Louisiana-Pacific Corporation ($LPX)

Good day, and thank you for standing by. Welcome to the Q1 2026 Louisiana-Pacific Corporation's Earnings Conference Call. [Operator Instructions] 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, and good morning, everyone. Thank you for joining LP Building Solutions to discuss our financial results for the first quarter of 2026 and our updated guidance for the second quarter and 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. During today's call, we will be referencing a presentation that has been posted to LP's IR website, which is investor.lpcorp.com. Our 8-K filing, earnings press release and other materials are also available there. Finally, today's discussion contains forward-looking statements and non-GAAP financial metrics, as described on Slides 2 and 3 of the earnings presentation. The appendix of the presentation also contains reconciliations that are further supplemented by this morning's 8-K filing. Rather than reading those materials, I will incorporate them by reference. And with that, I'll turn the call over to Jason.

Thanks, Aaron. Good morning, everyone, and welcome to LP's earnings call for the first quarter of 2026. We appreciate you joining us. I'm proud to say that in the first quarter, LP navigated the challenges of a complex market exceptionally well. Against an increasingly volatile macro backdrop and despite significant impact from winter storms and the conflict in Iran, we delivered on our guidance. Price realization, both in Siding and OSB exceeded our expectations, partially offsetting lower volumes and contributing to EBITDA performance above the high end of our guided range. I'll discuss our results for the quarter at a high level before describing what we are seeing in the various markets that we serve. One highlight that we are incredibly proud of is our safety performance in the quarter. LP team members in North America worked over 1.5 million hours with a world-class total incident rate of only 0.26. I also want to recognize our newest siding mill in Sagola, Michigan, for achieving two years without a recordable injury. Our goal will always be zero injuries, but I want to personally thank every LP team member, who contributes to our award-winning safety culture. From a macroeconomic perspective, given the trajectory with which the housing market weakened over the course of 2025, we expect that the first quarter would be a challenging comparable. Accordingly, as you can see on Page 5 of the presentation, our net sales were down compared to the prior year quarter, driven largely by softer OSB demand and lower commodity prices, which fell below EBITDA breakeven for Q4 of last year and Q1 of this year. OSB price softness accounted for a $66 million reduction in net sales and EBITDA. By contrast, the pricing power of SmartSide helped offset lower sales volume, moderating revenue declines. LP delivered EBITDA in the quarter of $82 million, representing an $80 million decline year-over-year, primarily from $66 million in lower OSB prices, which I mentioned earlier. Siding EBITDA was only $5 million lower despite 10% lower net sales, with the remaining roughly $9 million attributable to other factors, including South America, and higher corporate unallocated expenses. For the quarter, LP delivered $0.38 in adjusted earnings per share and returned $21 million to shareholders via dividends. I'm pleased to share that we saw minimal impact from crude oil price volatility in the first quarter. This reflects both near-term agility of our supply chain and operations teams as well as the longer-term algorithmic structure of many of our strategic supply contracts. We did see modest increases in freight rates, which was not surprising given how quickly diesel prices respond to crude oil supply disruptions. Overall, however, other inflationary impacts were minimal in the quarter. Alan will share some sensitivity analysis later to help model the direct and indirect impacts of crude oil price volatility on our raw material costs in the second quarter and beyond. Next, I will go a layer deeper and spend a few minutes describing how the quarter unfolded across the three market segments that the Siding business serves, each representing roughly 1/3 of siding volume. I will start with off-site construction, which includes both sheds and manufactured housing. While currently largely consisting of shed volume, opportunities are plentiful, to grow market share and manufacture of housing as well. As discussed on our prior call, prebuys in advance of our annual price increase resulted in elevated channel inventories. This was not exclusively a shed phenomenon, but the impact was disproportionately felt in this segment. In February, we anticipated that this would be a drag on first quarter volumes, while expecting channel inventory to normalize in Q2. I'm pleased to say that this has played out more or less as we expected, while shed volumes were off significantly in the first quarter, sell-through rates held up quite well and channel inventory is now back within seasonally normal ranges. Another 1/3 of LP siding volume goes into the repair and remodeling market, with pre-finished ExpertFinish, being our fastest-growing product line within this segment. In the first quarter, ExpertFinish accounted for 12% of our siding volume and 18% of siding revenue. We believe that ExpertFinish has a long runway for growth and continued share gains, and we are investing accordingly to support that demand. Our newest ExpertFinish line in Green Bay, Wisconsin, which adds approximately 50 million square feet or 25% to annual capacity is now ramping up and making excellent progress. We also plan to add a further 20 million square feet of capacity at our Bath New York facility later this year. And finally, in late April, we acquired a piece of land in North Branch, Minnesota, where we intend to build additional ExpertFinish capacity to support growing demand over time. The final 1/3 of LP Siding is used in new residential construction. One of our most significant growth opportunities is with the national homebuilders, where we remain relatively underpenetrated. We believe we are uniquely well positioned to build mutually beneficial partnerships with these homebuilders by leveraging SmartSide's labor-saving value proposition together with our integrated portfolio of OSB in siding. So far, in 2026, we have secured two new builder partnerships, and we continue to actively pursue additional opportunities. Just to give you a sense of scale for the business we recently secured with the nation's largest homebuilders as well as the magnitude of the opportunity ahead, I'll share some specifics. We currently expect to supply about 100 million square feet of SmartSide in total to 15 of the top 25 U.S. homebuilders. We estimate that this represents a high single-digit share of the total exteriors market for these builders and a similar high single-digit percentage of our overall SmartSite volume. Again, we believe that the unique value proposition we can offer these homebuilders gives us significant opportunities for additional growth in the years to come. Finally, before I turn the call over to Alan, I want to recognize Dusty McCoy and Ozey Horton, both whom retired last week from LP's Board of Directors. Personally, and on behalf of the entire LP team, I want to thank Dusty and Ozey for their insights, their thoughtful counsel and their contributions to LP's culture and strategic transformation. With that, let me turn the call over to Alan for a more thorough review of LP's financial results and our updated guidance.

