Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Q2 2023 UFP Industries Inc. Earnings Conference Call and Webcast. [Operator Instructions].

I would now like to hand the conference over to your speaker, Mr. Dick Gauthier, Vice President of Investor Relations. yours. is floor the Sir,

Dick Gauthier

prepared Welcome to Industries. Missad; call UFP questions. will XXXX CFO, will the be open second the call quarter for offer Mike Hosting and Matt Cole. conference and today then Mike call for Matt the remarks, are and CEO,

This be our to ufpi.com. website interested conference A simultaneously available and investors replay entirety is its available also at at website. that news call will in all media through

let These risks uncertainties are the cause me call release those of the identified Exchange over limited with but Litigation subject Missad, and are today's actual forward-looking to turn factors and to, to not to Reform and Securities statements you could filings the Commission. I press in uncertainties remind Matt and statements from the results Before and that as Private projections. Act include press presentation the These risks the defined XXXX. release in in materially include, that and differ company's Securities expectations

now the to over turn call Matt Missad. will I

Matt Missad

pressures other good our and and with Thank joining appreciate plenty you steeplechase call. quarter hurdles like XXXX everyone. measure. earnings of and We Dick, good QX competitive run for afternoon, some was you, thrown second in a obstacles

definitely and it Kenneth came Our end like team the persevered gave quarter. their out they the Rooks, and all, of ahead at

share sales $X.XX estimates EBITDA strong and per of exceeded volumes. lower Our spite earnings of margins remained in

for to pour the We quickly energies the changes. ourselves business to to this In addition bar exceeding ability a it. our strength helped financial metrics, react and high into set strategies, the quarter models and demonstrate of market

proved the value results. the in The itself balanced model of business

success and But providing economic strong units long-term did others diverse of performed returns. fuel customers face mix business while environments markets and end Some while better. helps our tough not

similar periods to better restructuring past. have in which increases in continue focus returns value-added driven and more financial XXXX effects our and the of product than see positive We in mix, the

board the our pleased of dividend for increased share September has XX for optimism, As a months. authorization that we in the these are improvements cash repurchase result next the increased long-term our to report and

evidenced year. of half XXXX a As first the will not smooth be the in year,

macro affect upward of week. of One, future The interest which Some is which strategies hikes, our factors, rate include: last hikes the uncertain. notched status

interest While XXXX. possible believe in another rates something hike likely is me year, more an rates to and year about election are leads fall this to that sometime

the monthly Two, new on seasonally housing starts, during rollercoaster which a based quarter were adjusted data.

serve, demand However, in markets resilient. has the most we been of

be and to a a will capital, more ample plans rate and growth returning our in which premium higher have for environment, capital shareholders. at both Three, fortunately, for we our

buyers which activity, slowed as to determine the targets try normal. has new M&A somewhat Four, and

remain acquisition term. and patient currently sought have runways stable We allocators. about become opportunities targeted better appears believe by our more for And growth for more targets. specific capital be fairly which lumber than to market will are being lastly, pricing, many at the I near available gotten values

consumer manufacturer, the seller as In review self-distributor, products solutions contractor. space, for and and solutions segment the a value-added Now let's as retail professional our outlook. DIY performance provide as the well

main its Our a its organization Prowood, segment developed plan and Edge. to business Retail UFP to around has strategies and continues and business Solutions consolidate DecKorators X refine units:

is points is resulting the retail consumer XXXX. XXXX, than affecting XX is significantly Two, the expected confidence repair for X% market be One, lower factors sales lumber are: revenue macro average. of Some below the historical level down dollars. to and in remodel Three, lower

to helped and available that again bolster and lesser solutions. pick retail XXXX. sale On repair XXXX. is helps in to has for fewer homes which the million will construction, side, a by positive expected remodel XX XXXX And prime new homes construction extent, fact up years are reach and remodel The spending

