Louisiana-Pacific Corporation

Good day and thank you for standing by. Welcome to the second quarter 2026 Louisiana Pacific Corporation earnings conference call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one 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, Aaron Howald. Please go ahead.

Thank you, operator.

Good morning, everyone. Thank you for joining LP Building Solutions to discuss our results for the second quarter of 2026 and our updated outlook for the remainder of the year. Hosting the call with me this morning are Jason Ringblom and Alan Haughie, who are LP's Chief Executive Officer and Chief Financial Officer, respectively. After prepared remarks, we will take a round of questions. As always, during today's call, we will be referencing a presentation that has been posted online at investor.lpcorp.com. Our 8-K filing, earnings press release, and other materials are also available there. Finally, today's discussion will contain forward-looking statements and non-GAAP financial metrics as described on slides two and three of the earnings presentation. The appendix of that presentation also contains reconciliations that are further supplemented by this morning's 8K filings. I will incorporate those materials by reference rather than reading them. And with that, I will turn the call over to Jason. Thanks, Aaron.

Good morning, everyone, and welcome to LP's second quarter earnings call. We appreciate you joining us. I'm proud to say that in the second quarter our team at LP maintained their focus on safety and efficiency as we executed our strategy focused on long-term value creation. Despite a housing market that feels like it's stuck in neutral, our siding business delivered revenue above the midpoint of our guided range and achieved year-over-year volume growth and expert finish. The inflationary impacts we absorbed in the second quarter were more or less consistent with the sensitivities previously outlined. However, as Alan will detail, siding margins faced a couple of unexpected headwinds during the quarter, including weather-related disruptions and constrained freight capacity. We expect to recover some of this impact later in the year, which we will discuss in our updated guidance. Slide 5 of the presentation summarizes our financial and operational highlights for the quarter. Net sales of $664 million were down $90 million from prior year, and EBITDA of $79 million was down $63 million. While siding was comping against last year's all-time record quarter, Most of the decline in revenue and EBITDA was driven by lower OSB prices due to soft demand in North and South America. Siding sales were off 4% compared to prior year, as 7% higher prices partially offset 11% lower volumes. Even so, Siding delivered a 26% EBITDA margin, which was also in line with our guidance. In terms of cash and capital allocation, Operating cash flow of $140 million benefited from the typical seasonal working capital cycle associated with log inventories. LP earned 40 cents of adjusted earnings per share, returned $21 million to shareholders, and ended the quarter with just under $1 billion in liquidity. On the last call, we described how the unintentional pull forward of siding sales volume in the fourth quarter of 2025, particularly in the shed sector, affected first half siding volumes and channel inventories. I'm pleased to report that prime smart side channel inventories have normalized as expected. The abnormally large sequential increase in volume from the first to the second quarter Led by improvements in all market segments is further evidence that this is behind us. Additionally, distributor sell-through rates for Prime SmartSide were higher in the second quarter than any of the previous five quarters. Order intake also exceeded levels seen in four of the previous five quarters, surpassed only by the record second quarter of last year. Expert Finish Inventories and the Distribution Channel have also come down substantially from their first quarter peak, and similar to Prime SmartSide, order intake continues to rebound following the end of our managed order file earlier in the year. Two more highlights from the quarter make me particularly proud of our team at LP. First, despite the challenges ranging from a choppy housing market to record flooding that impacted our team in Manitoba, We maintained our focus on operating safely and efficiently. Our siding and OSB mills delivered meaningful improvements in operational efficiency as measured by OEE in the quarter. And second, LP continues to receive external recognition for both product innovation and as a top employer in our communities. Engaged team members strengthen our culture, which is key to driving consistent execution of our strategy over the long haul. Slide six of the presentation updates a chart that we have shared at previous investor days. It helps us look beyond the near-term churn of inventory fluctuations, managed order files, and market volatility to see the longer-term trajectory of our share gains more clearly. The chart shows 15 years of normalized SmartSide volume and revenue growth compared to single-family housing starts on a 12-month basis. ending with our Q3 guidance. Comparing 2025 to 2011 on a full year basis, single family starts have been volatile of course and have been down in recent years, but have averaged a compound annual growth rate of almost 6%. In contrast, SmartSide volume has grown at a compound annual rate of almost 10% per year and SmartSide revenue has grown at 14%. Comparing the second quarter of this year to the mid-COVID housing peak in the second quarter of 2021, single-family starts are down 18%. By contrast, SmartSide volume is up 10% and SmartSide revenue is up a hair over 50%. Any way you look at it, SmartSide is gaining share, and we remain confident that we have a long runway for continued growth ahead of us. Not to steal Aaron's thunder, but as he will lay out in our updated guidance, we expect LP's siding business to return to year-over-year volume and revenue growth in the third quarter. To supply growing demand, we are investing in expert finish capacity, so let me update you on our progress. First, the new line at our Green Bay facility is continuing to ramp up following the typical startup process. We also plan to add another 20 million feet of capacity at our Bath, New York facility later this year. And finally, at the end of June, we broke ground in North Branch, Minnesota on what will be our largest and most efficient expert finish painting facility. I want to thank everyone at LP who has contributed to the safe and efficient execution of these expansion projects. With inventories now within normal seasonal ranges, and given the strength in our order files, we expect to return to sodding volume growth in the third quarter. Our outlook reflects true customer demand and is not predicated on restocking or other inventory fluctuations, nor does it assume any improvement in the underlying markets we serve. When those markets do improve, as they inevitably will, our capacity footprint coupled with our system-wide operational efficiency improvement positions us well to further accelerate growth, share gains, and margin expansion. Finally, as you all know, LP announced in June that Alan will retire as CFO on September 1st after nearly seven years in the role. Before I turn the call over to him, I want to express my thanks personally and on behalf of LP's team members and shareholders for his many contributions to LP. Alan is the architect of LP's disciplined capital allocation strategy and he has been an invaluable partner to me, to Brad before me, and to our executive team and board as we designed and executed LP's transformation from a commodity forest products company to a specialty building products company. Just as importantly, Alan built an outstanding finance organization and develop a talented team that is well positioned for the future, including helping prepare Aaron as his successor. Many of you know Aaron well and I have tremendous confidence in him and the finance team he will lead. Alan, I'm incredibly grateful for your leadership, your partnership and everything you've done for LP, our shareholders and our people. Thank you and feel free to take it from here.

