Simpson Manufacturing Co., Inc. Announces 2023 Third Quarter Financial Results

Net sales of $580.1 million increased 4.8% year-over-year

Income from operations of $140.2 million increased 14.2% year-over-year

Diluted earnings per share of $2.43 increased 18.0% year-over-year

Declared $0.27 per share quarterly cash dividend

Simpson Manufacturing Co., Inc. (the “Company”), an industry leader in engineered structural connectors and building solutions, announced its financial results for the third quarter of 2023. Refer to the “Segment and Product Group Information” table below for additional segment information (including information about the Company’s Asia/Pacific segment and Administrative and All Other segment).

All comparisons below (which are generally indicated by words such as “increased,” “decreased,” “remained,” or “compared to”), unless otherwise noted, are comparing the quarter ended September 30, 2023, with the quarter ended September 30, 2022.

2023  Third Quarter Financial Highlights

• Consolidated net sales of $580.1 million increased 4.8% from $553.7 million.
  • North America net sales of $456.8 million increased 4.4% from $437.8 million, mostly due to higher volumes partially offset by price decreases in effect earlier in 2023.
  • Europe net sales of $119.0 million increased 6.4% from $111.9 million, primarily due to the positive effect of approximately $7.9 million in foreign currency translation, partly offset by lower volumes.
• Consolidated gross profit of $282.9 million increased 15.7% from $244.5 million. Gross margin increased to 48.8% from 44.2%.
  • North America gross margin increased to 51.8% from 47.5%, primarily due to lower raw material costs, offset by higher warehouse and freight costs, as a percentage of net sales.
  • Europe gross margin increased to 37.9% from 31.5%, primarily due to a decrease in raw material costs as a percentage of net sales. Cost of sales in the prior year period included a $2.9 million inventory fair-value adjustment as a result of purchase accounting with respect to the acquisition of FIXCO Invest S.A.S (“ETANCO”).
• Consolidated income from operations of $140.2 million increased 14.2% from $122.8 million. The increase was primarily due to increased consolidated gross profit, which was partly offset by higher operating expenses, including increased variable compensation and personnel costs as a result of the increase in the number of employees supporting production, engineering and sales activities. Operating expenses were partly offset by lower acquisition and integration costs including lower professional fees. Consolidated operating margin increased to 24.2% from 22.2%.
  • North America income from operations of $135.6 million increased 6.5% from $127.3 million. The increase was primarily due to higher gross profit, which was partly offset by increased personnel costs from the increase in the number of employees supporting production, engineering and sales activities and variable compensation.
  • Europe income from operations of $15.5 million increased 151.3% from $6.1 million, primarily due to higher gross profit (partly due to the prior year $2.9 million raw material fair-value adjustment as noted above) and lower acquisition and integration costs, which were partly offset by increases in personnel costs and variable compensation.
• Net income was $104.0 million, or $2.43 per diluted share of the Company’s common stock, compared to net income of $88.2 million, or $2.06 per diluted share.
• Cash flow provided by operating activities increased approximately $79.7 million from $124.9 million to $204.6 million, mostly from increases in net income and decreases in working capital.
• Cash flow used in investing activities increased approximately $9.8 million from $12.0 million to $21.8 million. Capital expenditures were approximately $22.5 million compared to $9.7 million.

Management Commentary

“We delivered solid financial performance in a challenging operating environment with third quarter net sales of $580.1 million increasing 4.8% over the prior year quarter led by improved volumes in our North America segment,” commented Mike Olosky, President and Chief Executive Officer of Simpson Manufacturing Co., Inc. “We achieved double-digit volume growth year-over-year in our commercial, national retail and building technology markets as we have continued to execute on our strategies, enabling us to win new applications and customers. While Europe net sales were relatively flat year-over-year on a local currency basis, our gross margin has continued to improve versus historical levels and ETANCO continues to perform well.”

Mr. Olosky concluded, “While 2023 U.S. housing starts will likely finish below 2022 levels, we continue to believe in the sustainable strength of the housing market in the mid to long-term given the shortage of new housing. However, based on the current interest rate environment and the resultant impact on the housing market, we anticipate that our fourth quarter 2023 results will start reflecting some downward pressure, in addition to typical seasonality, compared to the third quarter of 2023. Further, while our operations throughout the Company were mostly down for approximately three days in mid-October due to a cybersecurity incident, the swift actions of our dedicated team and commitment to our customers led us to resume shipments to clear our backlog within just one week. Looking ahead, we continue to believe that we have ample opportunities to pursue our growth initiatives and enhance stockholder value over time.”

Corporate Developments

• On October 19, 2023, the Company’s Board of Directors (the “Board”) declared a quarterly cash dividend of $0.27 per share, estimated to be $11.5 million in total. The dividend will be payable on January 25, 2024, to the Company’s stockholders of record as of January 4, 2024.

Business Outlook

The Company has updated its 2023 financial outlook based on three quarters of financial information to reflect its latest expectations regarding demand trends, raw material costs and operating expenses. Based on business trends and conditions as of today, October 23, 2023, the Company’s outlook for the full fiscal year ending December 31, 2023 is as follows:

• Operating margin is now estimated to be in the range of 22.0% to 22.5%.
• The effective tax rate is estimated to be in the range of 25% to 26%, including both federal and state income tax rates and assuming no tax law changes are enacted.
• Capital expenditures are estimated to be approximately $100.0 million depending on a number of various external factors.
• The Company continues to make progress on its efforts to integrate ETANCO into its operations and to realize previously identified offensive and defensive synergies in the years ahead. However, the Company expects these efforts will result in ongoing integration costs through 2023 and beyond.

For the full third quarter results, click here.

About Simpson Manufacturing Co., Inc.

Simpson Manufacturing Co., Inc., headquartered in Pleasanton, California, through its subsidiaries, including Simpson Strong-Tie Company Inc., designs, engineers and is a leading manufacturer of wood construction products, including connectors, truss plates, fastening systems, fasteners and shear walls, and concrete construction products, including adhesives, specialty chemicals, mechanical anchors, powder actuated tools and reinforcing fiber materials. The Company primarily supplies its building product solutions to both the residential and commercial markets in North America and Europe. The Company’s common stock trades on the New York Stock Exchange under the symbol “SSD.”

Source: Simpson Manufacturing Co., Inc.