Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Doman Building Materials Group Ltd (CWXZF, Financial) reported a revenue increase of $19.2 million or 3% year-over-year, reaching $663.1 million for Q3 2024.
- The company maintained a strong gross margin of 15.5%, despite challenging market conditions.
- The acquisition of Tucker Lumber is expected to be immediately accretive to EBITDA, free cash flow, and earnings per share.
- Doman Building Materials Group Ltd (CWXZF) successfully closed a $265 million senior unsecured note offering, which helped reduce outstanding credit facility amounts.
- The company is expanding its operations with the acquisition of Tucker Lumber, which adds significant scale in 10 new states in the U.S.
Negative Points
- Doman Building Materials Group Ltd (CWXZF) faced lower average pricing for construction materials, impacting year-over-year financial comparisons.
- Expenses increased by $5.9 million or 8.7% year-over-year, largely due to inflationary pressures and additional costs from acquisitions.
- Finance costs rose by $1.7 million or 16.3% due to higher interest rates on variable rate loan facilities.
- Net earnings decreased by $6.6 million compared to the same quarter last year.
- The company decided not to renew its normal course issuer bid (NCIB), focusing instead on debt reduction and integration of recent acquisitions.
Q & A Highlights
Q: Can you provide more detail on the year-on-year revenue increase and whether there was an improvement in core business trends?
A: The revenue increase was primarily driven by the acquisition of Southeast Forest Products, which helped offset declining pricing. We pushed more units through to achieve the $663 million revenue for the quarter. (CEO, Amar Doman)
Q: Are you seeing any volume pickup from recent hurricanes, especially with the acquisition of Tucker?
A: Yes, we are seeing increased activity in Texas and the Carolinas post-hurricanes. The weather has been favorable, and volumes are looking strong as the fourth quarter begins. (CEO, Amar Doman)
Q: What new processes or expansions in the product portfolio are brought by the new acquisitions?
A: The acquisition of CM Tucker introduces robotics and new product lines like balusters and spindles. This acquisition is technology-forward, and we plan to integrate these technologies across other divisions over time. (CEO, Amar Doman)
Q: How does the current environment for lumber and sawmill curtailments compare historically, and how does it affect your strategy?
A: This environment is unique with permanent closures in British Columbia and expansion in the US South. It's a transition with no historical comparison, indicating a longer-term change in sawmilling. A slight demand increase can lead to rapid rallies, suggesting potential for lumber to perform well with a recovery in housing. (CEO, Amar Doman)
Q: Are there any revenue synergies expected from the integration of Doman and CM Tucker, and how long might it take to realize them?
A: There is minimal geographic overlap, allowing us to quote national accounts across the US. This national footprint is valuable, and we expect to leverage it further in our 2025 negotiations. (CEO, Amar Doman)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