In than up customers. up and with anticipated stronger X% sales unit big-box sales quarter, the were overall Sunbelt X% with second and Prowood

still second strengthen below using which focus Prowood durability While reasonable of well the team performance create from the appearance quarter team performance, better its in products. our the to its product continues The on XXXX. building targets, wood significantly the brand to development terrible of levels margins and enhance solutions treatments improved and

its has market to expanding mineral-based considerable speed which DecKorators opportunities innovation is to for technology its product patented development using growth. team

$XX have to efficiency additional over the by increasing expenditures further Just capacity greatest And continue the million installers we material certified DecKorators to in expand now the XXX million, while be who board last week, approved for approximately products. an $XX and capital utilization. cheerleaders

grow Site-Built value. provide and our best right performed to and is and the been products to Construction harness national solutions has opportunities, the unit business and customer distribution build reach, the solutions, multifamily expertise provide help strategy retail expand production. segment, find, to and select brands has new business purchasing in In a utilize simple: Overall, our innovative fill able down the market and well very network

of are facilities. operating We near in Site-Built capacity functional our currently many

base innovation developing more We on new Site-Built customer challenges. team The and have different and well, are conventions challenging products. the to help by aims customer we the industry to more customers existing extremely and new utilizing solve serving our innovative in be and focus added products sales

of others. innovation We before are results be our newest in one the implementing we'll and monitoring it facilities, technology expand we the to

consolidating new a facility, We the much customers double into our nearby in an and the in Chicopee, to which better England Massachusetts are Belchertown, capacity has serve New facility Massachusetts footprint markets. larger existing and

volumes much sales than declines year. they unit, business last lower lumber declined and factory-built remained prices the dramatic customer as On experienced

we sales. down is production opportunities it although have of is growth market that over our since the RV we in industry a percentage example, still XX%, low For such believe overall

called portfolio a into growing product for drive This We RV new have created brand value-added unit Recreate. our business new products its for to is customers.

will dealer on inventories of experienced our continue more get line strong for Again, to team uncertainty business as results. management for the any through with believe XXXX guide construction, in outlook second improve also and to the demand. We to Factory-Built should in the rely we produce half overall,

standardization packaging structural continuing its facilities is segment, Packaging the the restructuring. at since path towards In its

expect struggle. gain has and which in pallet market, across pricing. as trades. a efficiencies and term, organization than has the all approach strong. an the put facility oversupply on drive competitors of who outlook The sales jack remains We in rather inventory new will heavier of long-term the pressure seen engineering high-priced to used will for near being have UFP struggle in PalletOne pallets packaging the manufacturing, holistic a each more pallets also of Customers we

invest to becoming of are acquisition packaging a slightly. economic some advance our From in outlook, grow an packaging We others down expect solutions will the innovation runways and continue while goal to of global to provider. automation, we

Our estimate units. in overall is mid-single packaging down for digits

operating On well the those customers front, as in multinational customers we countries our the international serve. is their both growing team as domestic countries solutions their offering in to

and We our continue growth opportunities to gain in evaluate add our to to markets portfolio. share existing

are areas new other of products. Some interest

sales for and were million the products $XXX.X quarter were second New year-to-date $XXX.X million.

our due the level behind annual of of lower pricing. large to market part the in are We lumber $XXX million target

and million an strategic in than acceleration plan and expected XXXX. come. integral New are each unit's Over part innovation sales our business of each in years months investments and new products to the fruit generate $XX of annual product XX to more in our should in development bear more categories is

we side the although of materials to raw trending lumber compared the the started last expect the do when few that mills declined margins. actively and upward On to their especially weeks We supply years, do prior market the then during are their volatility, not side, managing in quarter June. strengthen significant expect

Inventory.

