UFP Industries (NASDAQ:UFPI) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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Summary
UFP Industries Inc reported Q1 2026 net sales of $1.46 billion, an 8% decrease from the previous year, influenced by a 7% decrease in units and a 1% decrease in price.
The company’s adjusted EBITDA margin for the quarter was 7.6%, with earnings per share at $0.89, impacted by higher medical and transportation costs and adverse weather conditions.
Strategically, UFP Industries Inc announced two acquisitions: Moisture Shield and Berry Pallets, to expand capacity and geographic reach, and introduced new products like True Frame Joist and Arris trim.
Despite macroeconomic headwinds, the company remains focused on cost control, opportunistic M&A, and maintaining a strong financial position with $2 billion in liquidity.
Future guidance is cautious, with expectations of flat to slightly down unit volumes for the year, but with strategic investments aimed at achieving long-term growth targets.
Full Transcript
OPERATOR
Good day and welcome to UFP Industries Inc Q1 2026 earnings conference call and webcast. At this time all participants are in a listen only mode. After the speaker presentation there will be a question and answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Press star 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Stanley Elliott, Director of Investor Relations. Please go ahead. Good morning everyone. Thank you for joining us to discuss UFP Industries first quarter 2026 results.
Stanley Elliott (Director of Investor Relations)
Joining me on our call are Will Schwartz, our President and Chief Executive Officer, and Mike Cole, our Chief Financial Officer. Following our prepared remarks, we will open the call for questions. Before I turn the call over, let me remind you that yesterday’s press release and presentation include forward looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, the factors identified in this release, in our most recent annual report on Form 10K and in our other filings with the Securities and Exchange Commission. Today’s presentation will also include certain non GAAP measures. For a reconciliation of these non GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website ufpi.com I will now turn
Will Schwartz (President and Chief Executive Officer)
the call over to Will Good morning, everyone, and thank you for joining today’s call to discuss our financial results for the first quarter of fiscal year 2026. We’ll start by sharing our thoughts on the quarter, what we are seeing in the marketplace, and provide some thoughts on how we see the business performing for the balance of the year before opening the call for questions. the call for questions. Many of these same dynamics that we saw through much of 2025 continued into our first quarter. After seeing some stabilization through much of the quarter, macro headwinds and competitive pressures increased volatility as the quarter progressed. We were also adversely affected this quarter by a longer than normal winter season and so the normal seasonal uplift during the month of March failed to materialize. In addition to the impacts of softer demand, our results were impacted by higher medical costs than the previous year. This abnormal activity throughout March contributed to roughly 60% of the year over year decline in profitability in the quarter. Business conditions have since leveled out, but given the ongoing geopolitical uncertainty and broadening inflation, particularly around higher transportation costs. We are approaching the remainder of the year with a slightly more cautious outlook. Our Q1 results are reflective of the current operating environment. Net sales of $1.46 billion were down 8% from Q1 of 2025, representing a 7% decrease in units and a 1% decrease in price. Our adjusted EBITDA margin for the quarter was 7.6% and earnings per share for quarter was $0.89. Despite the temporarily challenged environment, we will continue to be focused on refining and growing our core business. We will focus on controlling costs and we plan to use this period of uncertainty to be more opportunistic and leverage our strong financial position. With approximately $2 billion in liquidity, we intend to pursue meaningful MA while returning our free cash flow to shareholders through opportunistic share repurchase and dividends. As we’ve said before, we continue to target above market growth with an emphasis on returns and we continue to make strategyic investments that contribute to the long term success of our business. In the immediate term, new product sales remain consistent at 7.5% of sales on a trailing 12 month basis. We also have a sharp eye towards strengthening our core business for the long term, deploying capital for greenfield investments in Matt, introducing innovative products and structurally lowering our cost base. On the cost side, we are actively mitigating higher costs and remain on track to deliver the remaining 25 million of our $60 million cost out program by year end with the potential to capture incremental savings beyond our initial targets. While Mike will share additional color on the results, we were also pleased to announce two post quarter end acquisitions that align with our disciplined strategy to deploy capital toward high quality strategyic fits. Before I get into the details, I’d like to start by welcoming the employees of Moisture Shield and Berry Pallets into the UFP family. These companies were a strategyic financial fit, but equally