H.B. Fuller Company (NYSE:FUL) Q1 2023 Earnings Call Transcript

Celeste Mastin: And again, Mike, as we look at that construction adhesives business, we €“ it’s a small business for us. We are still growing it, and we are growing it very selectively. We target high EBITDA margin applications. We don’t want to be in every construction adhesive. We want to be in select areas where we know that we can achieve those higher EBITDA margins. So, it is an innovation-driven space, and that is the part of the market that we are focusing on. So, I agree with what John said. And I would also add that the plant closure benefit will be mostly felt in 2024. And so I agree with his cadence on 2023. You are just €“ we are not done at the end of 2023 with improving that EBITDA margin.

Mike Harrison: Perfect. And then just a quick one. The cash flow statement shows that you spent about $17 million on an acquisition in the quarter or on acquisitions in the quarter. What did you buy? And maybe talk a little bit about how much additional M&A activity we might expect in the rest of the year?

Celeste Mastin: Yes. We bought two small companies in the quarter. One was a company called Lemtapes in Finland. Lemtapes fits with our coating systems €“ our adhesive coating systems business. So basically, kind of specialty tapes for packaging applications. We have got a strong position in that business here in the United States. It’s a high-margin product line and Lemtapes in Finland expands our business for us into Europe. So, that was one of the two acquisitions we did. The second one was a company called Aspen Research, which is located fairly near our headquarters here in Saint Paul. They have unique production capability that we really like, benefits our insulated glass business, which as you know, we really want to grow.

And I think we will bring some production-based technology more continuous flow that we can deploy to other technologies in the company and around our footprint. So, that’s what we bought. Now when you look at our objective as it relates to M&A, even I have spoken about the growth roadmap that I developed with the team to identify our highest margin, most strategic opportunities to grow the business. And clearly, while some of those we will tackle organically, some of them will be best served by doing an acquisition. We are in process of building a pipeline of what I will call proprietary, smaller acquisitions that are targeted to those opportunities and allow us to fill those needs. So, you should be expecting us to do, call it, kind of four or five little acquisitions a year, probably ranging in purchase price from $10 million to $100 million kind of €“ more like about $40 million on average.