Louisiana-Pacific (NYSE:LPX) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Louisiana-Pacific Corporation reported a 7% increase in net sales for its siding business in Q3 2026, despite a 2% decline in single-family housing starts, with total net sales reaching $691 million.
The company achieved a record $473 million in siding net sales, with an EBITDA of $119 million, driven by higher selling prices and a 2% increase in siding volumes.
Louisiana-Pacific expanded its distribution network, aligning with Specialty Building Products and other partners to enhance market presence, leading to a new strategic partnership with Taylor Morrison.
Total EBITDA remained flat at $82 million due to inflationary pressures, particularly in raw materials and freight, which negatively impacted EBITDA by $18 million.
The company announced indefinite curtailment of its Jasper, Texas mill and temporary idling of the Maniwaki, Quebec mill, as part of its capacity management strategy due to soft market demand.
Operating cash flow was $112 million, with $56 million reinvested in capital expenditures and $21 million returned to shareholders through dividends.
Louisiana-Pacific’s future outlook includes continued growth in siding volume and revenue in Q4 2026, with full-year siding EBITDA expected between $415 million and $425 million.
The company was recognized as one of America’s Greatest Companies by Newsweek and earned the Engineered Wood Association’s Safest Company Award for the fourth consecutive year.
The company’s guidance for full-year EBITDA is between $270 million and $280 million, reflecting improved siding and OSB outlooks.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to Q3 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 press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 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 (Treasurer)
Thank you, operator, and good morning, everyone. Thank you for joining us to discuss LP Building Solutions’ results for the third quarter of 2026 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 Holwald, our Chief Financial Officer. Following these prepared remarks, we’ll 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 that 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’ll turn the call over to Jason.
Jason Ringblom (Chief Executive Officer)
Thanks, Bob. Good morning, everyone, and welcome to LP’s third quarter earnings call. We’re glad you could join us. As expected, LP’s 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 siding 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 Milwaukee 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 ExpertFinish.
And then finally we returned $21 million to shareholders through dividends. Before I turn the call over to Aaron for a closer look at LP’s financial results, I’d 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 Engineered Wood Association’s Safest Company Award for the fourth 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 LP’s ExpertFinish 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, and help us deliver strong results. That’s 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 one of America’s Greatest Companies. The recognition considers financial performance, innovation, workplace culture, and environmental sustainability.
One 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 ExpertFinish, serving professional dealers, one-step distributors, and retail customers, complemented by distribution partners in designated regional markets.
Those include existing LP partners BlueLinx, Coastal Forest Products, J.M. Thomas Forest Products, Minot Builder Supply, Sherwood Lumber Supply, Taiga Building Products, Wausau Supply Co., Weyerhaeuser, and WS Building Materials, many of whom will grow their coverage of SmartSide. We are also pleased to welcome new partners Forest Product Supply Company and Palmer-Donavin. These distributors will carry the full line of LP SmartSide products including ExpertFinish and the Naturals Collection and transition away from competing siding products.
Our SmartSide distribution partners share LP’s 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 home builders, Taylor Morrison named LP its new Strategic Vendor of the Year. We’re 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, we 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 market segments. Our return to growth reflects the strength of our strategic relationships with distributors and home builders, 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 siding growth strategy, thank you. I’m grateful for all that you do and very excited about what we can achieve together. And with that, I’ll turn the call over to Aaron for a more detailed review of LP’s financial results for the quarter and our updated Q4 and full-year outlook.
Bob Hopkins (Treasurer)
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, adding $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 ExpertFinish volume dipped slightly.
ExpertFinish 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 Louisiana-Pacific and for our customers. Many of Louisiana-Pacific’s raw materials have petrochemical inputs, and higher diesel prices impact inbound and outbound freight. The year-over-year increase in raw materials resulted in a negative $12 million EBITDA impact for siding in the third quarter, primarily driven by MDI resin 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. As 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. While 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 Louisiana-Pacific’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. Finally, let me spend a minute unpacking the $17 million of other EBITDA benefits. Fourteen million of this is a result of inventory valuation adjustments. Higher prices at quarter end resulted in favorable lower-of-cost-or-market adjustments to our inventory. The 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, Louisiana-Pacific 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 Louisiana-Pacific.