Well, thank you, Jason. I must add that, you know, without a doubt, working at LP has been the professional high point of my career, even more so because I know I'm leaving the company and the finance function in excellent hands. But enough of this. On slide eight, you'll see the second quarter year-over-year revenue and EBITDA waterfall for siding, which largely played out as we expected, but for a couple of unexpected wrinkles I'll get to in a moment. Prices were seven points higher than last year for both primed and expert finish, contributing $27 million to revenue in EBITDA, with some modest benefits from mix and lower rebates. As expected, this year over year price performance stepped down a bit from the first quarter, in which we recognized final adjustments for lower 2025 rebates. Now average selling prices for siding do move around a bit quarter to quarter due to mix and other factors, but the longer term chart that Jason just discussed reinforces that smart site premium positioning and ongoing product innovation drive long-term pricing uplift, which more than offsets inflationary cost increases. Sales volumes declined by 11% from a comp that I should remind you was our all-time volume record. Within this, prime volumes were down 12% while expert finish volumes grew by 1%. The resulting hit to revenue was $46 million, which lowered EBITDA by $24 million. This brings me to the $14 million EBITDA drag from inflationary costs and other items, a little over half of which is from crude oil price increases flowing through our raw materials supply chain, broadly in line with the sensitivities we discussed on the prior quarter's call. And finally, EBITDA was negatively impacted by two separate and unanticipated events very late in the quarter. We experienced unplanned downtime at our mill in Dawson Creek, British Columbia, where equipment failures cost us a few days of production. And more significantly, from a people and production standpoint, unusually severe flooding in western Manitoba impacted our team at Swan Valley. These events resulted in higher freight costs and unplanned inventory movements. For freight, we anticipated that higher crude oil prices would lead to increased freight expenses because of the Iran conflict. However, constrained freight capacity has led to additional freight rate pressure and damage to transportation infrastructure caused by the floods in Manitoba necessitated both switching shipments from rail to truck and taking longer routes to market, thereby exacerbating the freight impacts. The result was higher freight costs than can be explained by crude oil cost increases alone. As for inventory, you may recall from the previous quarter's call that we built finished goods inventory in the first quarter in order to minimize service disruptions during a planned outage for a press rebuild at Segola scheduled for the third quarter. We pointed out at that time that the high EBITDA margin in the first quarter was partly the result of the absorption benefits of this inventory build, which we anticipated would reverse in the third quarter during the press rebuild. However, the lost production associated with these events in Dawson and Swann led to inventory reductions in the waning days of the quarter as opposed to the modest inventory build we had planned. So, while the magnitude of all this inventory build and consumption is unchanged, as are its absorption impacts, these unexpected outages pull forward the timing. This explains the bulk of the $4 million in inventory and other on the waterfall. I wouldn't normally comment on a guidance miss, but absent these events, we would have been at or above the top end of our guided EBITDA range. The silver lining is that the third quarter inventory drawdown and associated absorption impacts should be smaller than previously anticipated. In other words, this was a rather laborious way of saying the miss is largely timing. Switching to OSB on slide 9, the story is simpler, but with prices ending the quarter about $15 lower than our guidance algorithm, OSB results were proportionately lower as well. Commodity prices fell further than those of structural solutions, but the structural solution mix also fell. Of course, lower prices reflect soft demand, so it's not surprising that volumes also fell as LP sought to balance supply with demand. Lower prices and volumes combined for $67 million lower revenue and $46 million lower EBITDA. Unlike siding, freight is a pass-through for OSB and the comparatively lower raw material demands compared to siding led to smaller inflationary impacts. Finally, the $9 million a year of year benefit from inventory and other is mostly the non-recurrence of the lower of cost or market correction of the nearly $100 price drop that occurred during the second quarter of last year. Operating cash flow in the quarter of $140 million, as shown on slide 10, was boosted by the usual seasonal reduction in log inventory at our northern siding and OSB mills, as well as the unplanned inventory reduction in siding. We invested $59 million in capital projects and returned $21 million to shareholders via dividends to end the quarter with $228 million of cash on hand. And this left our total liquidity at just under a billion dollars, including the undrawn $750 million revolver. So now it only seems right that I should hand the guidance discussion over to the man who I am delighted to say will be succeeding me as CFO a few weeks from today. So over to you, Aaron.

