UFP Industries Announces Third Quarter Results

Rhea-AI Summary

UFP Industries, Inc. (Nasdaq: UFPI) announced Q3 2023 results with net sales of $1.8 billion, net earnings of $134 million, and EPS of $2.10. Operating margins remain historically strong. The company's balanced business model and focus on value-added products have led to improved margins. UFP Industries plans to invest cash surplus and cash flow for business growth and high returns on capital.

Positive

• Net sales of $1.8 billion and net earnings of $134 million in Q3 2023.
• EPS of $2.10, a 21% decrease from the previous year's record quarter.
• Operating margins remain historically strong.
• New product sales as a percent of total sales rose to 9.7%.
• Adjusted EBITDA of $208 million, a 24% decrease from last year.
• UFP Industries maintains a strong balance sheet with $682.4 million in net surplus cash.
• The company plans to invest in acquisitions, capital expenditures, dividend payments, and share repurchases.

Negative

• Net sales decreased by 21% due to a decrease in prices and organic unit sales.
• Diluted EPS decreased by 21% compared to the previous year's record quarter.
• Adjusted EBITDA margin declined by 40 basis points to 11.4%.
• UFP Packaging and UFP Construction experienced decreases in net sales and adjusted EBITDA.
• Adjusted EBITDA margin for UFP Packaging decreased to 11.9%.
• Adjusted EBITDA margin for UFP Construction declined to 13.2%.

Operating Margins Remain Historically Strong

GRAND RAPIDS, Mich.--(BUSINESS WIRE)-- 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

Source: UFP Industries, Inc.

FAQ

What are UFP Industries' Q3 2023 net sales?

UFP Industries reported net sales of $1.8 billion in Q3 2023.

What is the company's EPS for Q3 2023?

The EPS for Q3 2023 is $2.10.

What is UFP Industries' approach to capital allocation?

UFP Industries focuses on acquisitions, capital expenditures, dividend payments, and share repurchases.

What is the company's net surplus cash on September 30, 2023?

UFP Industries has $682.4 million in net surplus cash on September 30, 2023.

What is the goal for new product sales as a percent of total sales?

The goal is to achieve a ratio of new product sales to total sales of 10%.