BMHC, BFS weather tough second quarters
Two of the industry’s largest pro dealers reported losses for their second fiscal quarters, and neither company predicted a change in fortunes any time soon.
Builders FirstSource reported a net loss of $45.9 million for the second quarter, which ended on June 30, 2008, swinging from net income of $8.4 million for the second quarter of 2007. The Dallas-based pro dealer, which ranks ninth on the Home Channel News Top 350 Pro Dealer Scoreboard, posted $307.3 million in sales for its second quarter, a 34 percent decline from $465.1 million during the same period last year.
“Although we cannot predict how long this down turn will last, we generally expect these difficult operating conditions to at least continue through 2008 and 2009,” said CEO Floyd Sherman during the earnings conference call.
Sherman also said the company is diversifying its customer base “through cultivating relationships with custom builders in markets [where] we previously sold predominately to production builders.”
|Q2 net loss$45.9 million|
|Q2 sales$307.3 million Down 34 percent|
Builders FirstSource has also been attempting to shift more of its business more toward light commercial and multi-family. According to Sherman, the company has more than $25 million in projects awarded that are slated to begin in the third and fourth quarter. These projects put pressure on margins, he warned, due in part to the amount of time spent estimating and bidding the jobs. “Typically, you are bidding against [multiple] people also competing for that job,” Sherman said.
While Sherman pointed to “consolidating within some of [our] markets,” the executive said his company has not exited any major markets—yet.
A continued decline in housing starts could put this consideration on the table, he added.
Building Materials Holding Corp. (BMHC) has already pulled out of the Mid-Atlantic market and Florida, according to chairman and CEO Robert Mellor. Closing unprofitable business units is one of the San Francisco-based pro dealer’s strategies to raise cash and preserve liquidity. On Aug. 14, Mellor told investors that the company has also closed its framing and concrete operations in Tucson; sold its window operations in Phoenix; and is winding down HVAC operations in Arizona and Nevada, trim operations in Nevada and plumbing operations in Nevada and Southern California.
|Q2 net loss$31.9 million|
|Q2 sales$385 million Down 41 percent|
These closures are part of BMHC’s consolidation of its locations into six regions. BMHC also combined its two subsidiaries, BMC West and Select Build, into one company. Through these and other initiatives, including selling off excess vehicles, equipment and real estate, BMHC hopes to produce a one-time cash influx of $50 million over the next three to four quarters.
Not surprisingly, the restructuring resulted in considerable job losses. According to Mellor, BMHC’s head count, at its peak of 25,000 in July 2006, has been reduced by 55 percent, to “just over 11,000” in June 2008. These cutbacks have apparently resulted in a backlash against the company. The Laborers’ International Union of North America (LIUNA) has organized protests against BMHC, claiming that SelectBuild workers have been subjected to unfair layoffs and pay cuts and unsafe working conditions at some job sites.
Protestors picketed BMHC’s annual shareholders meeting in May, and an analyst raised the issue during the company’s Aug. 14 earnings conference call.
“We are not cutting back on safety or benefits,” Mellor assured investors. “This is a move by the union group to push their agenda.”
Ranked No. 5 on HCN’s Top 350 list, BMHC reported sales of $385 million for its second fiscal quarter, a decline of 41 percent from sales of $656 million in the same quarter last year. The San Francisco-based company lost $31.9 million during the quarter, which ended June 30, 2008. This compares to a net gain of $19.4 million for the second quarter of 2007.