Operating Margins Remain Historically
Strong
UFP Industries, Inc. (Nasdaq: UFPI) today announced third
quarter 2023 results including net sales of $1.8 billion, net
earnings attributable to controlling interests of $134 million, and
earnings per diluted share of $2.10.
“This quarter once again demonstrated that our balanced business
model, management structure, and focus on value-added products have
produced structural improvements in our operating margins that have
normalized above pre-pandemic levels,” said Chairman and CEO
Matthew J. Missad. “We are well-positioned for success and will
continue to invest our cash surplus and robust cash flow to grow
our business and generate high returns on capital.”
Missad added, “Our ability to generate cash allows us to
maintain a balanced approach to capital allocation, as we invest in
new products and drive operational improvements through technology
and automation, while providing meaningful returns for
shareholders. The UFP team has enhanced our strong culture of hard
work and proven results by developing an impressive adaptability to
internal change and an ability to manage through challenging
markets.”
Third Quarter 2023 Highlights (comparisons on a
year-over-year basis):
- Net sales of $1.83 billion decreased 21 percent due to a 12
percent decrease in prices and a 9 percent decrease in organic unit
sales.
- New product sales as a percent of total sales rose to 9.7
percent from 7.8 percent in 2022. The company evaluates new
products annually and sunsets (but continues to sell) those that no
longer meet the classification of “new”; its goal is to achieve a
ratio of new product sales to total sales of 10 percent.
- Diluted EPS of $2.10 represents a 21 percent decrease from last
year’s record quarter.
- Adjusted EBITDA1 of $208 million decreased 24 percent while
adjusted EBITDA margin1 declined 40 basis points to 11.4 percent,
which exceeded the company’s minimum EBITDA margin target.
Capital Allocation
UFP Industries maintains a strong balance sheet, with $682.4
million in net surplus cash (surplus cash less interest-bearing
debt and cash overdraft) on September 30, 2023, compared to $128
million in net surplus cash at the end of the third quarter of
2022. The company had approximately $2.2 billion of liquidity as of
September 30, 2023. The company’s return-focused approach to
capital allocation includes the following:
- Acquisitions. UFP Industries
maintains a healthy pipeline of acquisition targets in core
businesses that are intended to generate long-term growth and
margin improvement, expand its breadth of products and
international reach, and create incremental value for customers and
shareholders. On September 20, 2023, the company acquired a
controlling interest in Palets Suller, a leading manufacturer of
machine-built pallets in Spain, providing a strong foundation to
grow and expand its value-added business in one of the largest
ceramic tile manufacturing export markets in the world.
- Capital expenditures. The company
continues to target capital investments of $175-200 million in 2023
while focusing on expanding its capacity to produce new and
value-added products, achieving efficiencies through automation and
enhancing the work environment of its facilities for employees.
- Dividend payments. On October 24,
2023, the Board of Directors for UFP Industries approved a
quarterly dividend payment of $0.30 per share. The dividend is
payable on December 15, 2023, to shareholders of record on December
1, 2023.
- Share repurchases. At their July 26,
2023, meeting, the Board of Directors authorized up to $200 million
for share repurchases through July 31, 2024. Since July 26, 2023,
the company has repurchased 212,000 shares at an average price of
$97.87 and has $179 million left remaining in its authorization.
The company repurchased 766,812 shares from January 1, 2023,
through September 30, 2023, at an average share price of $80.95 (a
total of $62.1 million).
By business segment, the company reported the following third
quarter 2023 results:
UFP Retail Solutions
Net sales of $711 million, down 16 percent compared to the third
quarter of 2022, attributable to a 9 percent decline in selling
prices and a 7 percent decline in organic unit sales. Adjusted
EBITDA of $53.8 million improved 50 percent compared to the third
quarter of 2022, and adjusted EBITDA profit margin improved to 7.6
percent from 4.2 percent during the third quarter of 2022. This
improvement is primarily due to variable-priced products such as
ProWood treated lumber, which benefited from a more stable lumber
market than in 2022, when margins were adversely impacted by a
significant decrease in lumber prices in the third quarter of
2022.
UFP Packaging
Net sales of $450 million, down 23 percent compared to the third
quarter of 2022, due to a 16 percent decrease in selling prices, a
9 percent decline in organic unit sales, and a 2 percent increase
in sales from acquisitions. Adjusted EBITDA was $53.7 million, down
40 percent, due to normalizing market pricing and a decline in
volume that is in line with market conditions. Adjusted EBITDA
margin decreased to 11.9 percent from 15.4 percent due to
competitive price pressure and lower volume. Value-added sales
increased to 76 percent of total net sales compared to 74 percent
for the third quarter of 2022. New product sales as a percent of
total net sales increased to 16.1 percent from 11.5 percent during
the same period of 2022.
