Plumbing, HVAC, PVF and industrial supplies distribution giant Ferguson reported its 2023 fourth-quarter and full-year financials on Sept. 25, which revealed that the company is expecting flat revenue in the year ahead after netting nearly $30 billion this past year.
The performance report also detailed the company’s substantial 2023 expansion via acquisitions.
Ferguson ranked No. 3 on MDM’s 2023 Top Industrial Distributors List, and charted No. 1 for Plumbing, No. 2 for HVACR, No. 2 for Industrial PVF, No. 7 for Building Materials/Construction, and No. 8 for MRO.
Ferguson reported 4Q23 total sales of $7.84 billion, down 1.7% year-over-year, with organic revenue down 5.3%, partially offset by 2.2% acquisition growth and a 1.4% impact from an additional selling day. The company said the decline in net sales was mainly driven by declines in residential, partially offset by growth in non-residential. Price inflation stepped down from approximately 5% in 3Q23 to approximately 1% in 4Q23.
- Gross margin of 30.6% ticked up 10 basis points year-over-year.
- Operating profit of $782 million dipped 3.9% year-over-year, while operating margin of 10.0% (10.4% adjusted) dipped 20 basis points (-30 adjusted).
- Adjusted EBITDA of $858 million declined 4.2% year-over-year.
- Net profit of $584 million was nearly identical to the $582 million a year earlier.
- In the U.S., sales of $7.43 billion declined 1.5% year-over-year, while adjusted operating profit of $804 million fell 3.0%.
- Here is how Ferguson’s U.S. 4Q sales growth fared by customer group.
- Residential Trade Plumbing: -11% (+21% in 4Q22)
- HVAC: +4% (+18% in 4Q22)
- Residential Building & Remodel: +2% (+21% in 4Q22)
- Waterworks: -1% (+36% in 4Q22)
- Commercial/Mechanical: +6% (+27% in 4Q22)
- Other (Fire Fabrication, Facilities Supply, Industrial): +6% (+27% in 4Q22)
- In Canada, sales of $410 million declined 5.1% year-over-year, while adjusted operating profit of $22 million fell 37.1% year-over-year
For its calendar 2023, which spanned Aug. 1, 2022 through July 31 of this year, Ferguson reported net sales of $29.73 billion — up 4.1% vs. 2022. Organic revenue was up 1.5% vs. 2022, while acquisitions contributed 2.5% growth. Average inflation during the year was approximately 8%.
- Gross margin of 30.4% dipped 30 basis points vs. 2022.
- Operating profit of $2.66 billion decreased 5.7% vs. 2022, while operating margin of 8.9% (9.8% adjusted) fell 100 basis points (-50 adjusted).
- Adjusted EBITDA of $3.11 billion decreased 1.5% vs. 2022.
- Net profit of $1.89 billion trailed 2022’s $2.12 billion.
- In the U.S., sales of $28.29 billion increased 4.5% vs. 2022, while adjusted operating profit of $2.89 billion was flat.
- In Canada, sales of $1.44 billion decreased 3.7% vs. 2022, while adjusted operating profit of $76 million fell 32.1%.
Ferguson detailed that, during its 4Q23, the company completed three acquisitions that netted the company approximately $450 million in combined revenue. Those three deals were announced on Aug. 2 in the form of plumbing distributor Bruce Supply Corp. (Brooklyn, New York); waterworks distributor The Kennedy Companies (Mount Laurel, New Jersey); and HVAC distributor S. G. Torrice (Wilmington, Massachusetts).
Overall, Ferguson said it completed eight acquisitions during its fiscal 2023, gaining combined annualized revenue of approximately $780 million. The company noted it invested $616 million in those eight acquisitions during the year.
Ferguson’s fiscal 2024 guidance showed the company expects broadly flat net sales, with adjusted operating margin forecasted to be 9.2% to 9.8%. This assumes mid-single digit market decline with continued company market outperformance, contribution from already-completed acquisitions and one additional sales day.
Ferguson expects the overall impact of price inflation to be broadly neutral for the year.
The company anticipates full-year capital expenditures to be between $400-450 million.
“FY2024 financial guidance reflects a continued challenging market backdrop, particularly in the first half of our fiscal year against strong prior year comparables,” Ferguson CEO Kevin Murphy said in a news release. “Our balanced end market exposure positions us well to leverage emerging multi-year structural tailwinds such as non-residential megaprojects. We remain confident in the strength of our markets over the medium and longer term and expect to capitalize on attractive growth opportunities.”