Sales, earnings up at expanding Universal Forest Products
Company in acquisition mode, looking to new product development, industrial growth.
Universal Forest Products Inc. is in the midst of an expansion, and the company is announcing record growth.
The Grand Rapids-based holding company, which provides capital, management and administration to wood-product subsidiaries, reported net earnings and net sales last month that it said are the best of any quarter in the company’s history.
Net second-quarter sales are up 4 percent over 2015, from $838.2 million to $872.1 million.
In a conference call to investors, CEO Matthew Missad said the results were driven by strong sales gains in the retail and construction markets, which grew 7.5 percent and 6.5 percent respectively over the same period last year.
UFPI saw gross retail sales of $406.7 million and construction sales of $249.3 million. Gross sales were down in the company’s industrial sector by 2.9 percent over the second quarter of 2015, to $231.4 million.
The company said its announced acquisitions of Idaho Western Inc. of Nampa, Idaho, and Robbins Manufacturing Co. of Tampa, Florida, are expected to add $100 million in annual gross sales.
Missad told the Business Journal he attributed his company’s success first and foremost to the company’s founders and previous leaders who made the smart decision of diversifying the business. He also credited the “outstanding” talent in the company’s workforce of 8,000 as a competitive advantage.
Diversification and workforce talent have been integral to UFPI’s strategic focus for some time. Among those efforts is a focus on expanding in existing and new U.S. markets.
“For example, we’ve acquired a couple of companies in the Idaho market (Including Idaho Western) within the past year,” Missad said.
He explained UFPI was previously trying to serve the Idaho market through its Oregon business.
“It wasn’t efficient,” he said.
Missad said UFPI is also looking at retail expansion in the Southeast, including its recently signed letter of intent to purchase certain assets of Robbins Manufacturing, a manufacturer of treated wood products with facilities in Florida, Georgia and North Carolina.
“It’s an opportunity to consolidate capacity we have with theirs and increase efficiency,” Missad said.
He said UFPI is benefiting from the growth of independent and big-box retailers.
UFPI is also looking — conservatively — at opportunities for international expansion, Missad said.
“We are in Mexico and Canada, and we have a company in Australia,” he said. “We are comfortable growing more in those markets, but we are also looking at other opportunities around the globe in markets that make sense for our products and where our customers are located. We’d like to partner up with them as well.”
Despite the decrease this quarter in the industrial sector, Missad said UFPI has seen the fastest growth in this area, something he expects will continue.
“We are continuing to look for more opportunities in that space,” he said.
The company noted lower industrial production in the United States and a strong U.S. dollar as factors that adversely affected the company’s industrial business during the second quarter.
It also attributed the second-quarter decrease to “being more selective in this area by pursuing greater value-added business.” UFPI said that strategy has contributed to an improvement in gross profit margins in the industrial market.
UFPI announced said its net earnings are attributable to controlling interest of $33.4 million for the second quarter of 2016, up 28.6 percent over net earnings attributable to controlling interest of $26 million for the same period of 2015.
Second-quarter 2016 diluted earnings per share were $1.64, compared with diluted earnings per share of $1.28 for the second quarter of 2015.
UFPI’s growing retail business — products such as decking, railings, fencing and landscaping and garden materials — is also a growth opportunity for the company, according to Missad.
“On the retail side, we are looking for strategic combinations, new products and potential consolidation where it makes sense,” he said.
Missad said the key to UFPI’s future is really its new products initiative.
He said the company’s strategy of playing offense during the economic downturn has paid off so far by forcing the business to focus on creating products consumers want and need.
“We have to reinvent ourselves and come up with new products or services that will help us grow,” he said. “That’s what we’ve been pushing.”