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MasterBrand Cabinets Sales Hit $716.5 M But Profits Lag

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October 28, 2021 | Bill Esler

Jasper, IN—Customers are opting for more expensive cabinets, helping MasterBrand Cabinets third quarter sales rise nine percent to $716.5 million, and hitting $2.11 billion for the nine months ended September 30, 2021, a 16 percent increase.

But MasterBrand, a unit of Fortune Brands Home & Security, Inc. (NYSE: FBHS) and the largest U.S. cabinet business, also reported an operating margin of just 9.7 percent. But the cabinet division looks like a laggard compared to sister divisions such as plumbing including Moen faucets, with sales up 26 percent and operating income up 40 percent or doors and locks operations which were up 30 percent in revenue and 20 percent in operating income. MasterBrand operating income actually fell 18 percent.

Cabinets are harder to build, requiring more labor especially as sales increased for the most customized versions. “Our teams are deploying lean methodologies and complexity reduction strategies to ease the supply chain and labor limitations,” says CEO Nicholas Fink, noting “significant order backlogs persist across the business.“

Fink says, “Demand was equally strong on both stock and make-to-order [semi-custom and custom cabinetry] with the strongest momentum continuing in our premium offerings, but labor shortages and freight availability remain the biggest challenges impacting performance in margins in our cabinets business.”

Inflation on materials is another significant factor, according to CFO Pat Hallinan. “It’s really affected all of our businesses,” he says, “but in businesses like cabinets, and doors, and decking—where you don’t build up big inventories of components and/or finished goods—the inflation tends to course through your income statement in real time a bit more.”

Other units of Fortune Brands did even better. Its plumbing sales, centered on the Moen brand, rose 26 percent; Outdoors & Security sales, including Therma-Tru Doors and Larson Doors (acquired in November 2020), increased 30 percent, driven by Larson and organic growth of 6 percent. While Therma-Tru Doors are mostly fiberglass, the Larson business produces several lines of DuraTech aluminum-clad wood core doors.

“We also saw consumers continue to spend up the price spectrum into premium offerings. We have seen this multi-quarter trend in both plumbing and cabinets,” Fink told analysts during an earnings report interview. “I’m also seeing this trend play out within our premium offerings in decking and doors.”

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