Boise Cascade Co

NYSE:BCC

Earnings Call Analysis

Boise Cascade's Q3 2024 Overview: Revenue Declines Amid Market Challenges

In Q3 2024, Boise Cascade reported sales of $1.7 billion, a 7% year-over-year decline, with net income falling to $91 million ($2.33 per share) from $143 million ($3.58 per share) last year. The downturn reflected a tougher housing market, driven by affordability issues and economic uncertainty. Wood Products sales decreased 12%, while Building Materials Distribution sales fell 6%, which impacted EBITDA across both segments. Looking ahead, the company anticipates modest growth in 2025, with housing starts projected at 1.35 million. They plan increased capital expenditures of $200-$220 million, alongside ongoing shareholder return strategies, including a $0.21 dividend per share.

Quarterly Overview and Financial Performance

In the third quarter of 2024, Boise Cascade reported consolidated sales of $1.7 billion, reflecting a 7% decline compared to the same quarter in 2023. The company faced the adverse effects of a decrease in U.S. housing starts, with total starts down 3% and single-family starts down 1% year-over-year. Net income for the quarter was $91 million, or $2.33 per share, significantly lower than the $143.1 million, or $3.58 per share, recorded in the previous year's quarter. Despite these challenges, management praised their teams for navigating a tough economic landscape marked by affordability issues and other uncertainties.

Segment Performance and Challenges

The Wood Products segment experienced a 12% drop in sales, totaling $453.9 million, contributing to an EBITDA of $77.4 million, down from $122.9 million a year ago. The decline in earnings was chiefly attributed to lower prices in engineered wood products (EWP) and plywood, alongside rising conversion costs. Similarly, Building Materials Distribution (BMD) saw a 6% decrease in sales at $1.6 billion, with EBITDA falling to $87.7 million from $104.9 million the previous year. The gross margin in the BMD segment also faced a decrease of $7.7 million year-over-year owing to lower commodity prices.

Market Conditions and Pricing Trends

The company noted ongoing pricing pressure in the market, particularly affecting the LVL and I-joist products with sequential price reductions of 2%. The average plywood net sales price dropped by 13% compared to the previous year. However, Boise Cascade reported resilience in plywood sales volume, holding steady, while gross margins in BMD improved slightly by 50 basis points to 15.7%, indicating a better mix and growing sales in general line products.

Capital Allocation and Return to Shareholders

In terms of capital deployment, Boise Cascade has prioritized organic growth and shareholder returns. So far, they have invested $136 million in capital expenditures over the first nine months of 2024, with expectations to increase this figure to between $200 million and $220 million in 2025. The company has demonstrated commitment to shareholders by paying $220 million in dividends year-to-date, including a recently approved quarterly dividend of $0.21 per share, and has repurchased about $165 million in shares throughout the year.

Outlook and Future Expectations

Looking ahead, the housing market is projected to see modest growth. Housing starts are forecasted at approximately 1.35 million for 2024, with a slight uptick to 1.4 million expected in 2025. Despite headwinds in the short-term, the company remains optimistic about the medium and long-term fundamentals of the housing sector and is positioned to capitalize on growth opportunities in both the distribution and building materials markets.

Navigating Market Volatility

Company executives acknowledged the volatile marketplace, especially concerning the unpredictability of demand. They are prepared to swiftly pivot as market conditions shift, making informed inventory decisions to ensure they meet customer needs effectively. Given the competitive landscape, their commitment to offering high-quality EWP solutions remains strong, as builders continue to seek efficient construction methods to cut down cycle times.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning. My name is Grace, and I will be your conference facilitator today. At this time, I would like to welcome everyone to Boise Cascade's Third Quarter 2024 Earnings Call. [Operator Instructions]

It is now my pleasure to introduce you to Chris Forrey, Vice President Finance and Investor Relations, Boise Cascade.

Mr. Forrey, you may begin your conference.