and commodity-type value-added as products. As we to not know are for items, shift turns higher-margin generally that more we are high they as value-added for products inventory

amount focused need levels. the inventory, and on Transportation have of and although have chain to at right products to generally with operating elevated available, supply more are customers reduce having We on safety working we stock remained been hand. readily with our costs working to improve has of forecasting mix the

was we at employees of the applicants quarter. capital, the versus for unemployment U-X first end challenge. that end note still the June X.X% are human to quality finding X.X% but In the a of at work, index is looking up More

opportunities education with overall performance incentive has for improved our well engagement been providing resonates to with teammates and very results. well teams. and additional system together Our pay advanced growth candidates, internal and financial of hourly drives training Tying for received

also generation plans. to the continue of talent to strategic We our that ensure next promote leaders match train levels others and growth can

the Now Mike to financial information. it over Cole review to I'd like turn to

Michael Cole

Thank you, Matt.

originally than products the to enhanced operating our in which for quarter adjusted value-added to a margin XX in in to X% operating favorable management ability changed reduction XX% consolidated selling we've drop profits the $X XXXX, XX.X%, XX% more demonstrating the customers, since an business consisting structure of units. include was prices, due to decrease by we and points XX% XX% And an overall range EBITDA offer basis of a progress of estimated lumber the customers improved margin billion, units. in our to sales million, A XX% this made that in prices we which to our results in to $XXX XX.X%, to new primarily year. drop in passed resulting and decline Our in solutions each decremental

debt reduced last strength A improvement of average cost to year-to-date year. our in this cash net our invested million net return a increase seasonal on compared continues sheet weighted $XXX to volumes of year cash to that in operating which prices with year lumber gain $XXX million And a as capital. million lower and capital balance An XX.X%, flow annualized surplus is capital. compared last working X.Xx of of $XXX

dropped flat XX% million, in decline an sales selling segment segment, in of prices sales. $XXX By XX% and consisting to Retail unit our

conditions, up and well this business by Given Prowood DecKorators sales quarter, primarily market driven our our unit units. held

more was business expectations. XX%, big independent an customers quarter unit by -- which we is housing with Our the in increase with new an with increase line with sales also while to starts our X% were closely with retailers, correlated which dropped believe up for box

over million XXX% last profits Our to retail operating from increased year, a $XX this year. increase

has retail which of at heavily the was per variable in over a sales QX. trends by that segment dropped from end $XXX lumber $X,XXX beginning at quarter of toward less sequential thousand mix impacted thousand the our lumber than year, to priced per treated adversely weighted the Last prices

this in At for in believe beginning indicated we in in XXXX. in resulted increase on of million challenge the operating same Retail to performance a we and QX positioned is build well the the profit year. in had operating of year. haven't the well an our momentum the strong segment increase $X year, to this positioned year-to-date half segment back this report we was Their Fortunately, profits

unit organic in also Packaging. segment X% Sales volume. contributed contributed a XX% dropped decrease unit in to acquisitions, at which is price of a than XX% pressure. to which consisting and to demand prices, this year, on anticipated beginning selling to Customer million, competitive currently the Moving this has X% softer $XXX we decline of a

As pressure per we provides at demand operating the in year. stabilized. a low a of segment Packaging a time, these this price QX since Also, other higher cautious result end sales prices most of operating year, of of profits XX% XXXX this to falling pricing for last a of to XX% the segment the last that decrease resulting operating comparisons slightly year. of us unit factors, optimism profits profits products QX to XX% from has from in better and million, the with $XX in Sequential range than and we and segment our contributed dropped sell for decremental period fixed XX.X%, a in of margin are estimated to lumber

$XXX decline XX% Turning million, in consisting to XX% and of prices in Sales XX% an in a this decrease to segment Construction. units. selling dropped

year. again XX% $XX than pricing to resulting range the from due As and XX% Factory-Built operating segment estimated units and to of volumes the profits unit the XX%, million, XX% decremental drop expected, for the to Site-Built XX% a year, businesses in year we -- decrease competitive XX.X%. in respectively. decline better the caused was declined to a was full our for Lower last our This whose Construction operating margin and more

business its in fixed constraints a also sales year, team Last last the to year. more through selective of prices time. the benefited capacity the in to and more that Construction Peak the lumber with from prices heavily selling drop are QX be pursued weighted allow demand I period earlier because for QX, are products segment in mentioned we

