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    FULLER H B (FUL)

    FUL Q2 2024 trims organic sales guidance to 0–2% on pricing headwinds

    Reported on Jun 26, 2025 (After Market Close)
    Pre-Earnings Price$76.35Last close (Jun 27, 2024)
    Post-Earnings Price$76.89Open (Jun 28, 2024)
    Price Change
    $0.54(+0.71%)

    What went well

    • Robust Segment Volume Growth: Construction Adhesives recorded double-digit volume increases, EA achieved mid-single-digit growth, and even HHC showed positive volume improvement, indicating broad-based demand across key segments.
    • Effective Cost Optimization: The company is realizing significant restructuring savings as part of its $45 million three-year program—having already delivered $10 million in 2023 and targeting around $20 million in savings for this year—to enhance margins.
    • Strategic Acquisition Boost: The recent ND Industries acquisition is expected to deliver about $13 million in EBITDA benefit in the second half and positions the business in a high-growth fastener locking segment with anticipated revenue growth exceeding 10% per year over 3–5 years.

    What went wrong

    • Negative Pricing & FX Headwinds: Pricing issues remain a concern, as index-based pricing corrections and a strong U.S. dollar have already imposed a 3%+ pricing headwind and are expected to continue exerting pressure in the near-term, potentially eroding margins and revenue growth.
    • Persistent Weakness in the HHC Segment: The HHC segment, particularly in hygiene-related markets, continues to experience low single-digit volume growth and consumer softness in key regions (U.S. and Europe), suggesting that this underperforming segment could drag overall performance.
    • Integration & Margin Risks with ND Industries: Despite ND Industries’ attractive historical margins of approximately 30%, integration challenges and potential dilution from corporate overhead could risk reducing its margin profile, especially given FX impacts that have already limited its EBITDA contribution.

    Q&A Summary

    1. Organic Guidance
      Q: Why revise organic sales guidance range?
      A: Management revised the organic growth range from 0–3% to 0–2% due to a more negative pricing impact (down roughly 2–3%) offset by stronger volume trends, reflecting a conservative forecast for the year.

    2. ND Acquisition Benefit
      Q: What’s the ND impact in H2?
      A: The acquisition is expected to deliver about $13 million in benefits for the second half, roughly $6 million per quarter, with integration progressing smoothly.

    3. ND Revenue Growth
      Q: What’s ND’s revenue growth target?
      A: Management expects ND to grow revenues at greater than 10% annually over a 3–5 year horizon as it enters its next phase of expansion.

    4. ND Margin Sustainability
      Q: Will ND sustain high margins?
      A: Despite added public company costs, ND’s margins are expected to remain at or above 30% due to cost synergies and increased operating leverage.

    5. Leverage Targets
      Q: What is the target leverage ratio?
      A: The company targets a leverage ratio in the range of 2.5x to 3x, even as it adds acquisitions, maintaining a disciplined capital structure.

    6. Restructuring Savings
      Q: What are the restructuring savings?
      A: The restructuring program, originally set at $45 million over three years, delivered about $10 million in 2023, with roughly $20 million more savings expected in 2024 and the rest in 2025.

    7. CapEx & Cash Flow
      Q: What are CapEx and FCF plans?
      A: The CapEx forecast remains at $140 million for the year, complemented by a robust M&A pipeline with potential expenditures up to $350 million and ongoing share repurchases.

    8. Pricing Outlook
      Q: How will pricing evolve?
      A: Pricing is expected to improve as index-based agreements level off, shifting from a roughly –3.3% impact earlier to a normalized 1–2% range over the full year.

    9. EA Margin Outlook
      Q: Can EA margins reach 20%?
      A: Engineering Adhesives reported margins at about 18% in Q2, with expectations that continued volume improvements will lift margins closer to 20% in the second half.

    10. HHC Volume Outlook
      Q: How is HHC volume trending?
      A: HHC experienced low-single-digit volume growth, with hygiene segments soft but showing sequential improvements, suggesting cautious optimism for the remainder of the year.

    11. EA Volume Performance
      Q: How did EA volumes perform?
      A: EA demonstrated robust performance, with mid-single to double-digit increases in key end markets such as automotive, glass, and aerospace, reinforcing its strong market position.

    12. Divestiture Options
      Q: Any divestitures planned for margins?
      A: Management is critically evaluating all markets; while divestitures are possible for non-core segments that fall short of leverage criteria, shared infrastructure may complicate such moves.

    13. Infrastructure Streamlining
      Q: How is infrastructure being optimized?
      A: The company has already exited 9 plants out of 80 and is considering an additional 3–6 closures, along with warehouse network optimization, to reduce fixed costs.

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