Thank you, Jason. I'd also like to add my thanks and congratulations to the whole LP team for a very strong quarter for safety. And to Dustin and Ozey for their service on LP's Board of Directors, I know I have certainly benefited from their wisdom and guidance over the last 7 years. Okay. The first quarter performance for Siding is shown on Page 8 of the presentation. In line with expectations, unit volumes were down by 18% year-over-year. And as discussed on the last earnings call, in addition to a slowing market, we exited the fourth quarter with increased channel inventory following the announcement of our January price increases disproportionate amount of that inventory was held by distributors serving our shared customers where elevated inventory led to volume declines both sequentially and year-over-year. ExpertFinish, on the other hand, continues to be the best-performing product category within siding, which in this market means volumes are flat. The 9% increase in selling prices partly mitigated the decline in volume with prime prices increasing by 8% and ExpertFinish prices increasing by 10%. Now there are a few moving parts within all of this, so let me briefly unpack it. The largest single contributor to the reported 9% price increase is naturally our January 1st list price increase, which averaged 4 to 5 points. The remainder, let's call it 4.5 points is roughly 2.5 points from favorable mix and around 2 points from rebate refinements. Now the mix dynamics are the result of lower volume of shared products within the prime product category and relatively strong volumes for ExpertFinish, including the two-toned natural subcategory, which we launched in the second quarter of 2025. And what I refer to as rebate refinements include the final recognition of lower-than-expected rebate payments relating to the fourth quarter of last year as well as modestly lower rebate accrual rates in 2026, and both factors are, of course, volume related. As we look towards the second quarter, we expect list price realization to remain steady, of course, while mix and rebate impacts will probably normalize somewhat. So price and volume combined for a revenue reduction of $42 million, but an EBITDA hit of only $8 million. The $2 million reduction in selling and marketing cost is merely timing, and while inflationary costs have been mailed so far, I'll discuss this subject further in a moment. The other bar includes the non-recurrence of the EBITDA benefit of last year's OSB production at Siding mills, more than offset by some inventory build in anticipation of maintenance outages later in the year. The resulting EBITDA margin of 28% for Siding was, of course, helped by the rebate and inventory dynamics I mentioned earlier and would be closer to last year's 26% without these factors. But in the long run, the roughly 50% incremental EBITDA on volume, albeit on a decline this quarter, shows the significant leverage that this business will deliver as and when growth resumes. For OSB on Page 9, prices once again the dominant element. In 2025, OSB prices were their highest in the first quarter, fell significantly in the second and have been mired net EBITDA breakeven for the past several months. As a result, prices are 28% lower than the first quarter of last year, resulting in $66 million less revenue and EBITDA. Lower OSB volumes for both commodity and Structural Solutions reduced sales and EBITDA by a further $30 million and $10 million, respectively. Now the operations team did an outstanding job of controlling what they can, operating efficiently, minimizing costs and prioritizing safety. As a result, mill overhead and SG&A contributed $5 million in year-over-year savings and the $3 million negative shown in the Siding waterfall from lower OSB transfers is offset here with income. All of this results in a $12 million EBITDA loss, better than our guidance amidst a very challenging demand and price environment. Cash flow on Page 10 shows net operating cash outflow of $38 million compared to an inflow of $64 million last year, reflecting the $80 million reduction in total EBITDA and a somewhat larger-than-usual buildup of log inventory. Cash ended the quarter at $164 million, and we have $900 million in liquidity, including our undrawn revolver. Now before I conclude with our updated guidance, let me address the impact of crude oil prices on LP's raw material and freight costs, as shown on Page 11. Starting with freight. Roughly speaking, we estimate that each $10 per barrel increase in crude oil corresponds to a $0.03 per mile increase in LP's variable freight costs on a blended basis, assuming current rail trip mix and refinery margins. LP experienced total freight usage of the order of 30 million miles in 2025. So the full year freight cost impact of each $10 per barrel increase in crude oil prices, all else equal, would be an annual impact of about $1 million. In OSB, freight is generally passed through while Siding is priced on a delivered basis, so that the EBITDA