[Chris Forrey, executive]

Thank you, Grace, and good morning, everyone. I would like to welcome you to Boise Cascade's Third Quarter 2024 Earnings Call and Business Update. Joining me on today's call are Nate Jorgensen, our CEO; Kelly Hibbs, our CFO and Treasurer; Troy Little, Head of our Wood Products Operations; and Jeff Strom, Head of our Building Materials Distribution operations.

Turning to Slide 2. This call will contain forward-looking statements. Please review the warning statements in our press release, on the presentation slides and in our filings with the SEC regarding the risks associated with these forward-looking statements. Also, please note that the appendix includes reconciliations from our GAAP net income to EBITDA and adjusted EBITDA and segment income to segment EBITDA.

I will now turn the call over to Nate.

[Nathan Jorgensen, executive]

Thanks, Chris. Good morning, everyone. Thank you for for joining us for our earnings call today. I'm on Slide #3. Total U.S. housing starts and single-family housing starts decreased 3% and 1%, respectively, compared to the prior year quarter. Our consolidated third quarter sales of $1.7 billion were down 7% from third quarter 2023. Our net income was $91 million or $2.33 per share compared to net income of $143.1 million or $3.58 per share in the year ago quarter.

Both of our businesses performed well and delivered good financial results in a demand environment that continues to be constrained by home affordability challenges and economic uncertainties. And I want to thank our associates across the company who deliver -- continued to deliver superior value to our customers and vendor partners no matter the demand environment.

In addition, we continue to deploy capital through our organic growth projects and additional returns of capital to our shareholders. Kelly will now walk through our segment financial results, give some insight on the fourth quarter and then provide an update on our capital allocation in more detail. After which, I'll provide an outlook before we take your questions. Kelly?

[Kelly Hibbs, executive]

Thank you, Nate. Good morning, everyone. Wood Products sales in the third quarter, including sales to our distribution segment were $453.9 million, down 12% compared to third quarter 2023. The Wood Products segment EBITDA was $77.4 million compared to EBITDA of $122.9 million reported in the year ago quarter. The decrease in segment EBITDA was due primarily to lower EWP and plywood sales prices as well as higher conversion costs. Lower I-joist sales volumes also contributed to the decrease in segment EBITDA.

The BMD sales in the quarter were $1.6 billion, down 6% from third quarter 2023. BMD reported segment EBITDA of $87.7 million in the third quarter compared to segment EBITDA of $104.9 million in the prior year quarter. BMD gross margin dollars decreased $7.7 million from third quarter 2023. Selling and distribution expenses increased by $10 million compared to the prior year quarter, mainly due to the BROSCO acquisition.

Turning to Slide 5. On a year-over-year and sequential basis, third quarter volumes for LVL were flat and down 2%, respectively, and I-joist volumes over the same comparative periods were down 8% and 10%. And I-joist sales volumes were influenced by multiple factors, including the level of housing starts, competition from other wood-based products and an increasing proportion of concrete floor applications that limit wood floor opportunity. Sequential pricing for both LVL and I-joist was down 2% due to continued pricing pressure in the market.

Turning to Slide 6. Our third quarter plywood sales volume was 391 million feet, flat with the year ago quarter. The 333 per thousand average plywood net sales price in the third quarter was down 13% year-over-year and 8% sequentially. We experienced lower plywood pricing in July at approximately $320 per thousand before rebounding at the end of the quarter with our September average price realizations around $350 per thousand.

Moving to Slide 7 and 8. BMD's year-over-year third quarter sales decline of 6% was driven by sales price decreases as sales volumes were flat. Excluding the impact of the BROSCO acquisition, BMD sales would have decreased 9% from third quarter 2023. By product line, commodity sales decreased 12%, general line product sales increased 4% and sales of EWP decreased 14%. As mentioned earlier, gross margin dollars decreased $7.7 million in third quarter compared to the same quarter last year. As expected, lower margins on commodities and EWP were the principal drivers of the decline in margin dollars. However, BMD's gross margin percentage was 15.7%, up 50 basis points year-over-year. This increase is reflective of both BMD's ongoing growth in general line sales, which represented 44% of our sales mix in the third quarter as well as year-over-year margin improvement in that category.

