SiteOne Landscape Supply, Roswell, Ga., the nation’s largest distributor of landscape supplies, reported second-quarter net income of $44.2 million on net sales of $608.6 million, up from the year-ago $26.9 million and $513.4 million, respectively. Adjusted EBITDA moved up to $93.2 million from $74.9 million.
The company said the increase in net income was primarily caused by higher net sales, gross margin improvement, and the absence of the costs related to the IPO and refinancing.
Organic daily sales grew 8 percent during the quarter. as the company said it experienced strong growth across all major product categories. It said agronomic products recovered nicely during the quarter with a 9 percent growth rate, versus 1 percent for the first-half. As for costs, SiteOne said fertilizer was down quite a bit versus last year, but overall costs, including other products, will be flat at year-end.
Acquisitions contributed approximately $53.7 million of net sales growth, or an additional 10 percent.
The company, which calls itself an industry consolidator, acquired Evergreen Partners, Durham, N.C., and Conway, S.C., during the quarter, and South Coast Supply, Los Alamitos, Calif., Aug. 7. The company said Evergreen strengthens its position in Raleigh, N.C., and gives it the number one position in Myrtle Beach, S.C. South Coast Supply adds a Southern California hardscapes company with two locations, and allows it to expand its offerings in Orange County.
“These acquisitions expand our full-line offering in the Carolinas and in Southern California, and bring us excellent new geographic locations in those markets,” Chairman and CEO Doug Black told analysts Aug. 9. “In total, we have now completed six acquisitions in 2017, with approximately $105 million in annualized income.”
SiteOne says it has grown its footprint to 477 branches across 45 U.S. states and five Canadian provinces. It says the market remains highly fragmented, with a long runway for expansion. It says it is the largest and only national industry leader with a 10 percent share of the $17 billion wholesale landscape distribution market.
The company also said it is in the midst of transforming its supply chain with a new JDA replenishment system and new distribution centers. During the transition, the company said it was carrying more inventory to reduce the risk of disruption.
Black said the company is off to a strong start in the third quarter, and that July was a good month. He said that so far this year has been more of a normal year, and that while some months were rainier than others, the company is diversified across the U.S. and Canada. “And so that tends to average itself out.”
Asked about a labor shortage, Black told analysts it continues to be real. “It is the governor on the growth; if you look at the commercial space in particular, a lot of projects are still being delayed and there’s good backlog, partly because it’s harder and harder for all trades to get these projects done, so that the labor is tight, and naturally that does give our customers good opportunities to pass-through price increases, to be more profitable, and so there is a positive in the market for our customers.”
Six-month net income was $33.7 million on revenues of $943.6 million, up from $21.3 million and $841.9 million, respectively. Adjusted EBITDA was $93.5 million, up from $79.4 million, respectively.