• Revenue: Up 2.3% year-on-year; organic revenue down 0.2% due to lower pricing.
• Volume: Increased 1.3% year-on-year.
• Adjusted EBITDA: $148 million, down 14% year-on-year; margin declined to 16.1%.
• Adjusted Gross Profit Margin: 29.6%, down 170 basis points year-on-year.
• Adjusted Earnings Per Share (EPS): $0.92, down from the previous year.
• Cash Flow from Operations: $301 million for the full year, down year-on-year.
• Net Debt-to-EBITDA Ratio: 3.1 times, flat versus the end of Q3.
• HHC Segment: Organic revenue down 2.2% year-on-year; adjusted EBITDA margin decreased to 13.9%.
• Engineering Adhesives (EA): Organic revenue decreased 1.9%; adjusted EBITDA margin at 19.7%.
• Construction Adhesives (CA): Organic sales increased 10.5%; adjusted EBITDA margin at 12.3%.
• 2025 Guidance: Full year net revenue expected to be down 2% to 4%; adjusted EBITDA between $600 million and $625 million.
• Capital Expenditures: Approximately $160 million expected for 2025.

• Warning! GuruFocus has detected 5 Warning Sign with FUL.

Release Date: January 16, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• H.B. Fuller Co (NYSE:FUL) achieved a record adjusted EBITDA margin of 16.6% for the fiscal year 2024, indicating strong operational performance.
• The company made significant progress in reducing net working capital requirements and maintaining a stable leverage ratio.
• Strategic acquisitions, such as GEM Srl and Medifill Ltd, are expected to enhance market presence in the medical adhesives sector.
• The Construction Adhesives segment showed strong performance with a 10.5% year-on-year increase in organic sales, driven by roofing growth.
• H.B. Fuller Co (NYSE:FUL) plans to reduce its global manufacturing footprint, which is expected to generate approximately $75 million in annualized cost savings once complete.

Negative Points

• The fourth quarter saw an unexpected deceleration in volume across most end markets, impacting overall performance.
• Organic sales were down slightly in the fourth quarter, reflecting a weakening economic backdrop.
• Adjusted EBITDA in the fourth quarter was down 14% year-on-year, with a decline in adjusted EBITDA margin to 16.1%.
• The HHC segment experienced a marked slowdown in volume growth and negative pricing year-on-year.
• The company faced higher raw material costs and delayed pricing actions, leading to margin pressure.

Q & A Highlights

Q: Can you speak to the cash cost to implement the restructuring plan and the flow-through of expected savings? A: Celeste Mastin, CEO: The plan is aggressive but achievable. We have a global footprint with redundancies and opportunities for growth. We plan to reduce facilities from 82 to 55 by 2030, with 16 reductions by the end of 2025. John Corkrean, CFO: Savings should be roughly $5 million in 2025, stepping up to $20 million in 2026, reaching a $75 million run rate. The cost to implement is estimated between $25 million and $50 million, with capital costs of $150 million over five years.

Q: What is the level of price increase you're expecting for fiscal 2025? A: Celeste Mastin, CEO: We anticipate a 0% to 2% price increase, with volume down mostly across the total business in 2025. In HHC, significant raw material cost increases were not fully offset by price increases in Q4, but we are implementing them in Q1.

Q: Can you elaborate on the weakness in the packaging and consumer markets? A: Celeste Mastin, CEO: In Q4, we saw a deceleration in 10 out of 13 HHC market segments, including consumer-packaged goods. There may be inventory rationalization at customers, and distributors are cautious. However, we are gaining market share in flexible packaging through innovation.

Q: Why were margins down significantly in Q4, and how are volumes tracking in Q1? A: Celeste Mastin, CEO: Margins were down due to raw material cost increases, particularly in HHC. John Corkrean, CFO: Q1 volumes are modestly better, but Q1 is typically our lowest margin quarter. We expect pricing actions to show more impact in Q2.

Q: How are you managing execution risk and customer service during the manufacturing footprint optimization? A: Celeste Mastin, CEO: We are consolidating within the existing footprint and reducing redundancy, particularly in HHC. We are confident in our operational leadership and have piloted location closures successfully. The focus is on reducing costs and improving service.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.