BlueLinx Holdings Inc. Q3 2009 Earnings Call Transcript

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2009-11-05 12:04:08.0

Tags: Goldman Sachs Group Inc., Call Transcript, Earnings, BlueLinx Holdings Inc., Prices, Operational Accounting, Finance, Seeking Alpha

Question-and-Answer Session

Operator

(Operator instructions). Our first question will come from Alex Ovshey with Goldman Sachs.

Alex Ovshey -- Goldman Sachs

Good morning. Just a question on the gross margins. You highlighted that they're above historical levels despite the weak bonds environment. Can you talk about operating leverage in the business and where you see the margins going as housing starts and bonds come back for BlueLinx?

Doug Goforth

Yes. Alex, as I mentioned, we're focused on maintaining that increasing margin percentage as the business comes back, but the margins are increasing due to the processes and the systems that we've invested in, in the previous couple of years. We've talked about those extensively. The abilities of our team to utilize those systems, to understand the true market, it's a local business and we need to make sure that we're competitive.

We have reduced some volumes to customers and businesses and products that were marginally or unprofitable, and that has raised our blended margin. And then, quite honestly just the economic conditions where more of our business is out of warehouse and more of our orders are smaller. So we must raise our margins to serve those smaller order quantities. We need those disciplines as the business comes back.

Alex Ovshey -- Goldman Sachs

Okay. And in terms of mix, as housing begins to come back, where do you see the mix between the specialty and structural products falling out?

George Judd

We expect to continue to grow our specialty share to over 60% of our total revenues. However, I would expect that the structural business will come back in a revenue stream earlier. Prices are deflated. Price matters. As we talked about 20% price decline on our structural products in the quarter directly affects our revenue.

As Doug mentioned, much of that was in steel, which was 50% decline for many of our steel products over previous year quarter. And as that price comes back it will skew some of our mixes. But our focus is still and will remain to focus on the product. But we add value to grow our specialty business at a higher rate than we grow our structural business.

Alex Ovshey -- Goldman Sachs

Okay. And just coming back to the metal product. What are the main end markets that your metal products go into? It's not just residential housing, correct?

Doug Goforth

Yes. No, that's correct. Thank you for asking that question. Large percentage of our steel products go to commercial construction. And as most of us know that segment is being particularly hard hit right now.

 

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