Two Major Industry Players Report Expected Drops but Remain “Pleased” with Second QuarterAugust 5th, 2020 by Tara Taffera
With second quarter financials released by many of the industry’s players, Masonite and Jeld-Wen were the latest to release their results this week. CEOs of both organizations addressed how COVID-19 impacted operations.
At Masonite, net sales decreased 11% to $500 million in the second quarter versus $563 million in the second quarter of 2019, due to the negative impacts of COVID-19. Still, Howard Heckes, president and CEO says he is “extremely pleased with our second quarter performance and the resilience of our business.”
Jeld-Wen reported that revenue improved sequentially throughout the quarter, declining only 11.3% year-over-year, ahead of original expectations.
“We delivered performance above expectations in an uncertain demand environment and in challenging operating conditions, demonstrating that underlying business fundamentals are strong and our strategy is delivering results,” said Gary S. Michel, Jeld-Wen president and CEO.
Both CEOs recognized employees for their resilience in withstanding tough economic conditions, and say they remained committed to previously defined goals.
“We benefited from our previously implemented pricing strategy and saw demand strengthen following an initial decline early in the quarter during the onset of the COVID-19 pandemic,” said Masonite’s Heckes. “Operationally we faced many headwinds, yet the organization did an exceptional job addressing these challenges in order to protect our employees and serve our customers. With continued uncertainty around the impact of the ongoing pandemic, we remain keenly focused on near-term execution while also monitoring emerging trends that may contribute to our business momentum following the crisis.”
Michel said Jeld-Wen, “remained disciplined,” following the company’s playbook amid COVID-19. The company’s goals remained, “to profitably grow our market share in key products and channels, deliver improved price realization, and structurally reduce costs through the rigorous deployment of the Jeld-Wen Excellence Model (JEM) and our footprint rationalization and modernization initiatives,” he said.
“I am proud of how our associates have risen to the unprecedented challenges brought on by COVID-19, maintaining safe working environments for each other and our channel partners, and continuing to deliver world-class products to our customers,” Michel added. “While the persistence of the virus in many countries globally contributes to near-term demand uncertainty, we believe that the pandemic will result in long-term trends that will drive improved demand for our products in both new construction and repair and remodel activity.”
Masonite Financial Highlights
When discussing Masonite’s second quarter results, the company reported that North American residential net sales were $381 million, flat compared to the second quarter of 2019. Total company gross profit increased 6% to $136 million in the second quarter of 2020 compared to $129 million in the second quarter of 2019.
Net income attributable to Masonite increased $10 million to $34 million in the second quarter of 2020. Adjusted EBITDA increased to $92 million in the second quarter of 2020 from $80 million in the second quarter of 2019.
Looking at year-to-date results, North American residential net sales were $765 million, a 4% increase compared to the first six months of 2019, driven by a 7% increase in AUP partially offset by a 2% decrease in base volume and a 1% decrease from foreign exchange. Europe net sales were $101 million, a 39% decrease compared to the first six months of 2019. Architectural net sales were $177 million, a 3% decrease compared to the first six months of 2019.
Total company gross profit increased 12% to $271 million in the first six months of 2020, compared to $241 million in the comparable period of 2019.
Selling, general and administrative (SG&A) expenses of $154 million decreased $3 million compared to the first six months of 2019. The decrease was primarily due to COVID-19 related cost reductions and non-cash items, the company reported.
Jeld-Wen Financial Highlights
Second quarter 2020 highlights for Jeld-Wen include an adjusted EBITDA margin increased 130 basis points to 12.7%, despite impact from the COVID-19 pandemic. Free cash flow improved $12.4 million year-over-year. The company also reported a strengthened balance sheet with record liquidity of $809 million, an increase of $254 million compared to December 31, 2019.
Net revenue for the three months ended June 27, 2020 decreased $126.6 million, or 11.3%, to $992.3 million, compared to $1,119.0 million for the same period last year. The decrease in net revenue was driven by a 10% decline in core revenue and a 1% adverse impact from foreign exchange. Core revenue, which excludes the impact of foreign exchange and acquisitions completed in the last twelve months, was unfavorably impacted by a 13% headwind from volume/mix, primarily related to COVID-19, the company reported, partially offset by a 3% pricing benefit.
Net income was $23.1 million during the second quarter, compared to net income of $22.4 million in the same quarter last year, an increase of $0.7 million.
For North America, net revenue decreased $60.3 million, or 9.0%, to $608.1 million, due to a 9% decrease in core revenue. Core revenue decreased due to a 14% volume/mix headwind, primarily a result of the COVID-19 pandemic, the company reported, partially offset by a 5% pricing benefit. Adjusted EBITDA margin expanded by 190 basis points to 15.0%, according to the company. In Europe, net revenue decreased $38.9 million, or 12.9%, to $261.5 million, due to an 11% decrease in core revenue and a 2% adverse impact from foreign exchange.