UFP Industries Q4 2024 Earnings Report

Tenaris EPS Results

• Actual EPS: $1.20
• Consensus EPS: $1.24
• Beat/Miss: Missed by -$0.04
• One Year Ago EPS: N/A

Tenaris Revenue Results

• Actual Revenue: $1.46 billion
• Expected Revenue: $1.43 billion
• Beat/Miss: Beat by +$35.91 million
• YoY Revenue Growth: N/A

Tenaris Announcement Details

• Quarter: Q4 2024
• Date: 2/17/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, February 18, 2025
• Conference Call Time: 9:00AM ET

Tenaris (NYSE:TS), together with its subsidiaries, produces and sells seamless and welded steel tubular products and related services for the oil and gas industry, and other industrial applications. The company offers steel casings, tubing products, mechanical and structural pipes, line pipes, cold-drawn pipes, and premium joints and couplings; and coiled tubing products for oil and gas drilling and workovers, and subsea pipelines. It also manufactures sucker rods used in oil extraction activities and tubes for plumbing and construction applications; and offers oilfield/hydraulic fracturing services and energy and raw materials, and financial services. The company operates in North America, South America, Europe, the Middle East and Africa, and the Asia Pacific. Tenaris S.A. was founded in 2001 and is based in Luxembourg. Tenaris S.A. operates as a subsidiary of Techint Holdings S.à r.l.

Tesla Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to the Q4 twenty twenty four UFP Industries Inc. Earnings Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to your speaker, Mr. Stanley Elliott, Director of Investor Relations. Please go ahead.

[Stanley Elliott, Director - Investor Relations at UFP Industries]

Good morning, everyone, and thank you for joining us to discuss our fourth quarter and full year twenty twenty four results. Joining me today on the call are Matt Massad, our Executive Chairman of the Board Will Schwartz, our Chief Executive Officer and Mike Cole, our Chief Financial Officer. This conference call is available simultaneously to all interested investors in News Media through the Investor Relations section of our website, ufpi.com. A replay of the call will be posted to our website as well. Before I turn the call over, let me remind you that today's press release and presentation include forward looking statements as defined in the Private Securities Litigation Reform Act of 1995.

[Stanley Elliott, Director - Investor Relations at UFP Industries]

These statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. These risks and uncertainties also include, but are not limited to, those factors identified in the press release and in the company's filings with the Securities and Exchange Commission. I will now turn the call over to Matt.

[Matthew Missad, Executive Chair of the Board at UFP Industries]

Thank you, Stanley, and good morning, everyone. We appreciate you joining us for our fourth quarter and year end twenty twenty four earnings call. In recognition of basketball season, this morning's call will feature a three man weave. I will give a brief overview of Q4, then I will pass the ball to our new CEO, Will Schwartz, who will talk about our markets and plans for 2025 and beyond. Will will pass to Mike Cole for a more detailed financial discussion before we open the line for questions.

[Matthew Missad, Executive Chair of the Board at UFP Industries]

The fourth quarter of twenty twenty four saw a similar declining sequential demand trend in most areas of our business. This continued weak demand decreased operating efficiency and increased competitive pressure. Both of these factors compressed operating profits. In response to these trends, our leadership team have been executing the cost reductions and facility reductions we outlined in Q4. They are also identifying and planning for additional cost containment and prioritization of projects and administrative initiatives to ensure that those that are not mandated by regulations or higher risk factors are implemented based on the highest return to the company.

[Matthew Missad, Executive Chair of the Board at UFP Industries]

And in spite of these challenges, the team finished 2024 with sales of $6,700,000,000 and EBITDA of $682,300,000 dollars a 10.3% EBITDA margin. More importantly, the balance sheet is exceptionally strong with nearly $1,200,000,000 in cash and an equivalent amount of debt capacity. This liquidity positions the company to aggressively pursue its growth strategy as well as to take advantage of more reasonably priced M and A opportunities should they arise. It also allows us to continue returning capital to shareholders in the form of cash dividends and share repurchases. Our teammates are not happy with the overall performance, which they feel personally in the decline in their incentive compensation.

[Matthew Missad, Executive Chair of the Board at UFP Industries]

This, however, is consistent with our philosophy to reward our team when business is great and to share the pain when it is not. Obviously, we are all highly motivated to improve the results and drive shareholder value to new heights. As you can imagine, our leadership team like Queen and David Bowie feels the pressure coming down on them. Fortunately, I have seen them under pressure and I am very confident that Will and the team whose veins are like ice, ice, baby, will succeed in spite of the pressure. Now, I'll turn it over to Will Schwartz.

