Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MasterBrand Inc (MBC, Financial) reported a 6% increase in net sales for the third quarter of 2024, driven by the acquisition of Supreme Cabinetry Brands.
- The company delivered strong free cash flow of $65 million in the third quarter, bringing the year-to-date total to $142 million.
- MasterBrand Inc (MBC) is seeing growth in the US single-family new construction market, with year-over-year market growth of mid-single digits.
- The integration of Supreme Cabinetry Brands is progressing well, with operational and commercial synergies being realized.
- Strategic initiatives such as Align to Grow, Lead through Lean, and Tech Enabled are driving efficiency and growth in targeted areas.
Negative Points
- Adjusted EBITDA margin contracted by 160 basis points to 14.6% due to timing of price realization and inflation in cost of goods.
- The repair and remodel market remains soft, with consumers hesitant to commit to large purchases due to economic and political uncertainty.
- Net income decreased by 51.3% compared to the same period last year, impacted by acquisition-related costs and higher interest expenses.
- The Canadian market remains weak, with challenges in housing affordability and new housing despite rate reductions.
- MasterBrand Inc (MBC) experienced a 3% decrease in its legacy business due to lower net average selling prices from seasonal promotions.
Q & A Highlights
Q: Can you provide more color on your view that you can grow volumes in new construction despite the anticipated air pocket and the visibility you have on the volume side?
A: The new construction market is still growing, and we expect this to continue into the fourth quarter. Although there was a slight slowdown in July, we have secured significant new business in the single-family new construction sector, which should help us maintain growth despite potential air pockets.
Q: Regarding pricing, the softness in the quarter seems consistent with 2Q. Can you provide more detail on the sequential pricing trend and the impact of trade-down versus like-for-like?
A: The pricing trend has been consistent throughout the year, with more impact on the repair and remodel segment. In new construction, builders are seeking lower costs due to mortgage rate instability. We anticipate that the Fed's rate cuts will eventually stabilize mortgage rates, which should help alleviate some pricing pressures.
Q: Can you elaborate on your commercial synergies plans following the Supreme acquisition?
A: We are in the process of integrating the sales teams and identifying products to offer across the combined sales force. This involves training and familiarizing dealers with new product lines. While it takes time, we expect to see the benefits of these synergies in 2025.
Q: With ASP down low single digits, do you expect it to be closer to flat year-over-year in 4Q given price increases and less severe mix headwinds?
A: We anticipate ASP to be up in the fourth quarter, but it's too early to provide specific details. Our plans suggest it will be around flat year-over-year.
Q: Regarding inventory, how do you expect it to trend in a typical year, and is the build in 3Q typical?
A: Our inventory typically builds at the beginning of the year and decreases through the third quarter. However, recent years have been atypical due to external factors like port strikes. The current inventory build was partly to mitigate potential shipping challenges.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