UFP Construction
Net sales of $584 million, down 25 percent compared to the third
quarter of 2022, due to a 12 percent decrease in selling prices and
a 13 percent decrease in organic unit sales. Adjusted EBITDA was
$76.9 million, down 34 percent, largely due to more normalized
market pricing and to a decrease in volume attributable to the
decline in housing starts and in the production of manufactured
homes. Adjusted EBITDA margin declined to 13.2 percent from 14.9
percent during the same period of 2022.
CONFERENCE CALL
UFP Industries will conduct a conference call to discuss its
outlook and information included in this news release at 9 a.m. ET
on Tuesday, October 31, 2023. The call will be hosted by Chairman
and CEO Matthew J. Missad and CFO Michael Cole and will be
available simultaneously and in its entirety to all interested
investors and news media through a webcast at
www.ufpinvestor.com/news-filings-reports. A replay of the call will
be available through the website.
UFP Industries, Inc.
UFP Industries, Inc. is a holding company whose operating
subsidiaries – UFP Packaging, UFP Construction and UFP Retail
Solutions – manufacture, distribute and sell a wide variety of
value-added products used in residential and commercial
construction, packaging and other industrial applications
worldwide. Founded in 1955, the company is headquartered in Grand
Rapids, Mich., with affiliates in North America, Europe, Asia and
Australia. UFP Industries is ranked #403 on the Fortune 500 and
#149 on Industry Week’s list of America’s Largest Manufacturers.
For more about UFP Industries, go to www.ufpi.com.
This press release contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act, as
amended, that are based on management’s beliefs, assumptions,
current expectations, estimates and projections about the markets
we serve, the economy and the Company itself. Words like
“anticipates,” “believes,” “confident,” “estimates,” “expects,”
“forecasts,” “likely,” “plans,” “projects,” “should,” variations of
such words, and similar expressions identify such forward-looking
statements. These statements do not guarantee future performance
and involve certain risks, uncertainties and assumptions that are
difficult to predict with regard to timing, extent, likelihood and
degree of occurrence. The Company does not undertake to update
forward-looking statements to reflect facts, circumstances, events,
or assumptions that occur after the date the forward-looking
statements are made. Actual results could differ materially from
those included in such forward-looking statements. Investors are
cautioned that all forward-looking statements involve risks and
uncertainty. Among the factors that could cause actual results to
differ materially from forward-looking statements are the
following: fluctuations in the price of lumber; adverse or unusual
weather conditions; adverse economic conditions in the markets we
serve; government regulations, particularly involving environmental
and safety regulations; and our ability to make successful business
acquisitions. Certain of these risk factors as well as other risk
factors and additional information are included in the Company's
reports on Form 10-K and 10-Q on file with the Securities and
Exchange Commission
Non-GAAP Financial Information
This release includes certain financial information not prepared
in accordance with U.S. GAAP. Because not all companies calculate
non-GAAP financial information identically (or at all), the
presentations herein may not be comparable to other similarly
titled measures used by other companies. Management uses Adjusted
EBITDA, a non-GAAP financial measure, in order to evaluate
historical and ongoing operations. Management believes that this
non-GAAP financial measure is useful in order to enable investors
to perform meaningful comparisons of historical and current
performance. Adjusted EBITDA is intended to supplement and should
be read together with the financial results. Adjusted EBITDA should
not be considered an alternative or substitute for, and should not
be considered superior to, the reported financial results.
Accordingly, users of this financial information should not place
undue reliance on the non-GAAP financial measure.
Net earnings
Net earnings refers to net earnings attributable to controlling
interest unless specifically noted.
1 Represents a non-GAAP measurement; see the reconciliation of
non-GAAP financial measures and related explanations below.
