Why Did H.B. Fuller’s Construction Products Revenue Fall?


Sep. 28 2016, Updated 11:05 a.m. ET

H.B. Fuller’s Construction Products segment

H.B. Fuller’s (FUL) Construction Products segment reported revenue of $64.4 million in 3Q16, which is 12.6% of the company’s total revenue. On a year-over-year basis, the revenue from this segment fell 11.1% due to the following factors:

  • Prices positively impacted revenue 0.20%.
  • Low sales volumes negatively impacted revenue 11.2%. However, the company claims that 2015 saw unusual sales volumes in this segment due to the business ramp-up with Lowe’s (LOW). FUL expects the volume to be flat in 4Q16.
  • The foreign exchange translation negatively impacted revenue 0.1%.

It’s worth noting that 4Q15 revenue is shown as reported and doesn’t reflect the alignment of a new reporting structure.

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Construction Products segment: Adjusted EBITDA and EBITDA margin

The Construction Products segment reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $5.7 million in 3Q16 compared to $9.7 million in 3Q15. This implies a fall in adjusted EBITDA of 41% on a year-over-year basis. The segment’s adjusted EBITDA margin for 3Q16 was 8.9% compared to 12.5% in 3Q15. This implies a fall of 360 bps (basis points) in adjusted EBITDA margins on a year-over-year basis.

The excess cost related to the new facility start-up in Aurora, Illinois, and lower sales volumes impacted the margins. FUL expects that the new facility will be completed by the end of the year and will reduce the headwinds of $1 million to $2 million in costs due to the delay.

As of September 22, 2016, the iShares Core S&P Small-Cap ETF (IJR) had 0.36% of its total holdings in H.B. Fuller. A few holdings of this ETF include Cirrus Logic (CRUS), NuVasive (NUVA), and Piedmont Natural Gas (PNY), with weights of 0.55%, 0.53%, and 0.76%, respectively.

In the next part, we’ll look at the 3Q16 performance of H.B. Fuller’s Engineering Adhesives segment.


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