Universal Forest Products, Inc. 1Q net earnings down 4 times to $3.9 million

Apr 20, 2007. /Lesprom Network/. Universal Forest Products, Inc. announced on April 16 its first quarter results, including net sales of $549.0 million and net earnings of $3.9 million, down from net sales of $665.6 million and net earnings of $15.9 million for the same period in 2006. The numbers compare with an unusually strong first quarter in 2006 due, in part, to the spike in FEMA orders for manufactured homes in the wake of the 2005 hurricane season, and reflect the impact of the soft lumber and housing markets, as well as adverse weather conditions. “We predicted that the housing market would be soft, but it turned out to be even weaker than we anticipated. In addition, supply continues to exceed demand in an already depressed lumber market, keeping prices low and adversely affecting our sales numbers,” said president and CEO Michael B. Glenn. “These factors combined to create a tough quarter.” Mr. Glenn noted that January and February were as weak as the company has seen, but as the weather improved in March, sales and profits also rebounded. “March provided us with reason to believe we might soon see positive evidence of our efforts to gain market share,” he added. “The monthly trend is positive and we believe the moves we’ve made over the past six months to position the company for growth contributed to an increase in market share. We are optimistic for stronger months ahead, especially in our do-it-yourself/retail and industrial markets.” By market, Universal posted the following gross sales results for the first quarter: • $196.1 million in do-it-yourself/retail, a decrease of 9.4% from 2006; • $138.8 million in site-built construction, a decrease of 34.9% from 2006; • $133.5 million in industrial, a decrease of 4.7% from 2006; and • $88.3 million in manufactured/modular housing, a decrease of 17.3% over 2006. These results were impacted by the lumber market, which affects the company’s cost of materials and its selling prices. Mr. Glenn called the lumber market in the first quarter of 2007 “one of the weakest we have seen in many years.” On average, the lumber composite price was 24% lower in the first quarter of 2007 compared to the first quarter of 2006, and sustained over-supply continued to drive prices even lower. The company’s unit sales declined approximately 8% for the quarter primarily due to weak single family and manufactured housing market conditions; these declines were partially offset by increased unit sales attributable to businesses the company has acquired since the first quarter of 2006. Mr. Glenn noted that sales to new customers in the first quarter helped mitigate the effect of the struggling site-built and manufactured housing markets. “Times like these provide us with the opportunity to demonstrate the power of Universal. We put our collective shoulder to the grindstone to gain market share where we could, to enhance our operations, and to position the company for growth when the markets return,” Mr. Glenn added. To enhance its opportunity in 2007 and beyond, Universal is focused on its strategic plan, GO 2010; on fully integrating recent acquisitions including Aljoma Lumber and Banks Lumber; and on a continuous improvement strategy that’s being deployed throughout the company to enhance customer satisfaction, empower employees and improve productivity. Outlook At the beginning of 2007, the company announced annual targets for unit sales growth ranging from 10% to 15% and net earnings growth (excluding certain tax adjustments from 2006 results) of 5% to 10%. These targets continue to be subject to a number of assumptions. Due to the seasonality of our business and to other market factors that might impact our year-end results, it is too early to assess the relative accuracy and scope of those assumptions. Universal Forest Products markets, manufactures and engineers wood and wood-alternative products for do-it-yourself/retail home centers, structural lumber products for the manufactured housing industry, engineered wood components for the site-built construction market, and specialty wood packaging for various industries. The company also provides framing services for the site-built sector. The company reported sales of nearly $2.7 billion in 2006. Universal has approximately 10 000 employees who work out of more than 100 locations.