impact to LP would be mitigated by that dynamic. I should also add that LP Siding is lighter and more durable than some competing alternatives, which allows us to ship by rail and transport much more volume on a truck than these competitors can. For raw materials, excluding logs, many of our inputs have crude oil as feedstock including resins, primate and paint. And of course, the delivered cost of these materials include some freight. For raw materials across LP's North American business, we estimate that the total annual cost impact of each $10 per barrel increase in crude oil is of the order of $1.5 million to $2 million per quarter or $6 million to $8 million per year, all else equal. And this would be split roughly 75-25 between Siding and OSB given sidings more raw material-intensive recipe. LP can experience a slight cost impact for logs when higher diesel prices impact harvesting and delivery costs, but compared to the freight and raw material costs, the log cost impact is small enough to be immaterial for modeling purposes. Now bear in mind that these are estimates of annual impact. Many of our raw material supply contracts have trailing algorithm at adjusted prices with varying update cycles, so the specific timing of these various impacts is more variable. We saw minimal impact in the first quarter. But if prices stay elevated, we will trend towards these annual run rate over the next 2 quarters or so. Our raw material cost estimates are incorporated in our updated guidance, as shown on Slide 12, unlike our approach to OSB guidance, we will explicitly avoid any attempt to predict future crude oil prices. Frankly, we're less concerned about the cost impact of higher crude oil prices than we are about the broader macroeconomic and demand impacts and the general volatility driving them. You will recall that our full year guidance was predicated on housing starts being flat year-over-year. Mathematically flat starts would require a rebound in the second half. Now we made no attempt to predict the timing or trajectory of that rebound but expected that improving consumer confidence, moderating interest rates and seasonal increases in OSB pricing demand would be the bell weathers that would signal its approach. And as you are all aware, especially following the conflict in Iran, not only are those market indicators not improving, but they continue to erode. Now while our order files in siding give us a good bit of visibility into the second quarter, high input costs fall in consumer confidence and increasing interest rates are magnifying uncertainty about demand in the back half of the year. As a result, we feel it's prudent to temper our expectations for the second half. Current lower levels of market activity, we anticipate signing volume declines year-over-year in the second quarter of about 10%, with sequential improvements through year-end. Within this, ExpertFinish is expected to continue to outperform prime products as we gain share relative to competing prefinished alternatives, we therefore expect full year export finished volume growth in the mid-single digits range. List prices should remain very steady, of course, but the very strong price/mix effect of the first quarter is expected to moderate as shed mix increases now that the channel inventory of shed products has normalized. As a result of these volume and price dynamics, we currently expect Siding revenue in the second quarter between $435 million and $445 million and EBITDA between $115 million and $120 million. For the full year, Siding revenue and EBITDA are now expected to be between $1.64 billion and $1.66 billion with EBITDA between $410 million and $425 million. For OSB, we're applying our normal methodology, assuming prices remain flat for last Friday's printed level. Unfortunately, Friday's print included a significant drop in the Southeast and Southwest regions, bringing OSB prices back under EBITDA breakeven levels. As a result, we now expect OSB EBITDA in the second quarter to be a loss of about $10 million. Now we don't plan to really plug doggedly ahead should these prices persist in an oversupplied market. But again, for modeling purposes, extrapolating current prices forward, the third and fourth quarters will deliver similar results as reflected in the revised full year guidance. And finally, while our modeling approach has generally been to assume that LP South America and unallocated corporate expenses net to zero, the economic situation in Chile is similarly depressed and uncertain at the moment the softer results in South America are reflected in the total adjusted EBITDA guidance. So in conclusion, the housing market and general consumer sentiment aren't showing the hope for signs of recovery yet, and this is most acutely felt in OSB demand and prices. But we remain confident in the SmartSide value proposition and in the long runability of our Siding business to gain share in all the segments we serve. And with that, we'll be happy to take a round of questions.

