Doman Building Materials Group Q1 Earnings Call Highlights

Key Points

• Revenue fell in Q1 to CAD 762 million from CAD 793 million a year earlier, mainly because weaker pricing in SPF lumber, OSB and plywood offset steady shipment volumes. Net earnings were essentially flat at CAD 23.9 million, while EBITDA slipped slightly to CAD 68 million.
• Margins and costs improved despite the softer top line, with gross margin rising to 17% from 16.7% and operating expenses declining on cost discipline. Finance costs also fell as net debt decreased, helping offset lower sales.
• Management is investing in fencing capacity and U.S. manufacturing, including new East Coast production trials and mill upgrades in Texas and Arkansas. Doman said the goal is to reduce imported product exposure, improve margins, and build a longer-term fencing business that could reach 15% to 18% of the mix.

Doman Building Materials Group TSE: DBM reported lower first-quarter revenue as weaker pricing across key construction material categories offset steady shipment activity, while margins improved and net earnings were essentially unchanged from a year earlier.

Chairman and Chief Executive Officer Amar Doman said on the company’s first-quarter 2026 earnings call that revenue was CAD 762 million, compared with CAD 793 million in the same period last year. He attributed the decline primarily to lower pricing for SPF lumber, oriented strand board and plywood, partly offset by increases later in the quarter in Southern Yellow Pine in the U.S.

“Despite that pricing pressure, our performance reflects the resilience of our operating model,” Doman said. “We maintained strong shipment volumes and continued to execute effectively across our network.”

Gross margin was CAD 130 million, with the margin percentage improving to 17% from 16.7% a year earlier. EBITDA was CAD 68 million, compared with CAD 70 million last year. Net earnings were CAD 24 million, which Doman said was “essentially in line” with the prior year. The company also declared a dividend of CAD 0.14 per share during the quarter, paid in April.

Lower Pricing Weighs on Revenue, but Margins Improve

Chief Financial Officer Darren Gwozd, who joined the call for the first time in the CFO role, said sales for the three months ended March 31 were down CAD 31 million, or approximately 3.9%, from the prior-year period. He said the decline was “largely due to the decreases in year-over-year pricing in certain construction material categories.”

Construction materials accounted for 83% of sales, compared with 81% last year, while specialty and allied products represented 14% and other sources accounted for 3%.

Gwozd said gross margins were CAD 129.5 million, down from CAD 132.5 million in 2025, reflecting lower sales. Expenses declined to CAD 85.6 million from CAD 87 million, a decrease of CAD 1.4 million, or 1.6%. Distribution, selling and administration expenses fell CAD 1.1 million to CAD 61.4 million, which Gwozd attributed mainly to continued cost management.

Finance costs were CAD 16.6 million, down from CAD 19.4 million a year earlier, “largely as a result of lower net debt,” including lower use of the revolving loan facility and lower unsecured notes balances. Net earnings were CAD 23.9 million, compared with CAD 23.6 million in the first quarter of 2025.

Management Cites Commodity Volatility and Weather Impacts

Doman said commodity pricing remained volatile during the quarter, particularly for SPF, OSB and plywood. While pricing was weaker year over year, he said the company saw “some signs of stabilization” in the U.S. market during the quarter. However, he also pointed to continued uncertainty tied to interest rates, housing affordability and construction activity.

In response to a question from CIBC’s Hamir Patel about the company’s stronger-than-expected gross margin, Doman said the 17% margin reflected “some good astute buying” by the company when lumber prices were low in the fall. He said that inventory position helped as the market rose, particularly in the U.S., during part of the first quarter.

“Going forward, Hamir, you know, it’s anyone’s guess,” Doman said. “SYP is obviously coming off now. Having said that, we’re holding our margins, you know, not too bad.”

