BFS Acquisitions Boost Manufacturing Business 4.1% in 2019

Originally published by the following source: SBC MagazineMarch 9, 2020
by Jess Lohse

   

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Builders FirstSource reported 2019 net sales of $7.28 billion, down from 2018 numbers of $7.72 billion, but up from 2017 numbers of just over $7 billion. Much of the decrease reported in 2019 was attributed to commodity deflation from lower lumber prices. “Sales volume increased by an estimated 6.5%, driven by increased volumes across all of BFS’ product categories, led by growth in value-added product categories” as reported in Builders FirstSource’s Report of Fourth Quarter and Full Year 2019 Results.

Commenting on the results, CEO Chad Crow remarked, “We delivered another quarter of strong results to end 2019 with a solid foundation to further build on our record of success. Continued focus on our operational excellence initiatives contributed to a robust fourth quarter gross margin, while our full year gross margin improved 230 basis points, allowing us to achieve record annual Adjusted EBITDA of $516 million. Furthermore, we continue to make strategic investments in our operations and acquisitions to drive enhanced growth in margin-accretive products and markets, while preserving our balance sheet strength to support value-enhancing initiatives. We believe we are the strongest company in our industry, which is a real tribute to our team’s hard work and dedication. As we look forward, we are confident that our efforts to further partner with our customers to streamline the construction process will allow us to drive profitable growth in the years to come.”

BFS reported net sales of $1.449 billion in its Manufactured Products, or roughly 19.9% of sales, a 4.1% increase over 2018. Contributing to BFS’ manufacturing sales increase was the acquisition of Raney Components and Raney Construction, a Florida manufacturer and installer of wall panels and trusses. The acquisition is estimated to increase annual revenue by approximately $140 million. 

Since July 2019, BFS has completed five tuck-in acquisitions, adding six truss and millwork facilities to supplement organic growth, which in aggregate are expected to generate approximately $240 million in annual value-added net sales.  In 2020 BFS is looking to continue its success with value added product lines. “In 2020, we plan to expand our manufacturing and value-added capacity. We're adding two new truss and millwork plants, several new truss lines in existing plants and new machinery and systems in a dozen more locations. In total, we expect to again invest around one-third of our total 2020 capital expenditures in our value-added growth initiatives and the expansion of our production capacity” according to Peter Jackson, BFS CFO.

When asked about large public homebuilders vertically integrating into offsite manufacturing, BFS CEO Chad Crow commented, “the first acquisition BFS ever made was a spinoff of a similar situation with Pulte Homes back in 1998 or so. The challenge you see there, when it's one homebuilder getting into, say truss manufacturing, for example, at some point, it's hard to sustain that long term because at some point, if that plan is dependent on only one builder's production needs, at some point, the market gets saturated or built out and all of a sudden, you're delivering these trusses a really long way and it makes it become less economical.”

 

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