Q4 Reported EPS (diluted) of $0.80; Adjusted EPS (diluted) of $1.32, up 27% year-on-year
 Company achieves new record for Q4 and fiscal year adjusted EBITDA margin
 Q4 Adjusted EBITDA up 22% and Adjusted EBITDA margin up 440 basis points versus Q4 2022
 FY 2023 cash flow from operations increased 48% year-on-year to $378 million

ST. PAUL, Minn.--(BUSINESS WIRE)-- H.B. Fuller Company (NYSE: FUL)  reported financial results for its fourth quarter and fiscal year that ended December 2, 2023.

Fourth Quarter 2023 Noteworthy Items:

Achieved strong profit growth and record fourth quarter adjusted EBITDA margin on exceptional execution and proactive response to significant customer destocking activity throughout the year;Net revenue was $903 million, down 5.8% year-on-year; net revenue was up 1.2% year-on-year on a 13-week comparable basis; organic revenue decreased 3.5% year-on-year, driven by slightly lower pricing and volume;Gross margin was 30.3%; adjusted gross margin of 31.3% increased 510 basis points year-on-year, driven by pricing and raw material cost actions and restructuring benefits;Net income was $45 million; adjusted EBITDA was $173 million, up 22% year-on-year, and adjusted EBITDA margin expanded 440 basis points year-on-year to 19.1%;Reported EPS (diluted) was $0.80; adjusted EPS (diluted) was $1.32, up 27% versus the prior year, driven by strong operating income growth;Net working capital, as a percentage of annualized net revenue, decreased 200 basis points sequentially from 18.1% in the third quarter to 16.1% in the fourth quarter;Net debt-to-adjusted EBITDA ratio declined sequentially from 3.3X to 2.9X driven both by lower net debt and growth in adjusted EBITDA.

Summary of Fourth Quarter 2023 Results:

The Company’s net revenue for the fourth quarter of fiscal 2023 was $903 million, down 5.8% versus the fourth quarter of fiscal 2022. Organic revenue declined 3.5% year-on-year, with pricing adjustments reducing organic revenue by 3.4% and volume reducing organic revenue by 0.1%. Foreign currency translation increased net revenue by 0.3%, acquisitions increased net revenue by 4.4%, and the impact of one less week during the fourth quarter reduced net revenue by 7.0%. Net revenue increased 1.2% year-on-year on a comparable 13-week basis in the fourth quarter.

Gross profit in the fourth quarter of fiscal 2023 was $274 million. Adjusted gross profit was $283 million. Adjusted gross profit margin of 31.3% increased 510 basis points year-on-year. Pricing and raw material cost actions, restructuring benefits and general cost reductions drove the increase in adjusted gross margin year-on-year.

Selling, general and administrative (SG&A) expense was $160 million in the fourth quarter of fiscal 2023 and adjusted SG&A was $156 million, effectively flat year-on-year. Continued cost management and additional restructuring benefits offset inflation in wages and services and the incremental SG&A costs associated with acquisitions completed over the previous year.

Net income attributable to H.B. Fuller for the fourth quarter of fiscal 2023 was $45 million, or $0.80 per diluted share. Adjusted net income attributable to H.B. Fuller for the fourth quarter of fiscal 2023 was $74 million. Adjusted EPS was $1.32 per diluted share, up 27% year-on-year driven by strong operating income growth.

Adjusted EBITDA in the fourth quarter of fiscal 2023 was $173 million, up 22.4% year-on-year. Adjusted EBITDA margin increased 440 basis points year-on-year to 19.1%, driven by the balance of raw material and price movements versus the prior year’s fourth quarter, as well as restructuring savings. This year’s fourth quarter had one less week versus the prior year’s fourth quarter and this unfavorably impacted adjusted EBITDA growth by approximately $10 million.

