Boise Cascade Company Reports Third Quarter 2023 Results

Boise Cascade Company (“Boise Cascade,” the “Company,” “we,” or “our”) reported net income of $143.1 million, or $3.58 per share, on sales of $1.8 billion for the third quarter ended September 30, 2023, compared with net income of $219.6 million, or $5.52 per share, on sales of $2.2 billion for the third quarter ended September 30, 2022.

“After another solid quarter of operating and financial performance, I want to first thank our associates for their continued focus, hard work, and loyalty. In addition, we are pleased to have recently completed the acquisition of BROSCO and welcome their outstanding team to Boise Cascade. The acquisition supports BMD’s growth in the door and millwork business and brings us immediate scale in the Northeast markets,” stated Nate Jorgensen, CEO. “The strength and flexibility of our balance sheet allows us to remain committed to our reinvestment and growth strategies while also rewarding our shareholders, as evidenced by our most recent special dividend announcement. As we look forward to 2024, we are dedicated to supporting our vendor and customer partners and appreciate their ongoing confidence and trust in us. We are well positioned to navigate market uncertainties as near-term demand for new residential construction evolves.”

Third Quarter 2023 Highlights

In third quarter 2023, total U.S. housing starts decreased 6%, driven by a decrease in multi-family housing starts compared to the same period in 2022. However, single-family housing starts increased 7% compared to the same period in 2022. On a year-to-date basis through September 2023, total housing starts and single-family housing starts decreased 12% and 13%, respectively, compared to the same period in 2022. Single-family housing starts are the key demand driver for our sales.

Wood Products

Wood Products’ sales, including sales to Building Materials Distribution (BMD), decreased $80.1 million, or 13%, to $515.2 million for the three months ended September 30, 2023, from $595.3 million for the three months ended September 30, 2022. The decrease in sales was driven by lower plywood sales prices, lower sales prices for I-joists and LVL (collectively referred to as EWP), and lower LVL sales volumes. These decreases were offset partially by higher plywood sales volumes.

Wood Products’ segment income decreased $56.4 million to $99.6 million for the three months ended September 30, 2023, from $156.0 million for the three months ended September 30, 2022. The decrease in segment income was due primarily to lower EWP and plywood sales prices, as well as lower LVL sales volumes. These decreases in segment income were offset partially by lower wood fiber costs and higher plywood sales volumes.

Building Materials Distribution

BMD’s sales decreased $286.5 million, or 15%, to $1,670.3 million for the three months ended September 30, 2023, from $1,956.8 million for the three months ended September 30, 2022. Compared with the same quarter in the prior year, the overall decrease in sales was driven by sales price and sales volume decreases of 14% and 1%, respectively. By product line, commodity sales decreased 20%, general line product sales decreased 5%, and EWP sales (substantially all of which are sourced through our Wood Products segment) decreased 21%.

BMD segment income decreased $57.3 million to $97.1 million for the three months ended September 30, 2023, from $154.4 million in the comparative prior year quarter. The decline in segment income was driven by a gross margin decrease of $48.4 million, resulting primarily from lower margins on EWP. In addition, selling and distribution expenses increased $6.0 million.

Recent Developments

On October 2, 2023, the Company completed the acquisition of Brockway-Smith Company (BROSCO) for a purchase price of $168 million, inclusive of estimated working capital at closing of $51 million, which is subject to post-closing adjustments. The Company funded the acquisition and related costs with cash on hand.

Balance Sheet and Liquidity

Boise Cascade ended third quarter 2023 with $1,273.0 million of cash and cash equivalents and $395.9 million of undrawn committed bank line availability, for total available liquidity of $1,668.9 million. The Company had $445.1 million of outstanding debt at September 30, 2023.

Capital Allocation

Excluding acquisitions, we expect capital expenditures in 2023 to total approximately $190 million to $210 million. Our 2023 capital expenditures range includes funding for greenfield distribution centers in South Carolina and Texas, projects at our mills in the southeast to expand our EWP capacity, spending related to new door shop assembly operations in Kansas City, Missouri, and Denver, Colorado, and the purchase of a distribution center in West Palm Beach, Florida.

For the nine months ended September 30, 2023, the Company paid common stock dividends of $140.9 million. In addition, on October 26, 2023, our board of directors declared quarterly and special dividends of $0.20 per share and $5.00 per share, respectively, on our common stock. The fourth quarter dividends will total approximately $206 million and are payable on December 15, 2023, to stockholders of record on December 1, 2023.

As of September 30, 2023, approximately 2.0 million shares were available for repurchase under our existing share repurchase program.

Outlook

Demand for the products we manufacture, as well as the products we purchase and distribute, is correlated with new residential construction, residential repair-and-remodeling activity and light commercial construction. Various industry forecasts for 2023 U.S. housing starts are estimated to be 1.4 million units, compared with actual housing starts of 1.55 million in 2022, as reported by the U.S. Census Bureau. Throughout 2023, home affordability has been a challenge for consumers given higher mortgage rates and limited home price decreases. However, given a resilient economy and low levels of existing home inventory for sale, demand for new residential construction has been stronger than anticipated. Homebuilders have also addressed affordability challenges facing homebuyers in various ways, including smaller home sizes, fewer amenities, price incentives, and mortgage rate buydowns. Economic uncertainties, escalating mortgage rates, and home affordability are expected to continue to influence the near-term demand environment. Consensus forecasts for 2024 single- and multi-family housing starts in the U.S. generally range from 1.3 million to 1.4 million units, which is comparable with 2023. Regarding home improvement spending, the age of U.S. housing stock and elevated levels of homeowner equity have provided a favorable backdrop for repair-and-remodel spending. However, industry forecasts project continued moderation of year-over-year growth in renovation spending, and economic uncertainty may also negatively impact homeowners’ further investment in their residences.

As a manufacturer of certain commodity products, we have sales and profitability exposure to declines in commodity product prices and rising input costs. Our distribution business purchases and resells a broad mix of commodity products with periods of increasing prices providing the opportunity for higher sales and increased margins, while declining price environments expose us to declines in sales and profitability. Future commodity product pricing and commodity input costs may be volatile in response to economic uncertainties, industry operating rates, transportation constraints or disruptions, net import and export activity, inventory levels in various distribution channels, and seasonal demand patterns. During fourth quarter 2023, we expect to experience seasonally slower demand for the products we manufacture and distribute, as well as modest EWP price erosion.

For the full third quarter results, click here.

About Boise Cascade

Boise Cascade Company is one of the largest producers of engineered wood products and plywood in North America and a leading U.S. wholesale distributor of building products. For more information, please visit the Company’s website at www.bc.com.

Contact:

Kelly Hibbs – Investor Relations – investor@bc.com

Source: Boise Cascade Company