[Will Schwartz, CEO at UFP Industries]

Thank you, Matt, for the kind words. Good morning, everyone, and thank you for joining us on our fourth quarter earnings call. I'd like to start by saying that I couldn't be more honored and proud to be entrusted with the CEO role. UFP has an incredibly rich history, having celebrated our seventieth anniversary earlier this month, and I look forward to shaping this next chapter. I also want to thank Matt for his truly remarkable career and the impact he's had on transforming UFP over his thirty nine years with the company and thirteen plus years as CEO.

[Will Schwartz, CEO at UFP Industries]

I am indebted to him for his leadership, mentorship, friendship and support, as well as the support of our board and over 15,000 plus employees across the globe. I couldn't be more excited about the opportunities that exist in each of our business units. We entered 2024 somewhat cautiously, expecting total unit sales would range from slightly positive to slightly negative for the year. That framework largely played out. Fourth quarter unit sales were relatively unchanged in the quarter with 2% growth in construction and 1% growth in international offsetting a 1% decline in our packaging business and flat sales in our Retail segment.

[Will Schwartz, CEO at UFP Industries]

Unit sales declined 1% for the full year. 2024 proved to be more challenging than initially expected, more so on the pricing side, and we felt these challenges primarily across our packaging and construction businesses. With the exception of Pallet one and factory built, conditions in the second half of the year took a step down where broad based pricing pressures, commodity deflation and a negative manufacturing variances and product mix impacted our profitability. As we mentioned over the past few quarters, customer demand continues to be mixed. However, our broad based portfolio allowed us to dampen some of the end market volatility.

[Will Schwartz, CEO at UFP Industries]

While down from twenty twenty three levels, 2024 EBITDA margin is 300 basis points higher than twenty nineteen levels. This portfolio of products can and will deliver better results and we are actively addressing items under our control. Looking ahead, driving profitable growth will remain a key part of our overall strategy. We have identified runways across each of our business units that meet our high return threshold and continue to act on both inorganic and organic opportunities. We're going to be aggressive in gross sales, but we are going to grow the right sales.

[Will Schwartz, CEO at UFP Industries]

Our M and A team remains extremely active and our acquisition pipelines are healthy. The valuation gap we've seen over the past several years between buyers and sellers has started to narrow. However, we remain disciplined on what we're willing to pay. Earlier in January, we announced the acquisition of CNL Wood Products, a leading manufacturer of wood pallets in Alabama. We are excited to welcome CNL into the UFP family.

[Will Schwartz, CEO at UFP Industries]

CNL will operate as part of UFP Packaging's PalletOne business unit and expands our geographic reach. Expanding into new geographies or expanding our product offerings or both are key criteria when identifying acquisition targets across all of our business units. We prefer M and A to greenfield expansion in most cases, but that being said, we have identified a number of greenfield opportunities as part of the 1,000,000,000 multi year capital plan mentioned on previous calls. We are investing heavily in automation, technology, new product development and capacity expansion that will leave us better positioned to create shareholder value. The strength of our balance sheet has allowed us to deploy growth capital across our highest growth and highest margin opportunities.

[Will Schwartz, CEO at UFP Industries]

We can do this while maintaining our conservative financial structure, which we believe positions us well to navigate through all phases of an economic cycle. New product sales for 2024 came in at $5.00 $5,000,000 and 7.6% of sales. We continue to strive for and see a pathway for new products to become 10% of sales over time. I am extremely pleased with the momentum we are seeing across the portfolio and believe our current product pipeline is one of the strongest in our company's history. We will showcase some of these products at the IBS trade show in Las Vegas next week, where we will introduce new products and new applications featuring our proprietary mineral based SureStone technology.

[Will Schwartz, CEO at UFP Industries]

One product that we are particularly excited about is our new Summit decking board, designed and engineered utilizing our ShearStone technology, but at a price point to target the DIY and small contractor markets. This product will become available through both independent and big box retailers over the course of 2025 as we continue to expand distribution and manufacturing capacities. We will support the launch with a marketing campaign designed to help drive brand awareness for decorators and the value behind this proprietary technology. Meeting our internal return on capital targets drives all of our business decisions. We remain keenly focused on the cost side of our business.

[Will Schwartz, CEO at UFP Industries]

In 2024, we closed underperforming operations and other less strategic locations as we look to balance our costs with the current business environment. We will continue to evaluate the entirety of our portfolio and explore strategic alternatives for products and assets that fall short of our profit thresholds. Across the portfolio, we continue to identify opportunities to reduce costs and become more efficient. From purchasing and manufacturing to sales, marketing, transportation, we will pursue actions that drive a better bottom line performance. We have already identified $60,000,000 of structural cost savings from cost and capacity reductions and these efforts are ongoing.