[Operator Instructions] Our first question comes from the line of George Staphos with Bank of America Securities.

I wanted to ask a point of clarification if maybe it's a two-parter for my first question. Alan, I just want to make sure your guidance does not include any assumption on oil pricing per se, correct? So if so, can you tell us what the change in oil was relative to your fourth quarter so that we could somewhat calibrate to your adjustment in guidance relative to the cost? And the second part of that question is, is there a way to give us [indiscernible] a change in oil, how much hits percentage-wise on cost of manufacturing in siding, and how much hits on the freight side?

Well, Alan is most of the heavy lifting on this. I'm going to let Aaron attempt to answer that question with the level of detail that we're willing to share.

Of course the question...

So in reverse order, the cost of manufacturing through the raw materials is a much larger impact than freight. The full annualized impact of freight is relatively small, as Alan detailed, and we have more miles of transport for OSB just given the volume. So you can you can basically anticipate most of the costs hitting on the raw material side and in the manufacturing side. Within that, about 75% of the impact to cost of manufacturing will land in siding just because of the more raw material intensive recipes of Siding relative to OSB. And the last thing I'll say is our guidance makes our best attempt to reflect our current understanding of what the actual annualized impact will be, meaning that we have baked in what we have seen near term in terms of those material inputs and also our understanding of the various dynamics of the contracts themselves, the supply contracts that is with regard to their pricing algorithms and methodologies, and that's about as specific as we're going to get on that rather than diving too deep into nuts and bolts of those individual contracts. So short answer, yes. The guidance for margin does reflect of what we're seeing in the market, and what we anticipate seeing in the back half of the year. And if prices go significantly higher or lower, you've got the sensitivities to give it some Kentucky windage.

Okay. The second question is on the 100 million square feet of siding across the 15 of the top 25 builders. Is that the '26 actual volume that you expect, or is that a run rate? And what was the base in '25, if you could share that?