Thank you, Alan. And let me first echo Jason's thanks for everything you've done for LP. I am incredibly honored to have the opportunity to succeed you. As Jason said earlier, we are expecting LP's siting business to return to year-over-year growth in the third quarter. Higher selling prices are projected to contribute the majority of this growth, but based on the momentum of our order file as well as our demand outlook, we also expect modest volume increases. The low end of our Q3 siting revenue guidance of between $460 and $470 million would tie the previous revenue record. Given the single-family starts are down about 7% on a trailing 12-month basis, in Q2, This continues the longer-term trend of citing growth and share gains that Jason discussed earlier. Despite ongoing headwinds from raw material inflation, we anticipate citing EBITDA in the third quarter of between $110 and $120 million for an EBITDA margin of about 25%. And we affirm our prior full-year guidance for citing revenue, EBITDA, and margin. Unfortunately, the outlook for OSB is moving the opposite direction. The OSB demand environment remains very challenging. Even with a small uptick Friday, OSB prices have fallen by about $12 or 6% since our May call, even as raw material costs have increased. As a result, EBITDA for OSB would fall to approximately negative $45 million in the third quarter and to negative $120 million for the full year, assuming, as we always do, that prices remain flat at their current levels through year end. LP has no control over OSB prices, obviously. but we are aggressively pursuing opportunities to improve cost and efficiency while protecting our assets and, most importantly, keeping our team members safe. As for CapEx, LP's investment plan for the year is back-end loaded as is frequently the case. This timing allows some flexibility to scale back or postpone non-essential projects as needed, particularly in OSB. As a result, we now expect to invest about $320 million in CapEx. To save you the math, that is a $70 million reduction from our prior guidance for full-year capital. At that level, siting would account for roughly three-quarters of the total capex and essentially all of the growth capex. And as we have said, nearly a billion dollars in liquidity significantly enhances the flexibility with which we can invest in siting growth, irrespective of OSB volatility. And with that, we will be happy to take a round of questions.