We’re 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 Louisiana-Pacific’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 Louisiana-Pacific with just over a billion dollars 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 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 the 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 $1.67 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.
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 year’s 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 Louisiana-Pacific 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, Louisiana-Pacific’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 Louisiana-Pacific 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 Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Matthew Bouley with Barclays. Your line is now open.
Matthew Bouley (Analyst)
Morning everyone. Thank you for taking the questions. I’ll 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 kind of 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 how your geographic coverage more broadly has changed as a result of these distribution changes.
Thank you.
Jason Ringblom (Chief Executive Officer)
Thanks Matt. I’ll 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 hard cladding solution. And as we went through this process we were very fortunate to have multiple options and ultimately are very pleased with where we landed. 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 one-time event. So this will be over the next, I would say 2/4, maybe even 3. So we’re working with our current and new distribution partners to do that the best way we know possible, knowing that it’s more of an art than a science. The first part of your question was around sell-through rates. I believe maybe I’ll touch on ExpertFinish first. Yes, volumes right now for the year are anticipated, or shipments 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 prior year quarter we’re up 8%. And then when you compare Q3 to Q2 of this year, we’re actually up 13%. So seeing a nice trend there. And then on the prime side, we’re also seeing sell-through rates that are comparable to prior year, which is encouraging just given the softness in the market.
Matthew Bouley (Analyst)
Got it. Okay. Well thank you for all that detail in addressing my, I guess, multi-part question there. Secondly, sticking with siding, given the inflationary backdrop and presumably choppy end-market demand, in my words, how are you thinking about pricing into early 2027 and what do you think you need to do from here in order to offset the level of inflation we’re seeing out there? Thank you.
Jason Ringblom (Chief Executive Officer)
Yeah, so that’s something obviously we’ve kept an eye on for the majority of the year. We’ve been fortunate to be price-cost positive up until the beginning of Q4. Obviously that’s 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’re anticipating netting roughly 3 and a half to 4% on a similar mix to 2026, with Prime SmartSide being a hair higher than what we’re anticipating on the ExpertFinish side.
And in terms of when we expect to realize those price changes, right now, based on our order file, we’re expecting shipments to go out with the new prices sometime in early to mid-January.
OPERATOR
Thank you. Our next question comes from the line of Keaton Memora with BMO Capital Markets. Your line is now open.
Keaton Memora (Analyst)
Good morning, Jason, Aaron. It’s just a follow-up to Matt’s question. Do you have any sort of pre-buy built into Q4? In the past it used to be like 110% of what they typically buy. Is that sort of still the case in Q4 volumes?
Jason Ringblom (Chief Executive Officer)
Keaton, thanks for the question. What I would say about Q4 of this year is it’s a little bit more complex than prior years because obviously we’re working through the distribution changes. So we’re 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 demand by region to manage the load-in appropriately with our new partners.
So it is a little bit more complex or dynamic relative to what we’ve done in recent years. But we’re keeping a very close eye on those channel inventories and working with current and existing distributors as we go through the process.
Keaton Memora (Analyst)
Understood. Okay. And then just as a follow-up, recognizing that you are not giving 2027 guidance at the moment, if you just look to 2027 with the housing backdrop and the interest rates where they are, can you give us some framework in terms of how you think about volumes next year? If starts are, let’s say, down mid-single digits, is there a way for us to think about sort of outperforming the broad housing market?
Jason Ringblom (Chief Executive Officer)
Yeah, I’ll take that one, Keaton. As you said, we are not giving guidance for 2027 yet. But on the last call we did update everyone on multi-year 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’ve pretty consistently outperformed those markets by, 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, that is not a hint at algorithmic guidance, but merely a reflection of our historical performance, and that’s what gives us confidence in the product and our teams to deliver.
OPERATOR
Thank you. Our next question comes from the line of Philip Singh with Jefferies. Your line is now open.
