UFP Industries(UFPI) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales reached a record $1.02 billion for the quarter, up 2% over 2018, with unit sales growing by 7% [6] - Earnings per share was $0.58 compared to $0.53 in 2018, with earnings up 28% when excluding a $7 million gain in 2018 [6] - EBITDA for the quarter was $65.9 million, up 25% over 2018 [6] - Gross profit dollars per unit grew by 18%, more than double the unit sales increase [7] - Overall sales increased by 2%, driven by a 7% increase in unit sales, partially offset by a 5% decrease in selling prices [28] Business Line Data and Key Metrics Changes - Retail market sales decreased by $13 million or 3%, with a 6% decline in selling prices offset by a 3% organic unit increase [29] - Industrial market sales increased by 15%, driven by a 16% increase in units, with acquisitions contributing 10% to unit growth [31] - Construction market sales decreased by 3%, with a 5% organic unit increase offset by an 8% decrease in selling prices [32] - Unit sales to manufactured housing customers decreased due to a decline in industry production of more than 11% [33] Market Data and Key Metrics Changes - The Southern Yellow Pine lumber market averaged 12.9% lower than 2018, with the Random Lengths Composite Index down 26.5% on average from 2018 [9] - The retail market finished the quarter strong, with March showing better volume than expected after a slow February [12] - In commercial construction, unit sales grew 15%, while the industrial market saw unit sales grow 16% [19] Company Strategy and Development Direction - The company aims to be the complete industrial packaging solution provider and is aggressively pursuing acquisition targets [20] - Capital allocation strategy prioritizes acquisitions, greenfield growth, and automation efficiency projects [21] - The company plans to expand production capacity significantly within the next 12 months [16] Management's Comments on Operating Environment and Future Outlook - Management noted that demand has not caught up with added capacity in the lumber market, impacting pricing [52] - There is optimism regarding order files and construction markets, with expectations of continued demand through Q3 [55] - Management acknowledged areas for improvement, particularly in SG&A growth and production labor challenges [24][25] Other Important Information - The company plans to spend approximately $95 million for capital expenditures this year, including significant projects to enhance productivity [41] - The trailing 12-month return on invested capital is 12.5%, exceeding the weighted average cost of capital [45] Q&A Session All Questions and Answers Question: Insights on lumber markets and pricing trends - Management indicated that demand has not caught up with supply, leading to pricing challenges, but expects alignment in Q2 [52][54] Question: End market demand outlook for Q2 - Management reported strong order files and positive trends in construction markets, expecting continued demand [55] Question: M&A pipeline expectations for 2019 - Management expressed confidence in a strong M&A pipeline, focusing on industrial targets and smaller acquisitions [56][57] Question: Growth expectations across different markets - Management anticipates modest growth in retail and construction, with strong performance expected in the industrial market [63][64] Question: Insights on new mill capacity and its impact on lumber prices - Management noted new mills coming online and their potential impact on market pricing, emphasizing the need for demand to meet supply [80][82] Question: Dividend policy and potential for quarterly payments - Management is open to considering a quarterly dividend if it becomes significant enough for shareholders [84]