[Will Schwartz, CEO at UFP Industries]

At the same time, we will not stop making strategic investments to develop our growth runways, which we believe will enhance our product mix and improve our return to shareholders. These investments include expanding capacity in new and value added product manufacturing, expanding our core, higher margin products geographically and improving efficiencies and throughput while lowering costs through automation. Turning quickly to the segments. Retail, our product strategy is to grow applications on the exterior of the home and in the yard, while also adding new applications inside the home. I previously mentioned new products expanding our position in the composite decking space, where there is a cautious optimism around the spring building season.

[Will Schwartz, CEO at UFP Industries]

ProWood continues to identify cost out and facility consolidation opportunities while investing in its go to market strategies. In construction, our site build business continues to normalize following years of robust demand. Our factory build operations continue to capitalize on favorable industry conditions and our strong market position to drive share gains during the year. We took aggressive cost actions in our commercial business and we anticipate improved financial results going forward. Concrete Forming continues to position its business to more front end design and value added solutions.

[Will Schwartz, CEO at UFP Industries]

We think our value proposition will become even more apparent should construction labor see any volatility resulting from recent policy decisions. Packaging. Organic sales declines in our structural and protective packaging more than offset growth in our highly automated PalletOne business. Pricing remains competitive, more of a function of end markets. Material costs are generally stable.

[Will Schwartz, CEO at UFP Industries]

Turning to our outlook. We expect the business conditions that impacted our 2024 results will carry over through the first half of twenty twenty five. Existing home sales remain depressed, home equity levels remain at record levels and housing affordability remains a challenge. Industry forecasts remain mixed as well as with housing starts estimates for 2025 ranging from slightly down to slightly up for the year. R and R forecasts are also showing a lack of true consensus with headwinds expected to continue in the first half of the year before returning to growth in the back half.

[Will Schwartz, CEO at UFP Industries]

This outlook is further clouded by recent news around tariffs on Canadian lumber. While the industry imports less than 20% of lumber from Canada, any movement in the commodity creates inflation in domestically sourced wood species as well. While the twenty five percent tariff on Canadian lumber has been paused for thirty days, the situation remains fluid. Regardless of the outcome, we remain confident in our ability to navigate any potential pricing resulting from tariffs with our balanced portfolio and purchasing strategies. Historically, softer patches in the economy have allowed UFP to utilize our scale, strong financial position and generally lower cost manufacturing position to gain share in the marketplace.

[Will Schwartz, CEO at UFP Industries]

All of this uncertainty is contributing to a lack of visibility beyond the first half of twenty twenty five. We expect modest unit declines across each business unit on the aggregate through the first half of the year. We do expect commodity deflation to be less of a headwind to margins in the coming year given recent trends in the lumber market. Longer term, we are well positioned to take advantage of favorable demographic trends and an under built housing market. We plan to take market share as well.

[Will Schwartz, CEO at UFP Industries]

A hallmark of this company is that everything we do from the boardroom down to the shop floor is driven by a returns focused approach and that will not change. We will manage through this uncertainty and emerge a leaner, more nimble and more profitable company. At this point, I will pass to our CFO, Mike Cole to discuss the financials.

[Michael Cole, CFO & Treasurer at UFP Industries]

Thank you, Al. Our consolidated results this quarter include a 4% decline in sales to $1,460,000,000 driven by a 4% reduction in selling prices while unit sales were flat. The decline in selling prices primarily resulted from weaker demand, which led to more competitive pricing in our Packaging and Construction segments. This headwind resulted in a 28% decline in our adjusted EBITDA to $133,000,000 while our adjusted EBITDA margin fell to 9.1%. While volumes and margins are seasonally lower in Q4, persisting competitive pricing pressured margins more than typical trends.

[Michael Cole, CFO & Treasurer at UFP Industries]

Importantly, we were able to deliver an adjusted EBITDA margin for the year of 10.3% well above historical levels in spite of demand and pricing challenges throughout the year. Similarly, our return on invested capital was resilient at 18.3%, which is almost two times our weighted average cost of capital and well above historical levels, highlighting the strong returns our business can achieve even when faced with more challenging market conditions. We continue to generate strong operating cash flows, which totaled $643,000,000 for the year and our balance sheet continues to gain strength with a cash surplus that's grown to almost $1,200,000,000 providing us with ample flexibility to pursue our financial and strategic objectives as we move into 2025 and beyond. Moving on to our segments. Sales in our retail segment were $525,000,000 flat compared with last year consisting of a 1% decline due to transfers of certain product sales to the Packaging segment offset by a 1% increase in unit sales.