Question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from Katan Mumtora at BMO Capital Markets.

Thank you. First off, Alan, congratulations. This indeed is a very different company from when you took over as CFO. And Aaron, I look forward to continuing to work with you. Congratulations. Maybe just to start with, can you give us a little bit of a breakdown for Q2 siding volumes in terms of just end markets? How did Sheds do, you know, kind of new construction and repair and remodeling and sort of what is embedded for Q3 by way of siding volumes and markets.

Thanks, Keaton. Appreciate the question. Yeah, I'll touch on that. So as you guys recall, you know, Q1, we were working through a pretty significant destock across, you know, all market segments. But the major one was the offsite segment or what we call shed. Fortunately, we saw that particular market segment rebound very nicely. I think we were up over 30% from Q1 to Q2, so very good progress there in off-site. That being said, for the year, we're anticipating that segment being down anywhere from 10% to 15% in volume. Looking at repair-remodel, we're projecting that segment to be Flat to slightly up a bit. We use our expert finish product category as kind of a proxy to look at how that particular market segment is performing and are pleased with the progress we're making there. And then everything else, I would say flat to slightly down in alignment with underlying market conditions and starts that Aaron mentioned earlier.

Understood, that's helpful. And then just one more from my side. In terms of just your distribution partnerships, obviously there's been news here recently. I'm curious kind of what are the implications for LP both for SmartSide and OSP? And if you can just give us just rough order of magnitude Your exposure to Boise Cascades, you know, on the smart side siding. Thank you.

Yeah, Keaton, what I'd say is, you know, those changes didn't necessarily come as a surprise to us. In fact, we thought it would happen or materialize a little bit sooner. For LP, we don't anticipate any lapsing coverage. You know, we've talked about this before on calls. from a two-step distribution standpoint. We have two or more distributors that service all of our markets, and we're in the midst of working through transition plans to ensure that our channel customers and all of our end users feel no disruption as a result of these changes. As you can imagine, this news hit the wire late last week, early this week, and we've been fielding inbound calls pretty much nonstop from distributors eager to promote SmartSide. So we're in the process of going through a pretty robust evaluation process with the goal of having new committed LP Siding partners in place ASAP. And when I say that, as soon as possible by October 1 of this year at the latest. The other thing I would mention, Keaton, is we've been through Similar transitions, but even at a much larger scale. You may remember the transition we went through in 2017. It represented almost double the scale of this one, and our goal is to really replicate exactly what transpired there from an outcome standpoint.

Got it. Now that's very helpful, Jason. I'll jump back in the queue. Thank you.

Our next question comes from Phil Ng at Jefferies.

Hey, guys. Congratulations, Alan and Aaron. Aaron, looking forward to working more with you going forward. I guess from a high level, you guys managed price-cost, you know, quite well in the first half, but any more color what you're seeing on the inflation part as we kind of look up the back at 2027, you know, a few of your Competitors on the vinyl side of down second round, their price increases, just big picture. How should we think about your approach and philosophy on pricing, especially as we look at the 2027 with raws and how your adjacent competitive products are pricing?

Yeah, thanks, Phil. I would say that our strategy is essentially the same as it has been so far year to date, and that is the raw material inflation has been volatile, but we're looking at this more as a potential opportunity for volume gains. The later we get into the year, the less sense it makes to have a mid-year price increase given that we're close to the time when we would be announcing next year's price increase as well. In terms of where those raw material inputs are, of course, they've been highly volatile. We almost need a timestamp to the minute on an answer for what crude prices are relative to the last time we gave the guide, but we're seeing maybe slightly more raw material cost headwinds in the back half of the year due to some factors that are probably more complicated than we need to dive into here, but some of the raw material feedstocks that move in ways differently from crude have worked against us a little bit. So short version, not much strategy change. We're seeing some potential signs that our stance on price has helped with our volume in the back half, and we'll probably roll any raw material cost offset into our full year price increase for next year.