important they aligned well with our future. In our Decorators business unit, we announced the acquisition of Moisture Shield Decking Operations from Old Castle APG. The acquisition adds a wood plastic composite plant in Springdale, Arkansas which meaningfully expands our capacity, adds redundancy to our operation and enhances our ability to bring unique products to market. Additionally, this acquisition eliminates the need to spend capital on a new green field as demand for our product has outpaced capacity. We anticipate that this acquisition gives us the needed footprint to double our wood plastic composite decking manufacturing capacity by 20. Additionally, the acquisition also brings the rights to Moisture Shield’s Cool Deck technology, a proprietary heat mitigating technology which reduces heat transfer by up to 35%. We believe this would fit alongside our Decorators decking line, including integration into our surestone technology boards in our packaging segment. We also welcome to the UFP Family Berry Pallets, a new pallet manufacturer in the upper Midwest that expands our geographic reach and strengthens the density of our pallet network. These opportunities to increase the scale and synergy of our business only create value if we integrate it well. And that’s exactly why earlier this month we announced Patrick Benton will transition from his role as President of UFP Industries Construction segment path to the newly created Executive Vice President of Operations Integration position. Patrick has spent his career running some of our most profitable plants and business units and he knows firsthand what it takes to drive efficiency, reduce cost and accelerate the path to strong returns. In his new role, Patrick will apply that operational discipline across our growing portfolio of acquisitions, ensuring we move faster from close to contribution and that every business we bring into the UFP family performs to its full potential. Now moving on to segment highlights beginning with retail, our largest business unit, Prowood continues to make progress on lowering our cost positions and improving our manufacturing process. Some of this progress was overshadowed by the levels of inflation we saw in the quarter as well as the later than usual winter conditions. Prowood is an industry leading brand and we continue to add more value across our portfolio. A great example of this is our True Frame Joist product launched last month at jlc. As a reminder, this is the business unit’s first proprietary product designed specifically for use in deck substructures. The value we add on the front end eases several common pain points for contractors saving time and money. We have expanded production into four manufacturing plants and increased our sales efforts to capitalize on the demand pull. While still relatively small, this is a compelling product line extension in our core pressure treating and decking products. Similarly, we are pleased with the repositioning of our edge business and prospects for profitable growth. Our new Arris trim, made with Sheerstone technology, will begin shipping to customers late this quarter. Early demand indicators look quite favorable as contractors are gravitating to the same product features that has made our surestone decking offering so compelling. Turning to deckorators, we continue to see strong momentum from last year carryover into our first quarter. Our Shearstone decking sales increased 27% and our traditional wood plastic composite decking increased by 4%, both from the same quarter a year ago. We believe both metrics remain ahead of the broader industry. We were pleased with the results of our efforts last year to enhance Deckorator’s brand and intend to maintain that effort in 2026. In addition to our elevated sales volumes, our measures of consumer interest have more than doubled over the past year. These metrics include where to find a contractor, where to buy decorators and sample requests both at big box retailers and through our website. The outperforming demand stated earlier combined with the measurable customer feedback gives us confidence in our stated plan to double market share over the next five years. We remain excited about the progress we are making within both our surestone and Wood plastic manufacturing facilities to increase capacity and meet growing consumer demand. Our first truck left Buffalo in mid April and we continue to ramp up production at both our surestone production locations. We look forward to being fully operational in Q2, which will help us continue to work through the sales backlogs that we were not able to realize in the first quarter. Coupled with the recent Moisture Shield acquisition, we are well positioned to capture growth entering 2026 and beyond. Despite near term macro uncertainty, our confidence in the business remains strong and we continue to expect 100 million of incremental decorators growth this year. Our packaging segment continues to make progress despite an uneven macro backdrop. We are positioning the business for longer term success by introducing new value add products to our customers, investing in automation and investing in new and lower cost manufacturing Quoting activity has remained strong, but customer takeaway remained mixed which is reflective of the uncertainty across many end markets. The combination of higher commodity prices and a competitive market remain an overhang on profitability. That said, we are encouraged that our margins continue to stabilize sequentially and supports our view that we