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS
ENDED
SEPTEMBER 2023/2022
Quarter Period
Year to Date
(In thousands, except per share
data)
2023
2022
2023
2022
NET SALES
$
1,827,637
100.0
%
$
2,322,855
100.0
%
$
5,694,031
100.0
%
$
7,713,042
100.0
%
COST OF GOODS SOLD
1,463,237
80.1
1,872,679
80.6
4,571,235
80.3
6,281,051
81.4
GROSS PROFIT
364,400
19.9
450,176
19.4
1,122,796
19.7
1,431,991
18.6
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
195,649
10.7
214,327
9.2
595,035
10.5
649,015
8.4
OTHER LOSSES (GAINS), NET
1,419
0.1
(1,195
)
(0.1
)
5,224
0.1
1,341
—
EARNINGS FROM OPERATIONS
167,332
9.2
237,044
10.2
522,537
9.2
781,635
10.1
INTEREST AND OTHER
(6,177
)
(0.3
)
6,382
0.3
(13,043
)
(0.2
)
19,858
0.3
EARNINGS BEFORE INCOME TAXES
173,509
9.5
230,662
9.9
535,580
9.4
761,777
9.9
INCOME TAXES
39,326
2.2
58,561
2.5
125,031
2.2
188,692
2.4
NET EARNINGS
134,183
7.3
172,101
7.4
410,549
7.2
573,085
7.4
LESS NET LOSS (EARNINGS) ATTRIBUTABLE
TO NONCONTROLLING INTEREST
(148
)
—
(4,860
)
(0.2
)
316
—
(13,023
)
(0.2
)
NET EARNINGS ATTRIBUTABLE TO
CONTROLLING INTEREST
$
134,035
7.3
$
167,241
7.2
$
410,865
7.2
$
560,062
7.3
EARNINGS PER SHARE - BASIC
$
2.14
$
2.68
$
6.55
$
8.93
EARNINGS PER SHARE - DILUTED
$
2.10
$
2.66
$
6.45
$
8.89
COMPREHENSIVE INCOME
$
130,422
$
167,624
$
417,518
$
567,409
LESS COMPREHENSIVE INCOME ATTRIBUTABLE
TO NONCONTROLLING INTEREST
820
(4,273
)
(2,661
)
(13,290
)
COMPREHENSIVE INCOME ATTRIBUTABLE TO
CONTROLLING INTEREST
$
131,242
$
163,351
$
414,857
$
554,119
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS BY SEGMENT (UNAUDITED)
FOR THE THREE AND NINE MONTHS
ENDED
SEPTEMBER 2023/2022
Quarter Period
2023
(In thousands)
Retail
Packaging
Construction
All Other
Corporate
Total
NET SALES
$
711,381
$
449,885
$
583,960
$
81,426
$
985
$
1,827,637
COST OF GOODS SOLD
610,000
355,924
439,152
58,814
(653
)
1,463,237
GROSS PROFIT
101,381
93,961
144,808
22,612
1,638
364,400
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
56,001
52,524
75,293
14,937
(3,106
)
195,649
OTHER
31
8
(45
)
1,007
418
1,419
EARNINGS FROM OPERATIONS
$
45,349
$
41,429
$
69,560
$
6,668
$
4,326
$
167,332
Quarter Period
2022
(In thousands)
Retail
Packaging
Construction
All Other
Corporate
Total
NET SALES
$
845,304
$
584,808
$
777,126
$
112,203
$
3,414
$
2,322,855
COST OF GOODS SOLD
767,841
440,975
577,552
82,740
3,571
1,872,679
GROSS PROFIT
77,463
143,833
199,574
29,463
(157)
450,176
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
48,435
66,521
89,455
16,752
(6,836)
214,327
OTHER
96
14
(265)
(994)
(46)
(1,195)
EARNINGS FROM OPERATIONS
$
28,932
$
77,298
$
110,384
$
13,705
$
6,725
$
237,044
Year to Date
2023
(In thousands)
Retail
Packaging
Construction
All Other
Corporate
Total
NET SALES
$
2,380,956
$
1,424,546
$
1,650,017
$
235,162
$
3,350
$
5,694,031
COST OF GOODS SOLD
2,064,156
1,091,452
1,246,346
170,818
(1,537)
4,571,235
GROSS PROFIT
316,800
333,094
403,671
64,344
4,887
1,122,796
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
170,211
180,153
216,714
42,402
(14,445)
595,035
OTHER
4
(84)
1,190
4,423
(309)
5,224
EARNINGS FROM OPERATIONS
$
146,585
$
153,025
$
185,767
$
17,519
$
19,641
$
522,537
Year to Date
2022
(In thousands)
Retail
Packaging
Construction
All Other
Corporate
Total
NET SALES
$
2,959,976
$
1,872,510
$
2,538,973
$
332,186
$
9,397
$
7,713,042
COST OF GOODS SOLD
2,674,996
1,417,006
1,950,671
230,100
8,278
6,281,051
GROSS PROFIT
284,980
455,504
588,302
102,086
1,119