On volumes, Doman said weather had a significant influence. In response to TD Cowen analyst Kasia Kopytek, he said volumes in the first quarter tracked roughly in line with 2025 when weather was favorable, but some regions experienced disruptions from rain and other conditions. He cited shutdowns in the Carolinas on certain days and unusually heavy rain in California. He said volumes were “just off a couple of points in certain regions,” while in Canada, whitewood volumes for OSB panels and lumber were up despite lower pricing.

Asked about early second-quarter conditions, Doman said the company was seeing a pickup as weather improved in markets such as Toronto, Montreal and Chicago. “As soon as the weather turns on,” he said, “we’re seeing decent volumes come back.”

Fuel Costs, Consumer Trends and Market Outlook

Doman said fuel costs are expected to remain elevated for some time and that the company is trying to recover costs through fuel surcharges where possible. “We can’t grab all of it, sadly, but we’re doing the best we can,” he said.

RBC Capital Markets analyst Matthew McKellar asked whether soft consumer confidence was showing up in product mix. Doman said the company was not seeing meaningful changes in SKU patterns and that sales trends remained largely weather-driven. “The SKUs we’re moving are fairly traditional and what we normally sell,” he said.

National Bank Financial analyst Zachary Evershed asked whether customers on either side of the border were communicating different expectations for the year. Doman described customers as cautious, citing uncertainty related to geopolitical developments and the broader economy. “No one’s terribly bearish,” he said, but added that it was “tough to find anyone getting too excited about the economy.”

Fencing Investments and U.S. Manufacturing Capacity

Doman provided several updates on fencing-related investments. He said the company is starting production trials in Estill and expects new equipment to be in place by June to produce fencing on the East Coast, including 1-by-6 pickets for retail customers that are currently imported. He said the goal is to eliminate those imports and produce the material in the United States.

The company has also upgraded its Gilmer, Texas, sawmill, which Doman said is approaching targets, and is considering upgrades to three or four additional fence mills in Arkansas and Texas. He said the new capacity could begin contributing in the third and fourth quarters.

Asked by Kopytek what percentage of the company’s mix fencing could ultimately represent, Doman said he did not have a near-term percentage but said a longer-term goal of 15% to 18% “in a couple years” would be significant. He said achieving that would depend in part on improving efficiencies at existing mills.

Doman said bringing production in-house could help margins and provide supply security, particularly by reducing exposure to tariff risks tied to material imported from Brazil. “That’s what our customers are looking for in the U.S., is U.S.-made, nothing coming over the water that’s got tariff risk and other challenges,” he said.

Capital Spending, M&A and Balance Sheet

Gwozd said investing activities used CAD 10.6 million of cash in the quarter, compared with generating CAD 11 million a year earlier. The prior-year period included a non-recurring sale of timberlands for CAD 14.4 million. The company invested CAD 16.2 million in property, plant and equipment during the first quarter, compared with CAD 3.5 million in 2025.

Doman said part of the elevated capital spending related to the purchase of property in Hawaii, which he described as opportunistic because of the scarcity of industrial land there. He said the purchase would eliminate rent for the company going forward, but added that it was “not a massive strategy.”

On mergers and acquisitions, Doman said the company’s approach has not changed despite the uncertain market backdrop. He said the balance sheet is “primed and ready” but that Doman will remain selective and disciplined. “We haven’t hit the pedal or hit the brakes,” he said, adding that the company will act when opportunities fit its strategy and valuation requirements.

Management said the company was not in breach of any lending covenants during the quarter. Looking ahead, Doman said the company is planning cautiously while focusing on cost discipline, product mix, scale, distribution capabilities and balance sheet strength.

About Doman Building Materials Group TSE: DBM

Doman Building Materials Group Ltd is a wholesale distributor of building materials and home renovation products. The company services the new home construction, home renovation and industrial markets by supplying the retail and wholesale lumber and building materials industry, hardware stores, industrial and furniture manufacturers and similar concerns. Its operations also include timber ownership and management of private timberlands and forest licenses, and agricultural post-peeling and pressure treating through CanWel Fibre Corp.

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