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FH

FULLER H B CO (FUL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue rose to $923M (+2.3% YoY) but adjusted EBITDA fell 14% to $148M with margin compressing to 16.1% on delayed pricing realization and HHC raw-material inflation; adjusted EPS was $0.92, down YoY .
  • Construction Adhesives delivered strong volume (organic +10.5%; roofing +30%) but margins dipped on variable comp and one-time inventory adjustments; HHC decelerated broadly (10 of 13 segments) and saw margin drop to 13.9% .
  • FY2024 fell short of prior guidance: adjusted EBITDA came in at ~$594M vs $610–$620M guided in September, and operating cash flow landed near $300M vs prior $325–$350M; management initiated FY2025 guidance with net revenue -2% to -4% (up 1%–2% ex-Flooring), adjusted EBITDA $600–$625M, adjusted EPS $3.90–$4.20 .
  • Strategic catalysts: footprint/logistics consolidation (82 plants → 55 by 2030; NA warehouses 55 → ~10 by 2027) targeting $75M annual savings, plus medical adhesives acquisitions (GEM, Medifill) to shift mix to higher-margin markets .

What Went Well and What Went Wrong

What Went Well

  • Construction Adhesives organic sales +10.5% YoY; roofing grew >30% YoY, reflecting share gains and product innovation (e.g., PG-1 EF ECO) and exposure to data center build-out .
  • Engineering Adhesives adjusted EBITDA increased YoY in Q4; margin at 19.7% supported by ND Industries acquisition and resilient auto/electronics demand despite solar weakness .
  • Working capital efficiency improved: net working capital fell to 14.5% of annualized revenue in Q4, down 160 bps YoY and sequentially; management reiterated path to >20% adjusted EBITDA margins over time .
  • Quote: “We expanded margins and achieved a new record adjusted EBITDA margin for the fiscal year of 16.6%, keeping us on track to achieve our goal of greater than 20% adjusted EBITDA margin” — Celeste Mastin .

What Went Wrong

  • Adjusted gross margin fell 170 bps YoY to 29.6% and adjusted EBITDA declined 14% YoY, driven by higher raws in HHC (hydrogenated hydrocarbon resins, waxes/oils) and delayed pricing actions .
  • HHC experienced a dramatic Q4 slowdown: deceleration in 10 of 13 segments; margin sank to 13.9% vs 19.9% in Q4’23; packaging/distribution demand softened and consumer shifts pressured mix .
  • FY2024 missed September guidance on adjusted EBITDA ($594M vs $610–$620M) and operating cash flow (~$300M vs $325–$350M); late-quarter volume inflection and price realization slippage were cited .
  • Quote: “We encountered an unexpected deceleration in volume… [and] delayed price increase realization into fiscal 2025, delaying the offset of higher raw material costs and resulting in margin deterioration” — Celeste Mastin .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Revenue ($USD Millions)$902.9 $917.9 $923.3
Adjusted EPS ($)$1.32 $1.13 $0.92
Adjusted Gross Margin %31.3% 30.4% 29.6%
Adjusted EBITDA ($USD Millions)$172.6 $165.3 $148.3
Adjusted EBITDA Margin %19.1% 18.0% 16.1%

Segment breakdown (YoY):

SegmentQ4 2023 Net Rev ($MM)Q4 2024 Net Rev ($MM)Q4 2023 Adj EBITDA Margin %Q4 2024 Adj EBITDA Margin %
Hygiene, Health & Consumable (HHC)$411.1 $395.7 19.9% 13.9%
Engineering Adhesives (EA)$365.7 $381.9 20.2% 19.7%
Construction Adhesives (CA)$126.1 $145.7 12.6% 12.3%

KPIs and drivers:

KPIQ3 2024Q4 2024
Organic Revenue (%)+0.4% -0.2%
Pricing Impact (%)-2.6% -1.5%
Volume Impact (%)+3.0% +1.3%
M&A Contribution (%)+3.0% +2.7%
FX Impact (%)-1.5% -0.2%
Net Debt ($MM)$1,889.7 (Aug 31) $1,841.3 (Nov 30)
Net Debt / Adjusted EBITDA (x)3.1x 3.1x
Net Working Capital / Annualized Rev (%)16.1% 14.5%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($MM)FY 2024$610–$620 (Sep 25 update) ~$594 (prelim Jan 2) Lowered
Operating Cash Flow ($MM)FY 2024$325–$350 ~ $300 Lowered
Net Revenue GrowthFY 2025N/A-2% to -4%; +1%–2% ex-Flooring New
Organic Revenue GrowthFY 2025N/AFlat to +2% New
Adjusted EBITDA ($MM)FY 2025N/A$600–$625 New
Adjusted EPS (diluted) ($)FY 2025N/A$3.90–$4.20 New
Core Tax Rate (%)FY 2025N/A26%–27% New
Net Interest Expense ($MM)FY 2025N/A$120–$125 New
Operating Cash Flow ($MM)FY 2025N/A$300–$325 New
Capital Expenditures ($MM)FY 2025N/A~$160 (incl. ~$40 footprint) New
Adjusted EBITDA ($MM)Q1 2025N/A$105–$115 New
Footprint SavingsThrough FY 2030N/A~$75M annualized savings at completion; ~$150M capex over 5 yrs New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Pricing/raw materialsPrice -3.4% YoY; margin tailwinds; raws largely neutral/tailwind Pricing less negative; ~$10M raw headwind in Q3 HHC raws up (hydrogenated hydrocarbon resins; waxes/oils); pricing delayed to FY2025 Deteriorated in Q4, actions underway
HHC demand/marginsVolumes turned positive; margin +50 bps YoY Organic dev improved; margin -70 bps Broad deceleration (10/13 segments); margin down to 13.9% Weakening
Construction AdhesivesRoofing +20%; margin 15% Strong volumes; margin 16.4% Organic +10.5%; roofing +30%; margin 12.3% on comp/inventory Strong volumes; margin compression
Engineering AdhesivesReturned to growth; margin 18.4% Organic -2% on clean energy; margin 19.7% Organic -1.9% (ex-solar positive); margin 19.7% Stable margin; solar headwind persists
Footprint/logisticsAnnounced exits and warehouse optimization Discussed ongoing optimizations Plan: plants 82→55 by 2030; NA warehouses 55→~10 by 2027; $75M savings; $150M capex Accelerating execution
M&A/medical adhesivesAcquired ND Industries (>30% EBITDA margin) Acquired HS Butyl (waterproofing tapes) Announced GEM & Medifill (€23M sales/€11.5M EBITDA; €180M) Active portfolio upgrade
Regional performanceAPAC ex-solar +7%; China strong Americas +3%; APAC ex-solar +6% Americas down slightly; APAC flat; ex-solar +6% Mixed; Americas decelerated
Working capital/leverageND/strong FCF; net debt 3.1x NWC 16.1%; net debt 3.1x NWC 14.5%; net debt 3.1x Improving NWC

