Northeast Bank Common Stock 2026 Q2 Earnings Call

Good morning, everyone. Thank you for joining Louisiana-Pacific 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 Louisiana-Pacific'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. 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 8-K filings. I will incorporate those materials by reference rather than reading them.

With that, I will turn the call over to Jason.

Thanks, Aaron. Good morning, everyone. 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 in ExpertFinish. The inflationary impacts we absorbed in the second quarter were more or less consistent with the sensitivities previously outlined. 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 five 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 $0.40 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 SmartSide 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. 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.

ExpertFinish inventories in 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. 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 Siding business to return to year-over-year volume and revenue growth in the third quarter. To supply growing demand, we are investing in ExpertFinish capacity. 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, N.Y. facility later this year. Finally, at the end of June, we broke ground in North Branch, Minnesota, on what will be our largest and most efficient ExpertFinish 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 siding 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. 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 developed 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. Feel free to take it from here.

Well, thank you, Jason. I must add that 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. 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 ExpertFinish, contributing $27 million to revenue and 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.

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 SmartSide's 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, primed volumes were down 12%, while ExpertFinish 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 material supply chain, broadly in line with the sensitivities we discussed on the prior quarter's call.