UFP Industries(UFPI) - 2025 Q2 - Quarterly Results

Q2 2025 Performance Overview Second Quarter 2025 Financial Highlights UFP Industries reported a decline in Q2 2025 key financial metrics, with net sales down 4% to $1.84 billion and net earnings falling to $100.7 million, reflecting soft but stable end market demand Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1.84 billion | $1.90 billion | -4% | | Net Earnings | $100.7 million | $126.0 million | -20.1% | | Diluted EPS | $1.70 | $2.05 | -17.1% | | Adjusted EBITDA | $174.1 million | $203.9 million | -14.6% | | Adjusted EBITDA Margin | 9.5% | 10.7% | -120 bps | - Net sales decrease of 4% was driven by a 1% decrease in price and a 3% decline in organic units[5] - New product sales were $129.1 million, representing 7.0% of total net sales, an increase from 6.7% in the prior year's quarter[5] Management Commentary and Strategy Management characterized the market as having limited visibility and soft but stable demand, with tariff uncertainty posing a challenge, while targeting $60 million in structural cost savings by year-end 2026 - The business environment is marked by limited visibility, tariff uncertainty, and soft but stable end market demand[4] - The company is on target to achieve approximately $60 million of structural cost savings by the end of 2026[4] - Future strategy centers on innovation, strategic investments for growth, pursuing complementary M&A, and leveraging a strong balance sheet for share repurchases and dividends[4] Capital Allocation UFP Industries maintains a strong liquidity position of approximately $2.1 billion, prioritizing strategic acquisitions, organic growth investments, increased dividend payments, and share repurchases - As of June 28, 2025, the company had approximately $2.1 billion of liquidity, including $841.9 million in cash[7] - The company plans to invest $300 million to $325 million in capital projects in 2025 as part of a larger plan to invest up to $1 billion through 2028 for automation, technology, and expansion[8] - The quarterly cash dividend was increased by 6% year-over-year to $0.35 per share[8] - A new share repurchase authorization of $300 million through July 31, 2026, was approved, replacing the prior authorization under which 2.6 million shares were bought back for $269.6 million[8] Business Segment Performance In Q2 2025, all three business segments reported year-over-year declines in net sales, facing unique challenges including customer transitions, competitive pricing, and softer demand Q2 2025 Net Sales by Segment (vs. Q2 2024) | Business Segment | Q2 2025 Net Sales | Q2 2024 Net Sales | Change | | :--- | :--- | :--- | :--- | | UFP Retail Solutions | $788.2 million | $809.1 million | -3% | | UFP Packaging | $428.7 million | $435.2 million | -2% | | UFP Construction | $551.6 million | $574.5 million | -4% | UFP Retail Solutions Net sales decreased 3% to $788.2 million, driven by a 7% drop in organic units due to a large retail customer loss, partially offset by market share gains and strong demand for Surestone decking UFP Retail Solutions Q2 Performance | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $788.2 million | $809.1 million | | Gross Profit | $113.7 million | $126.7 million | | Gross Margin | 14.4% | 15.7% | - Within the Deckorators business, railing sales declined 25% due to the loss of a large retail customer, while mineral-based Surestone composite decking sales increased over 45% due to share gains with another retailer[9] - The company is adding capacity to supply Surestone decking to approximately 1,500 stores by 2026, positioning it for a modest net market share gain in 2025[9] UFP Packaging Net sales declined 2% to $428.7 million, primarily due to a 4% drop in selling prices, with market share gains in PalletOne and Protective Packaging offsetting a decline in Structural Packaging UFP Packaging Q2 Performance | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $428.7 million | $435.2 million | | Gross Profit | $70.6 million | $83.7 million | | Gross Margin | 16.5% | 19.2% | - Organic unit sales were flat, with a 2% decline in Structural Packaging offset by a 5% increase in PalletOne and an 8% increase in Protective Packaging due to market share gains[11] UFP Construction Net sales fell 4% to $551.6 million, as a 6% decrease in selling prices more than offset a 2% increase in organic unit sales, with strong growth in Factory Built, Commercial, and Concrete Forming counteracted by softer Site Built Housing demand UFP Construction Q2 Performance | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $551.6 million | $574.5 million | | Gross Profit | $100.2 million | $125.6 million | | Gross Margin | 18.2% | 21.9% | - Organic unit sales increased in Factory Built (+8%), Commercial (+6%), and Concrete Forming (+11%), but decreased 7% in Site Built Housing due to softer demand[14] Outlook The company