Business Overview
H.B. Fuller Company (FUL) is a leading global manufacturer of adhesives, sealants, and other specialty chemical products. Founded in 1887 and headquartered in St. Paul, Minnesota, the company has evolved over the decades to become a diversified solutions provider serving a wide range of industries, including consumer goods, construction, transportation, and electronics.
H.B. Fuller's history can be traced back to 1887 when the company was founded by Harvey Benjamin Fuller, a chemist who developed and patented the first cold-water glue. In its early years, the company focused on manufacturing specialty chemicals and adhesives for local customers in the Midwest region of the United States. As the business grew, H.B. Fuller began expanding its geographic reach, opening sales offices and manufacturing plants in other parts of the country and eventually internationally.
A significant milestone in the company's history was its transition to becoming a public company in the 1950s when it listed its shares on the New York Stock Exchange. This provided additional capital to fund the company's growth strategy of expanding its product portfolio and global footprint through both organic initiatives and strategic acquisitions.
Throughout its history, H.B. Fuller has weathered economic downturns, navigated changes in raw material costs and availability, and adapted to evolving customer demands and industry trends. The company has made substantial investments in research and development to continually innovate its adhesives, sealants, and specialty chemical offerings. H.B. Fuller has also focused on optimizing its manufacturing and supply chain operations to enhance efficiency and competitiveness.
Today, H.B. Fuller operates in 35 countries, with a presence in North America, Europe, Latin America, Asia Pacific, India, the Middle East, and Africa. The company's operations are organized into three reportable segments: Hygiene, Health and Consumable Adhesives (HHC), Engineering Adhesives (EA), and Construction Adhesives (CA). In fiscal year 2024, HHC accounted for 43% of total net revenue, EA contributed 41%, and CA generated the remaining 16%.
Financials and Key Metrics
For the fiscal year ended November 30, 2024, H.B. Fuller reported net revenue of $3.57 billion, a 1.6% increase from the prior year. However, organic revenue, which excludes the impact of acquisitions and foreign currency, decreased by 1.0% due to a 2.7% decline in product pricing, partially offset by a 1.7% increase in sales volume.
The company's adjusted gross profit margin expanded by 90 basis points to 30.3% in fiscal 2024, driven by pricing actions and raw material cost management, as well as the benefits of restructuring initiatives. Adjusted EBITDA reached $594 million, resulting in a record adjusted EBITDA margin of 16.6%.
Net income attributable to H.B. Fuller in fiscal 2024 was $130.3 million, or $2.30 per diluted share, compared to $144.9 million, or $2.59 per diluted share, in the prior year. The decrease in net income was primarily due to higher operating costs and the impact of a $47.3 million loss on the impairment of assets associated with the company's North American Flooring business, which was divested in the fourth quarter of 2024.
In the most recent quarter (Q4 2024), H.B. Fuller reported revenue of $923.3 million, up 2.3% year-over-year. However, the company recorded a net loss of $7.4 million for the quarter, primarily due to the aforementioned impairment loss related to the North American Flooring business divestiture.
Segment Performance
Hygiene, Health and Consumable Adhesives (HHC): This segment accounted for 43% of total net revenue in 2024. Net revenue decreased 3.4% compared to 2023, primarily due to a decrease in product pricing and sales volume, partially offset by an increase from acquisitions. Segment operating income decreased 12.9%, and operating margin decreased 130 basis points in 2024 compared to 2023.
Engineering Adhesives (EA): Contributing 41% of total net revenue in 2024, this segment saw a 2.1% increase in net revenue. Organic revenue growth decreased by 1%, offset by a 3.7% increase from acquisitions and a 0.6% decrease from currency impacts. Segment operating income increased 3%, and operating margin increased 10 basis points in 2024 compared to 2023.