Yes, I'll touch on that, George. The 100 million feet that we specified is, in fact, where we think we'll land in '26. Obviously, with the wins that we've communicated in recent calls, the prior year volumes were lower. What I would say about the programs, we're not going to give specific names, but each one of these meets a material threshold for us and add several thousand homes to our portfolio. And in both cases, these programs that we talked about really provide us access to new markets where we're underpenetrated, specifically in the Southeast and Southwest markets. And because of that, it's allowing builders and contractors to really experience the benefits of using SmartSide and in many cases, for the first time with respect to installers.

Jason, I get that, is there any way to size is that 1/3 increase, a 25% increase, a 2% increase. Any granular would be helpful?

Yes, I would say it's above 10%.

Our next question comes of Mike Roxland of Truth Securities.

One quick one, just -- I believe the gap between vinyl and engineered was has narrowed. Vinyl seeing increases due to oil. I think there's been a price increase announced for May, 3% to 8% of most products. So where does the price spread currently stand between vinyl and engineered wood? And how does that compare to, let's say, 3 or 6 months ago? And have you seen any switching to engineer wood or let's say, even not switching itself where indications of interest to switch to engineered wood as a result of this narrowing spread.

Mike, I'll touch on that. I mean, as you noted, we're hearing from our customers that there are some manufacturers going up on the vinyl side. That just makes SmartSide more attractive with regard to that specific comparison. So that's something we're keeping a close eye on. But I do think most of that has taken place over the course of the last 30 days, essentially. So we haven't felt anything material in our order file as it relates to some of the changes in pricing dynamics in the market.

Got you. But in terms of your customers themselves, not in the oral just yet, but indications that there could be some increasing orders or better demand should this spread continue to narrow?

Yes. I think anytime that spread narrows, it presents an opportunity, and we're positioned well to capitalize on that. So we like the narrowing of that spread, and we'll take advantage of it where we can.

And just one quick follow-up. Where does that spread currently stand relative to 3 months ago, 6 months ago?

I mean, it's tough to really put your finger on that. I mean what we're hearing is price increases in the neighborhood of 6% to 12% depending on who it is. So I mean, the spread has narrowed by that much.

Got you. One last one, I'll turn it over. Just any update just on the potential conversion at Milwaukee?

Yes. I can touch on that, Mike. As of today, we have roughly speaking, about 400 million to 500 million feet of capacity to support our growth on the prime side. We've explained our options for expansion on prior calls, so I won't get into that. But what I will say is that the engineering work continues on a couple of different paths, including [ Maniwaki. ] So nothing new there to share, but I would expect we'll be in a position to share some more information in the coming quarters.

Our next question comes from the line [indiscernible].

[indiscernible] on for Matt today. So first off, I guess, just staying on capacity. So I guess, even if volumes come in softer than expected, our understanding is that the Green Bay line would still support margin expansion given its higher efficiency. Do you guys have a sense of the magnitude of the potential margin benefit if this were the case? And then how is that contemplated in the guidance?

Yes. Thanks, [indiscernible]. Good question. It is contemplated, but the margin benefit really accrues to us more when the facility is fully ramped up early in its ramp up, which is where we are now. That effect is less pronounced, both by virtue of lower efficiency in the early days of operations and a smaller amount of volume as it goes through. So I think very roughly speaking, if you think about the margin improvement for expert finishes being on a similar trajectory than it was last year. I think that puts you in the right ballpark. And then as we get more volume through that facility, we'll really be able to see the effect of that efficiency and get more specific about its actual effect in subsequent quarters.

We'll certainly bleed about it as and when it happens.

Okay. Great. That's really helpful. And then, I guess, second, so back to the new construction opportunity, when we think about the siding volume of the 15 of the top 25 builders, where can this high single-digit number get to as we think of maybe a more normalized starts environment? And then just so I think more broadly, longer term for your new construction strategy, how are you growing in that channel? Is it more thinking about growing wallet share? Is it building up the number of builder partnerships?

