when you look at the magnitude of this change relative to what we have gone through in our past, it is not of the same scale, but we really were focused on finding exclusive partners to the SmartSide brand And, you know, we were able to achieve that, which is going to create that better alignment around our strategy and improve execution. So even though there has. There have been some musical chairs, we think the partners that we have aligned with are now going to be loyal to promoting the SmartSide brand and more dialed into our downstream demand creation strategy. So yes, there are some new partners that will have to get educated and onboarded You know, no different than some of the changes we have made in the past, but that is a pretty quick process. And, we believe we will be off to the races to start 2027. Aaron Howald: Yeah. I think the churn is gonna be near term. Negative is just the noise in the. during the transition. Longer term, we have got greater geographic reach, greater exclusivity. it is a long-term positive. Mark Weintraub: Okay. Thank you. Thank you. Operator: Thank you. Our next question comes from the line of Paul Quinn. With RBC Capital Markets. Your line is now open. Analyst: Good morning. Thanks for all the details so far. Just following up, on a comment you made about a preference shift away from brick, given that labor intensity and cost. I think brick has seemingly been donating some share in NewRezi over the past few years. Could you give us any more detail on how material or abrupt that preference shift you are seeing is? Thanks very much. Aaron Howald: that is a good question, Paul. it is not very abrupt, and so far, it is pretty small. But it is an encouraging trend. You know, the brick is very expensive and certainly, if you drive around Nashville, you see a lot of white brick homes. Nobody makes white bricks. So those homes have been painted. If you are going to paint a substrate, brick is an extremely expensive substrate to paint. So you know, as those trends continue, we will begin to see a little bit of an expansion in our addressable market. It will be geographically patchy. There are some markets that are stronger or weaker for brick. it is not gonna be it is not gonna be a massive driver of growth for us, but it does expand the addressable market. It does increase the geographies and the markets where SmartSide can play. And it reinforces the value proposition for our product being very durable and very efficient to install. So we are, you know, we are optimistic that trend will continue. Analyst: Thank you for the color. I will pass it back. Thanks, Paul. Operator: Thank you. This concludes the question and answer session. I would now like to turn it back to Bob Hopkins, Treasurer of Louisiana Pacific Corporation. For closing remarks. Thank you, operator. Bob Hopkins: With no more questions, we will end the call there. Thank you all for joining us and look forward to speaking with you soon. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.