[Michael Cole, CFO & Treasurer at UFP Industries]

Unit increase was comprised of a 3% increase in volume with big box customers, while our volume with independent retailers declined by 7%. By business unit, we experienced a 1% unit increase in ProWid offset by a 2% decline in Edge and a 4% decline in Deckorators. Within Deckorators, our decking sales increased 20% driven by our Surestone decking product which increased 43%. Surestone which comprised 55% of our total composite decking sales this quarter will continue to benefit from our efforts to expand distribution, bring on new capacity and increase our marketing efforts. Our year over year gross profits and gross margins in retail improved primarily due to favorable changes in our ProWid product mix due to SKU rationalization and the sustained impact of operating improvements we've discussed throughout the year.

[Michael Cole, CFO & Treasurer at UFP Industries]

Operating profits in retail improved by $7,000,000 as a result of the improvement in gross profit and a $6,000,000 decline in SG and A as a result of lower compensation costs and bonuses, offset by an increase in additional SureStone advertising costs. Moving on to packaging. Sales in this segment dropped 9% to $375,000,000 consisting of an 8% decline in selling prices and a 2% decrease in units, partially offset by a 1% increase as a result of the transfer of certain sales from retail. Customer demand in this segment remains soft and that's contributed to a more competitive pricing environment as we execute our strategy to gain market share. We also had an unfavorable change in product mix this quarter as our largest and most profitable business unit Structural Packaging experienced the greatest decline in volume.

[Michael Cole, CFO & Treasurer at UFP Industries]

As a result of these factors, year over year gross profits dropped by $21,000,000 for the quarter and gross margin dropped by three sixty basis points. Operating profits in the Packaging segment declined by $23,000,000 to a total of $20,000,000 for the quarter due to the decrease in gross profits and $5,000,000 of impairment charges associated with plant closures and capacity reductions reflected as a separate line item in the income statement below SG and A. Year over year SG and A expenses declined by only $4,000,000 for the quarter in the Packaging segment. However, it's important to note that prior year SG and A included a $5,000,000 adjustment to reduce annual accrued sales incentives and a $3,000,000 adjustment to reduce an earn out liability. Excluding these amounts, SG and A declined by $12,000,000 year over year, primarily due to lower bonus and bad debt expense.

[Michael Cole, CFO & Treasurer at UFP Industries]

Turning to construction, sales in this segment decreased 5% to $487,000,000 as a 7% decline in selling prices was partially offset by a 2% increase in units. The increase in volume was due to our factory built and concrete forming business units. These increases were partially offset by declines in our site built and commercial units due to weaker demand. The 19% volume increase in our factory built unit was due to an increase in industry production and market share gains. The increase in concrete forming was due to market share gains.

[Michael Cole, CFO & Treasurer at UFP Industries]

Selling prices fell in each of our business unit with the greatest impact in our site built unit. Gross profit decreased by $33,000,000 year over year with gross margin down $5.60 basis points driven by the decline in selling prices and a less favorable product mix as site build comprised a lower percentage of our overall sales. When combined with an $11,000,000 decrease in our SG and A due to lower bonus expense, our operating profits declined by 22,000,000 to a total of $36,000,000 for the quarter. As we manage through this cycle, we're mindful of our cost structure and working to find the right balance of making sure the company is appropriately sized relative to demand, while still investing in the resources needed to achieve our long term objectives for growth, product innovation, building brand awareness and improving our efficiency through technology. Our consolidated SG and A expenses declined $15,000,000 for the quarter due to a $24,000,000 decrease in bonus expense.

[Michael Cole, CFO & Treasurer at UFP Industries]

The remaining increase resulted from prior year adjustments totaling $8,000,000 that I mentioned earlier to reduce annual accrued sales incentives and an earn out liability. Additionally, current year increases include $3,000,000 for decorators advertising and $2,000,000 for severances. Looking improvements from cost and capacity reductions of $60,000,000 in 2026. Our plan for SG and A expenses next year excluding highly variable sales and bonus incentives tied to profitability is $565,000,000 This is flat when compared with 2024 and is comprised of $26,000,000 of anticipated cost reductions offset by $6,000,000 of planned increases primarily associated with new greenfield operations, technology improvements and product innovation and a $20,000,000 increase in our decorators advertising spend as we invest in building the ShearStone brand. In addition to the SG and A cost reductions, we've taken actions to reduce or eliminate capacity of locations that are not meeting our profitability targets.

[Michael Cole, CFO & Treasurer at UFP Industries]

We anticipate these actions will have a favorable impact on gross profits totaling approximately $15,000,000 in 2025. Based on the actions we've taken to date and opportunities for continued improvement, we're optimistic we will achieve our 2026 goal. Moving on to our cash flow statement. Our operating cash flow was nearly $643,000,000 Last year, our operating cash flow of $960,000,000 was elevated and included a $288,000,000 reduction in net working capital as we adjusted to reduce our inventories from the peak demand of the pandemic. Our investing activities included $232,000,000 in capital expenditures, comprising $124,000,000 in maintenance CapEx and $108,000,000 of expansionary CapEx.

