Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- JELD-WEN Holding Inc (JELD, Financial) has made significant progress in productivity projects, which are positioning the company for stronger performance as market conditions stabilize.
- The company has completed actions to right-size SG&A spending and is exceeding its targeted cost savings for the year, now expecting approximately $115 million in savings.
- JELD-WEN has established 'win rooms' to organize and track new customer acquisition efforts, which are already showing positive results.
- The company is actively addressing quality issues, with significant progress in improving quality in door skin production.
- JELD-WEN continues to streamline operations through footprint consolidation, enhancing capacity and cost structure for long-term profitability.
Negative Points
- Third quarter sales and EBITDA came in below expectations due to challenges from softer volume and mix across North America and Europe.
- The company faced quality and delivery challenges across several manufacturing units, impacting financial performance.
- JELD-WEN lost a stock business of a Midwest retailer, which opted to source windows from China, representing a near-term challenge.
- The company has reached a volume inflection point at several facilities, resulting in increased overtime and lower-than-expected productivity.
- JELD-WEN revised its net revenue guidance for 2024 downward, reflecting a deeper core revenue decline and lower anticipated revenue.
Q & A Highlights
Q: Can you provide more details on the quality issues mentioned and whether they contributed to the loss of the Midwest customer? Also, can you size the impact of losing this customer in terms of revenue and EBITDA?
A: The quality issues did not cause the loss of the Midwest customer. These issues were related to deferred maintenance and capital improvements needed in our plants. We are addressing these and have made significant progress, particularly in door skins quality. The loss of the Midwest customer represents a $75 million to $100 million impact on a full-year run rate, with a $20 million to $25 million impact expected in 2024. We are actively working on mitigation plans to regain business. - William Christensen, CEO, and Samantha Stoddard, CFO
Q: The midpoint of your outlook suggests a significant sequential decremental in the fourth quarter. When do you expect these decrementals to normalize?
A: We do not anticipate a significant change in volume or mix as we enter next year. We have set trigger points to adjust operations if volumes fall below certain thresholds. We expect 2025 to be a turning point, with improvements in leverage anticipated in the back half as volumes potentially increase. - William Christensen, CEO, and Samantha Stoddard, CFO
Q: How did sales progress through the quarter and into October, and how does the mix trend look?
A: Volume and mix have continued to deteriorate, particularly in the repair and remodel (R&R) market, which has not stabilized as expected. We are not seeing signals of improvement or further deterioration in October. The mix down is ongoing, with discretionary spending on major projects being pulled back. - William Christensen, CEO
Q: Can you discuss your capacity to handle projects and the potential to pull ahead initiatives given the current environment?
A: We have completed over 500 projects and have 350 active ones. We are resequencing these based on current opportunities and challenges. We are focusing on footprint optimization and automation to drive cost efficiencies. We aim to reduce the number of sites and improve investment levels for long-term efficiency. - William Christensen, CEO
Q: Regarding the Midwest customer, is there a trend of imported windows gaining market share, or is this an isolated case?
A: This appears to be a unique decision by the customer to try something different. We are not seeing a significant increase in imported windows from Asia, and we believe this is not a trend but rather a one-off situation. - William Christensen, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
