Griffon Rebounds as Residential Demand Returns
Revenue reached $481.4 million as residential-product volumes turned positive.
Griffon Corporation (GFF), a building-products maker, returned to year-over-year adjusted EBITDA growth in its fiscal third quarter as demand improved and price and product mix remained favorable. Adjusted EBITDA from continuing operations rose 2% to $124.8 million after declining 4% in the prior quarter.
The quarter marked a change in trajectory for the newly streamlined company. Volume increased 1%, led primarily by residential products, after residential weakness drove a 6% volume decline in the second quarter. Favorable price and mix strengthened to 6% from 5%.
Revenue rose 7% from a year earlier to $481.4 million, accelerating from a 1% decline in the second quarter. Adjusted earnings increased to $1.51 a share from $1.39, while adjusted income from continuing operations rose 5.5% to $68.0 million.
Profitability remained below year-earlier levels despite the sequential rebound. Adjusted EBITDA margin improved to 25.9% from 23.2% in the second quarter but narrowed from 27.2% a year earlier as higher material and selling, general and administrative costs partly offset revenue growth. Gross margin fell about 170 basis points to 47.0%.
GAAP income from continuing operations was $66.3 million, compared with a loss of $108.7 million a year earlier, when Griffon recorded a $243.6 million goodwill and intangible-asset impairment. For the first nine months, adjusted EBITDA declined 2.1% to $331.8 million, leaving the third-quarter improvement to offset only part of the earlier weakness.
Griffon reduced debt by about $137 million during the quarter, lowering net debt to roughly $1.2 billion and leverage to 2.2 times. Nine-month free cash flow declined 3.9% to $194.2 million as lower capital spending partly offset weaker operating cash flow.
The company also advanced its portfolio simplification, completing the AMES North America joint venture in June and the AMES Australasia transaction in July. Following those deals and the combination of Hunter Fan with Home and Building Products, Griffon is a pure-play building-products company.
Griffon repurchased 626,000 shares for $53.2 million during the quarter, accelerating from $32.9 million in the second quarter. The higher repurchase pace accompanied the debt reduction as the company completed its shift toward a more concentrated building-products portfolio.