Okay, helpful. A question for Jason. Certainly the first half, very noisy with the channel destocking. Just any color in terms of how order patterns and sell-out by the different markets have progressed. Has that kind of stabilized? We're in a better spot? And in the back half, certainly you're expecting volumes of rebound there. Is part of that just some of the wins that you've had, particularly on the homebuilder side or any of the bundling that you've talked about?

Yeah, I'd say you're right. First half was pretty noisy. That being said, our goal was really to keep all of our sales and marketing resources in the field focused on what they can control, and that's creating demand downstream. Fortunately, over the course of the last 30 to 45 days, we've seen a really nice incremental improvement in week-over-week order intake, and that's continued into Q3 and really informed our guidance. Seeing good progress there. I'm pleased with it, quite frankly. A quarter ago, it was probably hard to see this type of improvement, but I think it's a credit to our team and the way they're executing against our market segment strategies locally in all markets. Okay. Appreciate the color, guys. Thank you.

Our next question comes from Mike Roxland at Truist Securities.

Yeah, thank you, Kaycee, Alan, and Aaron for taking my questions. I'll just echo what everybody else has said, Alex. Congrats on your retirement, and Aaron, look forward to working with you more closely. First question I have is in terms of Manitoba, the flooding, the unexpected downtime at Dawson Creek, are those mills now fully up and running?

Yeah, we're happy to say that the damage to the infrastructure and that there was not much impact directly to the middle in Swan Valley related to the flooding. It was more our people who were impacted and the transportation infrastructure that made it difficult to get to and from. So we're back at a steady state now.

Got it. Perfect. And then just what was your operating rate in OSB in 2Q? Where do you plan to run in 3Q? At this juncture, what are you evaluating to make a determination as to whether you should continue running your assets as is or maybe whether you should consider taking downtime given the deteriorating supply and demand and pricing backdrop? Thank you.

I'll touch on OSB a little bit more holistically. Certainly, unusual times for OSB, adjusted for inflation. Prices have been bumping up against historical lows. Aaron mentioned it earlier, we remain focused on opportunities to reduce cost and increase efficiency. That's our focus while we optimize our network around a utilization rate, call it in the mid to high 70s. That's what we operated at in Q2. That's our plan for Q3. We think that is the right level to balance supply with our customer demand. What I would say in addition to that is OSB is cyclical and we've been through this before. Really what's different now at LP is prior cycles we didn't have the scale and cash generation potential of our siting business. So we're trying to manage the OSB side of the business wisely, matching capacity to demand. pulling back on CapEx a little bit where it makes sense and we're not compromising safety in any way, shape, or form. But this market will come back to us and we're committed to operating within that range I just mentioned.

Thank you. Our next question comes from Susan McCarley at Goldman Sachs.

Thank you. Good morning, everyone. And Alan, let me add my congratulations. We'll miss hearing you on the call. And Aaron, look forward to working with you more in your new role. My first question is just getting some more information on the share gains that you're seeing and citing. Can you give us some more color on what's coming through across the various channels relative to retail, R&R, and the builders? And then how do you think about the sustainability of the recent gains that you've realized?

Thanks, Susan. Yeah, I'll touch on that. I think, as we mentioned on prior calls, the majority of our share gains, kind of broadly speaking, are coming from vinyl, from traditional wood, and maybe to a lesser extent, but it's still important to mention, from brick and stucco as builders look to cut costs and address some of the affordability challenges that the industry faces. In terms of the stickiness of the share gains, I would point to our innovation strategy. Over the course of the last 10 years, we've brought a lot of new products to market. We've completed our portfolio. We've led in some areas in relation to like our expert finish naturals line and all of that is just playing into a very robust offering that addresses the broad needs of our different end use segments. So we feel that they're very sticky and that there's a number of product categories that we're just on the cusp of scaling in a more significant way.

