H.B. Fuller Co. recently reported financial results for its second quarter ended May 30, 2020. Net revenue of $675 million decreased 11% compared with the second quarter of 2019. Foreign currency exchange rates and the sale of the surfactants, thickeners, and dispersants business negatively impacted revenues by 4% on a combined basis. Organic revenue excluding these impacts was down 7% vs. the same period last year.
Hygiene, Health and Consumable Adhesives (HHC) organic revenue increased 7% year over year, with double-digit growth in hygiene, packaging, and health and beauty. Engineering Adhesives and Construction Adhesives organic revenue declined 20% and 15% vs. last year, respectively, in line with the company’s planning assumptions for expected impacts related to the COVID-19 pandemic.
“H.B. Fuller’s operating performance in the second quarter was strong as our worldwide team relentlessly focused on supporting customers in producing essential goods,” said Jim Owens, president and CEO. “Throughout the quarter, we found new opportunities to grow our business while managing costs and working capital. Our business model of global collaboration with local execution and a culture of customer focus enabled us to meet customer needs faster than competitors and gain share. Our supply chain and sourcing teams were able to meet demand while reducing costs and our technical, sales and office staff around the globe embraced new ways of working to increase productivity while reducing expenses. All of this was accomplished without any employees becoming infected with COVID-19 at work in our 72 factories.
“We realized significant growth in Hygiene, Health and Consumable Adhesives revenues by being the first and fastest to support customers during this crisis. Our restructuring into three global business units has resulted in productivity and efficiency gains that helped deliver EBITDA above our guidance range and enabled us to exceed last year’s debt paydown in the quarter while raising our dividend. During the quarter, we also scoped new operational initiatives which will generate $20 to $30 million in additional savings. Despite the challenging economic environment, we expect to continue delivering strong cash flow performance in 2020 by operating efficiently, reducing working capital needs and maintaining our debt paydown momentum, all while ensuring the health and safety of our workforce.”
The extent of COVID-19’s impact on global economic factors and the pace of economic recovery as businesses reopen remains uncertain. The company provided the following planning assumptions based on current economic projections, order patterns, and assumptions for global commercial activity:
- Estimated revenue in the third quarter anticipated to be down 5-10% year over year
- Continued elevated demand for HHC goods such as food and e-commerce packaging, paper products, and medical and personal protective equipment through the second half of the year, although at a slower rate than experienced in the second quarter as restocking of these products returns to more typical levels
- Lower year-over-year demand for durable products and building materials in industries such as new energy, transportation, and construction; H.B. fuller currently anticipates year-over-year comparisons for Engineering Adhesives and Construction Adhesives in the second half of the year will improve compared with second quarter results, as industrial production and building construction start to ramp up around the world
- Continued moderate declines in raw material costs in the second half of the year, driven by supply-demand dynamics for specialty chemicals and petrochemical feedstock costs
- Continued benefits from restructuring actions taken at the end of 2019
Throughout the COVID-19 pandemic, H.B. Fuller’s factories have remained open and operational. The company reports that it also created new ways to collaborate and accelerate productivity during this period. Over the past few years, H.B. Fuller has made investments in technology, analytics platforms, and virtual collaboration tools. The company has leveraged these tools to facilitate decision-making, maintain high levels of customer service, pursue new customer relationships, and accelerate its sales cycle through virtual product trials.
“By quickly mobilizing resources upon the outbreak of COVID-19, we were able to mitigate the severity of its impact on our operating and financial results through the first half of the year,” said Owens. “At the same time, we have found new and creative ways of working with customers and colleagues around the globe that will extend beyond this crisis. Moving forward, we will continue to leverage electronic tools and new methods of interacting with customers to improve our speed and agility. We are using the critical lessons learned during this crisis to refine our planning so that we are well-prepared for growth opportunities and any potential headwinds as we progress toward a global recovery.”
Additional details are available at www.hbfuller.com.
