By Kristen Bergstrand, Utilization and Marketing coordinator, Division of Forestry, Minnesota Department of Natural Resources
Louisiana-Pacific (LP) Corporation recently made two announcements. First, Curt Stevens, LP's chief executive officer, will retire on June 30, 2017, and Brad Southern will take over on July 1. Southern will be LP's fifth CEO and has held various leadership positions in specialty operations, siding, and oriented strand board (OSB), and was most recently the executive vice president, chief operating officer since November 2016.
Second, Brad Southern announced that LP will convert their existing OSB mill in Dawson Creek, British Columbia to a siding mill that will produce SmartSide siding. Southern said this decision was made because of growth on the West Coast, and a desire to lower risk. "Key factors that differentiated this site are timing to first board, wood cost, cost of production, proximity to our West Coast customer base, and reduced operational risk due to the fact that Dawson Creek is currently staffed and producing OSB." LP leadership will request board approval for this conversion project in July once the detailed engineering and design is complete.
Southern added that LP's other two recently acquired facilities in Cook, Minnesota, and Val-d'Or, Quebec can provide flexibility to support the growth of their SmartSide business. "Both the Val-d'Or and Cook sites are likely options for future Siding expansion," said Southern. "Given our strong SmartSide demand growth, we estimate that the Dawson Creek conversion will satisfy about two to three years of demand growth."
Southern continued by saying "since Val-d'Or is not currently operating and the Cook site is basically a brownfield mill needing new buildings and equipment we are continuing our planning process at both locations with a focus on Cook. Given Cook's brownfield nature they've initiated a more detailed engineering and design study which will be followed by the necessary environmental permitting assessments." "These are exciting times for our SmartSide business. We're fortunate to have multiple viable manufacturing options to support the demand growth being realized by our sales and marketing team, with the support of our distribution partners," Southern said.
The Cook site could potentially produce 400 million square feet per year, with a "footprint" for another 400 million square feet per year production line. Val-d'Or has existing equipment and needs less start-up time but is a smaller facility at 225 million square feet per year. Stevens in a previous call stated that the smaller Val-d'Or mill could fill the projected siding demand for about 1.5 years. Work would likely be done on both the Val-d'Or and Cook sites simultaneously because Cook would need a few years to bring online, and the two facilities would likely need to come online sequentially to close any gaps in production. As of now, the wood license has not been procured for the Val-d'Or mill.
While there is no clear timeline on when or if new siding operations might locate to Minnesota, if LP's SmartSide product growth projections are correct, Cook, Minnesota and Val-d'Or, Quebec remain viable sites to locate future siding production operations. Based on the projected twelve to fourteen percent annual product demand growth and announced facility conversion projects, new siding operations will not be needed until 2021/2022. As Southern pointed out "Strong SmartSide strategy to expand capacity and grow revenue is to stay ahead of demand using a rigorous evaluation process." LP celebrated 20 years of LP SmartSide trim and siding production in May.
LP is a manufacturer of engineered wood building products and is traded on the New York Stock Exchange under "LPX." It is located in Nashville, Tennessee.
References: Q1 2017 Louisiana-Pacific Corporate Earnings Conference call webcast and Q1 2017 Earnings Release Presentation. (Click on "events," then "past events.")