Okay, that's helpful. And then turning to OSB, as you do think about the capacity there and the underlying supply-demand dynamics in that business, can you talk about the ability to support structural solutions within any changes that you do make on that side of the business and where that can get to over time as you perhaps do take some initiatives there?

Yes, Susan. So in regards to structural solutions, we have quite a bit of redundancy built into our manufacturing network. So as we flex our mills, certainly that is something we take into consideration. But there's plenty of headroom there to where we're not sacrificing structural solutions supply as we make those decisions. That being said, kind of more broadly speaking, when you compare the margins of commodity to structural solutions, they're not materially different. So although it's important to supply that demand we're creating in the marketplace, if we were to sacrifice some of that, it wouldn't necessarily show up, again, materially in the financials.

just a little more color on that the incremental margin difference between them has compressed a little bit since the structural solutions products tend to be more raw material intensive and so when we see inflation in those inputs that compresses that a bit but but Jason's absolutely right there are very few structural solutions products that we only manufacture at one mil so we've got we've got plenty of redundancy and flexibility in there and our strategy with those products is the same with all the others we'll respond to customer demand and and supply the market with the products that they need.

Okay. Thank you both for the color. Good luck with the quarter.

Thanks, Sue.

Our next question comes from George Staffos at Bank of America Securities. George, your line is open.

George, if you're speaking, we can't hear you. Operator, maybe we go to the next one and give George a chance to circle back in.

Okay. Our next question comes from Matthew Bully at Barclays.

Good morning, everyone. Thank you for taking the questions, and my congratulations as well to Alan and to Aaron. Best of luck to you both. So just the CapEx guide reduced by 70 million, you mentioned you've got flexibility to scale back or postpone. Basically, just if you could unpack that a little bit, what would you be pulling back on, and is there sort of any changes to your medium-term market views that would be influencing your CapEx outlook? Thank you.

mostly what we would be pulling back on would be the maintenance projects that are lower risk both from a obviously most importantly from a safety standpoint but also from compliance with regard to environmental emissions things like that you know when when those projects are delayed they are only delayed they can't be eliminated so eventually we're going to have to do that work so we do that sort of You know, risk balancing relative to what customer demand looks like to know where we have mills and where we have projects that can be delayed a bit. In terms of investing in growth, we didn't slow that down much at all. I mean, we broke ground on the North Branch facility. That'll be our largest and most efficient expert finish facility earlier this summer. In fact, Jason operated the backhoe. and so the postponement is on the more longer-term sustaining maintenance type projects and obviously predominantly in OSB where we push those costs.

Okay, got it. Thank you for that, Aaron. Second one, just back on the OSB structural solutions, the volume pressure there this quarter and last quarter, is it Is there a theme there where, I don't know, if it's home builders, let's say, decontenting or shifting towards, you know, other lower value commodity product, et cetera, or just anything else going on there that you kind of unpack some of the pressure going on there? Thank you.

Yeah, I think you're spot on. There's cost pressure that's playing into it. You know, for example, a builder might trade down from $1,000 Our next question comes from Steven Ramsey at Thompson Research Group.

Good morning, and like others said, congratulations to all of you there. Connecting the dots here a little bit, you maintained the full year siding guide, yet the order patterns have been very strong. You noted Q2 and into Q3. Is there some conservatism built in here, or is this catch up from Q2?

There's a bit of conservatism built in, yes. We don't want to extrapolate forward just a couple of weeks of pretty robust order files, but yes, there is perhaps a bit of conservatism in that.

Okay, that's helpful. And then sticking to siding growth, there's the long-term opportunity in manufactured housing. Can you talk about the progress on that in 2026 and Manufactured Housing Outlook within the guide?