to in As each total value-added grow sales focus this our segment to to of continues we products. of sales ratio cycle, strategies an XX% this And manage increase executing our year on through report to year. we're to portfolio from pleased value-added our last XX%

this sales efforts continue and this achieve at to We're target total sales margin from Similarly, minimum increased to these least our our profitability over last X% to and to execute is of the structure ability We're confident to long-term mindful and our us in product year. us term. X% while we to appropriately sized year ratio resources the EBITDA continue environment long new relative to solutions company competitiveness of enhance enhance that help providing as XX% innovation. help our will our drive cost ensure also the strategies needed offer demand value-added of still

came and lower nearly to sales bonus and primarily due declined or expenses. $XX expenses under X% plan SG&A this Our in incentive million quarter,

Moving on cash flow to our statement.

volumes lower lower $XXX seasonal and a prices. from capital operations improvement was due resulting flow million, lumber requirements last $XXX million from Our working to over cash year

to cash a our in quarter X-day this and for Our increased year increase cycle XX days due the our to increase a year in inventory XX last cycle. from cycle X-day receivable days

While payments from over are delay slight in experienced XX% with receivables we've certain current. a our shape in customers, good overall

is for the improvement lower focus Our cycle adjust our our environment. historical current availability of -- of as for area safety an is levels the reset in we stock supply of trend demand above and inventory the impact and

typical into working move a seasonal QX, anticipate more QX in net we our As capital. we and decline

Our expenditures. investing million activities included in capital $XX

DecKorators products, focused our investments unit. expanding and key to in capital First, and new manufacture our areas: Our capacity primarily business segment are X on Packaging value-added primarily

our in core businesses. expansion geographic Second,

automation the center. all through our profit plants function increasing to working continue from cost transportation And capacity center transform in efficiencies our as in and fourth, achieving Third, enhancing we to conditions a a segments. this

far capital than financing our and million through to so million activities $XX in share more returning buyback of $XX XXXX. Finally, more of our shareholders included than dividends

capital resources. to structure and Turning our

last $XXX sheet continue in net to We million with in cash strong year. excess $XXX balance in million debt debt to have of a surplus compared

of certain Our and consisting total under billion, a cash with our allocation abundance different facility structure surplus us credit to lenders. strength return-driven $X with The cash long-term generation, and approach and managing to an to availability liquidity of capital was capital prudent provide shareholders business continues return grow nearly cycles. our and approach capital flow agreement our also of through conservative to to our shelf

M&A. share We'll approach and a balanced capital continue buybacks, to return-driven pursue dividends, between investments and

our a be dividend Specifically, in paid $X.XX quarterly to of in board a a which share represents the September, approved increase XX% quarterly rate.

with program fit strong margin, and We enhance worth July of and $XXX than have we providing potential. to are by variable for our companies continue expenditures and $XXX approved currently which to of total while pipeline long capital original higher end authorization timing. of Board this estimate lead year And healthy the million We're due returns a our impact us million shares lower new and the competitive strategic that providing Directors planning growth repurchase as a a $XXX share XXXX. to position that target capabilities until we is repurchase to to up million M&A of times to pursue opportunities continue of our

all on That's Matt. I financials, the have

Matt Missad

you, Mike. Thank

I'd it up questions. Now you. open like Thank to for

Operator

[Operator Instructions].

Our line question come Yinger of with first D.A. will Davidson. the Kurt from

Kurt Yinger

about there, quarters it Can pretty Just DecKorators the of of on offsetting wanted segments kind anything note and just -- retail. like unit Prowood, you sounded I of but good Sunbelt start all flat. were mean there? and unit had off business to some volumes talk

Matt Missad

by say it's considerably. probably Edge. down were UFP would volumes primarily I Their Yes, driven

Kurt Yinger

just, environment? the any overall market destocking Got anything specific it. guess, that or I or And is

Matt Missad

Yes.

we towards I they're it think the Edge of as going, different think a of driving products UFP and factors I at on higher-end finishing just where pure is more there. their One couple look is, there's less some items.