are closer to the bottom of the cycle. We continue to believe that our national footprint gives us geographic expansion opportunities and and our design and engineering capabilities separate us from many of our smaller, more regional competitors who lack the manufacturing scale and financial position to compete with national customers. With the improvements we made to the business, we can deliver above market growth in a recovery. Moving on to Construction the macro story in our construction segment has been fairly consistent for the past several quarters, but we continue to actively reposition our portfolio. A challenging new residential construction environment continues to weigh on, results overshadowing improvements across our other businesses. Residential builders remain cautious managing home inventories carefully ahead of the spring selling season. While consumer confidence and affordability headwinds persist. We continue to make investments in automation and other initiatives to improve our cost, position and throughput. One of these initiatives is the Frame Forward Systems brand that we launched in February at the International Builder Show. Frame Forward Systems positions our site built business unit to move our wood framing business beyond commodity component sale to capture increased margin through a system selling approach and to drive greater customer loyalty. While early Frame Forward Systems has been very well received by the construction trademark as we continue to raise the bar on off site manufacturing to address the on site challenges in the construction industry. Similarly in our factory built business, this business unit continues to actively add more value to our customers through partnerships, expansion of distribution capabilities and by facilitating cross selling with other parts of our business. Our concrete forming business continues to expand our product and services offerings to capture more of our customers wallets while helping them address labor challenges on the job site. Finally, our commercial business continues to build on new products, new customer relationships and the benefits from prior restructuring actions to deliver improved results. Across our construction segment. We are actively finding ways to solve our customers problems by helping address labor quality, production cost and reduced build time to help our customers win in the marketplace. Looking ahead, we remain committed to our long term targets and believe the steps we are taking today will position us to achieve these results in the future. As a reminder, we are driving towards the following a 12.5% EBITDA margin, 7 to 10% unit sales growth, some of which will come from M and A and new products ROIC in excess of 15% which is well ahead of our cost of capital and lastly to achieve all of this while maintaining a conservative capital structure. While the market dynamic has changed since our last call in February, it has not dampened our enthusiasm for our business longer term. As we’ve said before, we have confidence in our model and our focus remains on the most attractive opportunities that enhance our core business. We’re taking action to reduce costs, right size, capacity and exit underperforming or non core businesses while positioning the company to deliver above market growth and margin expansion as market conditions normalize. With that, I’ll turn it over to Mike Cole.
Mike Cole (Chief Financial Officer)
Thank you Will Net sales for the March quarter were 1.5 billion, down 8% from 1.6 billion last year. The change reflected a 7% decline in units and a 1% decline in pricing. Units declined due to continued weakness in residential construction activity, adverse weather, the exiting of select low margin commodity sales and softer demand for new pallets. Pricing was impacted by a 6% decline in lumber and continued price pressure in our site built business. Adjusted EBITDA was 111 million, down $31 million year over year and adjusted EBITDA margin was 7.6% compared with 8.9% in the prior year period. The decline was driven primarily by Site bill where gross profit decreased by nearly $19 million along with higher health care and transportation costs across the portfolio which increased approximately 7 million and 3 million respectively. Despite these headwinds, our trailing twelve month return on invested capital remained above our weighted average cost of capital at nearly 11%, demonstrating continued value creation through the current phase of the cycle. Turning to our segments, I’ll begin with the retail. Retail sales were $531 million down 12% year over year, driven by a 13% decline in units partially offset by 1% higher pricing. Prowood units declined 15% reflecting soft demand driven by adverse weather, weaker consumer sentiment and the absence of storm related demand. We also exited certain low margin commodity sales starting in Q2 of 2025. Deckorators delivered 2% unit growth as decking continued to outperform the market. Overall decking sales increased 16%, led by 27% growth in Surestone which was supported by capacity added at our Alabama plant and Wood plastic composite decking increased 4%. We continue to target above market growth in our Decorators business unit. In April, we added Wood plastic composite manufacturing capacity in Arkansas through an acquisition. Our new Surestone plant in Buffalo just started shipping and we continue to expand distribution across professional and retail channels, all of which is expected to support additional share gains in 2026 and beyond. Edge