Yes, I appreciate the question. What I would say is in the new construction segment, specifically with the top 25 builders, we still have a relatively small share position in the high single digits as we noted earlier. So there's a ton of opportunity there. At the end of the day, we're trying to be very disciplined or strategic in terms of where we leverage these enterprise programs. It's really about getting access to markets where we're historically underpenetrated building a stocking dealer base around those programs and then obviously, building our business around some of those wins. So it's something we're excited about and really leveraging as we go forward. In terms of the growth opportunity, I mean, at high single digits, the opportunity is very significant for us, and that will be a focus going forward.

Our next question is from the line of Ketan Mamtora of BMO Capital Markets.

Maybe just coming back to the full year siding guidance. It just backing into the numbers, it feels like the guide is $32 million below kind of what you all had talked about as we look at the midpoint of guidance, but Q1 was kind of a solid beat about $18 million higher, but it almost feels like a $50 million swing for the remaining three quarters. Can you sort of highlight maybe two or three key points that would help us sort of think about the key pieces here?

Yes, sure, Ketan, the drop in guidance -- were you referring to EBIT, the line cut out a bit. Were you referring to the EBITDA impact?

I was sorry. Yes, I was.

Yes. So yes, you're right. It's about a $50 million drop from the midpoint. High level, you've got to assume that the majority of this reduction is volume related, let's call it, $70 million worth of volume, which comes through at a 50% variable margin. So that accounts for about $35 million. And to sort of triangulate into one of the other questions, there's then about $15 million roughly, $15 million to $20 million of impact from oil in the back half of the year, concentrated more in the second half than it is in the second quarter. So that $50 million is roughly $35 million from volume, $50 million from oil-based costs.

I see perfect. This is very helpful. And then, Jason, you talked about expanding the dealer network. You -- there's a recent partnership as well with [indiscernible] here out on the East Coast. Can you talk about sort of how you are thinking about your existing distribution partnerships? Obviously, I'm not asking you to name them, but just in terms of how you are thinking about them of these relationships? And where do you think you've got opportunity to sort of penetrate more?

Appreciate the question, Ketan. So I think about our distribution network, I think I've mentioned on prior calls that we have really good access to market through our traditional two-step distributors. And those folks typically in most markets, we have two distributors and some, there might be some overlap where we have three. So those two steppers provide supply to many of the pro dealers and one steppers. So that is where our access to market, I would say, could be improved in some regions and really is the focal point of our enterprise program strategy to really build out that pull-through demand in those markets where we're underpenetrated. So we can build our stocking dealer network with those pro dealers, one steppers, et cetera, to grow our business with contractors and builders beyond those programs.

Your next question comes from [indiscernible].

I wanted to think about the cross-selling to builders. Clearly, it seems like success winning share with builders. I'm curious if you could parse out how much of that is success cross-selling OSB and Siding, or is this pure guiding wins?

Yes. Thanks for the question, Steven. What I would say is it's both. I think at the end of the day, I do believe that the integration of our two businesses that occurred roughly a year ago here at LP is allowing us to be, I would say, more creative, more flexible, more responsive when it comes to addressing the needs of our customers. These programs aren't cookie cutter in nature. They're really tailored in a way to meet the needs of each respective customers. So again, we're in the early stages, but we have, I believe, one of the most robust portfolios of products or solutions in the industry, and we're in a unique position to leverage that to drive value for all of those targets in the marketplace.

Okay. That's great. And then looking at Siding, seems like the implied second half margin a bit lower than the first half. Can you parse out how much of that is more builder series from these builder wins or higher expert finish volume, which I know is a mix negative for margin, even though it's on an upward trajectory on itself. So maybe you could talk through the second half dynamics of siding margin.

Yes, Steven, I'd say both of those factors are relatively small compared to the overall volume decline and the raw material price increases that Alan mentioned earlier.

Our next question will come from Sean Steuart from TD Cowen.

A couple of questions. The $200 million earmarked for strategic growth CapEx was consistent quarter-over-quarter. Can you remind us how much of that is ExpertFinish growth? And how much, if any, would be earmarked for [ Maniwaki ] work as you are presuming you advance that project. Is any of that total earmarked for that project?

