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Published in Manufacturing

UFP Industries credits diversification for stability as retail business rocked by slumping lumber market

BY Thursday, October 21, 2021 07:01pm

GRAND RAPIDS TWP. — As lumber prices returned to typical levels this year following their meteoric rise during the worst of the COVID-19 pandemic, executives at UFP Industries Inc. credit the company’s diversified business model for helping it weather the volatility.

The Grand Rapids Township-based wood products manufacturer released its third quarter 2021 results Wednesday, showing $2.1 billion in sales for the quarter, which was up 41 percent from the same quarter in 2020. 

Missad

The number signified a 3-percent decrease in organic unit sales, but acquisitions bumped the total up 16 percent in addition to a 28-percent increase in selling prices. Third quarter net profit for UFP (Nasdaq: UFPI) was up 57 percent year-over-year to $121 million, or $1.93 per diluted share.

Softened demand and plummeting material prices were most pronounced in UFP’s retail segment.

“As you recall, the lumber market was rising in Q3 of 2020 and retail customer takeaways exceeded expectations,” UFP Industries CEO Matt Missad said in a conference call with analysts to discuss the quarterly results. “2021 was a different story as retail demand was soft early in the quarter and the lumber market continued to fall dramatically. So, the ProWood treated products and the Sunbelt Spartanburg treated products were negatively impacted through the quarter.”

The retail segment generated $696 million in sales, which was down 19 percent organically from last year. This included a 38-percent decline in the ProWood business unit, where the pressure treated wood product saw an 11-percent drop in prices and a 27-percent drop in unit sales. 

And while UFP-Edge — the company’s siding, pattern and trim line — saw 12-percent organic unit growth, the other retail brands were down. Gross profit dropped 90 percent to $11 million from $106 million this time last year.

“We remain confident demand in this market will normalize in the near-term for a variety of reasons and when combined with our initiatives to increase market share, we believe retail will be a strong contributor to our future long-term growth,” Chief Financial Officer Mike Cole said on the call.

UFP Industrial grew sales through its acquisitions, finishing with $573 million in net sales, up 103 percent from the third quarter 2020. Selling prices increased 69 percent while unit sales increased 34 percent, which was attributed to acquisitions. 

Acquisitions like those made last year in PalletOne and T&R Lumber contributed $22 million to the segment’s $126 million in profit.

Finally, UFP’s construction segment generated $723 million in net sales, and saw a 16-percent increase in organic unit sales and 3 percent from acquisitions.

“Acquisitions are a strategic growth initiative as we pursue targets in each segment with an emphasis on scalable and synergistic new products or services, complementary value-added product and core competencies,” Missad said. “The pipeline remains robust.”

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