Boise Cascade Co. (BCC, Financial) released its second-quarter results before the opening bell on Aug. 5.Â
Snapshot of the quarter
The North American manufacturer of wood products and wholesale distributor of building materials recorded net income of $27.7 million, or 71 cents per share, down from $41.8 million, or $1.06 per share, the year before. Analysts were anticipating earnings of 48 cents per share. Revenue declined 12.64% from the prior-year quarter to $1.23 billion, falling short of expectations of $1.27 billion.
Reflecting on the company's performance, CEO Tom Corrick said:
"While the headwinds of low commodity products pricing and softer single-family residential starts made for challenging year-over-year financial comparisons, our businesses executed well during the second quarter. The progress we have made growing our distribution and EWP businesses is providing more stability to our earnings during periods of weak commodity pricing.”
For the quarter ended June 30, Boise Cascade recorded cash and cash equivalents of $202.4 million and $440 million in outstanding debt.
How did wood products fare?
Wood products sales, including sales to building materials distributors, amounted to $334.3 million in the second quarter, down 21% from the prior-year quarter. The company cited lower sales prices and sales volumes of plywood for the decline. Additionally, sales volumes were lower for engineered wood products.
Sales in the wood products segment decreased by $17.6 million to $18.9 million. Lower sales prices for plywood, lower sales volumes of engineered wood products and plywood and mounting per unit conversion costs contributed to the decline. These declines were slightly offset by higher net sales prices and lower costs of OSB and logs and lower expenses associated with employees.
Performance of building materials distribution
Building material distribution sales fell 10% year over year to $1.09 billion due to a 12% decrease in sales prices, which were partially offset by 2% sales volume growth.
For the reported quarter, the division’s income was $33.8 million, reflecting a drop of $13.9 million from the year-ago quarter.Â
Looking forward
Boise Cascade projects the demand for its products will slow down in 2019. As per the July 2019 Blue Chip consensus forecast, total U.S. housing starts are expected to be 1.24 million in 2019 and 1.27 million in 2020. The company expects residential construction growth in the near future to be flat to slightly down as builders are expected to face constraints in terms of availability of labor and building lots. Also, potential buyer’s affordability remains a concern.
Household formation rates will play a key role in determining the demand for the company’s building materials.
Disclosure: I do not hold any positions in the stocks mentioned.
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