UFP Industries, Inc. Q2 FY2025 earnings call

• The company continues to make investments to lower manufacturing costs, improve throughput, and customer service levels, and evaluate the portfolio for structural cost reduction.
• The $60 million cost-out program is on track to realize full savings by 2026, with divestitures and real estate sales completed.
• Committed to investing $1 billion in growth cap over five years, with an active M&A pipeline.
• In Retail, exiting less profitable lines and Deckorators customer shift beneficial in Q3; in Packaging, sales and margin declines flattening sequentially; in Construction, factory-built business growing but site-built impacted by weak builder sentiment.

Retail sales declined 3% from year-ago levels, largely due to a 7% decline in volumes, with pricing actions partially offset. Packaging sales declined 2% mainly because of a 4% decrease in pricing, while recent acquisitions contributed. Construction sales decelerated by 4%, with factory-built business seeing double-digit unit growth but offset by pricing decline. Retail sales were $788 million, a 3% decline; Packaging sales were $429 million, a 2% decline; Construction sales were $552 million, a 4% decline.

• Expect low single-digit unit declines across segments through year-end due to soft end market demand and competitive pricing.
• Site builds facing more headwinds but factory-built helps offset some pressure.
• Focus on gaining share in each business unit to mitigate volume declines.

• Market environment challenges including weaker demand, competitive pricing, and higher input costs.
• Tariffs on Canadian lumber and other tariffs creating additional headwinds.

Q: Unpack the sequential improvement in construction gross margins.

A: Site-built had a very challenging quarter with a $28 million year-over-year decline, but from Q1 to Q2, there was some improvement due to seasonality in factory-built, commercial, and concrete forming.

Q: How is the marketing campaign for Deckorators focused?

A: The marketing campaign for Deckorators is focused on the consumer to explain the value in SureStone technology and what makes the product different.

Q: What's the status of the packaging segment?

A: Packaging sales declined 2%, and while there are no signs of improvement, sequentially it feels like stabilization has been found though it's still a challenging market.

Q: How is UFP positioning itself with lumber duties?

A: UFP will continue to look for opportunities to convert some products to domestic species, utilize manufacturing abilities domestically and other sourcing to offset tariffs.

Q: About Deckorators store count and demand?

A: The store count load-in of 1,500 stores remained mostly unchanged in Q2 with the majority taking place in the back half, and composite decking is winning with the affluent customer while the average consumer may be downgrading.

Q: Concern about concrete forming business?

A: Confident in infrastructure growth as it's a small component of a much bigger business and UFP is well positioned to win in that space.

Q: Depreciation benefits and packaging demand?

A: Not seeing impact on sales levels yet from depreciation benefits, but there will be a cash flow pickup in the back half of the year.