Philip Singh (Analyst)
Hey guys, you talked about this new partnership with Taylor Morrison. Can you explain what that exactly entails? Is siding/OSB a bundling effort, and perhaps any early look in terms of the contribution and potential ramp for next year?
Jason Ringblom (Chief Executive Officer)
Yeah, thanks, Philip. I’ll touch on that briefly. We’ve done business with Taylor Morrison for a number of years, and on prior calls we’ve talked a fair amount about our enterprise programs and how we’re 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’ve historically been underpenetrated. We worked closely with TM over the course of the past year or so to structure a program that 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’s beneficial for Taylor Morrison and Louisiana-Pacific over the long haul.
Philip Singh (Analyst)
Helpful. And then, Jason, you provided some helpful insights in terms of your order book and visibility. It sounds generally pretty constructive, particularly on siding, but clearly where mortgage rates are at and builder sentiment deteriorating, how does that play into your outlook? What you’re 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’re saying on the R&R side of things as we look out to 2027?
Jason Ringblom (Chief Executive Officer)
Yeah. Maybe I’ll just touch on the first part of the question regarding the outlook and where channel inventories stand. From a prime SmartSide perspective, we are seeing channel inventories actually come down versus prior quarter and prior year. Same with ExpertFinish, but I would still classify them as seasonally normal, again trending a little bit lighter. This is obviously fluid with some of the changes going on with our distribution network, but we’re going to manage that closely as we work through the load-in.
In terms of looking ahead to next year, what we’re paying close attention to is the sell-through rates that our distributors report to us on a monthly basis. That gives us confidence that the share gains we’re after in the segments we play in—offsite, repair and remodel, and new construction—are going to carry out into the new year. We’re doing our best to minimize 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.
OPERATOR
Thank you. Our next question comes from the line of Stephen Ramsey with Thompson Research Group. Your line is now open.
Brian Baros (Analyst)
Hey, good morning. This is actually Brian Baros on for Stephen. Thank you for taking my questions today. First one, with your pricing moves in siding and the decisions you’ve made or not made in this rising commodity input cost environment, how do you assess the benefits in share capture at this point?
Jason Ringblom (Chief Executive Officer)
Brian, thanks. That’s a good question. It is very hard to quantify what portion of our volume increases that we’ve 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 can’t have hurt when the premium to move from vinyl to SmartSide, for example, collapses a little bit because of vinyl price increases—that can’t hurt our share gain—but it’s very difficult for us to quantify.
Brian Baros (Analyst)
Understood. And maybe a related question: with the new distribution deals you’ve announced, does this enable you to capture share in a better way than before? Are you seeing any large builders or retailers more enticed to come to you for product? You talked a little bit about this in the prepared remarks. What are you looking for in the near and medium term to measure the difference and ultimately the benefits of these moves?
Jason Ringblom (Chief Executive Officer)
Yeah, I’ll touch on that. I think the largest benefit is going to come from an alignment perspective to our strategy. If you think about our new distribution footprint, it’s over 100 locations with 12 or 13 different partners. If you add up their entire field sales organization, it’s much larger than what we have here at Louisiana-Pacific. So it’s an opportunity for us to create an extension of our sales force, getting our distribution partners more dialed into our downstream demand creation efforts and helping pull through new customers.
Regardless of how you look at it, it’s definitely going to be a net benefit as we think about the future.
OPERATOR
Thank you. Our next question comes from Mike Rowland with Truist Securities. Your line is now open.
Mike Rowland (Analyst)
Yeah, 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 two to three quarters. Can you talk about the cost impact as a result of that transition, and also what impact do you expect on siding volumes?
Jason Ringblom (Chief Executive Officer)
Sorry, Mike, could you repeat the question?
Mike Rowland (Analyst)
Sure. You mentioned, in terms of this whole transition with Specialty Building Products and the other distributors you laid out, a phased approach—working through your existing distributors, working through inventories, and then ultimately working with your new distributors over a certain period of time. You said this transition from old to new could take about two to three quarters. Is there a cost impact at all in making this transition, and is there anything from a siding volume perspective that we should be aware of as you make this transition as well?