BMD's EBITDA margin was 5.6% for the quarter, down from the 6.3% reported in the year ago quarter and down 30 basis points sequentially. We are pleased with BMD's performance in the third quarter given the market landscape. I'm now on Slide 9. Looking forward to the fourth quarter, October EWP and plywood volumes were resilient as they were comparable to our third quarter monthly averages. However, we expect seasonally lower volumes as we proceed through the quarter. On EWP pricing, we currently expect low single-digit sequential price declines in the fourth quarter. On plywood pricing, October realizations were approximately 5% above third quarter averages, but we'd expect seasonal price erosion as the quarter progresses. With regards to BMD sales expectations, seasonal factors and 2 fewer sales days in Q4 when compared to Q3 will be headwinds for us. Our daily sales pace through October is approximately 1% below third quarter daily sales averages and is expected to erode further in November and December.

I'm now on Slide 10. We had capital expenditures of $136 million in the 9 months ended September 2024 with $62 million of spending in Wood Products and $73 million of spending in BMD. Some equipment delays related to our previously disclosed multiyear projects in the Southeast U.S. have reduced our full year 2024 capital spending range. However, we anticipate these projects will still be completed on schedule and our spending pace in the fourth quarter will accelerate meaningfully as expected. Looking forward to 2025, we expect our capital spending to be between $200 million and $220 million. Speaking to shareholder returns, we paid $220 million in combined regular and special dividends during the 9 months ended September 30, 2024. Our Board of Directors also recently approved a $0.21 per share quarterly dividend on our common stock. Shareholders of record as of December 2 will see payment of this dividend on December 18. During the third quarter, we also funded approximately $70 million of common stock repurchases. Through October, our year-to-date total share repurchases are approximately $165 million or nearly 1.3 million shares.

In addition, our Board of Directors recently authorized the repurchase of an additional 1.4 million shares under our common stock repurchase program. Today, we have approximately 2 million shares available for repurchase under our share repurchase program. In summary, our capital deployment strategy continues with ongoing investments in our existing asset base, organic growth projects and returns to our shareholders. We also have the flexibility to execute M&A if opportunities surface that align with our strategy.

I will now turn it back over to Nate to discuss our business outlook.

[Nathan Jorgensen, executive]

Thanks, Kelly. I'm on Slide #11. Current industry forecast for U.S. housing starts are approximately 1.35 million for 2024 and at or modestly above 1.4 million for 2025. This compares to actual housing starts of 1.42 million in 2023 as reported by the U.S. Census Bureau. As of September 2024, single-family housing starts are outpacing 2023 levels by 10%, whereas multifamily starts have declined sharply from historic levels due to increased capital costs for developers and historic levels of multifamily unit completions in 2024.

Home affordability remains a challenge for many consumers due to home prices and the cost of financing with mortgage rate levels limiting the supply of existing housing stock available for sale. Large homebuilders are addressing affordability challenges by reducing home sizes and plan complexity as well as offering mortgage rate buydowns. New residential construction will continue to be an important source of housing supply moving forward.

We expect 2025 to reflect modest growth in home improvement spending as the age of U.S. housing stock and elevated levels of homeowner equity will continue to provide a favorable backdrop for repair and remodel spending. While near-term growth in demand may prove modest, the value proposition for 2-step distribution, particularly our ability to deliver nationwide service across leading brands in the marketplace is unmistakable, and we will continue to execute in support of our supplier and customer partners each and every day.

As we look past the near-term uncertainties, we remain bullish on the medium- and longer-term view on housing fundamentals, which affords us the ability to maintain a clear focus on our strategy and the execution of our growth initiatives. Thank you for joining us today and your continued support and interest in Boise Cascade. We welcome any questions at this time. Grace, would you please open the phone lines?

[Operator]

[Operator Instructions]. Our first question comes from the line of Michael Roxland with Truist Securities.

[Michael Roxland, analyst]

Congrats on a very good quarter despite the backdrop. Just first off on BMD, can you talk about the progression of sales in BMD during the quarter. It seems like September was a soften month across many paper and packaging materials. And I'm wondering if you just had stronger sales earlier in the quarter that may have faded in September. .