1,431,991
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
159,490
200,987
266,430
49,733
(27,625)
649,015
OTHER
634
618
(162)
1,085
(834)
1,341
EARNINGS FROM OPERATIONS
$
124,856
$
253,899
$
322,034
$
51,268
$
29,578
$
781,635
ADJUSTED EBITDA RECONCILIATION
BY SEGMENT (UNAUDITED)
FOR THE THREE AND NINE MONTHS
ENDED
SEPTEMBER 2023/2022
Quarter Period
2023
(In thousands)
Retail
Packaging
Construction
All Other
Corporate
Total
Net earnings
$
35,046
$
32,031
$
53,795
$
5,237
$
8,074
$
134,183
Interest and other
32
10
(1
)
(104
)
(6,114
)
(6,177
)
Income taxes
10,271
9,388
15,766
1,535
2,366
39,326
Expenses associated with share-based
compensation arrangements
1,314
1,686
1,685
184
3,324
8,193
Net loss (gain) on disposition and
impairment of assets
35
8
(14
)
(200
)
(112
)
(283
)
Depreciation expense
5,943
8,361
4,930
930
7,482
27,646
Amortization of intangibles
1,133
2,175
703
563
380
4,954
Adjusted EBITDA
$
53,774
$
53,659
$
76,864
$
8,145
$
15,400
$
207,842
Adjusted EBITDA as a Percentage of Net
Sales
7.6
%
11.9
%
13.2
%
10.0
%
1563.5
%
11.4
%
Quarter Period
2022
(In thousands)
Retail
Packaging
Construction
All Other
Corporate
Total
Net earnings
$
21,496
$
56,777
$
82,477
$
9,292
$
2,059
$
172,101
Interest and other
16
1,202
(4
)
1,212
3,956
6,382
Income taxes
7,420
19,319
27,911
3,201
710
58,561
Expenses associated with share-based
compensation arrangements
1,041
1,198
1,090
143
3,965
7,437
Net loss (gain) on disposition and
impairment of assets
86
13
86
—
(599
)
(414
)
Depreciation expense
4,821
8,931
3,313
741
7,041
24,847
Amortization of intangibles
943
2,357
797
482
129
4,708
Adjusted EBITDA
$
35,823
$
89,797
$
115,670
$
15,071
$
17,261
$
273,622
Adjusted EBITDA as a Percentage of Net
Sales
4.2
%
15.4
%
14.9
%
13.4
%
505.6
%
11.8
%
Year to Date
2023
(In thousands)
Retail
Packaging
Construction
All Other
Corporate
Total
Net earnings
$
112,286
$
116,446
$
142,499
$
16,857
$
22,461
$
410,549
Interest and other
76
1,012
(7
)
(4,476
)
(9,648
)
(13,043
)
Income taxes
34,223
35,567
43,275
5,138
6,828
125,031
Expenses associated with share-based
compensation arrangements
4,244
5,485
5,492
687
10,160
26,068
Net loss (gain) on disposition and
impairment of assets
61
(85
)
(45
)
(140
)
(256
)
(465
)
Depreciation expense
17,590
24,038
14,192
2,474
22,138
80,432
Amortization of intangibles
3,465
6,657
2,202
1,846
1,155
15,325
Adjusted EBITDA
$
171,945
$
189,120
$
207,608
$
22,386
$
52,838
$
643,897
Adjusted EBITDA as a Percentage of Net
Sales
7.2
%
13.3
%
12.6
%
9.5
%
1577.3
%
11.3
%
Year to Date
2022
(In thousands)
Retail
Packaging
Construction
All Other
Corporate
Total
Net earnings
$
93,888
$
188,954
$
242,270
$
34,136
$
13,837
$
573,085
Interest and other
56
2,730
(4
)
5,855
11,221
19,858
Income taxes
30,912
62,215
79,768
11,277
4,520
188,692
Expenses associated with share-based
compensation arrangements
3,323
3,842
3,697
466
8,651
19,979
Net loss (gain) on disposition and
impairment of assets
617
620
62
5
(952
)
352
Depreciation expense
13,813
22,497
10,101
2,028
20,442
68,881
Amortization of intangibles
2,742
5,773
2,481
2,067
385
13,448
Adjusted EBITDA
$
145,351
$
286,631
$
338,375
$
55,834
$
58,104
$
884,295
Adjusted EBITDA as a Percentage of Net
Sales
4.9
%
15.3
%
13.3
%
16.8
%
618.3
%
11.5
%
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
SEPTEMBER 2023/2022
(In thousands)
ASSETS
2023
2022
LIABILITIES AND EQUITY
2023
2022
CURRENT ASSETS
CURRENT LIABILITIES
Cash and cash equivalents
