Lumber price hikes helped enable BMC Stock Holdings to swing to a net profit of $3.7 million in the first quarter from a year-earlier $6.8 million loss on a 4.2% rise in sales to $757.7 million, the nation’s second-biggest full-service lumberyard reported today.
Higher prices for framing and sheet goods accounted for 2.8 percentage points of the 4.2-point sales gain, Atlanta-based BMC estimated. The company sold $244.4 million worth of lumber and sheet goods in the quarter, up 14.5% from a year earlier.
BMC stressed that overall sales might have been even better were it not for an abundance of rain in certain markets. Sales in March alone were up 9% and continued strong in April, it said. Gross profit climbed to 23.5% of net sales from 22.9%. BMC also touted the fact that sales of its Ready-Frame product jumped 68% in the January-to-March period to hit $34.1 million.
But the company also added a cautionary note. While higher commodity costs should boost net sales and gross profits in the future, BMC Chief Financial Officer Jim Major warned that such gains “may continue to constrain incremental EBITDA margins in the second quarter as increased selling prices have not been fully absorbed into the market. As a result, we are redoubling our efforts to drive improved operating expense leverage over the balance of 2017.”
Selling, general, and administrative expenses inched up to 19.6% of net sales from 19.5%.
One way that BMC prefers to measure itself in terms of adjusted net income, which consists of plus merger and integration costs, non-cash stock compensation expense, acquisition costs, impairment of assets, inventory step-up charges and after tax effecting those items. By that metric, adjusted first-quarter net income rose to $7.7 million from a year-earlier $5.4 million.
“The fundamentals supporting the single-family housing segment, including job growth, rising wages, historically low interest rates and low levels of inventory all provide confidence that we will continue to see a rising demand environment, and we are well-positioned to capitalize on this improvement,” President and CEO Peter Alexander said in the earnings announcement. “With moderating weather out west, we expect increased top line growth in the upcoming quarters and expect at least a 50% increase in Ready-Frame® sales for full year 2017 as compared to 2016. For the full year, we expect to achieve significant improvements in profitability as we continue to implement our growth strategies and realize improved operating expense leverage.”
On the balance sheet, goodwill accounts for $257.1 million of the company’s $1.44 billion in total assets, while it has $363.8 million in long-term debt.
