COOK- During a strong new housing and remodeling market and steadily increasing demand for its SmartSide trim and siding, Nashville-based LP Solutions recently announced that they will begin converting two of their oriented strand board mills to make the product, bypassing for now the Cook mill they acquired in 2016 for possible future development.
“To supply the growing demand for LP SmartSide Trim and Siding, LP announced a multi-year siding production capacity expansion plan to convert our Houlton, Maine, mill to manufacture SmartSide, likely followed by the conversion of our Sagola, Mich., OSB mill,” said LP Senior Manager of Corporate Communications Breeanna Straessle.
Starting with the Houlton site will help the company to better penetrate East Coast markets, Straessle said.
“Construction is expected to start this summer,” she continued, “with SmartSide production likely beginning in early 2022. Although the precise timing for LP Sagola’s conversion has yet to be determined, if demand for SmartSide continues to grow at historic rates, we will need to initiate work on the conversion soon after siding production begins at Houlton.”
That timeline likely pushes a decision on the Cook facility out until at least 2023, and when those discussions happen Cook won’t be the only option in the mix.
“There remains a long runway for further siding growth, with several potential expansions of existing facilities and other conversion opportunities,” Straessle said.
Those comments were amplified in a February investors meeting where one investor’s question about the Cook and Val-d’Or mills was answered by CEO Brad Southern.
“We do own a nice plant site in Cook, as you know, and we own a facility in Val-d’Or, Québec,” Southern said. “We also have an OSB mill in Maniwaki, Québec, that uses aspen and then we have Peace Valley. We also have expansion opportunities within our current mill network. Finally, there are other people that own OSB mills in aspen wood baskets that we have periodic conversations with. All of those will be on the table as we think beyond the Sagola conversion. It’s gotten to a point now with our growth where every couple of years we’re going to be needing to do one of these. So, it’s a very active conversation and all options will remain available to us.”
Hopes were high in 2016 that LP Solutions would soon reopen the mill in Cook that was shuttered by Ainsworth in 2008. But rather than build out the Cook mill or convert another newly acquired idle OSB mill in Val-d’Or, Quebec, the company decided to convert its Dawson Creek, BC, mill to siding to more quickly capitalize on the growing market for SmartSide products.
Last year LP Solutions added capacity by acquiring production facilities in Green Bay, Wis., and Granite City, Ill.
Under Southern’s leadership, converting lower-return OSB sites to higher-return siding sites has literally paid dividends, as he reported in February that LP Solutions had eclipsed its three-year financial goals a year ahead of schedule. Projected demand reinforced the need to bring additional siding production capacity on quickly.
“As you all know, the housing and repair and remodel markets that LP serves continue to show remarkable resiliency despite the ongoing COVID-19 pandemic and demand for our products has remained very strong,” Southern told investors. Quarter four was another record for SmartSide as sales increased by 30 percent. OSB prices remained exceptionally high throughout the quarter. It was a very strong ending to a uniquely challenging year that leaves LP well positioned for continued growth.”
One potential drawback for the Cook mill is the time it would take to build out the facility and get it into production, estimated by company officials in 2017 to be about two years. As the announced plans for the Maine facility suggest, a conversion of an operational facility can take half as much time and have lower overall costs.
However, one aspect of the Cook facility that could play into its long-term prospects is its size. While a press would have to be designed and built for optimal production, one production line at Cook could produce 400 million square feet of siding, past estimates indicate. That would be about 77 percent of the announced combined gain in production from the Houlton and Sagola conversions. Officials have said in the past that the Cook site could accommodate a second production line.
Key to any future decisions about production capacity will be for SmartSide to gain an increasing share of the trim and siding market, continued strong demand in the new housing and remodeling markets, and the performance of the OSB and engineered wood products segments of LP’s business.
Cook’s hopes will likely rest on Southern being able to repeat annually the optimistic picture he painted for investors in February.
“Each of these initiatives will accelerate LP’s ongoing transformation, grow our portfolio of SmartSide and Structural Solutions, and improve our operational agility as we meet increasing customer demand,” Southern said. “This acceleration of our growth and value creation strategy will build on LP’s growing momentum as we transform into a building solutions leader.”