Fortune Brands Delivers Strong Operating Margin and Profit Results; Company Updates Guidance to Reflect Softening Market Environment; Separation Into Two World-class Companies Progressing Well Ahead of Schedule
Fortune Brands Home & Security, Inc. (the “Company”, or “Fortune Brands”), an industry-leading home and security products company, today announced third quarter 2022 results.
Business and Operations Highlights:
- 3Q 2022 sales of $2.1 billion, an increase of 3 percent versus a year ago
- 3Q 2022 earnings per share (“EPS”) of $1.57, an increase of 8 percent versus a year ago; EPS before charges / gains of $1.79, an increase of 20 percent versus a year ago
- Full-year guidance updated to reflect a softening market environment
- Separation into two world-class companies progressing well ahead of schedule
“Our team delivered impressive third quarter results, including 20 percent EPS growth and margin improvement across all of our segments,” said Nicholas Fink, Chief Executive Officer, Fortune Brands. “Our sales grew 3 percent over an exceptionally strong 3Q 2021, reflecting the power of our brands. As anticipated, U.S. demand for housing softened in the quarter as housing affordability weighed on the consumer. The Company’s strong results demonstrate our ability to outgrow the market, achieve margin progress and invest for the future in a focused manner while facing a challenging environment.”
Fink continued, “We are taking proactive measures to drive market outperformance and profitability as we finish 2022 and begin 2023, while maintaining investment in our highest priority strategic initiatives. We have consistently distinguished ourselves by making the right moves during challenging times. Today’s environment is no different. We remain confident in the long-term fundamental demand for housing and will be primed to capture opportunities for value creation. Finally, I am pleased to report that our progress toward separating into two public companies is continuing well ahead of schedule. Our teams are working hard to complete the transaction this year.”
Third Quarter 2022
For the third quarter of 2022, sales were $2.1 billion, an increase of 3 percent over the third quarter of 2021. Earnings per share were $1.57, compared to $1.45 in the prior-year quarter, an increase of 8 percent. EPS before charges / gains were $1.79, compared to $1.49 the same quarter last year, an increase of 20 percent. Operating income was $281.2 million, compared to $286.6 million in the prior-year quarter, a decrease of 2 percent. Operating income before charges / gains was $334.9 million, compared to $293.3 million the same quarter last year, up 14 percent. Operating margin was 13.7 percent, compared to 14.4 percent in the third quarter of 2021. Operating margin before charges / gains was 16.3 percent, compared to 14.8 percent in the third quarter of 2021.
For each segment in the third quarter of 2022, compared to the prior-year quarter:
- Water Innovations sales decreased 14 percent and also decreased 14 percent adjusting for FX and acquisitions. Results were impacted by continued inventory destocking and softness in China. Importantly, U.S. point-of-sale grew approximately 5 percent in the quarter. Operating margin before charges / gains was 24.7 percent, up 210 basis points in the period over last year.
- Outdoors & Security sales increased 6 percent, or 5 percent adjusting for FX and acquisitions driven by price across all product categories. Operating margin before charges / gains was 16.1 percent, up 50 basis points in the period over last year.
- Cabinet sales increased 20 percent, driven by price across all product categories. Operating margin before charges / gains was 13.8 percent, up 410 basis points in the period over last year.
Balance Sheet and Liquidity
At the end of the quarter, net debt was $3.0 billion and net debt to EBITDA was 2.2x. The Company had $345 million in cash and $537 million of availability under its revolving credit facility.
The Company has repurchased approximately $75 million in common stock since the end of the second quarter, including approximately $36 million during the third quarter. Year-to-date, the Company has purchased approximately $580 million in common stock.
Annual Outlook Update
The Company now anticipates delivering 2022 full-year sales growth in the range of 4.5 percent to 5.5 percent relative to a global home products market growing at 2 percent to 4 percent and a U.S. home products market growing at 3 percent to 5 percent.
The Company now expects EPS before charges / gains for the full year to be in the range of $6.20 to $6.30.
The Company now expects to generate free cash flow of approximately $400 million to $450 million.
“Our teams continue to execute in a challenging environment, as demonstrated by our progress on margin and on strategic priorities,” said Patrick Hallinan, Chief Financial Officer, Fortune Brands. “We are facing increasing headwinds in response to slowing new construction and R&R activity coupled with greater than expected channel inventory reductions. In response, we are taking actions across the business to adjust to current market conditions. We remain committed to our long-term margin journey. We are already taking actions to prioritize margins and cash generation in anticipation of a softer market in 2023, while continuing to pursue our highest priority strategic initiatives. Our balance sheet is strong, and our focus will be on maintaining this strength. We fully maintain our confidence in the long-term fundamental opportunity of housing.”
Update on Separation into Two World-Class Companies
Please visit www.fbhs.com/separation-updates for more information about the progress of the separation, as well as information about our upcoming Investor Day on December 6, 2022.
For the full third quarter results, click here.
About Fortune Brands
Fortune Brands Home & Security, Inc. (NYSE: FBHS), headquartered in Deerfield, IL., is a Fortune 500 company, part of the S&P 500 Index and a leader in the home products industry. With trusted brands and market leadership positions in each of its three operating segments, Water Innovations, Outdoors & Security, and Cabinets, Fortune Brands’ 28,000 associates work with a purpose to fulfill the dreams of home. The Company’s growing portfolio of complementary businesses and innovative brands includes Moen and the House of Rohl within Water Innovations; outdoor living and security products from Therma-Tru, LARSON, Fiberon, Master Lock and SentrySafe; and MasterBrand Cabinets’ wide-ranging offerings from MANTRA, Diamond, Omega and many more. Visit www.FBHS.com to learn more about FBHS, its brands and how the Company is accelerating its environmental, social and governance (ESG) commitments.
Matthew Skelly – Investor Relations – Investor.Questions@FBHS.com – (847) 484-4573
Source: Fortune Brands Home & Security, Inc.