Stock Building Supply posted a loss for the third quarter of 2013, as did BlueLinx, but Builders FirstSource scored a profitable quarter. Then along came Carter Lumber on Nov. 1 saying it would close 26 locations mostly throughout the Midwest.
Stock, BlueLinx, and BFS all had strong sales in the quarter and told investors during the quarterly earnings calls that they were on the lookout for expansion opportunities.
Carter officials say that the company is closing out of weaker-performing markets and moving into stronger, more growth-oriented ones.
George Finkenstaedt of M&A Advisors says that companies looking for investment opportunities are largely driven by available cash. “On the surface, it means their balance sheets have improved and they have sufficient financial strength to make acquisitions or investments,” Finkenstaedt says.
“They see opportunities out there and believe in the long-term upward trend in the housing cycle and profitable building material supply growth,” he says.
Stock reported a net loss of nearly $3 million in the third quarter, following the second quarter’s net profit $242 million, the first in six years. The Raleigh, N.C.–based company says that net sales for the quarter totaled $328.5 million, compared with sales of $255.8 million in the third quarter of 2012.
Atlanta–based Bluelinx Holdings reported a third quarter 2013 net loss of $3.2 million, compared with year-ago net income of $3 million, while net sales in the quarter totaled $558 million, compared with prior year sales of $496.8 million.
Builders FirstSource (BFS) reported net income of $12.8 million, compared with the $13.6 million loss sustained in the third quarter of 2012.
All three companies say that they plan to expand in the coming year.
BFS will either expand existing facilities, bring mothballed ones back on line, or may build or acquire new facilities in new markets. “A couple of mothballed facilities may be opened next year and [we could] have them up and running if the demand occurs,” says BFS CEO Floyd Sherman, noting that a BFS truss operation and a panel operation will open in 2014.
The company may buy under-performing operations with potential capacity to add BFS lines to their production. The price tag for most of the acquisitions would fall in the $20 million to $75 million range.
Finkenstaedt says that for potential sellers, those expansion plans are good news as more strategic as well as financial buyers go shopping.
“More buyers/investors is a good thing for a seller,” he says. “It wasn’t too long ago that good investment opportunities lacked sufficient buyer interest because of the perceived risk and uncertainty in the housing market.”
“Strategic buyers can often afford a higher price than financial buyers. They can add to existing corporate infrastructures without significant additions to corporate overhead,” Finkenstaedt says.