Aaron Howald
Now, as Jason said, we’re trying to phase it in so that there isn’t a large step-function increase in volume. We’re trying to minimize that. In terms of a cost impact, it should be very minimal. Our goal 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 don’t create more noise than is inherent in a process like this.
Mike Rowland (Analyst)
Got it. Okay, makes sense, Aaron. And just one quick one: Maniwaki—did I hear you correctly when you say that’s going to be indefinitely curtailed as well, or is that a mill that you’re taking down for 4Q and then it should restart next year?
Jason Ringblom (Chief Executive Officer)
It’s 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.
Mike Rowland (Analyst)
Thank you very much.
Jason Ringblom (Chief Executive Officer)
Thanks, Mike.
OPERATOR
Thank you. Our next question comes from Jeff Stevenson with Loop Capital. Your line is now open.
Jeff Stevenson (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 (Chief Executive Officer)
Yeah, happy to elaborate on that, Jeff. When you look at our shed segment, 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 pay close attention to sell-through rates at a dealer level; 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 continues to be on growing our share of wallet with all the shed fabricators that are partners of Louisiana-Pacific. That would be opportunities to grow in flooring and roofing and trim beyond the panel market share that we enjoy. We do believe that we’ll be back on a growth trend as we look to the future and are excited about the offsite segment as it relates to our siding growth strategy.
Jeff Stevenson (Analyst)
Great. That’s 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 channel 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?
Jason Ringblom (Chief Executive Officer)
Yeah, maybe, Jeff. With vinyl producers taking midyear price increases, that has probably blunted that effect somewhat. But there’s an offsetting potential benefit that we could see as well. For the same reason, we’re beginning to see more evidence of preference shift away from brick because it’s so labor intensive and so expensive. So I think that there are some ways that Louisiana-Pacific could actually benefit from that ongoing margin pressure as well.
We’re watching it, and we’ve certainly seen margin pressure before and have historically outperformed the market. That’s what we intend to continue to do.
OPERATOR
Thank you. Our next question comes from the line of Susan McLaury with Goldman Sachs. Your line is now open.
Susan McLaury (Analyst)
Thank you. Good morning, everyone. My first question is going back to pricing in siding. I 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’re generally thinking about price/cost as we look to the next couple of quarters, and how much mix could benefit you?
Bob Hopkins (Treasurer)
Yes, Sue, I’ll take that one. Price/cost is going to be most challenged in the fourth quarter because raw materials continue to be a headwind and also because the impacts we’ve been talking about all year—in terms of 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, very negative changes for raw materials next year, we should be healthily price/cost positive as we head into the next year.
Aaron Howald
Okay. All right, that’s helpful. And my second question is on OSB, think about the changes that you’ve announced on the production side there. Are there any implications from that to structural solutions? Can you just talk more broadly about the demand environment for structural solutions given the slowdown in single-family starts that we’re seeing? 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’s been a bit of a preference shift to more commodity OSB products. It’s a little counterintuitive that 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.
OPERATOR
Thank you. Our next question comes from Sean Stewart with TD Cowen. Your line is now open.
Sean Stewart (Analyst)
Thanks. Good morning everyone. A couple questions and thanks for all the detail in the siding market context, but I’m going to start with capex. Aaron, you guys have lowered your 2026 guide and it’s 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 a structural shift in how you’re thinking about that expense?
Aaron Howald
No real structural changes, largely deferrals. One 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 one facility indefinitely and another one for 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, you know, pretty consistent with the way we try to be agile and flexible as we manage our capex, and I should reinforce no change in growth capital either.
Sorry to step on you there, Sean.
Jason Ringblom (Chief Executive Officer)
No, we’re full speed ahead on North Branch.
Sean Stewart (Analyst)
Understood. And, you know, appreciating there’s no urgency for whether it’s Maniwaki or something else in terms of the next siding conversion, but is there any—and we’ll get this, I imagine, with the February guidance for ’27—but is there any spending for preliminary work on a siding conversion that would be anticipated in the near midterm?
