UFP Industries Q2 Earnings Call Highlights

Key Points

• Q2 sales rose 3% to $1.88 billion, supported by acquisitions and 1% organic unit growth, but adjusted EBITDA fell to $154 million as freight costs increased sharply and margins contracted to 8.2%.
• Retail and packaging delivered growth, led by Deckorators decking and stronger structural and protective packaging demand. However, construction sales declined 4%, with site-built housing remaining UFP’s most challenged business.
• UFP invested $122 million in acquisitions, repurchased $142 million of shares year to date and maintained its full-year outlook, though management expects second-half demand near the lower end of previous guidance and elevated freight and energy costs to persist.

UFP Industries NASDAQ: UFPI reported second-quarter 2026 net sales of $1.88 billion, up 3% from $1.84 billion a year earlier, as acquisitions and modest organic unit growth helped offset continued softness in several end markets. However, a sharp increase in flatbed transportation costs weighed on profitability, with adjusted EBITDA declining to $154 million from $174 million in the prior-year period.

President and Chief Executive Officer Will Schwartz said the company’s 1% organic volume growth marked its first quarter of positive year-over-year organic growth since the third quarter of 2022. Acquisitions added another 2% to overall volume growth, while pricing was flat overall.

“Our positive organic growth at the consolidated level is an important milestone,” Schwartz said, citing product innovation, portfolio diversification and execution across the company. He said UFP remains focused on investing in higher-margin core businesses, pursuing disciplined acquisitions, expanding brand awareness, increasing value-added product sales and improving operations.

Freight Costs Pressure EBITDA Margins

Chief Financial Officer Mike Cole said higher flatbed transportation costs were the sole driver of the company’s year-over-year adjusted EBITDA decline. Adjusted EBITDA margin fell to 8.2% from 9.5% a year earlier.

Transportation costs, net of fuel surcharges, increased $27 million year over year, or 1.6% of net sales. Spot rates rose more than 30% during the quarter excluding fuel, as carrier capacity tightened amid regulatory changes and stronger enforcement in the transportation market.

Schwartz said the rate increase was more rapid and severe than the company experienced during the COVID-19 period. Rates have since stabilized, but at elevated levels that management expects to persist for the foreseeable future. UFP is working to adjust pricing where appropriate and pursue operating efficiencies to limit the impact.

Cole said the second quarter would likely represent the most difficult period for transportation-cost increases, because of UFP’s seasonal reliance on spot-market capacity. He expects the 1.6% sales impact to decline through the second half as the company relies less on the spot market and passes some higher costs to customers.

Retail Growth Led by Deckorators

Retail sales rose 4% to $819 million. The increase reflected 3% higher pricing and a 2% contribution from acquisitions, partly offset by a 1% organic unit decline. Retail adjusted EBITDA was flat from a year earlier, as favorable lumber-price trends, product mix, productivity gains and restructuring at Edge offset higher transportation expenses.

Deckorators recorded 9% unit growth and continued to outpace its market, while ProWood units declined 1% and Edge units fell 17% amid ongoing restructuring. Decking sales increased 59%, including 37% growth in mineral-based Surestone products and 85% growth in wood-plastic composite products.

The MoistureShield acquisition contributed 51% of wood-plastic composite growth and 23% of total composite decking growth, Cole said. The company also saw improved production throughput at its Selma and Buffalo facilities. Still, demand exceeded current output capacity, leaving a $30 million Surestone backlog at quarter-end.

Schwartz said UFP expects to reduce that backlog as capacity optimization progresses during the year and remains on track to deliver $100 million in decking sales growth in 2026, excluding MoistureShield. The company’s $30 million advertising program has more than doubled sample orders, website traffic and other metrics since its launch, according to Schwartz.

UFP also launched Arris trim, which uses Surestone technology, in mid-July. The company said customer feedback has been positive. Separately, it continues to expand distribution of the TrueFrame joist product through ProWood.

Packaging Gains Share; Construction Remains Uneven

Packaging sales increased 7% to $458 million, driven by 4% organic unit growth and a 4% contribution from acquisitions. Structural packaging volume rose 8% on customer wins, PalletOne volume increased 9% with support from acquisitions, and protective packaging volume grew 15% as new Indiana and Nevada facilities increased production.

Packaging adjusted EBITDA declined $11 million to $28 million, primarily because of higher transportation costs. The segment also faced material-cost pressure and competitive pricing in PalletOne, along with unabsorbed overhead at protective-packaging greenfield facilities.

Schwartz said the company is gaining traction with national structural-packaging customers, supported by its design, engineering and geographic capabilities. In response to an analyst question, he said national-account business rose about 25% in the quarter and is more contract-based and less transactional than smaller customer relationships.

Construction sales declined 4% to $523 million, reflecting a 3% decrease in selling prices and a 2% decline in organic units. Site-built organic units fell 3% as new residential construction remained soft, while factory-built units decreased 5%, partly due to the planned exit of lower-margin commodity sales.

Commercial and concrete-forming businesses provided areas of strength, with volume growth of 11% and 6%, respectively. Construction adjusted EBITDA fell $9 million to $36 million, due to pricing and market pressure in site-built operations as well as higher freight costs.

Management said multifamily trends improved and contributed to higher year-over-year backlog, though Schwartz characterized site-built construction as the company’s “most challenged business” and its least clear outlook area.

Acquisitions, Capital Returns and Outlook

UFP invested $122 million during the quarter to acquire MoistureShield, Berry Pallets and John Rock. Schwartz said the acquisitions add geographic coverage, service capability and capacity. The company expects MoistureShield to operate under the Deckorators brand and said it is making investments in the acquired Arkansas facility.

The company ended June with nearly $600 million in cash, no revolver borrowings and approximately $1.9 billion of total liquidity. It repurchased $142 million of shares year to date at an average price of $84.95 and said its board approved a quarterly dividend of $0.36 per share, up 3% from a year earlier.

UFP reduced its planned 2026 capital-project spending to between $175 million and $200 million, including about $75 million of maintenance spending. Cole said the reduction from the original plan reflects a greater emphasis on acquisitions to add capacity and the deferral of some projects until market conditions improve.

The company maintained its full-year outlook but now expects demand in the second half to fall toward the lower end of prior guidance, which called for flat to slightly down unit expectations in each segment. Management expects elevated energy and freight costs to continue, while stabilization in certain businesses and market-share gains could help offset weakness in new residential construction and pallet production.

About UFP Industries (NASDAQ:UFPI)

UFP Industries, Inc, founded in 1955 and headquartered in Grand Rapids, Michigan, designs, manufactures, and distributes a broad range of wood and wood-alternative products. The company operates through two primary segments: UFP Retail Solutions, which supplies building materials and components to home improvement retailers and lumber dealers, and UFP Distribution Solutions, which offers packaging, pallets, skids, and other industrial products for a variety of end markets. Its product portfolio includes treated and untreated lumber, engineered wood, decking, railing, fencing, vinyl sheets and profiles, and custom-designed packaging solutions.

With manufacturing facilities and distribution centers across the United States, Canada, Mexico and Europe, UFP Industries serves professional contractors, industrial customers, and do-it-yourself consumers.

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