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JELD-WEN(JELD) - 2024 Q2 - Earnings Call Transcript
JELDJELD-WEN(JELD)2024-08-06 15:16
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Financial Data and Key Metrics - Q2 2024 revenue was 986million,down12986 million, down 12% YoY, driven by lower core revenues due to market-driven volume declines in North America and Europe, and a mix shift to lower-priced products [10] - Adjusted EBITDA was 85 million, down 24millionYoY,withanadjustedEBITDAmarginof8.624 million YoY, with an adjusted EBITDA margin of 8.6% [10] - North America segment revenue declined 13% YoY to 711 million, with adjusted EBITDA down to 76millionfrom76 million from 109 million YoY [12] - Europe segment revenue was 275million,down10275 million, down 10% YoY, with adjusted EBITDA at 20 million, a 4milliondeclineYoY[12]−Thecompanyrepurchased1.6millionsharesatanaveragepriceof4 million decline YoY [12] - The company repurchased 1.6 million shares at an average price of 15.18 per share, offsetting dilution from the past 18 months [6] Business Line Performance - North America core revenue declined 13% YoY due to lower volume/mix, with slightly negative price/cost impact [12] - Europe core revenue decreased 10% YoY, driven by a 12% decline in volume/mix, partially offset by productivity improvements and better price/cost dynamics [12] - The company closed two facilities (Vista California Composite Windows and Hawkins Wisconsin Wood Windows), expected to generate 11millioninannualEBITDAsavings[7]MarketTrendsandOutlook−NorthAmericavolumesareexpectedtodeclinebylowdouble−digitsin2024,withnewsingle−familyhomeconstructionupbylowsingle−digits,whilerepairandremodelactivityisexpectedtodeclinebymid−to−highsingledigits[13]−TheEuropeanmarketistrendingtowardstheweakerendofpreviousguidance,withvolumesexpectedtodeclinebylowdouble−digitsduetomacroeconomicandgeopoliticalchallenges[14]−MultifamilyandCanadianmarketsareexpectedtodeclinebymorethan2511 million in annual EBITDA savings [7] Market Trends and Outlook - North America volumes are expected to decline by low double-digits in 2024, with new single-family home construction up by low single-digits, while repair and remodel activity is expected to decline by mid-to-high single digits [13] - The European market is trending towards the weaker end of previous guidance, with volumes expected to decline by low double-digits due to macroeconomic and geopolitical challenges [14] - Multifamily and Canadian markets are expected to decline by more than 25% YoY, contributing significantly to the overall North America volume decline [13][35] Strategic Initiatives and Transformation - The company is focused on its transformational journey, emphasizing people, performance, and strategy, with 500 active projects aimed at cost savings and operational improvements [15][16] - Key projects include standardizing door specifications across the North American network, expected to generate 4 million in benefits over five years, and automating bifold door assembly operations, expected to save 2millionoverfiveyears[16][17]−ThecompanyisincreasingCapExspendingby2 million over five years [16][17] - The company is increasing CapEx spending by 16 million YoY to support operational improvements, including material efficiency and automation [8] Management Commentary on Market Conditions - Management noted that consumer confidence remains weak, with no significant seasonal reload in inventory, indicating cautious spending on big-ticket items [31][45] - The company expects a lag of 1-2 months for resale homes to pick up after potential rate cuts, with a further 3-6 months lag for new construction and multifamily projects to rebound [40][41] Other Key Information - The company expects to deliver 100millionincostsavingsin2024,with100 million in cost savings in 2024, with 50 million from carryover benefits from 2023 and 50millionfromnewinitiatives[19]−Freecashflowfor2024isexpectedtobe50 million from new initiatives [19] - Free cash flow for 2024 is expected to be 25 million to 50million,withoperatingcashflowofapproximately50 million, with operating cash flow of approximately 200 million after 100 million in non-operating cash expenses for the transformation journey [20] Q&A Session Summary Question: Growth initiatives and sales efficiency - The company is focusing on pricing stability, sales efficiency, and cost management, with growth initiatives expected to materialize later in 2024 or early 2025 [23][24] - The company has identified 10 million to 15millioninadditionalcostsavings,expectedtoimpactQ42024[25][26]Question:Marginoutlookandcostsavings−ManagementexpectssequentialmarginexpansioninH22024,drivenby15 million in additional cost savings, expected to impact Q4 2024 [25][26] Question: Margin outlook and cost savings - Management expects sequential margin expansion in H2 2024, driven by 10 million to 15millioninadditionalcostsavingsandproductivityimprovements[28][29]−The15 million in additional cost savings and productivity improvements [28][29] - The 100 million cost savings target includes both COGS productivity and SG&A reductions [50] Question: Demand and pricing dynamics - The company is balancing volume growth with price stability, focusing on cost management to offset inflation, particularly in labor and benefits [30][32] - In Europe, the company has been able to hold pricing better due to its spec-driven portfolio, with some competitors struggling in the current market environment [33] Question: North America volume expectations - The low double-digit decline in North America volumes is driven by significant declines in multifamily and Canadian markets, which account for about 10% of North American business [35][36] Question: Price/cost dynamics - Price/cost is expected to be a 1% headwind in 2024, with pricing stable but cost inflation in labor and benefits impacting margins [37] Question: Seasonal trends and inventory levels - No significant seasonal inventory reload was observed in Q2, with inventories remaining thin and demand for big-ticket items delayed [45] Question: SG&A and productivity initiatives - SG&A reductions are part of the 100millioncostsavingstarget,withsignificantproductivityimprovementsexpectedfromCapExinvestmentsinautomationandoperationalefficiency[48][49]Question:Cashflowandinventorymanagement−Thecompanyisintentionallyincreasinginventorytoimproveservicelevels,withfreecashflowexpectedtobe100 million cost savings target, with significant productivity improvements expected from CapEx investments in automation and operational efficiency [48][49] Question: Cash flow and inventory management - The company is intentionally increasing inventory to improve service levels, with free cash flow expected to be 25 million to $50 million for 2024 [52] Question: Progress on new construction market share - The company is in the early stages of building relationships and winning orders in the new construction market, with results expected to materialize in 2025 [54] Question: Legal costs and cash flow - Legal costs related to the Towanda divestiture are not a major driver of cash flow, with the majority of cash costs tied to the transformation journey [56]