H.B. Fuller attributes 'strong' Q2 to acquisition, roofing market

ST. PAUL, Minn.—H.B. Fuller Co. reported strong growth in the second quarter of 2024, with net sales revenue of $917 million, 2.1 percent higher than the second quarter of 2023 ($898 million).

The second financial quarter for 2024 concluded June 1 for the largest pureplay adhesives supplier in the world.

"Our strong second quarter financial performance reflects the team's steadfast commitment to execution while driving our long-term strategy to focus on more profitable, higher growth segments of the market," H.B. Fuller President and CEO Celeste Mastin said during a June 27 conference call with investors and media. "We continue to innovate and deliver customized value-enhancing solutions to our customers while acquiring highly profitable, fast-growing businesses."

According to H.B. Fuller financials, EBITDA for 2Q of this year registered at $157 million, a 10-percent increase over an EBITDA of $143 million for 2Q 2023.

"This was driven principally by the net impact of pricing and raw material cost actions, volume growth, restructuring savings and benefits from recent acquisitions," Mastin said.

For the first six months of this year, net sales revenue was approximately $1.73 billion for H.B. Fuller, slightly higher than the $1.71 billion generated in the first six months of 2023.

EBITDA for the first six months of 2024 came in at $280.3 million, against $252.4 million in the first six months of 2023.

Mastin noted that H.B. Fuller will look to expand its market presence in "the most" differentiated segments.

"As we execute our restructuring program focused on streamlining our global footprint, we are driving sustainable enhancements to our cost structure and improving our ROIC," Mastin said. "In a large total addressable market, where we win one application at a time, we continue to meaningfully move the needle and remain on track to deliver adjusted EBITDA margin greater than 20 percent in the next three to five years."

Recent bolt-ons cited as "compelling acquisitions" by Mastin include the May 20 purchase of ND Industries, a supplier of specialty adhesives and fastener locking and sealing solutions that serves customers in the automotive, electronics, aerospace and other industries.

The Detroit-based ND Industries operates globally with facilities in the U.S. and Asia. The 300-person company is expected to see sales of about $80 million this year.

The company will operate within H.B. Fuller's existing Engineering Adhesives global business unit.

While foreign currency exchanges reduced net sales revenue by 1.7 percent, acquisitions increased net revenue by 3.9 percent.

The acquisition also increased immediate debt for H.B. Fuller, which came in at $1.9 billion as of June 1. This is up $131 million year-over-year.

"The increase in net debt was driven primarily by the acquisition of ND Industries during the quarter," Mastin said.

Year-to-date cash flow from operations increased $21 million year-over-year to $129 million, driven by improved profitability, according to H.B. Fuller.

All three of H.B. Fuller's global business units—Enginereeing Adhesives; Hygiene, Health and Consumable Adhesives; and Construction Adhesives saw quarterly volume growth.

Two of the three segments saw net sales growth year-over-year, according to H.B. Fuller 2Q 2024 financials.

"Our organic sales trends continued to improve," Mastin said. "Volume is up in all three business units. From a profitability perspective, we executed well ... consistent with our second-half expectations."

Mastin said Engineering Adhesives' organic revenue increased by 2.5 percent in the second quarter, "marking a return to positive organic growth."

The segments were led by Hygiene, Health and Consumables, which saw net sales revenue of $393.1 million in the second quarter, down from the $404.5 million generated by this business unit in 2Q 2023.

Upward trends in bottle labeling, packaging and medical "partially offset organic sales declines in hygiene," Mastin said.

Engineering Adhesives saw net sales revenue of $373.5 million for the quarter, a slight increase over the $364.1 million generated here in 2Q 2023.

"This segment was led by strength in electronics, aerospace, automotive and the RV markets," Mastin said. "It was partially constrained by slower demand in wood working and clean energy."

Construction Adhesives also saw a year-over-year increase, coming in at $150.5 million for the second quarter, against $129.7 million in 2Q 2023.

"Organic sales here increased 7 percent year-over-year, driven by strong demand in roofing," Mastin said. "Construction market conditions are more consistent with a normal construction season thus far."

For the first half of 2024, the segments mirrored the quarter, with Hygiene, Health and Consumables down year-over-year at $760.8 million, against $780 million generated in the first six months of 2023.

As it did for the quarter, Construction Adhesives made up for this overall decrease in the first half of 2024, generating net sales of $264.4 million against $222.3 million in net sales in construction in the first half of 2023.

Geographically, organic revenue was flat in the Americas; improved significantly relative to Q1 2024 in EIMEA; and increased about 7 percent year-over-year in Asia Pacific.

"Strength in China, which nearly achieved a double-digit increase in organic sales, drove (overall) organic sales growth," Mastin said.

Acquisition activity and a strengthening U.S. dollar has H.B. Fuller looking to a future of growth as the company upgraded its forecast to a higher range in net sales and EBITDA for the full year.

"Our M and A pipeline is robust," Mastin said. "And we continue to evaluate a number of potential transactions."

Net revenue growth now is expected in the range of 2 percent to 4 percent, with organic revenue flat, up 2 percent year-on-year. The company saw net sales revenue of about $3.5 billion in 2023.

Adjusted EBITDA now is expected in the range of $620 million to $640 million for 2024, representing approximately 7 percent to 10 percent growth year-on-year.

Equally, third-quarter adjusted EBITDA is expected to be healthier, in the range of $165 million to $175 million.

Operating cash flow is expected to be flat for the year, at between $300 million and $350 million.