help to the in impact happened -- year it's that's a so... so to going going got sales future, far help So that's it's this but

Kurt Yinger

it. Got

bridge will where bounce -- you margin to those I margins, and to business of maybe then you maybe you target kind perspective? makes Okay. that they about talk today kind back a you specifically below nice the had just units, from levels. push were Prowood hoping Sunbelt a referenced still where to think sense. And you're help are retail gross of what in think That but from And

Matt Missad

Yes.

that product. is value group. I think pay treatments within I we a with talked the a the end that is certainly or treated Solutions developing been Formulation new We've think help. and we're saw value the it's about our in that both the We retardant And to consumer the through products, Performance some pandemic for add consistent of struggle. believe our willing preservatives fair lumber fire the will that

matter to And base big that so customer delivering give us and us up for it's focus in help a consumer better product, from and ultimately the for real the that we're of value, margin us. drive our value, better better through to a value that's standpoint, making them selling the for sure is profile the

Kurt Yinger

then you being that's just And of at plans expansion kind add of lastly, terms assume to products capacity kind kind I And greenfield or I with kind targeted manufactured and of the Site-Built. capacity think like. any Okay. there? investments of referenced facilities of in Any

Matt Missad

Yes.

bit the of about facilities. capacity I talked at automation one in Chicopee, a We're -- about looking about think our we as areas. in talked adding we Massachusetts We larger other adding little facility. talked

part it. certainly that's So of

-- bit between we tried capacity I to think little capacity. and actual a I functional talked and differentiate

are not I running know facilities think all the I X shifts.

for a them. pleasant I of demand. shift that that So been a is But think possibility it's us, surprise for second some adding a much still there's

well. very been will our from so as -- it customers far it and that very long pleased how we're way, And outlook with has so stay knows the strong who but

Operator

the Elliott that Stifel. of line come with from And Stanley will

Stanley Elliott

you kind tail was or back of easy lot Site-Built more it the off? I to that the over then production at part you're be, other would multifamily flip seeing strength? multifamily event some the these a going to of And how these but starts On that of that in that, the single-family to for switch and facilities is between not flip, multifamily guess

Matt Missad

say ago is has it's The point. a probably stayed of demand for the certainly and just for slow, years I've incorrectly rental strength it's predicted That's X would been good -- us. multifamily I a that still there multifamily would factor strong. that housing.

But it's and So changeover. how layering really irritating good. And the it production easy to facilities of of our switch The to change job good like level facilities, really, but real the going that's outlook do where they gets move again, customers because challenge our them respect risk strong they've done production a over is or of still starts have challenging comes to around managing a shift not got the things looks With there at place. in. production those most it at transition delay I'm managing a schedules. to it's say that need easy, job of good really even more and at when really, and starts we to and

so I And give of that. them a for ton credit

Stanley Elliott

some Do be that line packaging kind could lag then it track? to the -- up should guess actually PMIs businesses? -- those in to like even you the starts think how going be it maybe seeing the be in you'll start in guys of PMIs packaging? of you competitive more year. that may will end I improving And with a speak another there's the And process pressures of the are benefit Or thing, to more bottoming by or it end little the the you before a saw looks

Matt Missad

will it of things Stanley, precise. probably your I on slight be difficult there. think But make be will points you, it couple a There's I tell there, lag going to on, more get Yes. a different which

typical in I take a value-added which not been and they're in think had from number there's at at not there's I is this orders which been more trying a to maybe certain products a convert program packaging panels activity to environment. is quoting if of while, areas, know that they've certain levels. for and basically sticks

well I pressure of think with but to created so respect And that's I those of of types very the results been we've doing competitive talked things, that some about.

on future. a that back, typically, the and excess packaging certainly of on And certainly the the are that those the index have takeaway mix that think think nice for think I the spite group a margins of done I down. cores side, dampen the until presence of absorbed. in a sign the managing are for shows can of lot for volumes good the pallet while But is a the pricing coming sales job I overall fact market I they've their business PMI

