UFP Industries Reports Record Third Quarter Results
UFP Industries, Inc. announced record net sales of $2.3 billion and net earnings attributable to controlling interests of $167 million for the third quarter of 2022. The company also reported record earnings per diluted share of $2.66, a 37 percent increase over the third quarter of 2021.
“UFP’s ability to deliver record-setting performance in a challenging economic environment is a direct result of the efforts of our hard-working teammates and a balanced business model that minimizes risk by operating in diverse but complementary markets,” said CEO Matthew J. Missad. “Our market-focused organizational structure helps us to better address customer needs, and our increased commitment to innovation and new, value-added products continues to improve our operating results and set us apart from competitors.”
Third Quarter 2022 Highlights (comparisons on a year-over-year basis):
- Net sales of $2.3 billion increased 11 percent due to a 6 percent increase in prices and a 5 percent increase in unit sales, including a 2 percent increase in unit sales from acquisitions.
- Earnings from operations of $237 million increased 41 percent. In the third quarter of 2021, the company recognized a gain on the sale of real estate of $9 million.
- SG&A increased $45 million or 26 percent. SG&A as a percentage of gross profit fell from 52 percent to 48 percent.
- New product sales of $178 million increased 38 percent. This excludes new products that were sunset at the end of 2021. New product sales leaders included Deckorators mineral-based composite decking and Strip Pak mixed-material packaging solutions.
- The percentage of total sales that are value-added increased to 66 percent from 64 percent.
- Adjusted EBITDA of $274 million increased 46 percent, and adjusted EBITDA margin improved by 280 basis points to 11.8 percent. Acquisitions completed during 2022 contributed $7.3 million to adjusted EBITDA.
By business segment, the company reported the following third quarter 2022 results (all quarterly numbers):
UFP Retail Solutions
$845 million in net sales, up 21 percent over the third quarter of 2021 due to a 15 percent increase in selling prices and a 6 percent increase in unit sales, including a 3 percent increase in unit sales from acquisitions. Unit growth was driven by increases in the company’s pressure-treating operations (Sunbelt Forest Products and ProWood), Deckorators and UFP-Edge. Unit sales growth for the company’s pressure-treating operations benefited from favorable year-over-year comparisons, as orders slowed in the third quarter of 2021 when retailers focused on reducing inventory.
Gross profit for UFP Retail Solutions rose to $77 million, a 615 percent increase over the third quarter of 2021, when rapidly falling lumber prices reduced margins for variable-priced products such as pressure-treated wood. Gross profit margin rose to 9.2 percent in 2022 from 1.6 percent in 2021.
Retail sales accounted for 38 percent of the company’s sales year to date. When evaluating future demand for the segment, the company analyzes data such as the same-store sales growth of national home improvement retailers and forecasts of remodeling activity.
$585 million in net sales, up 2 percent from the third quarter of 2021 due to a 3 percent increase in unit sales from acquisitions, a 1 percent increase in selling prices, and a 2 percent decline in organic unit growth. The organic unit sales decline is attributable to an intentional change in product mix, as the segment focuses more on higher-margin products and being selective in taking on new business. New product sales increased 52 percent to $64 million, and the segment’s percentage of value-added sales increased to 74 percent from 69 percent in 2021.
Gross profit rose 14 percent to $144 million, and gross profit margin rose 250 basis points, reflecting the company’s ability to pass on the impact of higher operating costs, as well as the successful implementation of value-based selling initiatives.
UFP Industrial sales accounted for 24 percent of the company’s sales year to date. When evaluating future demand, the company considers a number of metrics, including the Purchasing Managers Index (PMI), durable goods manufacturing, and U.S. real GDP.
$777 million in net sales, up 8 percent over the third quarter of 2021, due to an 8 percent increase in organic unit sales growth. Unit sales growth was driven by the Factory Built, Commercial and Concrete Forming Services business units. Gross profit increased $46 million or 30 percent to $200 million in the third quarter, led by Site Built and Commercial.
The company’s site-built residential customers have accounted for approximately 14 percent of total company sales year to date. Approximately one-third of site-built customers are multifamily builders. More than 75 percent of the company’s site-built residential housing sales are in areas such as Texas and the Mid-Atlantic, Southeast and Mountain West regions, which have experienced significant population growth through migration from other states and are forecasted to continue to grow in the long term. The company’s factory-built customers have accounted for 13 percent of total company sales year to date. This business, along with the company’s multifamily business, could benefit from higher interest rates as buyers seek more affordable housing alternatives. As a result of these factors, we believe these customers are better insulated from downturns in the housing market.
UFP Industries maintains a strong balance sheet with nearly $1.5 billion of liquidity as of September 24, 2022, consisting of $456 million of surplus cash, plus availability under its revolving credit facility and shelf agreements with lenders. The company’s diversified and return-focused approach to capital allocation includes the following:
- The company has targeted $175-225 million for capital expenditures in 2022, an increase over the $151 million spent in 2021. The company’s capital expenditures during the first nine months of 2022 totaled $115 million. Longer lead times required for most equipment and rolling stock may cause the company to fall short of its 2022 expenditures target.
- In February 2022, our Board of Directors authorized an increase in the company’s share repurchase program of up to 2.6 million shares. Through September 24, 2022, the company has purchased approximately 1.2 million shares at an average price of $77.06. The company has issued 911,000 shares in 2022 for share-based compensation programs at an average issue price of $82.69 per share.
- On October 19, 2022, the Board approved a quarterly dividend payment of $0.25 per share, payable on December 15, 2022, to shareholders of record on December 1, 2022. This dividend is 67 percent higher than the dividend of $0.15 per share paid on December 15, 2021.
- The company continues to seek opportunities to acquire companies that represent a strong strategic fit and allow it to drive new growth and margin improvements, enhance its capabilities, and create more incremental value for its customers and shareholders.
The following outlook remains largely unchanged from the guidance provided in the second quarter 2022 earnings release.
We expect our balanced business model and operational improvements will continue to help us navigate new external challenges, including rising interest rates and historically high inflation. In the near term, we continue to expect more normalized demand in our largest segment, UFP Retail Solutions. For UFP Industrial, we continue to monitor business activity and the key economic indicators that drive this segment with many of those metrics remaining mixed. Pricing remains healthy as we pass through inflationary costs and benefit from our focus on value-added products. For UFP Construction, we see continued activity in commercial and infrastructure end markets and expect our exposure to a projected softening in the housing market to be somewhat offset by favorable demographic trends in the markets we serve and our participation in more affordable housing and the multifamily market. Our diversified business and strong track record of executing our strategy gives us confidence that we can continue to successfully navigate various market environments while delivering returns to shareholders.
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About UFP Industries, Inc.
UFP Industries (Nasdaq: UFPI) is a holding company whose operating subsidiaries – UFP Industrial, 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 #401 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.
Dick Gauthier – Vice President, Communications and Investor Relations – (616) 365-1555
Source: UFP Industries, Inc.