Doman Building Materials Group Q3 Earnings Call Highlights

Key Points

• Third-quarter sales rose 5.9% to CAD 841.7 million, and net earnings increased to CAD 19.7 million. Adjusted EBITDA fell 3.1% to CAD 60.1 million, while gross margin as a share of sales declined to 14.8% amid lower lumber prices and higher freight and fuel costs.
• Management expects challenging lumber pricing in the fourth quarter as prices continue to fall and U.S. demand remains soft. The company is seeking to pass higher transportation costs on to customers, but has not yet recovered the full increase.
• Operating cash flow fell to CAD 122 million from CAD 161 million a year earlier, while the company paid CAD 36.9 million in dividends during the first nine months and expects no near-term dividend change. Its new sawmill is ramping up, with fencing expansion benefits expected in spring 2027.

Doman Building Materials Group TSE: DBM reported higher third-quarter sales and net earnings, but lower lumber prices during the quarter and rising freight and fuel costs compressed its gross margin.

Sales for the three months ended Sept. 30, 2026, rose 5.9% to CAD 841.7 million from CAD 795.1 million a year earlier. Chief Financial Officer Darren Gwozd said the increase was largely due to higher year-over-year commodity prices in certain U.S. construction materials categories.

Net earnings increased to CAD 19.7 million from CAD 18.1 million, helped by lower finance costs and depreciation and amortization. Adjusted EBITDA declined 3.1% to CAD 60.1 million.

Gross margin dollars rose modestly to CAD 124.8 million from CAD 123.1 million, while gross margin as a percentage of sales fell to 14.8% from 15.5%. Chairman and CEO Amar Doman attributed the percentage decline primarily to lower lumber pricing during the latter part of the quarter and higher freight and fuel costs.

Pricing Pressure Extends Into Fourth Quarter

Doman said lumber base prices remained higher than a year earlier, but began declining around the middle of the third quarter and continued to fall into the fourth. He described the U.S. market as soft and uncertain, while saying Canadian activity had picked up considerably in the second half of the year.

Gwozd said volumes were generally flat compared with the prior year, although they were slightly below year-earlier levels in the third quarter after running somewhat ahead earlier in 2026.

“I think fourth quarter’s going to be challenging for lumber pricing for everybody involved in the game,” Doman told analysts. He said production curtailments and purchases of lower-priced lumber were contributing to signs of a possible leveling in prices, though demand remained soft.

The company is attempting to pass higher transportation costs on to customers, but Doman said it had not recovered the full increase. He said the goal was to close that gap by the end of the fourth quarter, potentially as early as December, while noting that negotiations varied by customer and region.

Gwozd said the company also saw opportunities to improve efficiency through further integration of previous acquisitions and greater purchasing scale, although he did not expect those efforts to have a material impact.

Cash Flow and Spending

Third-quarter net cash provided by operating activities fell to CAD 122 million from CAD 161 million a year earlier. Gwozd attributed the decline primarily to a higher average inventory cost related to U.S. construction materials pricing.

For the first nine months of 2026, the company recorded net advances of CAD 19.1 million on its revolving loan facility, compared with repayments of CAD 150.2 million a year earlier. Gwozd noted that the prior-year figure included proceeds from the sale of timberlands.

Doman returned CAD 36.9 million to shareholders through dividends during the nine-month period, unchanged from a year earlier. Gwozd said no change to the current dividend level was anticipated in the near term.

Investment in property, plant and equipment rose to CAD 25.6 million for the nine months from CAD 14.7 million a year earlier, primarily because of a land acquisition in the first quarter. Excluding that purchase, Gwozd said capital spending remained modest, with maintenance capital expenditures generally expected to stay below 1% of annual revenue.

Expansion and Share Purchases

Doman said benefits from the company’s fencing expansion would be more apparent in spring 2027. Production at its new sawmill in Estill was ramping up, he said, and the company planned to continue upgrading other mills. Management is considering one or two further U.S. sawmill upgrades, including a facility in Arkansas and potentially another in Texas.

The CEO also said Doman continued to discuss potential acquisitions. On transportation, the company may add trucks in some regions over time but does not plan a wholesale shift away from its mix of owned and third-party vehicles.

Separately, Doman said he had established an automatic securities purchase plan, effective in December, under which 100% of his net after-tax base salary will be used to buy company shares in the open market. He said the arrangement reflected his long-term commitment to the business and alignment with shareholders.

Management did not provide earnings guidance. Head of Investor Relations Ali Mahdavi said the company does not anticipate providing such guidance in future quarterly or interim investor communications.

About Doman Building Materials Group (TSE:DBM)

Founded in 1989, Doman is headquartered in Vancouver, British Columbia, and trades on the Toronto Stock Exchange under the symbol DBM. As Canadas premier national distributor in the building materials and related products sector, Doman operates several distinct divisions with multiple treating plants, planing and specialty facilities and distribution centres coast-to-coast in all major cities across Canada and coast-to-coast across the United States. Strategically located across Canada, Doman Building Materials Canada operates distribution centres coast-to-coast, and Doman Treated Wood Canada operates multiple treating plants near major cities.

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