[Kelly Hibbs, executive]

Yes. So yes, good question, Mike. So I would say our activity was -- levels on a daily sales pace were actually fairly steady through the quarter. July, August and September there really wasn't a whole lot of deviation really just the only impact we saw was in September, we just had too fewer sales days.

[Michael Roxland, analyst]

Perfect. Got it. And what are you hearing right now from some of your major customers in BMD by product type like a commodity general line, EWP regarding demand and inventory levels.

[Jeff Strom, executive]

This is Jeff. I would just say, overall, what we're hearing from our customers is truly it's -- the dealers are saying just proceed very cautiously. The commodity market, obviously, we've got some nice tailwinds in this past month. So there's a lot of direct activity there. We moved a fair amount of commodities into that market. But from here going forward with the seasonality coming in, I think they're going to lean in hard on distribution. It's going to be very much a distribution-friendly market.

[Michael Roxland, analyst]

Got you. Great. And one last question before turning it over. Just on EWP, given that up until recently, lumber prices have been at cyclical lows, I mean, have you seen any shift or share shift to lumber from EWP that may be contributing to some of the volume weakness?

[Nathan Jorgensen, executive]

Mike, it's Nate. Yes, I think -- a good question. I think in terms of how the builders look at what products and services they use on floor systems, they're pretty resilient and kind of stay kind of true kind of independent of the pricing environment. So we haven't seen a lot of drift from I-joist or EWP systems to dimensional lumber. That's been pretty steady and consistent despite the fact, obviously, lumber prices have certainly come off.

So that would be, I guess, our view going forward as well. And part of that, Mike, as we've talked in the past that as builders are looking for, their challenges are not only build of material cost, but also cycle times. And so as they think about how do they take time out of the construction cycle, add simplicity to the cycle, EWP is a really an important part of that equation. So it remains pretty stable, and we expect that going forward.

[Operator]

Our next question comes from the line of Susan Maklari with Goldman Sachs.

[Susan Maklari, analyst]

My question is also on EWP and perhaps taking the other side of that, which is as lumber does seem to be inflating, especially over the last several weeks, and if that continues through next year, can you talk about what that could mean for EWP pricing? How you're thinking about that flowing through? And then, I guess, can you also talk to the EWP margins, just given the pricing decline that you've been seeing sequentially?

[Kelly Hibbs, executive]

Yes. So Sue, this is Kelly. I'll take that. And in terms of the first part of your question around lumber pricing increasing and how could that potentially correlate EWP pricing, I don't have a model in front of me, but I don't think there's a lot of statistical correlation there. I think really EWP pricing will fundamentally be driven by demand and operating rates and particularly single-family starts. So I wouldn't draw a correlation there. And then the second part of your question around -- remind me what it was again, please?

[Susan Maklari, analyst]

Yes. The EWP margins, as you saw that pricing decelerate on a sequential basis?

[Kelly Hibbs, executive]

Yes. So we don't speak to margin specific to EWP. I would just continue to have your focus on EBITDA margin in Wood Products in total because of how integrated -- how integrated we are. And we've seen a little bit of aggregation there because of plywood pricing remaining fairly weak still and some come off in EWP pricing as well. But we feel good about the business's operating posture and how they're operating and executing at a pretty high level.

[Susan Maklari, analyst]

Okay. All right. That's helpful, Kelly. And then thinking about the BMD business, some of your key partners there are doing a lot of work in terms of expanding their product offerings, getting perhaps a bit deeper vertically in their businesses. As you think about that strategy coming through. What does that mean for Boise?

And I guess as part of that, when we think about general line being, I think it's about 44%, 45% of your sales today, how do you see that helping you to get to perhaps a higher number? Could it become 50% over time? Or how will that all move through?