Yes. There's close to $100 million in here for ExpertFinish expansion. Not all of it, the new mill, some of it New York continuation of completion the New York facility, New York upgrade. So about $100 million there. And there is $20 million to $30 million on the next major siding mill. So call it, $130 million of siding capacity expansion euro it is ExpertFinish.

Okay. And then, Alan, you touched on the log inventory build in Q1, which, I guess, is Canada and the Northern U.S., that seems to be a bit larger than normal. Can you go into some of the factors there? And how we should think about the unwind through the remainder of the year?

Yes. The unwind will be just the normal course of consumption. We did do some forward logging as oil prices rose. So very pleased with the efforts of the team there to get ahead of some of the freight costs because obviously, once we get the spring breakup, there's very little we can do. So we got a little bit ahead of that. And the majority of the remainder is very much in anticipation of citing maintenance projects that will that mean to mean that we need to get a little bit ahead on finished goods as well. So it's actually a good piece of cost mitigation that really triggered it.

; Our next question will come from Kurt Yinger from D.A. Davidson.

Just wanted to sort of unpack the full year guiding sales outlook? I mean, my math kind of high single-digit decline in volume. I think maybe a couple of points of that would have been the destock in Q1. And I guess, how does kind of that underlying mid-single-digit volume decline compared to what you're expecting from the overall market, and I guess, what should we infer from that in terms of market share expectations?

It's an interesting one. You've got -- the really high level, like we think we're going to perform relatively well as in growth in both off-site and ExpertFinish. This is fundamentally gaining market share. And then the rest of the market -- the rest of the product lines, everything else that's not off-site and ExpertFinish is going to be down high teens. And that's where you see the greatest impact of the, let's call it, the market reaction, our reaction to the underlying weak market. So assume offsite and ExpertFinish are going to have modest growth and high teens decline in everything else. That's kind of the shape that we see a merger. PSP61441147 Got it.

And I guess on expert finish, the flattish volumes in Q1 and the mid-single-digit outlook for the year, is that a function at all of just kind of the capacity constraints that you've seen? Or how do we unpack that deceleration versus what we saw last year?

Yes, Curt, I'll take that one. So we are still dealing with a little bit of the expert finish allocation hangover, if you want to call it that. we came off allocation, what was it in February-ish, something like that. And now that we have visibility into channel inventories, we have noticed that they're a little bit higher than where we would like them to be, which is an uncommon when he come off of a managed order file. So we do believe the first half is going to be maybe a little bit weaker than the second half just due to our channel partners bleeding down inventories to more normal levels.

Our next question will come from Mark Weintraub from Seaport Research Partners.

Just wanted to follow up on the last question. And Alan, you mentioned it's for primed and for some of the other businesses, some growth, but down in the mid- to high teens and some of the other businesses, is that because customers in part are moving from the businesses where you see yourself being down high- to mid-teens into the areas where you are flat or growing, or are there two different dynamics going on here.

I think the -- Mark, I'll take that one. I think the biggest dynamic we're dealing right now -- well, we're mostly through it, was just related to the shed segment, and how much inventory carried over into the new year. I would say we're 85% of the way through that. There's still a little bit of excess inventory there. We have really good visibility into our order file into Q2. But beyond that, there's just a tremendous amount of uncertainty looking out into the back half of the year. So we feel good about what we're doing in the new construction segment. I feel like we can outpace housing starts in that segment. And then in repair/remodel. We touched on ExpertFinish being up mid-single digits, and that will be reflective of, we think, a better performance than the R&R segment as a whole.

Okay. So it sounds like it's really shed is where the source of -- the relative performance is going to be, you think, soft this year versus your historical algorithms against overall market? SP-4 Growth. Is that fair?

Yes, I agree with that. I mean we pay close attention to sell-through rates in that segment. So we get data from our distributors, and we're pleased to see that those sell-through rates have held up quite well. So it is really just an inventory dynamic that is playing out in '26.

Okay. Great. And then one last real quick one kind of related to all this, too. The [ Manawaukeee, ] can you remind us, is that particularly well positioned if the growth in prime continues to be prime continues to be a main focus or not necessarily?