Sure, I'll talk about the progress in a couple of ways. One, we are really encouraged by the traction we've seen for taking the same sort of enterprise approach to bundling siting and OSB with the home builders. We're encouraged that that is attractive to manufactured housing people as well. So there's an opportunity for growth there. In terms of the market itself, with the passage of the Housing Act recently, that should, all else equal, help manufactured housing be part of the affordability solution and compete against the lowest price point stick-built homes where LP would struggle to get traction just from an overall cost standpoint. We think that the market has some potential to improve and within that, we're encouraged by the progress that we've made.

Yeah, the only thing I would add there is over the course of the last two to three years, we've allocated more resources to that segment than maybe in prior years. We saw that as an opportunity for us to really gain more traction and I'm pleased to see that even in a soft market we've seen year-over-year growth and as Aaron mentioned, the enterprise bundling approach seems to have some stickiness in that segment. We're looking forward to future updates there.

Excellent. Thank you.

Thank you.

Our next question comes from Sean Stewart at TD Cowen.

Thanks. Good morning, everyone. Congrats to both Alan and Aaron. A couple questions. Wondering, given the ongoing positive trajectory you're seeing for citing order files, how you're thinking about the next capacity expansion option timing and how that might inform your CAPEX plans into 2027?

Yeah, what I'd say right now is no specific updates relative to what we've shared on prior calls. You know, we're confident that we have plenty of capacity available right now. I think I mentioned on the prior call four to 500 million feet of headroom and primed and plenty more coming in expert finish with, you know, Green Bay, Bath, and North Branch expansions. What I would say is we're continuing to assess demand projections. Our Maniwaki facility is more than likely the lead dog in the hunt, but we're fortunate to have other options available to us. So I would say it's in flux right now, but we're keeping a close eye on it.

Okay. Thanks for that, Jason. The second question is on costs. I appreciate resin is probably the most volatile piece of it right now. We've heard from one of your peers that they've seen relief for log costs in North America, given less competition for pulp logs. Have you guys seen any of that in your mix, both OSB and siting in recent weeks or months?

We saw some of that to begin the year, but with oil prices moving so dramatically the other direction, that has trended in the opposite direction. So that isn't going to carry through for us the back half of the year.

Those dynamics are very local, as you know. So it's not necessarily the case that those same dynamics impact all the consumers of those pulp logs.

Understood. Thanks very much, guys. Thank you.

Our next question comes from Kurt Yinger at DA Davidson.

Great. Thanks, and congrats, Alan and Aaron. Just wanted to follow up on the question around capacity expansion. I mean, recognizing that, you know, it doesn't sound like Maniwaki is necessarily the 100% next project. I guess, is there any consideration being given at this time to, you know, maybe pulling a project like that forward, just given what we're seeing in OSB and maybe more broadly, you know, what are kind of the puts and takes around that, you know, recognizing you don't necessarily need that siting capacity, but it might help on kind of the OSB side, given where we're at right now.

Good question, Kurt. What I would say is we're not going to make long-term siting capacity decisions based on what we're dealing with in the short term for OSB. We're going to broadly assess all the options available to us and look at what's the best return to LP and the siting business as well. can understand where you're coming from, but that's not the primary filter we're putting these options through.

Even if we did that, the cost of that magnitude of expenditure for a siding mill a couple or three years earlier than we needed it would more than offset the likely benefit that it could potentially create to price from a supply-demand-pressure standpoint in OSB. that even if we were tempted to do that, it probably wouldn't be as effective as one might hope.

Okay, okay, fair enough. And then there's been some noise around building codes kind of locally and wildfire prone areas and things like that. I'm just curious, big picture what you're hearing or seeing across certain parts of the country how you're positioning engineered wood as a siding material given some of those conversations. Would love to hear any color on that.

Yeah, I'll touch on that. So I think you're referring to WUI codes and I've mentioned on prior calls that this dynamic is nothing new. It's something we've dealt with for, again, as long as I've been with LP. There have been some changes in one state in particular and a couple local markets and specifically I guess where code requires an ignition resistant or non-combustible cladding and does not allow for a wall assembly including SmartSide to meet code, that is where we are challenged to meet the requirement. Fortunately, this is a small portion of the addressable market. One area in particular is Colorado. There's been some changes there, but fortunately for us, our volume's down there, but it's not down more than necessarily housing starts in general. So we're monitoring that closely and have a number of different new product development initiatives in place coupled with a heavy push on educating local authorities on the value prop of SmartSide in relation to some of the code changes they're debating just to make sure we're positioned well for the future.

