LBM’s latest earnings reports and analyst calls revealed that the biggest publicly traded dealers are betting on investments, efficiencies, and new tech features to keep expanding faster than modest construction growth would suggest. Here are the four developments that matter most.
Components and CapEx
BMC’s first automated truss plant has been operating in the Atlanta area for more than a year. During the analysts’ call, CEO David Flitman said BMC’s second automated truss plant—serving the Austin, Texas, market—is now up and running, while one in Salt Lake City should start phasing in production in the early part of this summer. “And we are now announcing that we will add this same technology in a fourth market, Seattle, where we are scheduled to launch production in time for next spring's building season,” Flitman said. BMC plans to spend $80 million to $90 million on CapEx, including investments in those truss plants.
Meanwhile, Builders FirstSource (BFS) said it expects to spend 1.5% of sales on capital expenditures this year. Given 2019’s $7.72 billion in sales, that works out to $77 million to $115 million. “We are committed to continuing the expansion of our current network of 58 manufacturing facilities,” CFO Peter Jackson told analysts. “Approximately 25% of our 2019 capital expenditures will be invested in our value-add growth initiatives, and expansion of our production capacity.”
Foundation Building Materials (FBM) said it will spend 1.4% to 1.5% of its 2019 net sales on capital expenditures. Given its forecast of $2.1 billion to $2.25 billion in sales this year, that works out to between $21 million and $34 million.
Sales and Profit Outlook
BFS predicts its net sales in the second quarter will trail last year’s numbers by 8% to 10% as a slight increase in volume is overwhelmed by an 11% to 13% decline in commodity prices from last year’s run-up in lumber. At the same time, however, gross margins should jump to between 25.6% and 25.8% from 23.7% in the year-earlier period. Second-quarter EBITDA should be between $120 million and $130 million, down from $139.1 million in the April-to-June 2018 period.
For all 2019, commodity prices should be about 9% to 10% lower than in 2018, Jackson continued. BFS didn’t forecast annual sales, but it did indicate its adjusted EBITDA should climb 50% to $750 million. That’s in part from operational initiatives that believes will boost EBITDA by $14 million to $16 million.
BMC predicts full-year net sales in 2019 will range between $3.5 billion and $3.65 billion; that compares with $3.68 billion last year. “We expect lumber & lumber sheet goods pricing to continue to be a headwind for us this year,” CFO Jim Major told analysts. “Having only averaged $355 year to date, we are now working under the assumption that the full-year average lumber composite pricing will be between $350 and $375, thereby creating a 6.5% to 8% headwind to our total net sales for the full year, and an even larger impact of 8% to 11% in the second and third quarters of 2019.
Both dealers expect organic sales growth—mainly from new home construction—to be in the low single-digits. BMC also is counting on its recent acquisitions (after discounting sales drops from its disposal of the Coleman Floor subsidiary) to be worth a rise of 1.5% to 2% in total net sales. Gross margins should total 24.5% to 25.5%, not much different than last year’s 24.7%. Adjusted EBITDA should reach only $225 million to $250 million, down from $265.9 million.
Foundation Building Materials predicted net sales of $2.1 billion to $2.25 billion in 2019 (up from $2.04 billion last year), a gross margin of 29.1% to 29.3% (up from 28.9%), and adjusted EBITDA of $160 million to $180 million (up from $162.5 million).
Beacon Roofing Supply, whose fiscal year ends Sept. 30, still is absorbing the fiscal impact of taking over Allied Building Products. It predicts its sales in fiscal 2019 will total $7.0 billion to $7.35 billion, up from $6.42 billion in the 12-month period ended Sept. 30, 2018. Adjusted EBITDA is forecast to total $540 million to $610 million, up from $483.8 million.
Stores
Beacon noted that it has add five greenfield stores since last Oct. 1 and plans to add five more by Sept. 30. Four of those additions have taken place this calendar year. They’re part of a spurt in greenfield activity that has seen SRS open 13 stores, ABC Supply six and Travis Roofing Supply one in just the first 4-1/2 months of this year.
BMC and FBM haven’t opened greenfield stores, but they have been doing some buying. BMC made two acquisitions in the Charlotte, N.C., area that landed it three Locus Lumber locations and one Barefoot & Co. facility. Meanwhile, FBM went to Canada and acquired the three-unit, Toronto-area Builders Suppliers Ltd.
Technology
Beacon announced it has launched a partnership that will integrate its Beacon Pro+ e-commerce platform with JobNimbus, a customer relationship management specialist, “to seamlessly create estimates and submit material orders directly to their local Beacon branch from inside the JobNimbus platform.”
Beacon’s Pro+ and 3D+ platforms already made it possible for customers to view past orders, keep up with rebates, pay bills, track deliveries, and manage projects. “We currently estimate that sales through our digital platform will be up approximately $300 million for fiscal 2019, up substantially from the 2018 number,” President and CEO Paul Isabella said.
Meanwhile, BFS appeared to ramp up promotions of its My BFS online tool, which it began rolling out last fall. It has many of the same online services as Beacon. It also has a feature that let’s a customer pull up an old order and see how the price of the material in that order has changed. BFS bills this as an aid to customers who need to create an estimate for a project that’s similar to one they’ve done before.
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