Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Boise Cascade Co (BCC, Financial) reported consolidated second quarter sales of $1.8 billion, demonstrating resilience despite a 1% decrease from the prior year.
- The company achieved a net income of $112.3 million or $2.84 per share, showcasing strong profitability.
- BMD sales increased by 1% year-over-year, reaching $1.7 billion, indicating growth in the Building Materials Distribution segment.
- Boise Cascade Co (BCC) paid $19 million in regular dividends and executed share repurchases worth approximately $100 million, reflecting a commitment to shareholder returns.
- The company is investing in organic growth projects, including the modernization of the Oakdale facility and a new distribution facility in Hondo, Texas, indicating a focus on long-term growth.
Negative Points
- Total US housing starts decreased by 7%, driven by lower multi-family starts, which could impact future demand.
- Wood product sales declined to $489.8 million from $530.3 million in the previous year, primarily due to lower EWP sales prices and higher wood fiber and conversion costs.
- Segment EBITDA for Wood Products decreased to $95.1 million from $127 million, indicating a decline in profitability for this segment.
- BMD's gross margin percentage decreased by 20 basis points year-over-year, reflecting margin pressure in the Building Materials Distribution segment.
- The company anticipates mid to high single-digit sequential volume declines in EWP for the third quarter, indicating potential challenges in maintaining sales volumes.
Q & A Highlights
Q: Can you discuss the performance in the general line segment within BMD and what is driving your outperformance in the market?
A: Kelly Hibbs (CFO): General line continues to be a focus for us, with good alignment with our supplier and dealer base. Jeff Strom (EVP, BMD): Our growth in footprint has allowed us to go deeper and wider in this segment, particularly in millwork. We leaned in hard during the winter buys, setting ourselves up well for the current market.
Q: How are you thinking about the incremental veneer capacity and its impact on EWP pricing?
A: Nate Jorgensen (CEO): We are focused on ensuring the right quantity, quality, and price for veneer. We will remain market-centric and support our customers' needs. We feel well-positioned to serve our customers, especially if the housing environment remains favorable.
Q: What does the current demand environment mean for EWP pricing in the next couple of quarters?
A: Nate Jorgensen (CEO): EWP is crucial for builders to reduce cycle times and complexity on job sites. We feel good about our setup for the balance of the year and will stay close to our builder partners to support them.
Q: Any thoughts on capital allocation, particularly regarding share buybacks and special dividends?
A: Kelly Hibbs (CFO): We will focus on executing our capital program and continue to be opportunistic in the market for share buybacks. We also have the capability for M&A if opportunities align with our strategy. We recently closed a small acquisition in Boise, Idaho.
Q: Can you frame the overall competitive backdrop for EWP and what gives you optimism or concern for the back half of the year?
A: Troy Little (EVP, Wood Products): We saw pricing pressure in Q2 and expect it to continue into Q3. The competitive landscape is largely around look-alike competitors producing I-joists and laminated veneer lumber. We feel good about our position to support builders' needs.
Q: Are you seeing any risk of destocking in the back half of the year?
A: Jeff Strom (EVP, BMD): On the commodity side, demand is slower, but general line remains steady. Customers are buying exactly what they need, and we don't see a major destocking risk.
Q: How do you feel about managing inventory risks and BMD margins in the third quarter?
A: Kelly Hibbs (CFO): We feel well-positioned in terms of days on hand and order. We expect gross margins to be similar to Q2, but EBITDA margins might be slightly constrained due to lower sales.
Q: Have you seen an acceleration in warehouse sales given the volatile environment?
A: Jeff Strom (EVP, BMD): Yes, warehouse sales have picked up, especially with uncertainty in commodities. We are seeing a clear increase in warehouse sales.
Q: Can you discuss the breakdown of BMD margins today versus five to seven years ago?
A: Kelly Hibbs (CFO): Selling and distribution expenses are higher due to growth and acquisitions like BROSCO. Jeff Strom (EVP, BMD): We also load up with staff before starting new operations, which affects timing.
Q: Any specific areas within general line products showing strength or weakness?
A: Jeff Strom (EVP, BMD): It's steady across the board. We have committed to having products on the ground, which has helped us take some market share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