[Michael Cole, CFO & Treasurer at UFP Industries]

As a reminder, our expansionary investments are primarily focused on three key areas: expanding our capacity to manufacture new and value added products geographic expansion in core higher margin businesses and achieving efficiencies through automation. Investing activities also included the acquisition of CNL Wood Products, a manufacturer of machine built pallets located in Hartzell, Alabama, which

[Michael Cole, CFO & Treasurer at UFP Industries]

fills a

[Michael Cole, CFO & Treasurer at UFP Industries]

geographic gap for our Pallet One business unit. Finally, our financing activities primarily consisted of returning capital to shareholders through almost $81,000,000 of dividends and $159,000,000 of share repurchases. For the year, we repurchased approximately 1,400,000.0 shares at an average price of less than $114 Turning to our capital structure and resources, we continue to have a strong balance sheet with nearly $1,200,000,000 in surplus cash, while our total liquidity has grown to 2,500,000,000 Our liquidity includes cash and amounts available to borrow under our long term lending agreements. With respect to capital allocation, we plan to continue to pursue a balanced and return driven approach. As we've discussed in the past, our highest priority for capital allocation is to drive organic and inorganic growth that results in higher margins and returns.

[Michael Cole, CFO & Treasurer at UFP Industries]

Our strategy also includes growing our dividends in line with our long term anticipated free cash flow growth and repurchasing our stock to offset dilution from share based compensation plans. We'll continue to opportunistically buy back more stock when we believe it's trading at a discounted value. With these points in mind, our board approved a quarterly dividend of $0.35 a share to be paid in December, representing a 6% increase from the rate paid a year ago. Last July, our board approved another $200,000,000 share repurchase authorization that expires at the July 2025. We've repurchased over 9,300 shares at an average price under $112 under this new authorization.

[Michael Cole, CFO & Treasurer at UFP Industries]

With regard to capital expenditures, last year we indicated we plan to increase our investments to an estimated range of $250,000,000 to $300,000,000 in 2024 to capitalize on the automation and higher margin growth opportunities we see in each of our segments. Our capital expenditures this year totaled $232,000,000 which was below our target as a result of longer lead times for equipment and the time needed for site selection in the case of investments in new locations. Projects approved in 2024 that will be completed in 2025 are expected to total 143,000,000 In addition, we currently plan to approve new capital expenditure projects in 2025 totaling approximately $350,000,000 dollars Finally, we continue to pursue a pipeline of M and A opportunities that are a strong strategic fit while providing higher margin return and growth potential. As we pursue these opportunities, we will remain disciplined on valuation. I'll finish up with comments about our outlook for the first half of the year.

[Michael Cole, CFO & Treasurer at UFP Industries]

We anticipate demand will be slightly down in each of our segments during this period. We believe this soft demand environment will also continue to result in more competitive pricing. Each of these factors should make for more challenging year over year unit sales and profit comparisons in the first half of the year. While some market indicators relevant to our business suggest conditions may improve from the first half of the year to the back half, we continue to approach the year with a sense of caution. With this uncertainty, we'll focus on things in our control to manage through these more challenging conditions in the short term, reducing costs, eliminating excess capacity and divesting underperforming assets, while positioning ourselves for eventual improvements in market demand and executing our strategies to drive long term growth and margin improvements.

[Michael Cole, CFO & Treasurer at UFP Industries]

With that, we'll open it up for questions.

[Operator]

And our first question will come from the line of Kurt Yinger with D. A. Davidson. Your line is open.

[Kurt Yinger, Associate Vice President, Research Analyst at D.A. Davidson Companies]

Great.

[Matthew Missad, Executive Chair of the Board at UFP Industries]

Hey, good morning, Curt.

[Kurt Yinger, Associate Vice President, Research Analyst at D.A. Davidson Companies]

Good morning, everyone. Good morning. Hi, Curt.

[Kurt Yinger, Associate Vice President, Research Analyst at D.A. Davidson Companies]

I just wanted to start off with decorators and was hoping you could maybe level set us around any shelf space changes at the big box level and kind of the expected impact on growth here in 2025 as well as maybe more so initiatives on the pro side including any strategies to maybe expand distribution?

[Matthew Missad, Executive Chair of the Board at UFP Industries]

Yes, that's a really good question. Certainly one that we're extremely excited about. You've heard a lot about the SureStone technology and we will have placement in a big way. That product is currently making its way to the big box and second half of the year it should be in a big way in 1,500 plus stores. We continue to build on our capacities through the CapEx investments that we've talked about and are excited.

