H.B. Fuller shows growth, sees success in third quarter

ST. PAUL, Minn.—While volume growth was not as high as expected for H.B. Fuller Co. in the third quarter, the chemical distributor remains "on track to achieve long-term growth targets."

The company's net revenue for the third quarter of fiscal 2024 was $918 million, up about 1.9 percent against $900.1 million in the third quarter of 2023.

The third quarter concluded Aug. 31. H.B. Fuller hosted an investor call on the financials Sept. 26.

"In the third quarter, we continued to advance our strategy and expand EBITDA margins through volume growth, restructuring actions and the acquisition of highly profitable, fast-growing businesses," H.B. Fuller President and CEO Celeste Mastin said. "At the same time, we continue to navigate a dynamic macroeconomic environment across our portfolio. Our volume growth during the quarter was impacted by slowing market demand in certain durable goods markets in EA, and we are adjusting our full year outlook accordingly."

An adjusted EBITDA of $165 million for the third quarter of this year was up 6 percent over the third quarter of 2023, according to the financial report.

The adjusted EBITDA margin for the world's largest pureplay adhesives supplier was 18 percent for the third quarter of this year, 70 basis points higher than the third quarter of last year.

This was driven by modest volume growth, according to H.B. Fuller.

"While this quarter's volume growth was at the low end of our expectations, we have a clear and focused strategy and a highly engaged team that is well-equipped to execute and drive business success," Mastin said. "We remain on track to deliver upon our long-term EBITDA margin and organic growth targets."

The ratio of net debt-to-adjusted EBITDA was 3.1X for the third quarter of this year, consistent with the second quarter of this year, H.B. Fuller said.

For nine months, the company is also ahead of last year.

Net sales for the first three quarters of this year registered at $2.65 billion, against $2.61 billion for the first three financial quarters of 2023.

"Volume leverage, restructuring savings and the benefit from acquisitions primarily drove the year-on-year increase in adjusted gross profit," Mastin said Sept. 26.

Selling, general and administrative expenses (adjusted) tallied $164 million in the third quarter of 2024, against $159 million adjusted SG&A in the third quarter of 2023.

"The impact of acquisitions and inflation in wages and services drove most of the year-on-year increase in adjusted SG&A," Mastin said

Two of three H.B. Fuller global business units—Engineering Adhesives and Construction Adhesives—saw quarterly volume growth.

Engineering Adhesives saw net sales of about $375 million in the third quarter of 2024, against $366 million in net sales in the third quarter of last year. This represented a 2.5-percent increase.

Construction Adhesives saw net sales of about $153.2 million for the most recent quarter, against $132.4 million for the third quarter of 2023. This represented a 15.7-percent increase.

Hygiene, Health and Consumable Adhesives was the only unit to report a year-over-year loss (3.1 percent), registering $390 million in net sales this quarter against $402.4 million in the third quarter of 2023.

"Organic revenue increased slightly year-on-year, with pricing adjustments reducing organic revenue by 2.6 percent and volume increasing organic revenue by 3 percent," Mastin said. "Foreign currency translation reduced net revenue by 1.5 percent and acquisitions increased net revenue by 3.0 percent."

H.B. Fuller is updating its guidance for this year, based on "year-to-date performance and current macroeconomic conditions."

Net revenue growth now is expected to be up approximately 2 percent with organic revenue flat year-over-year.

Adjusted EBITDA now is expected to be in the range of $610 million to $620 million, equating to year-on-year growth of between 5 percent and 7 percent.

On the acquisition front, H.B. Fuller recently acquired HS Butyl Ltd., the U.K.'s largest manufacturer and distributor of butyl tapes, expanding H.B. Fuller's position in the global waterproofing tape market.

The high-quality butyl tapes "provide strong, permanent, watertight seals" for an array of applications within the construction, infrastructure, automotive and renewable energy industries, H.B. Fuller said.

Terms of the Aug. 24 acquisition were not disclosed.

HS Butyl is a family-owned business that has been designing, engineering, and manufacturing butyl tape from its headquarters in Lymington, England, since its founding in 1964.

With more than $23 million in annual sales, HS Butyl exports to more than 50 countries around the world.

The new business will operate within the Construction Adhesives global business unit.

HS Butyl will be lateral to GSSI Sealants Inc., a North American producer of butyl tapes that H.B. Fuller acquired in 2022. According to Mastin, the European waterproofing tape market is twice the size of the North American market.

Other recent bolt-ons include the May 20 purchase of ND Industries, a supplier of specialty adhesives, fastener locking and sealing solutions that serves customers in the automotive, electronics, aerospace and other industries.

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

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