Strength in the multifamily sector and improved commercial activity helped drive strong third quarter results for Gypsum Management & Supply (GMS). Results during the quarter, ended Jan. 31, were also positively impacted by the continued expansion of the company’s complementary products segment. The positive tailwinds helped offset the early stages of a slowdown in single-family construction and difficult weather conditions during the quarter, according to GMS.
During the fiscal third quarter, net sales for GMS increased 7.0% on a year-over-year basis to $1.2 billion, with organic net sales increasing 6.4%. In the third quarter, wallboard sales increased 20.6% to $500.7 million, ceiling sales increased 4.9% to $16.8 million, and complementary product sales increased 11.7% to $352.6 million, while steel framing sales decreased 11.7% to $352.6 million.
Gross profit increased 9.4% on a year-over-year basis to $402.2 million, primarily due to the successful pass through of product inflation, improving commercial wallboard sales, growth in sales of complementary products, and incremental gross profit from acquisitions, according to GMS. Gross margin increased 70 basis points year-over-year to 32.6%.
“As we look to close out fiscal 2023 at the end of April, it appears single-family demand will continue to soften while multifamily and commercial activity should improve seasonally with continuing year-over-year growth,” GMS president and CEO John Turner said in a prepared statement. “Given these end market dynamics, subsequent to the end of the quarter, the company implemented cost reduction initiatives to better align our operations with the current demand outlook. As phased in, these initiatives are expected to reduce fixed SG&A expenses by approximately $15 million on an annualized basis.”
The distributor reported a third quarter net income of $64.8 million, a 5.5% increase compared to the prior-year period. Adjusted EBITDA increased 4.3% year-over-year to $140.8 million and adjusted EBITDA margin decreased 30 basis points to 11.4%.
During the company’s fiscal third quarter, GMS entered the New York City market through the acquisition of Tanner Bolt & Nut and opened a ceilings-focused greenfield location in the metro market. Additionally, the company opened a greenfield yard location in Chester, Va., and three new AMES store locations.
“At the end of December, we acquired Tanner Bolt & Nut in Brooklyn, N.Y. Tanner is a leading distributor of tools and fasteners servicing primarily the five New York City Boroughs and Long Island. Complementing this acquisition is our new greenfield yard, also in Brooklyn, with a dedicated focus on Ceilings, which we opened in early January,” Turner said. “Combined, these investments give us a meaningful presence in the New York City area and a base from which we intend to continue to invest and grow, demonstrating our ongoing commitment to our strategic priorities of expanding our footprint and growing our Complementary and core product sales.”