Stanley Elliott

activity? that? on million How Yes. about cadence And Is of the then the this -- the think additional repurchase it $XXX only lastly, year? any for should thoughts is we

Matt Missad

so far allocate It's valuations the certainly, what return next second of We we the that exceeded do stock there's to within to sure do are could to is period want the saw want else the really the capital for times XX-month our we've past. to in. where that in anything tried continue quarter, we'll and to and make invest right. the where you value highest We

there, approval So the extent opportunities ahead of those and have to to to to we able be board the the wanted repurchase. go are

Operator

BMO Markets. from Capital of Mamtora with line come will Ketan the That

Ketan Mamtora

you First question, kind were of Mike, high big curious, your about single talked up was I just box digits. sales

better was there you as are move a indicators. and retailer that some or resi skewed sort as the more trend mid-teens positive down through holding independent new go-forward half, seems side, it year-over-year are are to you that actually given as about of what resi, sharing are back be of resi better, getting changing on that, is comps basis on I signs you up seeing of any I which to kind -- new think the new is said, we with On kind as

Michael Cole

standpoint, which what From retail, about. being at you're strong still we're talking demand within a year-over-year looking is

QX a have would QX. that to I think point I sure QX seasonal we make pretty to change that from and significant occurs though, do out,

patterns, prices to respect seasonality. to would to last the to some be still back with projects. may that in people lumber feel over kind of the speculate, in normal like demand historical of higher expect we But I year-over-year, shape revert of more couple years is good so deferring and So that due

that's some are to repair/remodel And and so factors expected. been other than I better contributing think we that activity

Ketan Mamtora

Got you.

think in sheet Okay. shape. capital very allocation, is about balance strong obviously, I And then as

talked share as repurchases. as of of You you kind are about kind about of I'm the cyclical one as as how factors and expectations the M&A, moderated curious, whether think the kind interesting is X most -- seeing you anything other segments attractiveness you of seller over of kind opportunities where of think about kind increased, the else? relative or

Matt Missad

Yes. the Ketan, I marketplace. had focus fragmented has where the most think obviously opportunities the guess is been what I area that's we've and packaging a would I most say, highly

a a more that product and work some looking able in opportunities easier be in and synergies a would be fashion at, for selective scale or innovation we're for much think we new new form what that scale to across and they In the can in our network. there's create very So or other that to have combination us space. idea, us drive I through, segments, we're they product

be X they they ago. what the That's bit might X.X have -- about little come been they're years So values think them of are waiting you're what in in ago real I for quite or And terms capital, where pay years to need I talked going worth people right think now, I forward. and somebody and we valuations. still are right a not think the on

think at will to little there's there, I fit model. that be very we our our but So values that ways confident go in some a wheelhouse there opportunities and are

Ketan Mamtora

in any you final kind decremental far? you've terms on or And based Got update rethink of segments in think about one seen how margins your Mike, for you. of us question. so what

Michael Cole

a question. Yes. It's good

have at we -- and XX-Q XX-K and provided look forward the quarter. last outlook taking guidance we're that and of our a fresh We that

it's will you will lower that but how the wouldn't would of updated so to but materializing. the packaging decremental we it performance margin and original and compared overall, it the probably back much that I that that that change, on on little when profits, to the tell that we see thought the of think therefore, retail likely surprise the next we'll might I'm closer to We're we finally construction exactly week margin, is is I in expect given you, pretty And do do. build last range the decremental to guess file, and going back better year up doing what range year half be we a on year. half probably

Operator

further I'm to back turn to remarks. this queue like I no time. at would questions Matt in call showing the over the for Mr. Missad any closing

Matt Missad

thank again you us today. for time with Well, spending

the investment the our us Thank great returns. we'll many are and of great working there me challenges paraphrase you keep to in we'll ensure words for gives face, not a to it While alive. OneRepublic. and unknowns keep team we dreams Have your experienced confidence I'm worried about long-term day. right because now

Operator

all Thank for today's program. participating. concludes This you

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UFP Industries (UFPI) 2 Aug 232023 Q2 Earnings call transcript