Yes. Maniwaki is certainly an option for us. If we went that direction, it would be the largest OSB plant that we've converted to Siding, it would end up being our largest prime sitting facility. But again, we're still in the process of assessing all of our options and are pursuing parallel paths in some cases.

And our next question comes from Susan Maklari from Goldman Sachs.

My first question is on the Siding side of the business. Can you talk a bit about how you're thinking of price elasticity. And how within that growth that you're expecting in mid-single digits and ExpertFinish, is that reflecting the -- how much of that is the underlying strength of the consumer relative to your share gains and some of those new products that you're introducing that also seem to be gaining momentum.

Thanks for the question, Susan I'll talk a little bit about price elasticity. I mean we've -- if you look back at our history, we typically go up have a price increase one time annually. There may be a few times in our history, COVId being one where we had a second price increase. But we really monitor both raw materials, along with the broader competitive dynamics in our space to determine where we need to position pricing. As it pertains to the current environment, I would say we're taking a wait-and-see approach, kind of no different than we did with our approach to tariffs last year. We don't want to make a knee-jerk decision due to what could be short-term circumstances that we're dealing with right now just in terms of raw material pricing. But our focus is going to be on playing the long game and being as consistent and predictable as possible for our customers amidst all the factors impacting our pricing decisions for Siding. But we're pleased with what we've realized in terms of the annual price increase that Alan spoke to earlier, and right now, we're just holding steady.

Okay. That's helpful. And then maybe shifting gears to OSB. Can you talk about your plans for production there? And do you still expect that the industry will see capacity come online this year, or has the housing backdrop perhaps changed those plans? And could we see the being shift in terms of OSB supply as we move through the balance of 2026.

Yes, Susan, I would say you're just as good as mine in terms of new capacity coming online. I mean, I can speak to, obviously, one of our competitors taking out a plant or plants coming offline kind of as we speak right now in Western Canada. As it relates to OSB here at LP, I would just say our strategy really hasn't changed. And as we noted in our opening comments, we're proud of the way our team is navigating the current OSB environment, just focused on operating with discipline and agility, and I think over time, we've proven our ability to manage or control costs and continue to improve OEE or efficiency in the business. So it's a cyclical business, but I'm confident that we'll be ready to take advantage of the next upward cycle whenever demand improves.

And our next question will come from Adam Baumgarten from Vertical Research Partners.

Can we get some color on how siding sell-through trended throughout 1Q and into 2Q so far? Any major change in trend?

Yes. So I'll touch on that, Adam. I appreciate the question. We get data from our distributors on sell-through rates. We talked a lot about the inventory build from Q4 to Q1, and that Q1 was going to look a little bit weaker just due to the amount of inventory that we felt was held up at the two-step level. That ended up being largely true, and most of that inventory, as I mentioned earlier, has been depleted. Sell-through rates have more or less mirrored what we saw this time last year is down slightly as it relates to the underlying market conditions in the new residential construction segment. But no concerning trends at this point as it relates to sell-through rates, seeing the normal seasonal uptick in those rates, and hopefully, that will continue.

Okay. Great. And then just when we were chatting at the builder show, I think there was some commentary around being pleasantly surprised about the interest about ExpertFinish on some of the builders. Did that play any role in the new partnerships that you guys mentioned?

Yes. Adam, what I would say is it's playing more of a role than ever, but it's still a relatively small percentage of the business that's ending up going -- are bundled in these programs. But it is -- it's a macro trend there that's in our favor. Labor is tight, and it's expensive. Builders are focused on job site cycle times, and I think all of that plays into our favor as it relates to ExpertFinish and the new ExpertFinish naturals two-tone line. So we do believe that will be a trend that continues. And it's obviously why we're investing more in Green Bay [indiscernible] and North Branch, Minnesota going forward.

And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Aaron Howald for any closing remarks.

Okay. Thanks, everyone. With no further questions, we'll bringing the call to a close there. And as usual, be available for follow-ups. Stay safe, and we'll look forward to connecting again in the next quarter. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a wonderful day.