Simpson Manufacturing Company Reports Decrease in Q2 Sales

North America net sales of $463 million decreased 0.5% from $465.5 million on relatively flat sales volumes.

Consolidated income from operations of $132.2 million decreased 8.9% from $145.0 million. The decrease was primarily due to lower gross profits noted above and higher operating expenses including: personnel costs resulting from the increase in the number of employees supporting production, engineering and sales activities and professional fees, partially offset by lower incentive compensation. Consolidated operating margin decreased to 22.1% from 24.3%.

"Our net sales of $597 million were in-line with the prior year quarter in a continued challenging housing market in both the U.S. and Europe," commented Mike Olosky, president and CEO of Simpson Manufacturing. "In North America, both volumes and sales dollars were relatively flat year-over-year with pockets of strength in our OEM, component manufacturer and commercial end markets which were offset by weakness in national retail. In Europe, sales increased modestly year-over-year despite the difficult operating environment driven by our solutions-based selling approach that continues to fuel new customer wins and product applications. We look forward to benefiting from the attainment of defensive synergies in 2024 to drive increased profitability in Europe over time."

Olosky continued: "While we remain optimistic in the longer-term growth prospects of the housing market, our expectation for modest growth this year has been extended out into 2025 where we expect mid-single digit growth in U.S. housing starts. For 2024, we expect U.S. housing starts to be flat to slightly down and European housing starts to be below prior year. While our strong gross margins continue to fuel our organic growth initiatives, we will monitor the market and control costs accordingly, as was evident during the second quarter. We remain optimistic that execution against our growth strategy will enable us to continue outperforming the U.S. housing market on an annual basis."

Other statistics from the second quarter include:

• North America income from operations of $132.1 million decreased 7.9% from $143.4 million. The decrease was primarily due to a decrease in gross profits, as well as increased personnel costs and professional fees.
• Europe income from operations of $12.1 million decreased 13.1% from $14.0 million, primarily due to decrease in gross profits, as well as higher personnel costs, partially offset by lower integration expenses.
• Net income of $97.8 million, or $2.31 per diluted share of the Company's common stock, decreased 8.7% compared to net income of $107.2 million, or $2.50 per diluted share.
• Adjusted EBITDA of $152.6 million decreased 7.8% compared to $165.6 million.
• Cash flow provided by operating activities decreased approximately $78.2 million from $197.2 million to $119.0 million, due primarily to increases in working capital.

Corporate developments

During the second quarter, the company completed the acquisition of Calculated Structured Designs, Inc., a software development company providing solutions for the engineered wood, engineering, design and building industries in North America, Australia, and the U.K. The terms of the transaction were not disclosed.

Business outlook

The company has updated its 2024 financial outlook based on two quarters of financial information to reflect its latest expectations regarding demand trends, raw material costs and operating expenses. Based on business trends and conditions as of July 22, 2024, the company's outlook for the full fiscal year ending December 31, 2024 is as follows:

• Operating margin is estimated to be in the range of 20.0% to 21.0%.
• The effective tax rate is estimated to be in the range of 24.5% to 25.5%, including both federal and state income tax rates as well as international income tax rates, and assuming no tax law changes are enacted.
• Capital expenditures are estimated to be in the range of $180 million to $190 million, which includes $90 million to $100 million for the Columbus, Ohio, facility expansion and the new Gallatin, Tennessee, fastener facility construction with the remaining spend carrying over into 2025.