Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross margin remained solid at 15.7% despite market conditions.
- Adjusted EBITDA of $50.6 million, demonstrating strong operational performance.
- Successful renewal and amendment of the revolving loan facility, extending maturity to April 2028.
- Continued focus on cost management and operational efficiencies.
- Encouraging level of activity and modestly lower sales compared to the same period in 2023.
Negative Points
- Sales decreased by $20.9 million or 2.9% compared to the same period in 2023.
- Net earnings decreased by $12.2 million or 41.8% year-over-year.
- Expenses increased by $2.6 million or 3.6%, driven by inflationary pressures and acquisition-related costs.
- EBITDA decreased by $15.8 million or 24% compared to the previous year.
- Slowing construction market and lower sales on a year-over-year comparative basis.
Q & A Highlights
Highlights of Doman Building Materials Group Ltd (CWXZF, Financial) Q2 2024 Earnings Call
Q: Can you talk about the landscape for acquisitions and seller expectations?
A: We are seeing more opportunities in the acquisition market post-COVID. We recently completed the Southeast acquisition and are actively working on others. The environment is healthy for further M&A activity. - Amar Doman, CEO
Q: How has your business in Hawaii evolved since the fire last year?
A: Rebuilding is slow but ongoing. We supplied materials for the first school rebuilt and have contracts for small apartment buildings. The rebuilding process will provide business opportunities for years to come. - Amar Doman, CEO
Q: What are the implications of a potential Canadian rail strike on your business?
A: We have good supply via truck, but a rail strike would likely increase lumber prices in Canada. We are prepared to manage supply, but it could balance out depending on the strike's duration. - Amar Doman, CEO
Q: How are volumes faring and what are your expectations for the second half of the year?
A: Volumes are expected to be flat to slightly down, similar to Q2. We saw a pickup in Texas due to a hurricane, but overall, we anticipate a flat pace with some pricing appreciation in lumber. - Amar Doman, CEO
Q: Was there anything unusual in the SG&A expenses this quarter?
A: The increase in SG&A was primarily due to the Southeast acquisition. This is a good run rate going forward, with some seasonality expected. - James Code, CFO
Q: Did regional volumes in Canada remain weak this quarter?
A: Yes, volumes were weaker across Canada in Q2, but we have seen a pickup in the third quarter. We expect a modest recovery in volumes. - Amar Doman, CEO
Q: How do you see treated lumber prices faring in the south during the second half of 2024?
A: Prices are expected to be better than the first half, with a slight uptick. The market has firmed up but remains oversupplied. - Amar Doman, CEO
Q: What are your thoughts on sawmill cost curves versus current pricing levels?
A: Southern Yellow Pine is just profitable, while SPF is still in the red for major sawmillers. We are near breakeven levels, which is good for suppliers but may keep prices capped. - Amar Doman, CEO
Q: What is the rough split across commodities in your portfolio post-Southeast acquisition?
A: Southeast is purely treated lumber. We are focusing on expanding margins and growing the business into new markets, with significant growth expected in 2025. - Amar Doman, CEO
Q: Did the new contract with AZEK bring in new business or exclusivity?
A: We are now partnered with AZEK in Canada, which will be a strong brand for our composite materials. We are excited about the growth prospects for 2025. - Amar Doman, CEO
Q: Do you see any reason to update your gross margin expectations?
A: We believe the 14% to 16% range remains accurate, depending on lumber market volatility. Last year's 17% was a high watermark, and we are satisfied with the current performance. - Amar Doman, CEO and James Code, CFO
Q: What are your expectations for working capital release in the second half of the year?
A: We expect a typical pattern with no unusual fluctuations, with the trough in working capital coming in November-December. - James Code, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