[Nathan Jorgensen, executive]

Sue, it's Nate. Let me -- I'll start that, and I'll have Jeff fill in here as well. I think in terms of -- to your question on our vendor partners and how they're maybe approaching their business model going forward, clearly, we are seeing a number of new products and SKUs coming into the mix. And so as we look at kind of the SKU intensity, it continues to grow, which is really, to me, really supportive of 2-step distribution. Our customers downstream are looking for simplicity in terms of how they fulfill orders. And as new products and services are introduced by our key partners, we are an important part of that equation.

So as we think about kind of the new products, new services, we think that puts kind of more responsibility on 2-step distribution, and we're looking forward to that. I think the other component to that is both on the customers, maybe on the supplier side, there is, I think, measured optimism in terms of where the market is on the demand side. So I think they're going to be pretty measured in terms of their working capital footprint and that dependency on 2-step distribution will be there as well.

So as I look at it, too, a combination of new products, new SKUs, along with the demand environment that's pretty tepid, really speaks really well to who we are. And I think the importance that we have with our supplier partners and customers, obviously, moving forward. I think to your question on kind of the mix on 44% today and what's the upside for that. I think as you continue to look at who we are and the investments that we continue to make, we want to grow the overall franchise in BMD, but general lines is a really an important part of that, including our door and millwork segment. So we think that represents continued really good opportunity, both for our customers and our suppliers in growing that segment. And we want to continue to kind of grow that as we have here over the last couple of years.

[Susan Maklari, analyst]

Okay. That's very helpful color. And then if I could just squeeze 1 more in, which is you picked up the share buybacks really nicely this quarter. Can you talk a bit about how you're thinking about capital allocation and shareholder returns from here? And just any thoughts on how that may come through over the next couple of quarters?

[Kelly Hibbs, executive]

Yes. Sue, this is Kelly again. So yes, I'd say the narrative in the script is very much the same. We got some big capital spending ahead of us, as you know, in terms of organic growth as well as some needed replacement in certain facilities across the Southeast.

So big spending ahead there that we're excited to continue to execute upon and we're a little behind in some regards just because of timing in terms of equipment availability, but still very much staying the course there. And then beyond that, we have the flexibility to do M&A if something shows up that makes sense. And then as we've demonstrated, we've got the quarterly dividend as well as the 2 special components around either special dividends or share repurchases. We did do the special dividend in September, the $5 per share. We did buy similar shares here in the third quarter. Near term, not going to put a share number or a dollar value on it, but I expect we'll look to continue to be opportunistic as it relates to share repurchases.

[Operator]

Our next question comes from the line of Kurt Yinger with D.A. Davidson. One moment for our next question. Our next question comes from the line of Jeffrey Stevenson with Loop Capital.

[Jeffrey Stevenson, analyst]

I just wanted to follow up on Susan's question on general line sales, they continue to hold in well and partially offsetting some of the commodity pricing headwinds you're seeing. Is this really being driven by the product and geographic expansion we've had with key suppliers over the last several years, driving the relative outperformance of your general line category?

[Kelly Hibbs, executive]

I'd say it's a combination of things, Jeff. It's some purposeful things we've done around our door and network strategy to not just do acquisitions. There like we did with BROSCO, but also do some start-ups like we've done in Dallas, Houston, Denver, Kansas City and then the small Boise acquisition recently. So some of that's very purposeful. And then in other regards, we benefit from part of the question earlier around suppliers continuing to add SKUs and our ability to get those into the marketplace for them. So I'd say it's a combination of things, Jeff, driving that.

[Jeffrey Stevenson, analyst]

Okay. No, that's great to hear. And then I'm just wondering how you're approaching inventories in your distribution business over the next 6 months, given you continue to face with commodity and EWP pricing headwinds, while at the same time, you'll likely see some improvement on the single-family housing starts as we kind of move into next year's spring selling season? So I'm just wondering how you're balancing those 2 things.

[Jeff Strom, executive]

Jeff, this is Jeff. I would tell you, it is a balancing act is what it is right now. It is a distribution-friendly market. We know we need to be there to serve our customers who want to have the right amount of inventory. But at the same time, you do have the seasonal slowdowns coming right now. So we're looking at the 2. If we're going to err on one side, we're going to err on the side of having inventory to serve our customers.

