Boise Cascade (NYSE:BCC) reported a 15% decrease in consolidated sales in its third quarter 2023 earnings conference call. The company attributed the decline to lower prices and sales volumes in its Wood Products operations. Despite the drop in sales, both Wood Products and Building Materials Distribution (BMD) delivered solid operating and financial results. The company also announced the completion of the acquisition of BROSCO, which expands its presence in the Northeast region.
Key takeaways from the call:
- The company reported a net income of $143.1 million, a decrease from $219.6 million in the same quarter of 2022.
- Boise Cascade's outlook for 2023 U.S. housing starts is estimated at 1.4 million units.
- The company is focused on executing its growth strategies despite economic uncertainties and affordability challenges.
- Consensus forecasts for 2024 single- and multi-family housing starts in the U.S. range from 1.3 million to 1.4 million units.
- The company is continuing its investments in strategic initiatives, such as door shops in Kansas City and Denver, and an acquisition in Florida.
- Boise Cascade expects some margin compression in the BMD segment due to seasonality and fixed costs.
- The company uses a rolling average to buffer the impact of fluctuations in web stock costs and does not foresee significant increases in log costs in the near future.
During the call, Boise Cascade highlighted the importance of two-step distribution in their business model and the growth opportunity presented by customers preferring new SKUs and job packs over truckload shipments. The company also noted that they have managed web stock costs and log costs effectively, with log costs remaining relatively flat in the Southeastern United States and decreasing in the Pacific Northwest.
The company also discussed the role of Engineered Wood Products (EWP) in the construction industry, emphasizing the speed of construction and the reduction of cycle time that EWP offers. Boise Cascade did not foresee any significant shifts between EWP and lumber in terms of market share. The company also addressed price erosion in the EWP market, stating it is not a seasonal issue and does not expect significant changes.
Boise Cascade's capital allocation priorities include maintaining maintenance CapEx at around $125 million and potentially considering stock repurchases if there are no restrictions and it is deemed an attractive use of cash. The company also indicated that they see an opportunity for additional sales due to their production capacity and availability of I-joist products.
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