UFP Industries Announces Third Quarter Results

Operating Margins Remain Historically Strong

UFP Industries, Inc. (“UFP”) 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.

For the full third quarter results, click here.

About 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.

Source: UFP Industries, Inc.