Builders FirstSource — No. 1 on MDM’s 2023 Top Building Materials/Construction Distributors List — reported its second quarter financial results on Aug. 2, showing continued substantial year-over-year sales declines driven by lower demand and deflation.

Builders posted total 2Q sales of $4.5 billion, down 34.6%, which it said was driven by a 22.3% decline in core organic sales and a -16.2% impact of commodity deflation. It followed a 1Q sales decline of 31.6%.

Builders said that while core organic net sales in Value-Added Produced decreased 19.5% year-over-year, that category increased as a percentage of overall net sales mix from 43% a year earlier to 53% in 2Q23.

The company’s 2Q gross margin increased 40 basis points year-over-year to 35.2% (down 10 bps from 1Q), attributed to stronger mix in value-added products and Builders’ recent investments in Multi-Family and related commodity price fluctuations.

Builders’ 2Q net profit of $405 million fell 59.0% year-over-year ($334 million in 1Q), while adjusted EBITDA of $769 million fell 49.0%, which the company attributed to lower net sales and deflation. Adjusted EBITDA margin fell by 480 bps year-over-year to 17.0%.

“As we continue to assess our margin expectations based on our current mix and overall performance, we are confident that our long-term normalized gross margin percentage is now 29% or higher versus our previous expectation of 28% or higher,” Builders FirstSource CFO Peter Jackson said in the company’s 2Q earnings release.”

Looking ahead, Builders FirstSource said it expects full year 2023 net sales to be between $16.8 billion to $17.8 billion; gross margin between 33% to 35%; adjusted EBITDA between $2.6 billion to $2.9 billion; and adjusted EBITDA margin between 15%-17%.

The company had 2022 net sales of $22.7 billion.