In November 2021, LP chief strategists shouted from the rooftops their excitement and high hopes over Entekra, an adjacent 2018 business investment in offsite wall-and-floor panel and roof truss systems that had proven to add velocity to building envelope design, engineering and assembly … and, had shown early glimpses it could make money too.

Yesterday, 17 months later,  in its

Source: Company reports

To absorb the shock of fallen commodities prices, reduced demand volume, and continued investment in growing mill and distribution capability in the organization’s core competency areas necessarily meant pain would come somewhere in an LP system, now required to make hard choices.

Many – especially stakeholders in a heretofore vibrant, focused, but now- financially-challenged vanguard of building-as-a-service factory-based panelization, prefabrication, and modular construction sector – see the Entekra failure as a strategic fumble by its majority owner.

Instead, it was a business – in and of itself – that, to scale up, needs more capital runway, cycle-proof financial resources, and fire-in-the-belly evangelism than the Entekra business arc had in front of it as an LP-adjacent operator. To support a huge, front-loaded capital expenditure with what is inevitably a long, slow time-released return on investment – i.e. the measure of commitment likely necessary to transform American residential construction capability – requires a kind of pan-cyclical capital only big residential developers seem to be able to tap into.

Fixed-versus-variable-cost driven businesses don’t have that luxury of patience. They have to make at least enough money to pay the bills, keep the lights on, and revenue resource their way through a downturn to the next building boom. That’s how so many firms – young, old, big, medium, and large – weather turbulence.

As for LP which has prided itself as an innovations and solutions seeker, it took a plunge with a big investment in 2018 that worked out until it didn’t. It’s ability to both innovate and develop solutions – in its own framework – stays intact.

Not one of the seven equity research and institutional investment analysts on LP’s Q1 earnings call raised even a whiff of question or challenge regarding CFO Alan Haughie’s tidings that Entekra would be shuttered.

They got it.