$
957,197
$
449,135
Cash Overdraft
$
—
$
4,174
Restricted cash
3,761
729
Accounts payable
254,689
323,404
Investments
37,062
33,113
Accrued liabilities and other
347,499
433,747
Accounts receivable
712,329
877,776
Current portion of debt
1,539
41,536
Inventories
747,474
1,006,883
Other current assets
64,906
68,727
TOTAL CURRENT ASSETS
2,522,729
2,436,363
TOTAL CURRENT LIABILITIES
603,727
802,861
OTHER ASSETS
230,387
217,782
LONG-TERM DEBT AND FINANCE LEASE
OBLIGATIONS
273,308
275,417
INTANGIBLE ASSETS, NET
521,412
440,395
OTHER LIABILITIES
174,143
183,967
TEMPORARY EQUITY
20,191
7,563
PROPERTY, PLANT AND EQUIPMENT,
NET
745,604
644,007
SHAREHOLDERS' EQUITY
2,948,763
2,468,739
TOTAL ASSETS
$
4,020,132
$
3,738,547
TOTAL LIABILITIES AND EQUITY
$
4,020,132
$
3,738,547
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS
ENDED
SEPTEMBER 2023/2022
(In thousands)
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings
$
410,549
$
573,085
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation
80,432
68,881
Amortization of intangibles
15,325
13,448
Expense associated with share-based and
grant compensation arrangements
26,068
19,979
Deferred income taxes (credit)
113
(269
)
Unrealized loss on investment and
other
362
8,453
Equity in loss of investee
1,013
2,740
Net (gain) loss on sale and disposition of
assets
(465
)
352
Changes in:
Accounts receivable
(82,883
)
(137,607
)
Inventories
230,559
(36,259
)
Accounts payable and cash overdraft
49,093
(11,247
)
Accrued liabilities and other
(18,363
)
31,490
NET CASH FROM OPERATING
ACTIVITIES
711,803
533,046
CASH FLOWS USED IN INVESTING
ACTIVITIES:
Purchases of property, plant, and
equipment
(130,947
)
(113,725
)
Proceeds from sale of property, plant and
equipment
2,211
2,303
Acquisitions, net of cash received and
purchase of equity method investment
(52,383
)
(105,212
)
Purchases of investments
(26,333
)
(16,925
)
Proceeds from sale of investments
22,101
10,036
Other
(2,092
)
911
NET CASH USED IN INVESTING
ACTIVITIES
(187,443
)
(222,612
)
CASH FLOWS USED IN FINANCING
ACTIVITIES:
Borrowings under revolving credit
facilities
18,915
570,700
Repayments under revolving credit
facilities
(21,929
)
(571,075
)
Repayments of debt
(29
)
(1,957
)
Contingent consideration payments and
other
(6,179
)
(2,564
)
Proceeds from issuance of common stock
2,087
2,110
Dividends paid to shareholders
(49,723
)
(43,420
)
Distributions to noncontrolling
interest
(7,355
)
(12,023
)
Repurchase of common stock
(62,076
)
(93,215
)
Other
65
(210
)
NET CASH USED IN FINANCING
ACTIVITIES
(126,224
)
(151,654
)
Effect of exchange rate changes on
cash
3,199
(139
)
NET CHANGE IN CASH AND CASH
EQUIVALENTS
401,335
158,641
ALL CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD
559,623
291,223
ALL CASH AND CASH EQUIVALENTS, END OF
PERIOD
$
960,958
$
449,864
Reconciliation of cash and cash
equivalents and restricted cash:
Cash and cash equivalents, beginning of
period
$
559,397
$
286,662
Restricted cash, beginning of period
226
4,561
All cash and cash equivalents, beginning
of period
$
559,623
$
291,223
Cash and cash equivalents, end of
period
$
957,197
$
449,135
Restricted cash, end of period
3,761
729
All cash and cash equivalents, end of
period
$
960,958
$
449,864
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031808557/en/
Dick Gauthier VP of Investor Relations (616) 365-1555
UFP Industries (NASDAQ:UFPI)
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