• Revenue: $1.9 billion, a 7% drop due to a 6% reduction in selling prices and a 1% decline in unit sales.
• Adjusted EBITDA: $204 million, a 13% decrease, with an adjusted EBITDA margin of 10.7%.
• Cash Cycle: Improved to 56 days from 63 days last year.
• Return on Invested Capital: Nearly 20% over the trailing 12 months.
• Retail Segment Sales: Dropped 14% to $809 million.
• Packaging Segment Sales: Dropped 11% to $435 million.
• Construction Segment Sales: Increased 4% to $575 million.
• New Product Sales: $133.6 million for the second quarter, $259.5 million year-to-date.
• Capital Expenditures: $107 million, including $68 million in maintenance CapEx and $39 million in expansionary CapEx.
• Share Repurchases: $137 million year-to-date, with a total of $186 million repurchased out of a $200 million authorization.
• Dividends: $41 million returned to shareholders, with a quarterly dividend of $0.33 per share approved.
• Surplus Cash: Over $1 billion, compared to $702 million last year.

• Warning! GuruFocus has detected 1 Warning Sign with FNMA.

Release Date: July 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• UFP Industries Inc (NASDAQ:UFPI) reported a strong adjusted EBITDA margin of 10.7%, which remains well above historical levels.
• The company has a robust balance sheet with over $1 billion in surplus cash, providing flexibility for strategic investments.
• UFPI plans to allocate significant capital, including $300 million in packaging and $250 million in the Deckorators brand, to drive future growth.
• The construction segment saw a 4% increase in sales, driven by a 7% gain in units, indicating strong performance in a challenging market.
• UFPI's focus on innovation and new product development is expected to drive long-term growth, with new product sales on track to meet the 2024 target of $510 million.

Negative Points

• UFPI experienced a 7% drop in sales to $1.9 billion, primarily due to a 6% reduction in selling prices.
• The company is facing declines in unit volume across most business units, with slack demand creating competitive pressures.
• Retail segment sales dropped 14%, with a 5% decline in unit sales, particularly affecting big box customers.
• Packaging segment sales decreased by 11%, with soft demand and competitive pricing impacting gross profits.
• UFPI anticipates continued soft demand and competitive pricing for the remainder of the year, which may challenge unit sales and profit comparisons.

Q & A Highlights

Q: Can you elaborate on market share gains in construction and packaging? A: Matthew Missad, CEO: In construction, we're focusing on new products and geographic expansion, particularly in factory-built housing due to its affordability. In packaging, we're rationalizing facilities and customer base, aiming to gain share with new customers and exploring opportunities in alternative materials like steel.

Q: Are there competitive pricing pressures in retail and construction? A: Matthew Missad, CEO: In retail, pricing adjusts based on lumber markets. In construction, prices adjust every 90 days based on market trends, making pressures more manageable.

Q: What changes are expected in Deckorators' retail positioning for 2025? A: Matthew Missad, CEO: We're optimistic about increasing overall volume and introducing new products. While product line reviews are ongoing, we expect growth in both current and new products.

Q: Can you provide more color on operational improvements in retail margins? A: Matthew Missad, CEO: Improvements stem from efficiencies in operations, better utilization of best practices, and equipment enhancements. Michael Cole, CFO, added that improvements in acquired plants like Spartanburg and Sunbelt are contributing to better margins.

Q: What is the timeline and return expectation for the $1 billion investment plan? A: Matthew Missad, CEO: The plan spans 24 months, focusing on organic and greenfield growth due to high M&A pricing. We aim to deploy capital to maintain historical returns, with a focus on long-term value and profitability.

Q: How do you view the growth and margins in the packaging business amid current challenges? A: Matthew Missad, CEO: We focus on EBITDA margins and believe in long-term improvement through capacity alignment and market normalization. Michael Cole, CFO, noted cost variances as a margin factor and emphasized optimizing cost structure for future growth.

Q: How do new products contribute to reaching the long-term EBITDA target? A: Matthew Missad, CEO: New products meet higher return targets, providing value-add to customers and driving growth. They are key to improving EBITDA margins and achieving long-term targets.

Q: What are the plans for UFP Construction's geographic expansion? A: Matthew Missad, CEO: We're targeting regions with demographic growth, moving beyond our traditional markets to areas with increasing populations, aiming to be where future demand will be.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.