H.B. Fuller recently announced its financial results for the fourth quarter and full-year 2019. Net revenue of $739 million in the fourth quarter decreased 3.8% compared with the fourth quarter of 2018. Foreign currency exchange rates negatively impacted revenues by 2.1%, and the sale of the surfactants, thickeners and dispersants business negatively impacted revenues by 0.8%. Organic revenue, which excludes impacts from foreign currency and divestitures, was down 0.9% vs. last year. Organic revenue growth in Americas Adhesives, Asia Pacific, and Engineering Adhesives was offset by organic revenue declines in Construction Adhesives and EIMEA, primarily reflecting general industry and economic slowdowns in these areas.
“In the fourth quarter, we continued to gain share in strategic businesses including Engineering Adhesives and Hygiene, and our organic revenue trends improved sequentially compared with the third quarter,” said Jim Owens, president and CEO. “For the full year, adjusted EPS was within our guidance range of $2.95 to $3.05 and adjusted earnings and EBITDA improved year-over-year on a constant currency basis. These results were achieved in a weak external environment which impacted organic growth. Our cash flow conversion remained very strong as a result of solid earnings and working capital management and we significantly exceeded our debt paydown target.”
Net revenue for fiscal 2019 of almost $2.9 billion decreased 4.7% compared with fiscal 2018. Foreign currency exchange rates negatively impacted full-year revenues by 3.3%, and the divestiture negatively impacted revenues by 0.3%. Organic full-year revenue decreased by 1.1% year-over-year due to lower revenues in Construction Adhesives and EIMEA, partially offset by growth in Engineering Adhesives, Americas Adhesives, and Asia Pacific.
Effective December 1, 2019, H.B. Fuller completed the realignment of its business from five to three operating segments. According to the company, aligning resources around the three new global business units (GBUs)—Engineering Adhesives; Hygiene, Health and Consumable Adhesives; and Construction Adhesives—better positions it to quickly identify trends and utilize its adhesives portfolio to deliver new solutions targeted to evolving trends. In addition, the new organizational structure enabled a simplification of business processes and the elimination of more than 150 redundant positions, globally, leading to reduced costs.
“We are entering the new year with a strategically focused and realigned business poised for growth and beginning to see areas of positive trends on the top line,” said Owens. “We win with customers by solving their adhesive problems better and faster than competitors. By organizing into global business units, we benefit from reduced complexity, enhanced collaboration, and increased speed to market. Our new global teams and expanded utilization of our shared services model are in place, and our entire organization is focused on capturing new market share at greater profitability in 2020, and in the years ahead.”
The company updated the range of its previously disclosed cost savings target from this realignment to $25 million-$35 million by 2021, with approximately two-thirds of the savings to be realized in 2020. In its November 13, 2019, filing on Form 8-K with the Securities and Exchange Commission, the company announced approximately $9 million-$11 million of restructuring costs associated with this initiative to be recognized across the next several fiscal quarters. The company incurred $9 million of restructuring costs in the quarter ended November 30, 2019.
“In 2020, we are focused on executing the growth drivers and cost savings that are enabled by our GBU realignment and the synergies provided by the Royal Adhesives acquisition,” Owens said. “Our plan delivers organic growth in a continued challenging global manufacturing environment forecasted for 2020. In addition, we are reducing costs to support 10% earnings growth and increased cash flow. As a result of profit margin and working capital improvements, high cash flow conversion rates and our focused capital management programs, we remain on track to significantly exceed our committed $600 million in debt paydown by the end of 2020.”
Additional details are available at www.hbfuller.com.
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