H.B. Fuller Co. has released its financial results for the first quarter that ended March 4, 2023. The company reported net revenue was down 5.5% year-on-year and announced a restructuring plan, mainly within its construction adhesives business. According to H.B. Fuller, the initial cost of the restructuring will be $15 million to $20 million; the company expects the move will show an annual savings of $30 million to $35 million.
In its earnings conference call on March 30, Celeste Mastin, H.B. Fuller president and chief executive officer, explained that the company will be “closing one plant in North America for our construction business, and we’re also exiting our facility in Argentina.” The Minnesota Star Tribune reported that the restructuring plan will result in job losses of approximately 300 of the company’s 6,500 employees.
Net revenue for the first quarter of fiscal 2023 was $809 million. Organic revenue declined 2.5% year-on-year, driven by lower volume, mostly offset by favorable pricing. Volume declined 10.8% due to continued customer destocking actions in Construction Adhesives and generally slower economic demand conditions across all three global business units. Pricing actions favorably impacted organic growth by 8.3 percentage points. Foreign currency translation reduced net revenue growth by 4.9 percentage points, and acquisitions increased net revenue growth by 1.9 percentage points.
Consolidated organic growth was impacted by continued customer destocking and demand weakness affecting Construction Adhesives; however, the company reports that the benefits of its geographic and end-market diversification led to stable consolidated organic sales year-on-year. This was driven by Hygiene, Health and Consumable, and Engineering Adhesives, which, on a combined basis, continued to generate positive organic growth in the first quarter.
Gross profit in the first quarter of fiscal 2023 was $215 million. Adjusted gross profit was $217 million. Adjusted gross profit margin of 26.9% increased 190 basis points year-on-year. Pricing actions, net of raw material cost developments, drove the increase in adjusted gross margin year-on-year and more than offset the impact of reduced operating leverage due to lower volume.
Net income attributable to H.B. Fuller for the first quarter of fiscal 2023 was $22 million, or $0.39 per diluted share. Adjusted net income attributable to H.B. Fuller for the first quarter of fiscal 2023 was $31 million.
“Despite challenging demand conditions, particularly in Construction Adhesives, our team executed exceptionally well to deliver solid first quarter results that were in-line with our expectations,” said Mastin. “The diversification of our portfolio enabled us to deliver stable organic sales and diligent management of price and raw material dynamics drove significant gross margin improvement year-on-year and sequentially. Overall, this resulted in strong adjusted EBITDA performance and led to higher adjusted EBITDA margin year-on-year.
“Consistent with our strategic focus of continuously improving operational efficiency, we are implementing prudent and decisive actions to align our cost structure with lower volume expectations for 2023. These actions will lower our cost structure and improve the capacity utilization of our manufacturing network, allowing us to more effectively meet market needs and expand margins in-line with our long-term strategic plan.
“As we look ahead, we remain confident we will achieve our full-year guidance. We began to see margin expansion, driven by a combination of favorable price and raw material dynamics, and we expect this benefit to accelerate as we progress through the year and meaningfully benefit adjusted EBITDA margin. With our unique advantages and a more optimized cost structure, we are well positioned to continue creating value for shareholders and achieve our financial expectations for the year and beyond.”
Looking forward, the company stated that it continues to expect adjusted EBITDA for fiscal 2023 to be in the range of $580 million to $610 million, equating to growth of approximately 9% to 15% versus fiscal year 2022. Adjusted EPS (diluted) is now expected to be in the range of $4.10 to $4.50, equating to growth of between 3% to 13% year-on-year and fully diluted shares outstanding is now expected to be approximately 56 million. Revenue for fiscal 2023 is now expected to be down 1% to 4% versus 2022; organic revenue for fiscal 2023 is now expected to be in the range of down 1% to up 1%, reflecting expected demand weakness in Construction Adhesives.
For more information, visit www.hbfuller.com.
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