Beacon Roofing Supply, Inc. CEO: Decline has slowed
Beacon Roofing Supply, Inc. (Nasdaq: BECN) CEO Bob Buck said the distributor of roofing material’s business decline has slowed but will not make a specific prediction. Buck made the comments during a morning conference call.
“It seems to have slowed but we’d rather not make a prediction and that’s why we are so focused on cost reductions for fiscal 2008,” Buck said.
Buck said gross margins remain pressured in most regions and across all of Beacon’s product groups, but that gross margins have “settled down somewhat” sequentially, as compared to the third quarter. Beacon’s non-residential segment is the most stable, he said.
“[The commercial segment] is still stronger than residential and our suppliers remain optimistic about 2008 on their various earnings calls that have occurred over the last several months,” Buck said.
Beacon believes it can achieve the midpoint of current sales and profit estimates for fiscal 2008. Analysts, on average, expect fiscal 2008 earnings of $0.60 per share on $1.76 billion in revenue.
“Please understand our nature is optimism but our business plan is based upon realism,” Buck said. “By that, I mean this: we really believe we can achieve the midpoint of current sales and profit estimates for 2008. It could be achieved with an industry recovery in the second half of the year or it could be achieved by watching every expense, every day, particularly at our shelter regions.”
Before the opening, Beacon recorded fourth-quarter net income of $11.3 million, or $0.25 per share, in line with analyst estimates and compared with $14.6 million, or $0.32 per share, a year earlier. Quarterly sales rose 14.5% to $493.8 million, above Wall Street projections of $480.11 million and from $431.3 million during the year-ago period.
The Peabody, Mass.-based company said its acquisition of North Coast Commercial Roofing Systems, which was acquired during the third quarter, drove the sales increase. The construction industry’s widespread downturn pressured Beacon’s bottom line, the company said.
The chief executive said Beacon’s acquisition pipeline is full and that acquisitions are still part of the company’s growth plan.
“Several companies are doing quite well. The northwest is extremely strong, but I’m not saying that’s one that we’re targeting,” he said. “We are passing on acquisitions that are in troubled areas like Florida.”
At the end of fiscal 2006, Beacon had about 2,641 employees. After deducting the 208 employees that joined as a result of two acquisitions, Buck said the company had 2,500 employees at the end of fiscal 2007.
Several of Beacon’s suppliers have attempted price increases, but Buck said none have stuck.
“With the rise in petroleum, we do see some price increases in the future,” he said. “We still believe we need to see business at least flatten out before our vendors and our sales can increase prices. Our plan is to reduce costs now.”
In midday trading, BECN shares are up 16.07%, or $1.13, at $8.16. Over the last 52 weeks, shares have ranged from $7.35 to $21.90.