“I am proud of our leaders for exceptional execution throughout the year, as evidenced by strong profit growth and record margins. Across the organization, our teams proactively managed the changing price and raw material dynamics successfully and implemented decisive restructuring measures in the face of unprecedented customer destocking, which we believe is largely behind us, to deliver these results and position H.B. Fuller for continued future profit growth, margin expansion and strong cash flow,” said Celeste Mastin, H.B. Fuller president and chief executive officer.

“As the market leader in innovation, focused on providing highly customized solutions for our customers, we have successfully transformed our portfolio into one that is concentrated in the highly specified areas of our market segments. As such, we have begun to take our portfolio management approach to the next level by proactively driving capital allocation to the highest margin, highest growth market segments. We have compelling growth opportunities in front of us and we are confident in our capabilities to continue to transform H.B. Fuller and achieve an adjusted EBITDA margin target greater than 20 percent within the next 3 to 5 years.

“As we enter fiscal year 2024, we are confident in our outlook for positive organic growth and achieving further EBITDA margin expansion. We are successfully executing our strategy to deploy capital to the highest return opportunities, innovating with speed to deliver solutions for our customers, driving efficiencies throughout our manufacturing footprint, and achieving meaningful synergies from our collections of acquisitions.”

Fiscal Year 2023 Noteworthy Items:

Achieved record fiscal year adjusted EBITDA margin on exceptional execution and proactive response to significant customer destocking activity throughout the year;Net revenue was $3.51 billion, down 6.4% year-on-year; on a 52-week comparable basis, net revenue was down 4.6% year-on-year; organic revenue decreased 5.5% year-on-year, driven by 8.4% lower volume due to significant customer destocking activity during the year, offset somewhat by 2.9% favorable pricing;Gross margin was 28.7%; adjusted gross margin of 29.4% increased 350 basis points year-on-year, driven by pricing and raw material cost actions and restructuring benefits;Net income was $145 million; adjusted EBITDA was $581 million, up 10% year-on-year; adjusted EBITDA margin expanded 240 basis points year-on-year to a fiscal year record high of 16.5%;Reported EPS (diluted) was $2.59; adjusted EPS (diluted) was $3.87, down slightly versus the prior year, as strong operating income growth nearly offset significantly higher net interest expense and unfavorable foreign currency exchange which reduced adjusted EPS (diluted) by $0.58 and $0.18, respectively;Cash flow from operations of $378 million improved $122 million year-on-year, or 48%, on improved profitability and lower net working capital requirements.

Balance Sheet and Working Capital:

Net debt at the end of the fourth quarter of fiscal 2023 was $1,659 million, down $131 million sequentially versus the third quarter and down $26 million year-on-year. The sequential reduction in net debt, together with growth in adjusted EBITDA, reduced the ratio of net debt-to-adjusted EBITDA from 3.3X to 2.9X sequentially.

Net working capital in the fourth quarter of fiscal 2023 declined $74 million sequentially versus the third quarter and $58 million year-on-year. As a percentage of annualized net revenue, net working capital declined 200 basis points sequentially, and 180 basis points year-on-year on a comparable 52-week basis, to 16.1%.

Fiscal 2024 Outlook:

Net revenue growth for fiscal 2024 is expected to be in the range of up 2% to 6% with organic revenue flat to up 3% versus fiscal 2023, reflecting a rebound in demand following the unprecedented customer destocking activity in fiscal 2023, offset by slightly lower pricing as customers qualify lower price formulations and index-based pricing has a greater effect;Adjusted EBITDA for fiscal 2024 is expected to be in the range of $610 million to $640 million, equating to growth of approximately 5% to 10% year-on-year;The core tax rate, excluding the impact of discrete items, is anticipated to be between 27% and 28% in fiscal year 2024;Net interest expense for fiscal 2024 is expected to be between $115 million and $125 million;Adjusted EPS (diluted) is expected to be in the range of $4.15 to $4.45, equating to a range of up 7% to 15% year-on-year;Operating cash flow in fiscal year 2024 is expected to be between $300 million and $350 million and capital expenditures are expected to be approximately $140 million.