Construction Adhesives (CA): Representing 16% of total net revenue in 2024, this segment experienced a 17.2% increase in net revenue. Organic revenue growth was 9.5%, with a 7.5% increase from acquisitions and a 0.2% increase from currency impacts. Segment operating income increased 321.7%, and operating margin improved by 330 basis points in 2024 compared to 2023.
Liquidity
H.B. Fuller's balance sheet remained strong, with a net debt-to-EBITDA ratio of 3.1 times as of November 30, 2024. The company generated $302 million in operating cash flow and $163 million in free cash flow during the fiscal year. The debt-to-equity ratio stood at 0.0003, with cash and cash equivalents of $169.4 million. The company has a $700 million secured, multi-currency revolving credit facility, of which $689.7 million was unused as of November 30, 2024. The current ratio was 1.81, and the quick ratio was 1.16, indicating a healthy liquidity position.
Navigating Challenges and Executing Strategic Initiatives
Despite the challenging market conditions in 2024, H.B. Fuller remained focused on executing its strategic initiatives to transform the business and enhance long-term profitability. The company announced a comprehensive plan to optimize its global manufacturing and logistics footprint, which is expected to generate $75 million in annualized cost savings by 2030.
As part of this initiative, H.B. Fuller plans to reduce its global manufacturing footprint from 82 facilities at the end of fiscal 2024 to a target of 55 facilities by 2030. The company also intends to streamline its North American logistics and warehousing structure, reducing the number of warehouses from 55 to approximately 10 by 2027. These actions, which will require an estimated $150 million in capital expenditures over the next five years, are designed to improve capacity utilization, reduce future capital requirements, and better serve the company's customers.
On the portfolio optimization front, H.B. Fuller divested its North American Flooring business in the fourth quarter of 2024, a move that aligns with the company's strategy to focus on higher-margin, faster-growing market segments. The company also completed the acquisitions of two leading medical adhesive companies, GEM S.r.l. and Medifill Ltd., during the fiscal year, further enhancing its position in the attractive and rapidly growing tissue adhesives market.
Outlook and Conclusion
For fiscal year 2025, H.B. Fuller expects net revenue to be down 2% to 4% compared to 2024, primarily due to the divestiture of the Flooring business. Adjusting for this divestiture, the company anticipates organic revenue growth of 1% to 2%. Adjusted EBITDA is projected to be in the range of $600 million to $625 million, representing a 1% to 5% year-over-year increase. On a constant currency basis, this guidance range represents year-over-year adjusted EBITDA growth of 3% to 7%.
Full year adjusted earnings per share is expected to be in the range of $3.90 to $4.20, representing year-over-year growth of 2% to 9% versus fiscal 2024. The company anticipates full year operating cash flow to be between $300 million and $325 million before approximately $160 million of capital expenditures.
It's worth noting that in Q4 2024, H.B. Fuller encountered an unexpected deceleration in volume across the majority of their end markets and slowing customer order patterns, particularly in consumer product goods related market segments and their durable goods distribution channel. This resulted in margin pressure, as the company was unable to finish the year as strongly as expected. Adjusted EBITDA in Q4 2024 was down 14% year-over-year to $148 million, and adjusted EBITDA margin declined year-over-year to 16.1%.
Despite these near-term challenges, H.B. Fuller remains focused on its long-term strategy of transforming the business into a sustainably faster-growing, higher-margin enterprise. The company's strategic initiatives, including the optimization of its global footprint, portfolio management, and targeted acquisitions, are aimed at driving improved profitability and generating shareholder value over the long run.
As H.B. Fuller navigates the current operating environment, the company's proven track record of operational excellence, innovation, and prudent capital allocation positions it well to weather the storm and emerge as a stronger, more competitive player in the specialty chemicals industry. With a projected CAGR of approximately 5-6% for the adhesives industry over the next 5 years, driven by growing demand in end markets such as packaging, construction, transportation, and electronics, H.B. Fuller is well-positioned to capitalize on these opportunities and drive sustainable growth in the years to come.