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.
Fourth Quarter
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
Full 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%.
Acquisitions
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.
2024 Guidance
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.”
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