BOISE CASCADE Co Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Total US housing starts and single-family housing starts decreased 3% and 1% respectively compared to the prior year quarter. Consolidated third quarter sales were $1.7 billion, down 7% from Q3 2023. Net income was $91 million or $2.33 per share compared to $143.1 million or $3.58 per share in Q3 2023.
• Both businesses performed well despite constrained demand from home affordability challenges and economic uncertainties. Wood Products faced lower prices and volumes; BMD had flat volumes but lower sales prices, with general line sales helping margin percentage.
• Fourth quarter outlook: EWP and plywood volumes resilient in October but expected seasonal decline; BMD sales affected by fewer sales days and lower daily sales pace.
• Capital allocation: Capital expenditures $136 million in the nine months ended September 2024; expected $200-220 million in 2025 capital spending; paid $220 million in dividends, repurchased $165 million in shares, and board authorized more share repurchases.

Segment Performance

• Wood Products: Third quarter sales were $453.9 million, down 12% from Q3 2023. Segment EBITDA was $77.4 million vs. $122.9 million in the prior year quarter. Decrease due to lower EWP and plywood sales prices, higher conversion costs, and lower I-joists volumes.
• Building Materials Distribution (BMD): Sales in the quarter were $1.6 billion, down 6% from Q3 2023. Segment EBITDA was $87.7 million vs. $104.9 million in the prior year quarter. Gross margin dollars decreased $7.7 million, but gross margin percentage was 15.7%, up 50 basis points year-over-year. General line product sales represented 44% of the sales mix in Q3.

Guidance

• US housing starts forecast: ~1.35 million in 2024 and at or modestly above 1.4 million in 2025.
• Expect low-single-digit sequential price declines in EWP for Q4; plywood pricing expected to erode seasonally.
• BMD sales affected by seasonal factors and fewer sales days in Q4 compared to Q3.
• 2025 capital spending expected between $200 million and $220 million.

Risks

• Home affordability challenges and economic uncertainties impacting demand.
• Equipment delays related to multi-year projects in the Southeast affecting full year 2024 capital spending, though projects still on schedule.
• Seasonal fluctuations and market volatility affecting sales and pricing.

Question and Answer

• Q: Michael Roxland on BMD sales progression and customer demand A: Kelly Hibbs noted BMD daily sales pace was steady through the quarter with no major deviation, and Jeff Strom said customers are proceeding cautiously with commodities having recent tailwinds but a distribution-friendly market ahead.
• Q: Susan Maklari on EWP pricing, margins, BMD general line A: Kelly Hibbs said no strong correlation between lumber pricing and EWP pricing, and Nate Jorgensen discussed BMD's general line growth and how new products/SKUs support two-step distribution.
• Q: Jeffrey Stevenson on BROSCO performance, inventory, Oakdale plant A: Nate Jorgensen said BROSCO has performed well, Troy Little discussed the Oakdale plant modernization timeline and preparedness to serve customers without inventory impact.
• Q: Ketan Mamtora on BROSCO, EWP operating rates, BMD gross margins A: Nate Jorgensen said BROSCO is rock-solid, Kelly Hibbs reported EWP operating rates were ~80% in Q3, and Kelly Hibbs commented on BMD gross margins being solid in October but supply-driven in commodities.
• Q: Kurt Yinger on EWP volumes, BROSCO, Oakdale downtime, EWP capacity A: Nate Jorgensen discussed EWP volume stability due to geographic mix, Troy Little outlined Oakdale plant timeline and preparedness, and Troy Little talked about EWP installed capacity and labor flexibility to ramp up/down as needed