Universal Forest Products: Hurricanes Help Deliver Strong Numbers

March 2, 2006
Staggering fourth-quarter financials push the wood-products manufacturer toward its goals two years early.

What's the best way to celebrate 50 years in business? One way is to post an 87% increase in fourth-quarter net earnings. Another way is to boast a nearly 40% increase in net earnings for the entire anniversary year. Universal Forest Products Inc. -- one of IndustryWeek's IW 50 Best Manufacturing Companies in 2005 -- did both and then some.

"We don't often experience a fourth quarter as powerful as we just had, but a number of things aligned to make that happen in 2005," said William G. Currie, Universal's CEO and vice chairman, in a Feb. 6 press release. "It was an unusually strong end to an already strong year."

Indeed, the Grand Rapids, Mich.-based company also increased net sales for the year by nearly 10% to $2.69 billion.

Universal Forest Products Inc.
At A Glance

Universal Forest Products Inc.
Grand Rapids, Mich.
Primary Industry: Wood Products
Number of employees: 9,000
2004 In Review
Revenue: $2.5 billion
Profit Margin: 2.0%
Sales Turnover: 3.2
Inventory Turnover: 11.3
Revenue Growth: 29.2%
Return On Assets: 7.1%
Return On Equity: 15.9%
According to Currie, the company was aiming to hit those sales numbers in 2007.

"We were able to do that because we had a phenomenal year -- a year where everything seemed to go right and our focus on the basics paid off," Currie said in the conference call.

In addition to increasing sales in every category -- D-I-Y, site-built construction, industrial, and manufactured housing -- demand for Universal's products understandably increased following the hurricanes that hit the Gulf region in August and September.

"After any hurricane there is a strong demand for [materials], and we had it on hand. We sold a lot in the aftermath of the storms," Currie said in a Feb 7 conference call.

Currie also noted that Universal is well seated with The Home Depot and Lowes Corp. -- two very visible do-it-yourself stores -- and is focused on new products, divisions, accounts and acquisitions.

Universal purchased assets of Maine Ornamental Woodworkers Inc., a Maine-based manufacturer of decorative caps used on decking and fencing posts.

"Our acquisition strategy has been to target successful businesses that can add to our capacity or enhance our product offerings," Currie said in a June 3, 2005, press release announcing the acquisition.

The same month the company also announced it acquired an additional 25% membership interest in Shawnlee Construction LLC, a Warwick, R.I.-based framer of multi-family structures.

Universal acquired an initial 50% of the company in 2004 and plans to purchase the remaining 25% over the next five years. The move will enable Universal to enhance its sales to the site-built market and satisfy customer requests for turnkey construction packages, according to a June 27 press release.

To expand its consumer products market, Universal created a new division, Universal Consumer Products Inc.

Intended to create new distribution networks, the new division will comprise the company's operations that manufacture and market, consumer products including Latitudesa decking and railing, Maine Ornamental post caps, TechTrim polymer trim board and plastic lattice, DecKarators decorative balusters, and eon plastic decking and railing.

"At Universal Forest Products we make it a practice to do what we say we are going to do, and deliver it faster than promised," Currie said in the February conference call. "That's what 2005 was all about. We delivered on our goals and met our five-year plan in three years."

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