[Jeffrey Stevenson, analyst]

Okay. Great. That makes sense. And if I missed this, I apologize, I got on late. But just the time line for the Oakdale Louisiana plant modernization. And are you expecting to largely offset the loss plant capacity at other facilities during that time period?

[Troy Little, executive]

Yes, Jeff, this is Troy Little. Yes, the timing on the project is actually this week, we'll start demolition on 2 dryers and then go through the fourth quarter at about a 50% capacity, be down during the first quarter and then starting back up in the second quarter. In addition to that, we're also working on our log utilization center.

So that work is well underway right now that will parallel that. And then we also have some activity going on at Thorsby on just some pre-spending for the [ Line ] project next year. But in terms of your question around being prepared, yes, we accumulated veneers. We did have kind of some spending at the other facilities to make sure they were in order, and we don't expect any impact in terms of inventory available to our customers during this time. So we're well prepared going into it.

[Operator]

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

[Ketan Mamtora, analyst]

Perhaps to start with, this is sort of -- as we think about Q4, both on EWP volumes and just sort of activity levels in BMD, it sounds like October has held in quite well, but you are pointing to sort of seasonal slowdown in demand. How would you have us sort of think about that piece, given there are quite a bit of cross currents going on in the market? And sort of cyclically are you seeing things stabilize, getting better or taking a step down? What is the right way to think about it?

[Kelly Hibbs, executive]

Yes. Those are -- those are all the right questions, good questions, Ketan. So yes, October held up well. I think 23 sales days, good strong month, really happy with the results in October. Come November and December, certainly fewer sales days could be impacted by weather and then just kind of the continued kind of uncertainty and narrative around mortgage rates and other factors out there in the environment.

So I would suspect -- I think our EWP volumes will -- they will trend largely with single-family housing starts. And so we'd expect them to trend down like we saw last year -- last year fourth quarter. And I think in BMD, again, a nice sales pace, as I alluded to, in October, but we would expect to see that come off in November and December. And again, there's fewer sales days. We're getting a little bit of goodness right now from the margin profile as it relates to commodities. But again, the top line will be a big driver of BMD's bottom line results in terms of how much margin dollars can we generate in the fourth quarter. And then Nate, I think you had a follow-on here, Ketan.

[Nathan Jorgensen, executive]

Yes, Ketan, it's Nate. Just the other thing I would just add is, as you kind of described, it's a pretty volatile marketplace just in terms of what's happening on a range of items, both in our industry and outside of it. And I think what's most important for us is to make sure we've got capability to pivot quickly. And so to respond to the marketplace, whatever that might be. And so as Kelly described, October has been pretty resilient in terms of what's happened and some of the supply decisions on commodities in terms of reduced supply has created a reasonable backdrop here short term.

So our commitment and promise both to our customers and suppliers is to be in a position to serve. And so we're in an environment where it's not overly predictable, but we're going to, again, be in a really good spot to make sure we can pivot appropriately.

.

[Ketan Mamtora, analyst]

Understood. That's helpful. And just a couple of quick ones. Curious how the BROSCO business is performing?

[Jeff Strom, executive]

BROSCO business so far is -- it's been rock solid. It's everything we'd hope to be and a little bit more. It has really performed well.

[Ketan Mamtora, analyst]

Got it. And then, Kelly, maybe your operating rates in EWP in the third quarter?

[Kelly Hibbs, executive]

Yes, they were right around 80% in the third quarter. Per -- volumes are pretty consistent-ish with the second quarter and our operating rates were right around 80%. .

[Operator]

[Operator Instructions] Our next question comes from the line of Kurt Yinger with D.A. Davidson.

[Kurt Yinger, analyst]

Okay. Sorry about that earlier. Just wanted to start off on EWP. Clearly, just 1 quarter, but in terms of the stability in year-over-year LVL volumes versus I-joist, would you mostly just chalk that up to kind of geographic mix and kind of slab?

