H.B. Fuller Company (NYSE:FUL) Making Strategic Acquisitions

H.B. Fuller Company (NYSE:FUL) stock rose 4.83% (As on June 29, 11:21:21 AM UTC-4, Source: Google Finance) though the company missed the market’s expectations for the second quarter of FY 23. The company has strengthened its portfolio with two strategic acquisitions in the US and United Arab Emirates (UAE). The company has acquired US-based medical adhesives business Adhezion Biomedical and UAE-based adhesives manufacturer XCHEM International. Following the acquisition, Adhezion will be integrated with HB’s Hygiene, Health, and Consumable Adhesives global business, while XCHEM will operate within HB’s CA global business unit. The two companies are expected to contribute approximately $17m to revenue and $2m to adjusted earnings before interest, taxes, depreciation and amortisation in this financial year.

FUL in the second quarter of FY 23 has reported the adjusted earnings per share of 93 cents, missing the analysts’ estimates for the adjusted earnings per share of $1.01, according to the Zacks Consensus Estimate. The company had reported 9.6 percent fall in the adjusted revenue growth to $898.24 million in the second quarter of FY 23, missing the analysts’ estimates for revenue by 6.84%. The organic revenue decreased 8.3% year-onyear, driven by lower volume; Gross margin was 28.6%; adjusted gross margin of 29.0% increased 330 basis points year-on-year, driven by the combined impact of pricing and raw material cost actions; Net income was $40 million at the mid-point of Company guidance. Volume declined 14.2%, driven by customer destocking actions and generally slower industrial demand across all three global business units.

Adjusted EBITDA in the second quarter of fiscal 2023 was $143 million, at the mid-point of Company guidance and up 3% year-on-year. Adjusted EBITDA margin increased 190 basis points year-on-year to 15.9%, driven by the combined impact of pricing and raw material cost actions versus the prior year’s second quarter, as well as restructuring savings, partially offset by the impacts of lower volume and wage and other inflation. Net debt at the end of the second quarter of fiscal 2023 was $1,779 million, up $31 million sequentially versus the first quarter and down $89 million year-on-year. The sequential increase in net debt was driven by acquisition activity during the second quarter, offset by improved cash flow from operations. Cash flow from operations in the second quarter was $103 million, up $94 million year-on-year, reflecting improving margins and lower net working capital requirements.

FY 23 Adjusted EPS (diluted) is now expected to be in the range of $3.80 to $4.20, equating to a range of down 5% to up 5% year-on-year.