anticipates continued soft demand and competitive pricing for the remainder of 2025, while maintaining long-term goals for annual unit sales growth, adjusted EBITDA margins, and a conservative capital structure Short-Term Outlook UFP is navigating potential tariff impacts and expects to adapt without material adverse financial impact, with a restructuring plan including the closure of its Bonner, Montana facility and an unchanged 2025 outlook for low single-digit unit declines - The company is positioned to adapt to potential tariffs without material adverse financial impact after a short adjustment period[16] - The company plans to close its Bonner, Montana manufacturing facilities, expecting $15-17 million in Q3 2025 impairment charges, which will eliminate future annual operating losses of approximately $16 million[17] - The 2025 outlook remains unchanged, with expectations of low single-digit unit declines in each segment for the balance of the year[18] Long-Term Outlook UFP's long-term objectives remain unchanged, targeting 7-10% annual unit sales growth, with new products contributing at least 10% of sales, and aiming for 12.5% adjusted EBITDA margins while maintaining a conservative capital structure - Achieve 7-10 percent annual unit sales growth, including bolt-on acquisitions[19] - Generate at least 10 percent of all sales from new products[19] - Target 12.5 percent adjusted EBITDA margins[20] Financial Statements and Reconciliations Condensed Consolidated Statements of Earnings For Q2 2025, UFP reported net sales of $1.84 billion and net earnings of $100.7 million, both declining year-over-year from $1.90 billion and $125.9 million in Q2 2024, respectively Consolidated Earnings Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,835,374 | $1,901,959 | $3,430,893 | $3,540,925 | | Gross Profit | $312,734 | $362,743 | $580,930 | $688,821 | | Earnings from Operations | $123,091 | $159,034 | $215,343 | $292,857 | | Net Earnings (Controlling Interest) | $100,734 | $125,930 | $179,487 | $246,721 | | Diluted EPS | $1.70 | $2.05 | $2.99 | $4.00 | Condensed Consolidated Statements of Earnings by Segment In Q2 2025, all segments experienced a year-over-year decline in earnings from operations, with Retail falling to $53.5 million, Packaging to $26.2 million, and Construction to $36.1 million, reflecting similar downward trends for the six-month period Q2 Earnings from Operations by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Retail | $53,479 | $59,783 | | Packaging | $26,209 | $29,516 | | Construction | $36,060 | $52,011 | YTD Earnings from Operations by Segment (in thousands) | Segment | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Retail | $79,613 | $105,763 | | Packaging | $47,982 | $60,762 | | Construction | $63,876 | $97,353 | Reconciliation of Net Earnings to Adjusted EBITDA Consolidated Adjusted EBITDA for Q2 2025 decreased to $174.1 million (9.5% of sales) from $203.9 million (10.7% of sales) in Q2 2024, with all operating segments reporting lower Adjusted EBITDA and margins due to challenging market conditions Q2 Adjusted EBITDA by Segment (in thousands) | Segment | Q2 2025 Adj. EBITDA | Q2 2024 Adj. EBITDA | Q2 2025 Margin | Q2 2024 Margin | | :--- | :--- | :--- | :--- | :--- | | Retail | $63,978 | $70,187 | 8.1% | 8.7% | | Packaging | $38,796 | $42,960 | 9.1% | 9.9% | | Construction | $45,480 | $58,615 | 8.2% | 10.2% | | Total | $174,147 | $203,914 | 9.5% | 10.7% | Condensed Consolidated Balance Sheets As of June 28, 2025, UFP's balance sheet remained strong with total assets of $4.10 billion, cash and cash equivalents at $841.9 million, total debt of approximately $234.3 million, and shareholders' equity increasing to $3.17 billion Key Balance Sheet Items (in thousands) | Account | June 2025 | June 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $841,930 | $1,041,341 | | Total Current Assets | $2,367,505 | $2,554,029 | | Total Assets | $4,097,388 | $4,138,494 | | Total Current Liabilities | $521,118 | $588,388 | | Total Debt & Finance Lease Obligations | $234,303 | $276,733 | | Shareholders' Equity | $3,168,463 | $3,117,510 | Condensed Consolidated Statements of Cash Flows For the first six months of 2025, net cash from operating activities significantly decreased to $113.1 million, while investing activities used $149.6 million, and financing activities used $302.3 million, primarily for share repurchases and dividends Cash Flow Summary - Six Months Ended June (in thousands) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $113,138 | $239,078 | | Net Cash Used in Investing Activities | ($149,579) | ($119,038) | | Net Cash Used in Financing Activities | ($302,338) | ($196,468) | | Net Change in Cash | ($336,603) | ($80,154) | - Major uses of cash in financing activities for the first six months of 2025 included $251.9 million for common stock repurchases and $42.0 million for dividend payments[37]