Aaron Howald
Not a significant amount. We’ll get more detail when we get to the February call, as you said. What I want to 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’ll 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’ll have a lot more detail for that as we head into next year and as we get closer to the project really being underway.
OPERATOR
Thank you. Our next question comes from the line of Kurt Yinger with Davidson. Your line is now open.
Kurt Yinger (Analyst)
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 to new kind of enterprise partnerships as we move into 2027.
Jason Ringblom (Chief Executive Officer)
Thanks, Kurt. Yeah, you’re right. We’re in the midst of RFP season now and have a handful of programs that we’re working on with builders of scale, and that includes manufactured housing producers as well. What I would say, Kurt, is that these programs are progressing nicely. They look promising at this point. We’re 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 we are beginning to see evidence of a halo effect from the expanded positions with dealers in underpenetrated markets for SmartSide. So we’re 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 going to unfold, but we should have more information over the course of the next 30 to 60 days.
Kurt Yinger (Analyst)
Okay, that’s great. Thanks for that. Jason and Aaron, maybe just on OSB—I mean I know there’s a lot of moving pieces with the inventory adjustment and prices by region are up different amounts—but if we just look at the composite, I mean it’s 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 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’ve seen a larger increase in thinner products than in thicker products. Flooring prices haven’t 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.
Operator, do we have a next question?
OPERATOR
Thank you. Our next question comes from the line of Trevor Allanson of Wolfe Research. Your line is now open.
Trevor Allanson (Analyst)
Hi, good morning. Thank you for taking my questions. First one is on your 4Q siding revenue guidance. It does seem like it’s 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’s perhaps a little bit of conservatism in there, but it’s within the normal range of seasonal falloff as we head into the winter months. Jason, I think, reinforced what we’re seeing from a sell-through rate standpoint. And, you know, we’ve seen pretty consistent end-use demand, which is very encouraging. One of the effects of trying to phase in the inventory is we are avoiding—we’re trying to avoid—a large load-in which of course would show up as revenue. So we’re trying to be cautious not just about levels of conservatism, but also we don’t want to perturb the inventory channel any more than necessary as we transition to a new distribution network. So I really think it’s the result of all of those factors, Trevor.
Jason Ringblom (Chief Executive Officer)
Yeah, one point there. I mean we learned a hard lesson Q4 of last year, and ultimately we’re trying not to repeat that. So maybe a little bit of conservatism in there, but it’s a tough balancing act given the distribution changes.
Trevor Allanson (Analyst)
Okay. Yeah, makes sense. Thanks for that color. And then second question just on your views on your own OSB capacity here and industry capacity. You made the Jasper announcement before rates jumped, but now you’ve 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 capacity if you think there needs to be any more moves there.
Jason Ringblom (Chief Executive Officer)
Yeah, I’ll touch on that one. So if you think about our operating position leading up to the Jasper and Maniwaki curtailments, we were operating roughly in the 75-ish percent 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 to position the business for a further down cycle in OSB.
So we think we’re set up nicely going into 2027 and are going through the committed volume process currently to shore up our contract strategy and figure out how much open market wood we’ll have to sell in 2027.
OPERATOR
Thank you. Our next question comes from the line of George Staphos with Bank of America. Your line is now open.
George Staphos (Analyst)
Yeah. Hi everyone. Good morning. Jumping on the line here late at an industry conference. This may have been already asked. First of all, Aaron, 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’ve seen in the last nine months, six 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 don’t 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
Yeah, thanks, George. I’ll tackle some of that. In terms of sensitivity to crude oil prices, no, those really haven’t 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’s fallen about 5 or $6 since that in the past few days. So that explains some of the headwinds we’ve seen. In terms of our guidance sensitivities, yes, we made some adjustments that we described 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 raw materials.
In terms of engineering the product, there are some opportunities there and we’ve got excellent teams in our operations team that are looking at opportunities there. We use MDI resin exclusively in siding because it performs really, really well. And so we don’t have too many opportunities there, and we certainly don’t want to dial down the dosage rate or do rash things like that in the near term. But yeah, I would say broadly we’re looking at opportunities, but there’s not a whole lot we can do to offset most of the fluctuations in crude oil and similar inputs.