Got it. Okay. Thank you for that. Appreciate the call.

Thanks, Kurt.

Our next question comes from Mike Wontra at Seaport Research Partners.

Thank you. First, Alan, congratulations. While Brad and Jason were busy transforming LP from OSP to siding, you certainly did your thing with the balance sheet with all that share repurchase.

And congrats again. And Aaron, of course, congrats to you.

So I wanted to just focus a little bit more on some of the questions on when you do build the next siding facility. It's gotten a lot more expensive in a number of industries. to build. And we know what it used to cost you to build a new siting facility, and I know it could vary depending on what you do, but is there any kind of color that you can share with us to help us understand potential magnitude of project when you do decide to press the button to move forward?

Yeah, I'll take that, Mark. It is far too premature to share specifics on that cost, but Rough order of magnitude, what I would say is that, yes, inflation is a factor. Steel is more expensive. Labor is more expensive. That project will be more expensive than the previous conversions at Segola and Holton for a couple of reasons. One, because it's bigger. So assuming Maniwaki is where we build, it would be a larger project that would produce more siding. That alone would increase the cost. But inflation is another factor. Fortunately, the other thing that continues to increase is siding volume and siding price. So if you do the internal rate of return calculations, the inputs are bigger, the outputs are bigger. The return in percentage terms is pretty similar. But when we have more detail about first where the next mill will be and then as a function of that, what the project looks like, we'll be able to share those. It's just a little bit early for that now. But we're confident that it'll be an excellent investment in ongoing siding growth. Super. Makes sense.

and just since Maniwaki I think was characterized by Jason, is it fair to conclude that like these new Canadian tariffs that were announced, they don't have any impact on siting?

That is correct. Okay, good. But just like we wouldn't make a long-term siting decision based on short-term OSB volatility, we would be reluctant to make a long-term siting investment based on a tweet about tariff policy. Understood.

And then also, just to, and how long is it from the time that you would, you know, decide, decision to move forward and have a facility up and running, recognizing, again, it could differ depending on what you're doing where?

a lot of moving pieces in that as a function of where the location would be and what the project would look like and to a lesser extent what specific mix of siting products we would plan to make there but if you think on the order of two and a half years from decision to first board that's probably in the right ballpark. So given the capacity that we have in our existing footprint we've got a fair amount of flexibility about making sure that we can time that so that we don't have too much excess capacity for too long before we're ready to bring that next mill up to speed.

Great. Thanks very much.

Thank you.

Our last question comes from Adam Baumgarten at Vertical Research Partners.

Hey guys, good morning. Last quarter you talked about expert finish volumes growing mid-single digits in 26. Is that still your assumption for the year?

Yeah, that's more or less what we expect and expert finish has been the best performing category of our siting business year to date. We saw volume growth in the second quarter and that makes us even more confident in the capacity that we're adding to supply that future demand.

Okay, great.

And then

Just a comment you made earlier on kind of your lack of incremental price actions in 26, maybe some share gains.

Is that a broad-based comment? Is it maybe more specific to the HomeBuilder channel or R&R? Is it both? Just curious if you can give some more color there, kind of where you're seeing that progress.

I don't think that's knowable, really. I suspect that to the extent that we are getting volume from it, it would be relative to the – if our lack of price action is driving volume, it's more Thank you. Thank you.

This concludes the question and answer session. I would now like to turn it back to Aaron for closing remarks.

Okay, I guess George wasn't able to dial back in, so we'll connect with you later. Thanks for everybody for joining us. With no more questions, we'll end the call there. Hope everyone is safe, and we'll look forward to connecting later on during the day and during the week. Thanks very much.

Thank you for your participation in today's conference. This does include the program. You may now disconnect.