[Nathan Jorgensen, executive]

Yes, Keith -- sorry, Kurt, it's Nate. Yes, I would say when you look at mix on I-joists are probably more influenced by that than LVL headers as an example. So to your point, if there's a lot of slab on-grade construction, it still represents an opportunity for LVL and obviously, not so, especially if it's only a single-story construction for slab on grade. So we view it as very much a geographic mix statement, and that's, again, consistent with expectations.

[Kurt Yinger, analyst]

Got it. And over the last 2 quarters now, I mean one of your big customers has kind of talked about a shift maybe back towards I-joist versus floor trusses. I'm curious whether you're hearing that sentiment broadly and whether that's something at this stage that you think could be a relative driver of outperformance potentially next year relative to underlying single-family starts demand?

[Nathan Jorgensen, executive]

Yes, Kurt, it's Nate again. I would say when it comes to competitive floor systems, open web plated floor trusses versus I-joist, and again, as I made a comment earlier just in terms of how the builders are thinking about, what success has to be for them, they're looking at cycle times. And they're looking at how do they create speed and simplicity on the job site and I-joist EWP represents that. So as we think about the backdrop and competing against plated floor trusses, against engineered wood, we feel good about that environment in part given what the builder is trying to get accomplished, which is how do they reduce cycle times.

[Kurt Yinger, analyst]

Got it. Okay. And then I appreciate Troy kind of outlining the time line with Oakdale. Kelly, is there any way to think about kind of temporary P&L impacts related to the downtime? Obviously, it doesn't sound like it's going to impact volumes. But any discrete cost headwinds we should kind of be aware of over the next couple of quarters?

[Kelly Hibbs, executive]

Yes. Nothing I'd probably have you build in specifically just yet, Kurt. I mean our fourth quarter is typically -- we usually take some maintenance and downtime during that quarter anyway. So I wouldn't expect to see a lot of year-over-year impact from that. We'll continue to assess as we move into 2025. And if we have anything meaningful to speak of, we'll share that.

But at this point, I don't think we'd share anything meaningful. To Troy's point, the team in the Southeast did a great job of making sure we have plenty of veneer to support EWP in that marketplace because Oakdale is a very important veneer supplier, Alexandria, Louisiana. So we've done a good job of building inventory there. Might we have a little bit of volume impact on plywood into the first and second quarter? Yes, we will. But Oakdale, it's a big veneer supplier. It has a much more meaningful impact to Alex EWP than it does to our plywood volumes.

[Kurt Yinger, analyst]

Got it. Okay. That's great. And then finally, just on BMD gross margins. We'll see what November and December bring on the commodity pricing front. But is it fair to say that what you've seen in October, would still be a little bit better than even what was a pretty strong Q3 gross margin performance?

[Kelly Hibbs, executive]

Yes. I mean October was good. Again, the sales pace was good. The margin was solid, a little bit of energy in commodities. And as you know, we'll see -- I think that's -- in my view, the energy and commodities has been much for a supply-driven phenomenon than demand. So we'll see what happens here in November and December.

[Kurt Yinger, analyst]

Okay. Perfect. And then just last one, in terms of EWP kind of installed capacity, obviously, a lot of runway for growth there. I'm curious how you're positioning going into next year, given some of the uncertainty around kind of labor in the facilities and the flexibility to ramp up or ramp down depending on kind of what ultimately materializes on the demand front.

[Troy Little, executive]

Yes. This is Troy. I mean that kind of speaks to our integrated model. And so in terms of keeping employees, we've got the ability to shift veneer and/or some production time over to the plywood side, if we have any need to do that. And so I don't think we have a huge risk there. In terms of expansion, I mean, there's easing on the labor side a little bit. And so it's a matter of -- we always have turnover, but to the degree that we need to ramp up for that, that's -- we're prepared in advance relative to any additional shifts that we would add. So I think we're good.

[Operator]

I'm showing no further questions at this time. This concludes the question-and-answer session. And I would now like to turn it back to Nate Jorgensen for closing remarks. Go ahead.

[Nathan Jorgensen, executive]

Great. Thanks, Grace. We appreciate everyone joining us this morning for our update, and thank you for your continued interest and support of Boise Cascade. Please be safe and be well. Thank you.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.