Fortune Brands Delivers Solid Profit Results While Executing Transformational Actions Amidst a Challenging Environment
Fortune Brands Innovations, Inc. (“FBIN”, “Fortune Brands” or the “Company”), an industry-leading home, security and commercial building products company, today announced fourth quarter and full-year 2022 results.
- Fortune Brands Home & Security results, inclusive of Cabinets for the full fiscal year:
- Q4 sales declined 2 percent and full-year sales grew 4 percent
- Q4 earnings per share (“EPS”) decreased 34 percent to $0.85 due to separation transaction and reorganization expenses; EPS before charges / gains increased 18 percent to $1.56
- Full-year EPS decreased 6 percent to $5.23 due to separation transaction and reorganization expenses; EPS before charges / gains increased 10 percent to $6.32
- Fortune Brands Innovations results from continuing operations:
- Q4 sales declined 7 percent and full-year sales declined 2 percent
- Q4 EPS were $0.99; EPS before / charges gains were $1.07
- Full-year EPS were $4.11; EPS before charges / gains were $4.24
- Company provides 2023 financial guidance prioritizing market-beating sales results, margin preservation and cash generation against a declining market
“Our teams delivered impressive fourth quarter and full year results in the face of a challenging environment while executing several transformative initiatives,” said Fortune Brands Chief Executive Officer Nicholas Fink. “These initiatives should enable us to deliver our long-term targets and will also help us navigate the short-term challenges we expect to face in 2023. Our fourth quarter margin results demonstrate that we can protect margins even in a declining market. We head into 2023 well-prepared and will remain laser focused on delivering above-market sales results, preserving margin and generating cash. I am confident in the long-term potential of this Company and the team’s ability to deliver – regardless of the environment.”
Fourth Quarter 2022 FBIN Results from Continuing Operations
For the fourth quarter of 2022, FBIN sales were $1.1 billion, a decrease of 7 percent over the fourth quarter of 2021. Operating income was $182.2 million, compared to $195.4 million in the prior-year quarter, a decrease of 7 percent. Operating income before charges / gains was $196.1 million versus $197.2 million in 2021. Operating margin was 16.1 percent, compared to 16.0 percent in the fourth quarter of 2021. Operating margin before charges / gains was 17.3 percent, compared to 16.2 percent in the fourth quarter of 2021, an improvement of 110 basis points.
For each FBIN segment in the fourth quarter of 2022, compared to the prior-year quarter:
- Water Innovations sales decreased 9 percent, primarily due to continued inventory destocking, Covid-impacts to sales in China and declining sales volumes. Excluding the impact of the extra fiscal week and FX, net sales decreased around 11 percent. Operating margin before charges / gains was 24.0 percent, driven by cost controls and price realization.
- Outdoors & Security sales decreased 5 percent, driven by channel destocking and a return to regular seasonality across the segment. Excluding the impact of the extra fiscal week and FX, sales declined 7 percent. Operating margin before charges / gains was 14.8 percent, driven by cost controls and price realization.
Full Year 2022 FBIN Results from Continuing Operations
For the full year 2022, FBIN sales were $4.7 billion, a decrease of 2 percent from 2021, and a decrease of 2 percent when excluding the impact of the 53rd week and FX. Operating income was $774.3 million, compared to $811.2 million in the prior year, a decrease of 5 percent. Operating income before charges / gains was $809.7 million, compared to $829.2 million during the previous year, down 2 percent. Operating margin was 16.4 percent, compared to 16.9 percent in 2021. Operating margin before charges / gains was 17.1 percent, down 20 basis points over full year 2021.
“Our teams delivered solid 2022 results in a challenging environment. Our fourth quarter sales results reflect the sudden demand change we experienced following 400 basis points of Fed rate increases from May through December. This unusual pace of rate increases abruptly changed housing affordability and channel partner inventory plans, impacting our second half sales growth. Additionally, it created inefficiencies that we expect to impact first quarter 2023 margins. However, our teams have reacted decisively to alter our cost structure, production planning and our inventory in a manner that we expect will protect margins and improve cash generation in 2023,” said Fortune Brands Chief Financial Officer Patrick Hallinan. “We remain highly focused on driving outperformance, including above-market growth, margin preservation and enhancement and cash generation in 2023 and over the long term.”
Balance Sheet and Liquidity
At the end of the year, net debt was $2.0 billion and net debt to EBITDA from continuing operations before charges / gains was 2.1x. The Company had $643 million in cash and $1,250 million of availability under its revolving credit facility.
During the fourth quarter, the Company used a portion of the proceeds from the dividend from the Cabinets spin-off to pay down all outstanding variable rate debt.
During the fourth quarter, the Company repurchased approximately $39 million in common stock and for the full year, repurchased approximately $580 million in common stock.
Based on the Company’s assumption of a total global market decline of 6.5 percent to 8.5 percent, with the U.S. housing market also declining 6.5 percent to 8.5 percent, the Company expects full-year 2023 sales to be down 5 percent to 7 percent with operating margins between 16 percent and 17 percent, implying decremental operating leverage of between 25 percent and 30 percent.
The Company expects EPS before charges / gains to be in the range of $3.60 to $3.80.
For 2023, the Company expects to generate free cash flow of approximately $475 million, with a cash conversion rate of around 100 percent. Reflecting further on the future of Fortune Brands Innovations, Fink stated: “We successfully executed a spin-off of our Cabinets business, unlocking greater shareholder value for both companies by allowing us to focus on and invest in our unique growth opportunities. We rebranded our entire Company, with our new identity reflecting our evolution as a business focused on driving accelerated growth in our categories through brand and innovation. To better enable this focus and to make our business more efficient, we reorganized the Company from a decentralized structure with separate businesses to an aligned operating model that prioritizes activities that are core to brand, innovation and channel. Additionally, we placed our global supply chain resources under a unified leadership team to fully leverage the scale and execution excellence across our total business. These transformative changes will enable us to deliver on the long-term targets we set forth during our investor day and will also help us navigate the short-term challenges we expect to face in 2023.”
For the full fourth quarter results, click here.
About Fortune Brands Innovations
Fortune Brands Innovations, Inc. (NYSE: FBIN), headquartered in Deerfield, Ill., is a brand, innovation and channel leader focused on exciting, supercharged categories in the home products, security and commercial building markets. The Company’s growing portfolio of brands includes Moen, House of Rohl, Aqualisa, Therma-Tru, Larson, Fiberon, Master Lock and SentrySafe. To learn more about FBIN, its brands and environmental, social and governance (ESG) commitments, visit www.FBIN.com.
Leigh Avsec – Investor Relations – Investor.Questions@fbhs.com – (847) 484-4211
Source: Fortune Brands Innovations, Inc.