UFP Industries Reports Record Third Quarter Results
GRAND RAPIDS, Mich., October 20, 2021 – UFP Industries, Inc. (Nasdaq: UFPI) today announced net sales of $2.1 billion for the third quarter of 2021, a 41 percent increase over the third quarter of 2020, and net earnings attributable to controlling interest of $121 million, a 57 percent increase over the same period of 2020. The company also reported EPS of $1.93 per diluted share compared to $1.25 in the third quarter last year.
“Our outstanding third-quarter results once again validate our balanced business model and reflect the hard work and commitment of our employees,” said CEO Matthew J. Missad. “Our diversity of markets, coupled with an improved pricing model that quickly adjusts to lumber market fluctuations, have helped UFP deliver record profitability and provide a favorable return on investment to our shareholders, even when some markets face headwinds. When the pandemic and rising lumber prices presented challenges to our industrial and construction segments, our teams responded quickly to meet the unprecedented demand in the retail segment. As we anticipated, retail demand and lumber prices have normalized, and our industrial and construction segments are now experiencing favorable growth trends and profitability.”
Third Quarter 2021 Highlights (comparisons on a year-over-year basis):
- Net sales of $2.1 billion increased 41 percent due to a 28 percent increase in selling prices and 16 percent unit increase from acquisitions, offset by a 3 percent decrease in organic unit sales.
- Earnings from operations increased 58 percent to $168 million, including a $9 million gain on the sale of real estate.
- The increase in SG&A of nearly $35 million, or 26 percent, is largely attributable to recent acquisitions ($14 million), an increase in incentive compensation resulting from improved profitability ($10 million), and increases in wages and benefits ($8 million). SG&A as a percentage of gross profit improved by 400 basis points to 52 percent in 2021, as the company continues to focus on leveraging its cost structure as it grows and continues to invest in capabilities to enhance its value-added mix of products.
- New product sales of $196.7 million increased 24 percent. Recent acquisitions contributed $15.6 million to the total.
- Adjusted EBITDA of $187.5 million increased 49 percent and adjusted EBITDA margin expanded by 50 basis points to 9 percent.
UFP Industries continues to maintain a strong balance sheet with liquidity of approximately $668 million at the end of the third quarter despite an increase in our seasonal investment in net working capital of $193 million. This increase resulted from unprecedentedly high lumber prices and market demand. Net debt was $182 million compared to $32 million in net surplus cash at the end of the third quarter of 2020, primarily due to these factors and the acquisitions of PalletOne and Spartanburg Forest Products. The company had a cash surplus of $139 million at the end of the third quarter, and it continues to reduce working capital and generate strong free cash flow, allowing it to pursue growth opportunities and returns to shareholders through its dividend and share repurchase activities. UFP Industries has the authority to buy back approximately 1.1 million additional shares.
On October 20, 2021, the Board of Directors of UFP Industries approved a quarterly dividend payment of $0.20 per share, a 33 percent increase over the dividend of 15 cents paid on September 15, 2021, and a 60 percent increase over the dividend of 12.5 cents paid on December 15, 2020. The dividend is payable on December 15, 2021, to shareholders of record on December 1, 2021.
By business segment, the company reported the following third quarter 2021 results.
UFP Retail Solutions
- $696 million in net sales, down 1 percent compared to the third quarter of 2020. Unit sales fell 1 percent, mostly due to a 38 percent decline in the ProWood business unit. The decrease in ProWood’s year-over-year comparable numbers — an 11 percent drop in prices and a 27 percent drop in unit sales — is the result of the unusually high demand for pressure-treated wood in 2020 that followed the pandemic-related closures.
- Organic unit growth was achieved by UFP-Edge (up 12 percent). Other business units experienced organic unit declines compared to the third quarter of 2020, which experienced unusually high demand attributable to the pandemic-related closures; they include Handprint (down 17 percent), Deckorators (down 14 percent) and Outdoor Essentials (down 8 percent).Additional capacity for the Deckorators and UFP-Edge product lines is expected to provide growth in 2022.
- Gross profit for the retail segment fell 90 percent to $11 million from $106 million in the same quarter of 2020, as dramatically falling lumber prices reduced margins for variable-priced products such as pressure-treated wood.
- $573 million in net sales, up 103 percent from the third quarter of 2020. Selling prices increased 69 percent, and unit sales increased 34 percent. The unit sales increase is attributable to the acquisitions of PalletOne and T&R Lumber. New product sales grew 93 percent from the third quarter of 2020.
- Gross profit for the segment rose 162 percent to $126 million, exceeding unit sales growth of 34 percent, due to the company’s focus on adding value-added products and its ability to better leverage fixed costs and include the impact of higher lumber, labor, and transportation costs in its selling prices. Acquisitions contributed $22 million, or 45 percent, to the increase in gross profit.
- Value-added sales contributed to the increase in gross profits and improved from 64 percent of net sales in the third quarter of 2020 to 69 percent of net sales in the third quarter of 2021.
- $723 million in net sales, up 62 percent over the third quarter of 2020, due to a 43 percent increase in selling prices, a 16 percent increase in organic unit sales and a 3 percent increase in unit sales from acquisitions. Unit sales to site-built and factory-built housing customers rose 31 percent and 17 percent, respectively. Unit sales to commercial customers rose 26 percent, and the business unit returned to profitability after a loss in 2020. New product sales increased 131 percent from the third quarter of 2020.
- Gross profit of $154 million improved 148 percent over the third quarter of 2020, primarily as a result of improved unit sales, falling lumber prices, and the company’s ability to better leverage fixed costs.