Deflation, unsteady market impact Builders FirstSource
Declines in commodity prices, along with a soft housing market, continue to sting some of the biggest players in the industry.
Builders FirstSource reported this morning that second quarter net sales fell 34.6% to $4.5 billion compared to sales of nearly $7 billion in the same period a year ago.
The nation’s largest prodealer also posted a net income of $404.6 million for the second quarter — a 59% decrease from a net income of $987.2 million for the second quarter 2022.
The Dallas, Texas-based company said it faced 22.3% falloff in core organic sales during the quarter along with commodity deflation of more than 16%. The decreases were partially offset by acquisitions adding 3.9% to sales.
During the quarter, Builders FirstSource said it acquired Church's Lumber Yards in the Detroit market; JB Millworks in Chattanooga, Tennessee; and Builders Millwork Supply in Anchorage, Alaska.
The dealer also acquired Noltex Truss, located in Houston, during the first quarter.
Breaking down its core organic sales, Builders FirstSource said driving the decline were decreases of 31% in single-family builder sales, nearly 30% in multi-family, and a 4.6% drop in repair and remodel
Core organic sales in value-added products fell 19.5%.
Builders FirstSource issued its latest outlook for the year and expects 2023 full-year sales to reach between $16.8 billion and $17.8 billion. The company also projects that its adjusted EBITDA will be in the range of $2.6 billion to $2.9 billion.
Regarding the regions Builders FirstSource serves, the dealer expects single-family starts to be down in the high single-digits to low double-digits, multi-family rising by low double-digits, and repair and remodeling to rise by low-to-mid-single digits.
The company operates more than 550 locations in 42 states. Builders FirstSource noted that acquisitions made in the last 12 months are expected to add 3% to 4% sales growth in 2023.
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The Bottom Line: As core organic sales drop more than 22% while the dealer faced a commodity deflation of 16%, profits at Builders FirstSource fell 59% to $404.6 million.
What the CEO said: “Second quarter results surpassed our expectations driven by the strength of our value-added product portfolio, contributions from operational initiatives instilled over the last few years, and a more stable housing environment,” commented Dave Rush, CEO of Builders FirstSource. “We continue to exceed our near-term targets and execute our strategic priorities through the hard work and dedication of our team members. We are creating value for shareholders by driving operational excellence and prudently deploying capital for long-term growth.”
What the CFO said: “Our second quarter performance demonstrates that we are well positioned in the marketplace with differentiated solutions and a strong balance sheet,” said Peter Jackson, CFO at Builders FirstSource. “We continue to generate robust free cash flow and prudently deploy capital, making four value-enhancing, tuck-in acquisitions to date in 2023 and repurchasing over $700 million of shares in the second quarter.”
Company info: Read the full second quarter 2023 financial report from Builders FirstSource here.