[Matthew Missad, Executive Chair of the Board at UFP Industries]

So you'll see that really in the second half of the year come into play.

[Kurt Yinger, Associate Vice President, Research Analyst at D.A. Davidson Companies]

Got it. Okay. That makes sense. And then just on the construction gross margins, in terms of kind of the pressure versus the prior year, how much of that is really attributable to mix and factory built, the strength there versus site built? And then within site built specifically, is that mainly an unabsorbed fixed cost dynamic or how would you kind of describe the competitive dynamics there and gross margins you're bidding today versus the last couple of quarters?

[Will Schwartz, CEO at UFP Industries]

Mike, you want to take that one?

[Michael Cole, CFO & Treasurer at UFP Industries]

Yes, sure. So your first question about kind of the price decline we've seen in construction and how much of that is mix related versus just pricing declines. It's hard to break that out, Kurt, without giving you additional insights into the margins for each business unit, which as you know we're reluctant to do. I would there have been if I just kind of stay at a high level, the pricing declines within Saipo were very significant. We expect those to continue sequentially into the first half of the year.

[Michael Cole, CFO & Treasurer at UFP Industries]

We don't feel like those are at a bottom. We don't feel like those are getting worse. But the mix impact is also significant. If I get into the details there a little bit, factory build carries a much different gross margin structure and operating margin than the Seippold area. The Seippold business unit is our highest gross margin and highest operating margin business.

[Michael Cole, CFO & Treasurer at UFP Industries]

And so that is a prominent impact too. And sorry, I can't break it down further for you. No worries. And we expect that mix sequentially too I should say, we expect that mix impact to continue into the first half of the year too with Seippel being down more than the manufactured housing group.

[Kurt Yinger, Associate Vice President, Research Analyst at D.A. Davidson Companies]

Got it. Okay. And then I know you talked about kind of flat core SG and A 2025 versus 2024. It sounded like that kind of bonus expense component was a pretty meaningful tailwind here in Q4. And I know there's a lot of different factors that play into that.

[Kurt Yinger, Associate Vice President, Research Analyst at D.A. Davidson Companies]

But I guess from a consolidated SG and A standpoint, directionally, would you think that would be flattish as well or any kind of specific bonus elements we should be aware of going into next year?

[Michael Cole, CFO & Treasurer at UFP Industries]

Yes. The kind of the core SG and A, the number I kind of guided to the $565,000,000 that's a number that if you look at future quarters, that's a pretty fixed number from quarter to quarter. Q4 is generally a little bit lower than the other quarters. When you get into bonus and sales incentives, I think the metrics we've given you in the past are still good metrics. Bonus expense now, I would say maybe 16%, seventeen % of pre bonus operating profit that rates a little bit lower at the return on investment tier level we're at now.

[Michael Cole, CFO & Treasurer at UFP Industries]

Sales incentives are still pretty well locked in at about 5% of gross profit. So if you use the five sixty five and kind of spread it the way I'm suggesting and use those variable elements for bonus and sales incentives, you should get to a pretty good pretty good SG and A for the year. Just depends on how profitability and gross profit looks throughout 2025.

[Kurt Yinger, Associate Vice President, Research Analyst at D.A. Davidson Companies]

Okay, perfect. Appreciate the color. I'll turn it over.

[Will Schwartz, CEO at UFP Industries]

Thank you. Thanks, Eric.

[Operator]

Thank you. One moment for our next question. And that will come from the line of Ketan Mamtora with BMO Capital Markets. Your line is open.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Good morning and thanks for taking my question. Maybe to start with on the packaging side, can you talk about sort of what trends you are seeing both from a demand standpoint and sort of pricing competitive dynamics, are you seeing signs of stabilization or are we still seeing those pressures continuing?

[Matthew Missad, Executive Chair of the Board at UFP Industries]

Yes, it's a really good question. Certainly from our perspective, there continues to be pressure. The takeaway in the market is down as we've expressed and we continue to expect that to happen for at least the first half of the year. We believe we've reached kind of a bottom when you come to pricing, but we also expect to see pricing increases until we see some more demand and a more robust takeaway. So hope that kind of gives you what you're looking for there.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Yes, that's helpful. So is it fair to say that Maybe I'll

[Michael Cole, CFO & Treasurer at UFP Industries]

add on to Ketan. There is a mix impact as well. The PalletOne Group has performed better from a unit sales standpoint, taking a lot of share. The margin structure there is quite a bit different than on the structural packaging side. Do expect that to continue on sequentially as well, but I just don't want you to lose sight of the impact on mix there as well.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Got it. That's helpful. And then turning to the CapEx program, Mike, can you remind us out of that $1,000,000,000 what have you already kind of spent in 2024? And as we think about this year, how much is towards that the 1,000,000,000 program?