Management Commentary

  • Portfolio transformation and margin ambition: “We remain on track to achieve an EBITDA margin of greater than 20%… despite significant obstacles in the second half of the year” — Celeste Mastin .
  • Footprint consolidation rationale: “Reduce manufacturing facilities from 82… to 55 by 2030… warehouses from 55 to ~10 by 2027… ~$75M annualized cost savings” — Celeste Mastin .
  • HHC remediation: “Aggressive price increase plans… cost reduction plans… sourcing reallocated for key HHC raws” — Celeste Mastin .
  • Medical adhesives strategy: GEM & Medifill to enhance cyanoacrylate/tissue adhesives, €23M sales/€11.5M EBITDA, 15.5x pre-synergy EV/EBITDA — Celeste Mastin .

Q&A Highlights

  • Footprint program phasing: ~$5M savings in 2025; ~$20M in 2026; ramp to $75M run-rate by 2030; ~$150M capex over 5 years; non-capital cash costs ~$25–$50M partly offset by asset sale proceeds .
  • Pricing outlook: 2025 price +0% to +2% blended; HHC pricing actions to recover Q4 raws; some expected volume attrition from more aggressive pricing is acceptable to restore margins .
  • Raw material specifics: hydrogenated hydrocarbon resins (China tax enforcement), waxes and oils drove Q4 inflation; Q1 raws expected flat sequentially; benefits more visible in Q2 with sourcing changes .
  • Segment outlook FY2025: Volume down low single digits in HHC; flat in EA; up low-to-mid single digits in BAS; price up ~1%–2% across GBUs .
  • Construction drivers: share gains, new products (PG-1 EF ECO), data center and infrastructure exposure; BAS reorg effective FY2025 .

Estimates Context

  • Street (S&P Global) consensus data for Q4 FY2024 was unavailable due to system limits at time of request; as a result, we cannot assess beat/miss vs Street for revenue or EPS in this recap. Values from S&P Global were unavailable.

  • Contextualized vs Company Guidance: FY2024 adjusted EBITDA landed at ~$594M vs $610–$620M guided (Sep), and operating cash flow at ~$300M vs $325–$350M guided; the shortfall primarily reflected late-quarter volume deceleration and delayed price realization .

Key Takeaways for Investors

  • Near-term margin pressure centered in HHC should ease as pricing actions flow through; watch Q2 2025 for sequential improvement in price/raws bucket and EBITDA margins as sourcing changes take hold .
  • Construction Adhesives’ volume strength (roofing +30% YoY) is a bright spot; monitor margin normalization after variable comp and inventory adjustments; BAS reorg may enhance transparency and execution .
  • Footprint/logistics consolidation is a structural lever: minimal savings in 2025 (~$5M) but ramps in 2026+, offering medium-term EBITDA uplift and lower capex needs — a key thesis driver toward >20% margins .
  • Medical adhesives and fastener-locking solutions (GEM, Medifill, ND) accelerate mix shift to higher-margin growth segments; integration/geographic expansion are potential upside catalysts .
  • FY2025 guide implies resilient profitability despite softer top line (net revenue -2% to -4%; adjusted EBITDA up 1%–5%); focus on execution of pricing, restructuring savings and M&A synergies .
  • Working capital discipline continues (NWC/annualized rev down to 14.5%); leverage steady at 3.1x; supports flexibility for tuck-ins while managing macro uncertainty .
  • Trading lens: near-term sentiment hinges on evidence of pricing traction in HHC and stabilization ex-solar in EA; medium-term rerating case rests on structural savings realization and portfolio mix upgrade .

Additional Relevant Press Releases and Prior Quarters

  • FY2024 preliminary (Jan 2): adjusted EBITDA ~$594M; adjusted EPS ~$3.84; OCF ~$300M — reflects late-Q4 demand/pacing reset .
  • Q3 2024: adjusted EBITDA $165M (+6% YoY), adjusted EBITDA margin 18.0% (+70 bps); organic volume +3.0%; construction strong; EA impacted by clean energy .
  • Q2 2024: adjusted EBITDA $157M (+10% YoY), margin 17.1% (+120 bps); all GBUs posted volume growth; acquired ND Industries (>30% EBITDA margin) .
  • Flooring divestiture (Dec 2): ~$80M proceeds; reduces annual revenue by $160M and adjusted EBITDA by $15M; BAS formed ($850M sales/$130M adj. EBITDA in FY2024) .
  • Dividend (Jan 23): $0.2225 per share; 57 consecutive years of quarterly dividends .