H.B. Fuller (FUL) Q3 2026 Earnings: Pricing Lifts EBITDA, Inventory Drains Cash

H.B. Fuller's fiscal 2026 third-quarter earnings, released on September 24, 2026 in a press release and 10-Q for the three months ended August 29, showed pricing lifting profit ahead of guidance while cash collection fell behind [1][2]. The questions going into the quarter were whether the price increase would hold without heavy volume losses, whether Building Adhesive Solutions could keep its second-quarter volume gain, whether Engineering Adhesives would grow again as its solar exit ends, and whether cash flow would cut leverage before acquisition debt arrives. Pricing added 7.4% to revenue, volume fell 3.0%, and the company raised its full-year adjusted EBITDA guidance [1][3]. Engineering Adhesives returned to organic growth, although the solar drag persists [2][3]. The two material changes were that Building Adhesive Solutions again grew on price alone and that third-quarter operating cash flow was only about $65 million [1][2]. Taken together, the price increase is working better than planned on profit, but its cost has moved onto the balance sheet, and net debt has not come down.

H.B. Fuller formulates adhesives, sealants and coatings from petrochemical inputs and sells them to manufacturers of hygiene products, packaging, electronics and building materials [4]. It reports three adhesive segments: Hygiene, Health and Consumable Adhesives, Engineering Adhesives and Building Adhesive Solutions, which made up about 45%, 31% and 25% of fiscal 2025 revenue [4]. Its profit depends on the spread between selling prices and raw material costs, multiplied by volume.

Q3 operating cash flow of about $65 million as inventory absorbed profit

The company had said fiscal 2026 cash flow would be weighted to the second half, and net working capital stood at 16.4% of annualized revenue at the end of the second quarter [5]. Operating cash flow was $117.2 million in the first half and $182.6 million for the first nine months, which implies about $65.4 million in the third quarter; the company did not report the quarterly figure separately [1][6]. Net working capital rose to 18.5% of annualized revenue, and inventory days increased from 78 to 88 [1][2].

The company attributed most of the working capital increase to strategic inventory investments that support Quantum Leap plant changes and protect customer supply during the Middle East disruption [1]. Releasing that cash depends on when the company reduces its buffer inventory. Free cash flow for the first nine months was $40.9 million, compared with $62.2 million a year earlier [2].

Leverage fell because profit rose

Net debt at the end of the third quarter was $1,957 million, roughly flat year on year, while net debt to adjusted EBITDA fell from 3.3x to 3.0x [1]. The company maintained its full-year operating cash flow outlook of $300 million to $325 million, excluding acquisition-related items, which requires about $117 million to $142 million in the fourth quarter [3]. The cash acquisition of Advanced Medical Solutions (AMS) has been approved by AMS shareholders, and the company expects it to close by year-end, subject to regulatory approvals [2]. The company previously said leverage would be about 4.0x when the deal closes [7].

Building Adhesive Solutions growth now comes from price alone

Building Adhesive Solutions grew 6.2% organically in the second quarter and was then the only segment where both volume and price drove growth [8]. In the third quarter it grew 5.2% organically, and the 10-Q attributed that growth to pricing, partially offset by lower volume [2]. Management said roofing and insulating glass were solid, woodworking was soft, and high interest rates weighed on residential work [3].

The segment's financial results still improved. Third-quarter revenue was $246.5 million, segment adjusted EBITDA rose 8.0% to $44.8 million, and the margin was 18.2% [2]. That pattern suggests the second-quarter volume gain more likely reflected first-quarter projects delayed by weather and completed a quarter later. The company did not quantify the segment's volume decline, so its size remains unknown.

Progress: pricing beat plan and Engineering Adhesives turned positive

Pricing was largely realized in the third quarter, and volume losses were smaller than guided. Adjusted gross margin was 33.5%, up 120 basis points year on year, and adjusted EBITDA of $186.7 million came in above the midpoint of the $180 million to $190 million range the company gave in June [1][9]. The volume decline was milder than the mid-single-digit second-half decline the company guided to in June [10], which management attributed to customer material shortages being less severe than expected [3]. Management also said the price-to-raw-material spread should remain positive in fiscal 2027 but narrower than in 2026 [3].

Core demand in Engineering Adhesives is recovering, but the solar exit is not finished. The segment grew 0.7% organically, and its margin was 23.8%, up 50 basis points year on year [2]. Excluding solar, organic growth was about 5%, with strength in aerospace and general industries and weakness in electronics because of chip shortages in Asia Pacific [3]. Management had earlier said solar revenue would bottom in the third quarter [11], yet solar still reduced segment growth by about 4 percentage points this quarter.

Conclusion

This quarter's growth came entirely from price, profit conversion was stronger than planned, and cash generation was weaker than planned. Management's expectation of a narrower spread in fiscal 2027 indicates that part of the profit gain is tied to the supply disruption and may not last. The next tests are whether fourth-quarter operating cash flow reaches about $117 million, whether inventory starts to come down and whether the AMS deal closes on schedule. If the supply disruption persists and the company keeps its buffer inventory, the gap between profit and cash could continue.

Sources

[1] FUL Q3 FY2026 earnings release 8-K 2026-09-24, 2026-09-24, 8-K, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000039368&type=8-K [2] FUL 10-Q filed 2026-09-24, 2026-09-24, 10-Q, https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000039368&type=10-Q [3] FUL Q3 FY2026 earnings call summary 2026-09-24, 2026-09-24, earnings-call, https://investors.hbfuller.com [4] FUL 10-K FY2025 segments and end markets, 2026-01-22, 10-K, https://www.sec.gov/Archives/edgar/data/39368/000143774926001767/ful20251130_10k.htm [5] FUL 8-K filed 2026-06-25 balance sheet and working capital, 2026-06-25, 8-K, https://www.sec.gov/Archives/edgar/data/39368/000143774926021622/ex_980922.htm [6] FUL 10-Q filed 2026-06-25 first-half cash flow, 2026-06-25, 10-Q, https://www.sec.gov/Archives/edgar/data/39368/000143774926021677/ful20260530_10q.htm [7] FUL 8-K filed 2026-06-26 AMS leverage and synergies, 2026-06-26, 8-K, https://www.sec.gov/Archives/edgar/data/39368/000143774926021844/ex_981227.htm [8] FUL 10-Q filed 2026-06-25 BAS segment results, 2026-06-25, 10-Q, https://www.sec.gov/Archives/edgar/data/39368/000143774926021677/ful20260530_10q.htm [9] FUL 8-K filed 2026-06-25 fiscal 2026 outlook, 2026-06-25, 8-K, https://www.sec.gov/Archives/edgar/data/39368/000143774926021622/ex_980922.htm [10] FUL Q2 FY2026 earnings call 2026-06-25, 2026-06-25, earnings-call, https://investors.hbfuller.com [11] FUL Q1 FY2026 earnings call 2026-03-26, 2026-03-26, earnings-call, https://investors.hbfuller.com