UFPI Beaming After Strong 05

February 27, 2006
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GRAND RAPIDS — Based on the success of Universal Forest Products Inc. in the past five years, it's hard to say whether more trees have been felled to satisfy the demand for the company's engineered wood building materials, or to print the billions of dollars the company has raked in by selling them. UFPI just released a report of its financial performance in 2005, showing its fifth-straight year of dramatic sales and earnings increases.

Since 2000, the company has nearly doubled its annual sales, reaching a record $2.7 billion in 2005. Meanwhile, earnings have continued to improve as well. Part of the success of 2005 came from an exceptional fourth quarter.

"We don't often experience a fourth quarter as powerful as we just had, but a number of things aligned to make that happen in 2005. It was an unusually strong end to an already strong year," William G. Currie, Universal's vice chairman and CEO, said in a statement accompanying the year-end report.

Currie also said that internal cost controls helped boost profits. Despite an increase of 10 percent in net sales, UFPI's cost of goods sold increased by just 8 percent. The company also managed to rein in its general and administrative costs, keeping them below 9 percent of revenue.

Universal has been growing in recent years by expanding into new markets, but also through acquisitions. In 2005, its 50th year of operations, the company acquired an ornamental woodworking plant and a construction company in New England, formed a new alliance with a building truss manufacturer, rolled out a new consumer products division, and purchased a decking manufacturer to expand its decorative outdoor product offerings. It also boasted a "focus on under-performing plants" that paid off in the year's financial results.

"We hit on all cylinders last year," said Mike Glenn, president and COO. "Our people delivered and served more and more customers, and our markets were strong. Our performance continues to prove the strength of our business model and of our management team."

Strong business model and management team aside, Glenn admits that the GulfCoast hurricanes were among the primary drivers for such strong fourth-quarter performance.

"Fourth-quarter market conditions in 2005 were unusually strong, and we don't expect the same for 2006," he said. "We certainly don't want a repeat of the natural disasters that contributed to the demand for manufactured housing last year."

That segment of UFPI's business was up 13.6 percent for the year, with a remarkable 27.1-percent year-over-year improvement in the fourth quarter. In fact, the company enjoyed double-digit sales growth in all its business sectors except for the do-it-yourself retail market. That business segment showed a 1.3-percent increase over 2004. That market represents $1 billion of Universal's sales — more than one third of its total business.

Looking ahead to 2006, the company expects more of the same: measured growth in the home-improvement market, and stronger growth opportunities in site-built construction, manufactured housing and industrial sales. The clean-up and rebuilding efforts in the South are likely to positively affect sales, at least in the early part of 2006. The company expects sales and earnings growth to be lower than 2005 performance, but still showing healthy 10- to 15-percent improvements.    

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