UFPI Reports 20 Percent Increase In 3Q Earnings

June 21, 2002
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GRAND RAPIDS — Universal Forest Products Inc. experienced what a company official referred to as a “powerful” third quarter, posting double-digit gains in all four of the markets its serves.

Third quarter net earnings were $9.8 million, or 48 cents per share, a 20 percent increase over last year’s third quarter earnings. Net sales for the quarter rose to $433 million, representing a 17 percent increase over 2000’s third quarter.

Year-to-date, net earnings are $29 million, or $1.43 per share, compared to $27 million, or $1.32 per share, a year ago. Net sales for the first nine months were $1.2 billion compared to $1.1 billion for the same period last year.

Although the lumber market temporarily increased in August, it had little impact on the company’s sale prices and sales levels, said Mike Cole, chief financial officer.

Sales to the site-built construction, industrial, manufactured housing and DIY markets were up 32 percent, 15 percent, 14 percent and 12 percent, respectively.

The company attributes part of the sales increases in its site-built construction and manufactured housing markets to its recent acquisitions of Sunbelt Wood Components, D&R Framing contractors and Superior Truss.

Sales to the DIY market increased primarily due to a 10 percent increase in unit sales to Home Depot, which comprised 72 percent of the company’s DIY sales in the quarter. UFPI supplies about 50 percent of the pressure-treated lumber Home Depot sells nationwide.

According to CEO William Currie, a lot of questions about Home Depot have arisen now that it has a new president in control and a whole new merchandising group in place.

In mid-July, Atlanta-based Home Depot announced realignment of its merchandising leadership with the appointment of three new senior managers, all of whom report directly to President and CEO Bob Nardelli.

“The rumors are out there about 60-day terms and a more difficult relationship with them,” Currie said. “We don’t plan on any 60-day terms. As a matter of fact, we can’t afford to grow our business and run the business we want to run with those kinds of expenditures.”

He said the company would listen to all options and remain flexible and reasonable. But he added that UFPI doesn’t participate in anything that doesn’t make good business sense.

Company officials have met several times with Home Depot’s new management group and are “fairly comfortable” that UFPI’s business is intact, Currie remarked. He said UFPI feels it can work through any management issues and still maintain a good business relationship with Home Depot.

Currie also pointed out that UFPI just received two awards from Home Depot, one of them Vendor of the Year. The company also received “extraordinary” recognition for being one of the 10 most responsive suppliers to the Sept. 11 terrorist attacks.

“We immediately had the Reserves and State Police into our plants, and we immediately dispatched many loads of pressure-treated lumber to shore up some of the problems that were happening at the Pentagon and World Trade Center,” Currie recalled.

On the site-built construction side of the market, UFPI closed on its acquisition of P&R Truss on Oct. 15. With that purchase, the company has complete coverage of the market in the state of New York and the upper Northeast where it was weak before.

The manufactured housing industry is starting to see signs of stabilization even though it dropped from some 375,000 unit starts a couple of years ago to what looks like will be about 200,000 starts this year. Currie said that market is expected to start recovering next year and that UFPI’s purchase of Sunbelt Wood Components earlier this year will help strengthen its position in that market.

The company is currently pursuing a major acquisition in the industrial market and is still looking to purchase some site-built component manufacturers to fill geographic holes in the East and West.

Currie said UFPI is cautiously optimistic in its outlook for the fourth quarter but thinks it’s positioned “just about right” in the four markets it serves. He expects the month of October will give some indication of the fourth quarter’s outcome.

UFPI anticipates continued growth in unit sales in each of the four markets it serves. Targets for the fourth quarter are sales ranging from $310 million to $325 million and earnings from 16 cents to 19 cents per share.

The company is delaying announcement of any sales and earnings targets for 2002 until it closes out the fourth quarter and knows what deals are confirmed going into next year, Currie said. “They’re a little slow coming this year because there’s a lot of uncertainty in the markets.”

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