George Staphos (Analyst)
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 at some point you’ll want to have that in the market sooner than later, or is it really not a factor at this juncture? Obviously, it’s only going to be a big deal in certain regions, if it’s 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 (Chief Executive Officer)
Yeah, I would say there’s been more of a focus on some of the WUE codes really because of some of the changes that were made in the state of Colorado. You know, what I would say about our sales specifically is when you look at our sales so far out West year to date, where WUE 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’s something that we’re keeping a close eye on.
We’re 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 these codes apply to a very small portion of the addressable market. It’s something we’re keeping a close eye on but hasn’t affected our growth trajectory.
OPERATOR
Thank you. Our next question comes from the line of Adam Baumgartner with Vertical Research. Your line is now open.
Adam Baumgartner (Analyst)
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’m assuming where inputs are today, rolling that forward, you expect to be price/cost positive for the year. Does that include the early part of the year when these price increases go effective?
Aaron Howald
Yes. Though as Jason said, we expect to be realizing those price increases early to mid-January. So yes.
Adam Baumgartner (Analyst)
Okay, got it. And then just on MDI, there’s been some chatter out there that maybe prices are moderating a little bit sequentially with some of the force majeures 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?
Aaron Howald
We see the same news you do, and of course we’re optimistic about that. But as we’ve discussed on prior calls, our supply contracts tend to have lagging algorithmic adjustments in them. We don’t pay spot for many of these raw materials in the short term. So if those trends continue and if MDI spot prices stay lower for some period of time, then we’ll certainly see that in our purchase prices. So we’re, you know, fingers crossed those trends continue.
Adam Baumgartner (Analyst)
Okay, got it. Thanks. Best of luck.
Aaron Howald
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.
Mike Weintraub (Analyst at Seaport Research Partners)
Thank you. So you’ve articulated that with the musical chairs going on in distribution, you feel it’s a net positive. That’s certainly how I’ve interpreted it. But presumably there are puts and takes. Can you sort of help us understand where the benefits are that are going to outweigh any possible negatives?
Jason Ringblom (Chief Executive Officer)
Yeah, there’s certainly puts and takes, Mike. Sorry. But when you look at the magnitude of this change relative to what we’ve gone through in our past, it’s not of the same scale, but we really were focused on finding exclusive partners to the SmartSide brand and we were able to achieve that, which is going to create that better alignment around our strategy and improve execution. So even though there have been some musical chairs, we think the partners that we’ve 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. No different than some of the changes we’ve made in the past, but that’s a pretty quick process and we believe we’ll be off to the races to start 2027.
Aaron Howald
Yeah, I think the churn is going to be near term. The negative is just the noise during the transition. Longer term, we’ve got greater geographic reach, greater exclusivity. It’s a long-term positive.
Mike Weintraub (Analyst at Seaport Research Partners)
Okay, thank you.
OPERATOR
Thank you. Our next question comes from the line of Matthew McKellar with RBC Capital Markets. Your line is now open. Hi, good morning.
Matthew McKellar (Analyst at RBC Capital Markets)
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 new resi over the past few years. Could you give us any more detail on how material or abrupt that preference shift you’re seeing is? Thanks very much.
Jason Ringblom (Chief Executive Officer)
That’s a good question, Matt. It’s not very abrupt and so far it’s pretty small, but it’s an encouraging trend. 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’re going to paint a substrate, brick is an extremely expensive substrate to paint. So as those trends continue, we’ll begin to see a little bit of an expansion in our addressable market.
It’ll be geographically patchy. There are some markets that are stronger or weaker for brick. It’s not going to 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’re optimistic that that trend will continue.
OPERATOR
Thank you. I’ll pass it back.
Jason Ringblom (Chief Executive Officer)
Thanks, Matt.
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.
Bob Hopkins (Treasurer)
Thank you, operator. With no more questions, we’ll 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.
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