[Michael Cole, CFO & Treasurer at UFP Industries]

Yes, the 1,000,000,000 program is largely intact. We went through our five year planning cycle just completed it here recently and those numbers are still robust for future investment. Of that $1,000,000,000 last year, we had said that we would approve I think somewhere in the neighborhood of $300,000,000 and we approved actually $330,000,000 We just didn't get much of a spend this year through the CapEx line, maybe as much as you would have expected because so much of that relates to equipment purchases that have long lead times because of the sophisticated sophistication of them and then but also greenfields. The time it takes for site selection and close on greenfield locations is much longer. So I had referenced a carryover CapEx number of well over $100,000,000 I think it was $140,000,000 into next year.

[Michael Cole, CFO & Treasurer at UFP Industries]

And that's part of the reason why it's just the time it takes to get to closure on some of those projects. This year, we have another $350,000,000 that we expect to go through that approval cycle with and kind of fits into all those categories we had talked about before, very robust decorator spend really each of the business units in the packaging segment has a robust spend and cycle business unit stands out within the construction segment, really all of our highest margin businesses.

[Matthew Missad, Executive Chair of the Board at UFP Industries]

The only thing I would add in is really that's a commitment to deploying that capital and that $1,000,000,000 was really based around the inability for the M and A side based on pricing. You could see a pricing environment change on the M and A side that could affect that number, but deployment of capital doesn't change.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Got it. And then just one last one from me. As we think about sort of incrementals and decrementals and packaging and construction, as you made some of the footprint changes, rationalization on sort of the cost side, What do you think is the right way to think about it now?

[Michael Cole, CFO & Treasurer at UFP Industries]

Yes, Ketan, I think when I think about the times when we've guided incremental and decremental in the past and there hasn't been robust changes in pricing up or down. And I think those incremental and decrementals are largely intact. I look at the construction side and the packaging side is kind of being more around that 20% range. Retail will be changing with the growth of decorators as probably more in the 15% range now with Pro would be in as prominent as it is. So I think those are pretty good percentages to use going forward because I don't see the pricing being as big an element of change.

[Michael Cole, CFO & Treasurer at UFP Industries]

It's really more volume related I think at this point. The one caveat to that though is mix. Mix is a big factor. And so if you get mix changes that could result in changes in those estimates.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Got it. That's very helpful. I'll turn it over. Good luck.

[Michael Cole, CFO & Treasurer at UFP Industries]

Thank you.

[Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets]

Thank you.

[Operator]

Thank you. One moment for our next question. And that will come from the line of Reuben Garner with Benchmark. Your line is open.

[Reuben Garner, Equity Research Analyst at The Benchmark Company LLC]

Thank you.

[Will Schwartz, CEO at UFP Industries]

Good morning, Reuben.

[Michael Cole, CFO & Treasurer at UFP Industries]

Hi, Ruben.

[Reuben Garner, Equity Research Analyst at The Benchmark Company LLC]

Kind of an interesting question or potential opportunity on the lumber side with the tariff situation. Do you guys use very much Southern Yellow Pine in some of your markets like site build? Is there an opportunity to kind of increase the penetration there as a lower cost wood source that might help offset some of the pricing and margin pressure? Or is that just not something that I know historically in certain geographical markets it's not been possible, but we've heard it's been increasing of later. Are you guys seeing that in any chance to kind of accelerate it?

[Will Schwartz, CEO at UFP Industries]

Yes, that's a really good question, Ruben. And yes, I think the answer is, I think other species will be adopted based on pricing in the marketplace. Some of that's already happened over the last few years. You've seen a big transition of production further south and in Southern Yellow Pine production and I expect that would continue to be the case if we start to see pricing of other species. I think the adoption rate would grow.

[Reuben Garner, Equity Research Analyst at The Benchmark Company LLC]

Okay. And then a follow-up on decorators, whether it was in Q4 or throughout 2024, was there a noticeable difference in kind of the sell through your customers were seeing and what you guys were selling into the channel? In other words, do you feel like they've destocked over the last year? What does the channel inventory look like today?

[Will Schwartz, CEO at UFP Industries]

No, I can't really speak to any significant changes in that respect. The takeaway of our product is really good and we're excited about the product and product mix, but no, really can't speak to that change in a significant way.

[Reuben Garner, Equity Research Analyst at The Benchmark Company LLC]

Okay. And then last one, I'm going to sneak one more in on the CapEx side. Any material changes to the way you're thinking about that either near term or longer term?

