Industry manufacturers reveal production and guidance cuts
Weyerhaeuser, Jeld-Wen, Toro, LP Building Solutions and Masonite provide updates on the impact from the coronavirus.
Several industry manufacturers and suppliers have unveiled cuts to production, which they are being forced to make while being impacted by the COVID-19 pandemic.
Weyerhaeuser reported that for the month of April, the company expects to reduce operating capacity by approximately 20% for lumber, 15% for oriented strand board, and 15% to 25% for engineered wood products through a combination of temporary mill curtailments and reduced shift postures.
“We have taken significant steps to protect the health and well-being of our employees, consistent with Weyerhaeuser’s core values,” said Devin Stockfish, president and CEO of Weyerhaeuser. “Safety will remain the top priority in every decision we make as we continue to serve our customers.”
At the same time, Stockfish said that Weyerhaeuser is positioning itself for “financial flexibility.”
“Weyerhaeuser is operating from a strong financial position, and we have demonstrated that the company has the cost structure, agility, and resilience to deliver industry-leading performance through rapidly changing market conditions,” he said.
Other financial moves from the forest product and building materials giant include reducing 2020 capital expenditures by approximately $70-90 million; and increasing cash on hand by $550 million through a draw on its revolving credit facility, which expires in January 2025 and has $950 million of capacity remaining.
Door and window manufacturer Jeld-Wen said that the company has temporarily suspended production at locations that cumulatively represent less than 10%, or $5.7 million, of its 2019 consolidated net revenues. In many areas, the company’s products and services fall into categories that have received an ‘essential business’ or ‘life-sustaining’ designation by government agencies.
The Charlotte, N.C.-based company said, “out of an abundance of caution,” it recently enhanced its cash position by drawing down $100 million on its existing asset based revolving credit facility. Reflecting this draw down, as of March 27, 2020, the company had total liquidity of approximately $450 million, comprised of unrestricted cash and cash equivalents of approximately $230 million and approximately $220 million of availability under committed credit facilities.
“We are taking significant austerity measures to preserve cash and address near-term market dynamics,” said Jeld-Wen President and CEO Gary Michel. “The strategic actions we have taken with our footprint rationalization and modernization program along with the JELD-WEN Excellence Model, our business operating system, strengthen our position in a volatile market environment and prepare us to deliver long-term value creation once the COVID-19 pandemic subsides.”
The Toro Company reported that it is temporarily suspending production or reducing levels of production at certain facilities due to the effects of the virus, including anticipated reduced demand for products in certain businesses.
The mower and power equipment manufacturer also announced that it has entered into a three-year term loan agreement for $190 million to refinance revolving credit facility borrowings incurred in connection with the Venture Products, Inc. acquisition and to add incremental liquidity. With the funding of the term loan, the company will have liquidity of approximately $810 million, including cash on hand and unutilized availability under its $600 million revolving credit facility.
“I believe that we have the right people, plans, systems and resources to face these unprecedented challenges. We are focused on operational efficiencies and are prudently managing our balance sheet to provide additional flexibility as we navigate this uncertain environment,” said Toro Chairman and CEO Richard Olson.
LP Building Solutions is cutting OSB production by at least 100 million square feet (MMSF) in April, or about a third of total capacity, through a combination of curtailments and reduced schedules. This flexible approach is designed to maintain agility for further adjustments (up or down) as demand warrants, and to minimize the impact on our employees, the company said.
“We are in the early stages of this pandemic,” said LP CEO Brad Southern. “Much is still unknown about the magnitude and duration of health and economic impacts. LP is using the best available information to make sound decisions and act with integrity, agility, and resolve to protect our employees, customers, and shareholders.”
LP has also reduced its 2020 capital expenditure plans by 50% to roughly $70 million for the year, or an average of $15 million per quarter from Q2 to Q4. LP is also closely scrutinizing all discretionary spending.
“Liquidity will be key to weathering this uncertain economy,” said LP CFO Alan Haughie.
The CFO said that LP has a strong balance sheet and has taken steps to maximize liquidity by drawing on our revolving credit line early, cutting capital spending, and minimizing working capital through inventory reduction and reduced production.
“With our strong balance sheet and liquidity position, the Company is well-positioned to manage through a variety of down-side scenarios, including substantially lower revenue throughout 2020 and beyond.”
Masonite has temporarily closed all of its facilities in the United Kingdom due to the impact of COVID-19, effective March 27. Masonite said that it expects to begin reopening the operations upon the expiration of the U.K. order, which is currently scheduled to run through April 14.
The interior and exterior door manufacturer also said that it is on business continuity and ensuring that its facilities “remain operating where safe to do so.”
“We believe that the early steps we took to qualify and procure components from alternative sources and markets has contributed to our ability to avoid any supply chain disruption to date,” the company said.
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