[Michael Cole, CFO & Treasurer at UFP Industries]

I'm sorry Ruben, can you repeat that one?

[Reuben Garner, Equity Research Analyst at The Benchmark Company LLC]

Yes. On the capital expenditures side, any material changes into how you're thinking about investing whether it be in the near term or longer term?

[Michael Cole, CFO & Treasurer at UFP Industries]

No, we've kind of over weighted capital deployment for growth and the CapEx commitment is as high as I've seen it in my career head. Just lots of opportunities to expand existing facilities. The greenfield growth is very prominent, but also the efficiency and automation spend. When I look at the numbers over the next five years, the commitments to $250,000,000 to $300,000,000 And so that's a really big piece too. So that's why the numbers are much more elevated than what we've seen in the past.

[Michael Cole, CFO & Treasurer at UFP Industries]

And so still very committed to that. The only thing to Will's point earlier would be when you look at greenfields in our core businesses, it's always possible to pivot to M and A. We haven't built that into the plan. We know we're going to deploy the capital, but if we see M and A opportunities, obviously we prefer that to greenfield if we can. The opportunities just need to be there.

[Reuben Garner, Equity Research Analyst at The Benchmark Company LLC]

Great. Thanks for the detail and good luck guys. Look forward to seeing you next week.

[Will Schwartz, CEO at UFP Industries]

Thank you very much. Appreciate it.

[Matthew Missad, Executive Chair of the Board at UFP Industries]

Thanks, Shriv.

[Operator]

Thank you. One moment for our next question. And that will come from the line of Jay McCanless with Wedbush. Your line is open.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Hey, good morning guys. Thank you for taking my questions. I guess the first one just to kind of talk about the cost saves and the strategic review you guys highlighted last quarter. I guess is the $60,000,000 in cost saves by year end twenty six, is that where the plan is now or are there still some larger actions you guys could take under consideration?

[Will Schwartz, CEO at UFP Industries]

Yes, I think that's a constant evaluation and we constantly look at it and we are looking at it based on where business sits today. We will continue to look for opportunities for efficiency gains, consolidations, SG and A savings. So that's an ongoing effort.

[Michael Cole, CFO & Treasurer at UFP Industries]

Yes. And so in my comments, Jay, you heard that we had around $41,000,000 of actions we've taken to that we think will be improvements to $25,000,000 right. So those have been identified. We're actively working on that and most if not all of it will occur in '25. The $60,000,000 we expect to get to by full year impact in 2026.

[Michael Cole, CFO & Treasurer at UFP Industries]

Those have been identified and as Will said, we'll be working hard throughout the year to try to make sure we're executing on those, so we get the full year impact in the 26%.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Great. Thank you. And then the next question I had on MH, sounds like things are going really well there. The industry had a very good year with shipments up. I guess, what are you all seeing early first quarter and broadening it out a little bit more?

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Have you all seen any impact on concrete forming from some of these potential budget changes, things like that, something we need to be thinking about on that line item?

[Will Schwartz, CEO at UFP Industries]

Yes, I'll start with the factory built question. We still believe this is going to be a promising spot for us. The affordability is certainly a challenge today, whether it's interest rate related or just cost of building and we believe that's a place that will continue to grow. We're excited about it, continue to invest there. Secondarily, I think it's too early on that concrete forming question to realize any of that.

[Will Schwartz, CEO at UFP Industries]

So more to come in the future, nothing to speak of today.

[Jay McCanless, SVP - Equity Research at Wedbush Securities]

Okay, great. Thanks guys. Appreciate it.

[Will Schwartz, CEO at UFP Industries]

Thank you.

[Operator]

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call over to Mr. Will Schwartz for any closing remarks.

[Will Schwartz, CEO at UFP Industries]

Thanks again for joining us on the call this morning. Despite an uncertain first half outlook for 2025, we remain confident in our strategies. Engrained in our culture, we use the term tough times, tougher people. We look at challenging periods as opportunities to prove what we're truly made of. Thank you for your investment in us and have a great day.

[Operator]

This concludes today's program. Thank you all for participating. You may now disconnect.

Participants

Analysts

• Stanley Elliott, Director - Investor Relations at UFP Industries
• Matthew Missad, Executive Chair of the Board at UFP Industries
• Will Schwartz, CEO at UFP Industries
• Michael Cole, CFO & Treasurer at UFP Industries
• Kurt Yinger, Associate Vice President, Research Analyst at D.A. Davidson Companies
• Ketan Mamtora, Director - Building Products Equity Research at BMO Capital Markets
• Reuben Garner, Equity Research Analyst at The Benchmark Company LLC
• Jay McCanless, SVP - Equity Research at Wedbush Securities