volume declined 20% as we closed our Bonner facilities and narrowed the portfolio to products. We expect to meet profitability targets by the end of 2026, representing the significant actions needed to restructure the business unit. Retail adjusted EBITDA was down 1 million year over year. Gross profit and SGA were both essentially flat, reflecting improved mix and continued cost control. While we continue to invest in the Deckorators brand, we remain focused on improving Pro Wood distribution and increasing throughput and margins in deckorators. With these initiatives and the edge restructuring substantially complete, the retail segment is well positioned for improved results in 2026. Packaging sales were 394 million, down 4% year over year, reflecting a 2% decline in units and a 2% decline in pricing. Structural packaging volumes were flat, pallet 1 units declined 7% and protective packaging units increased 5%. As new greenfield locations continue to ramp up across the segment, we continue to gain share with key customers because of our ability to provide value added solutions and a comprehensive product portfolio on a national scale. Packaging adjusted EBITDA was 28 million, down 7 million year over year. The decline reflected lower volumes and higher input costs in Pallet 1 along with unabsorbed overhead as protective packaging greenfield operations continue to focus on achieving targeted volumes. We partially offset this gross profit impact with a $2 million reduction in SGA primarily from incentives tied to profitability. Construction sales were 465 million down 10% year over year with a 5% decline in price and a 5% decline in units. The change was driven primarily by a 14% unit decline in site build as housing demand remains pressured by affordability and weaker consumer sentiment and larger builders are focused on lowering inventory. We are however seeing improving trends among multifamily customers. Factory built units declined 7% as we exited certain low margin commodity sales while volume was lower, mix improved and supported higher profitability and Commercial and Concrete forming each achieved mid teens unit growth. Construction adjusted EBITDA was 26 million down 12 million year over year driven by market weakness and competitive pricing pressure in Site Build. The other three business units improved profitability through growth and more favorable mix partially offsetting the decline. As we manage through this cycle, we’re balancing cost discipline with continued investment on our long term strategy. We remain focused on aligning our cost structure with current demand while continuing to fund growth initiatives. Product innovation, brand awareness and technology enabled productivity improvements. Consolidated SGA declined over 3 million year over year due to lower incentive compensation tied to profitability. For 2026, our key cost structure targets are 25 million in cost savings from capacity consolidations, reducing cost of goods sold and keeping us on track to achieve the $60 million cost out goal we announced last year. Core SGA of approximately 570 million including decorators, advertising and excluding the following incentive related bonus expense of 17 to 18% of pre bonus operating profit sales incentives of about 3% of gross profit and 21 million of vesting expense for prior year stock based incentives, an effective tax rate of 25 to 26% and total depreciation, amortization and other non cash expenses of approximately $200 million. Turning to capital resources and capital allocation, the company continues to maintain a strong balance sheet. At the end of March the company had 714 million in surplus cash and no borrowings under its credit agreements for a total liquidity of approximately 2 billion. Our surplus cash was approximately $200 million lower than at year end driven by a typical seasonal working capital build that we expect to convert to cash by early Q4. We believe our diversified business portfolio generates meaningful and consistent free cash flow to support organic growth and M and A. Last year we converted 80% of adjusted EBITDA into free cash flow. Our highest capital allocation priority is to invest in opportunities, organic and inorganic, that grow our core businesses and increase margins and returns over time. Our focus areas are expanding geographically in core higher margin businesses where we have sustainable competitive advantages, expanding capacity for new and value added products and driving operational excellence through automation, consolidation and enhanced productivity. Consistent with this framework, in April we completed one acquisition and announced a second that we expect to close in May. On April 6th we purchased the net operating assets of Moisture Shield Inc. And on April 28th we announced our plan to acquire the net operating assets of Barry Pallets. These transactions are aligned with our capital allocation strategy to strengthen our core portfolio, expand capacity in the geographies we serve and improve margins. We also intend to return capital by growing our dividend in line with long term free cash flow and repurchasing shares primarily to us offset dilution from stock based compensation. We will evaluate additional repurchases opportunistically when we believe our shares are trading below intrinsic value and will preserve our balance sheet strength to fund growth. With these points in mind, the Board approved a quarterly dividend of $0.36 per share, a 3% increase from a year ago. We have a $300 million share repurchase authorization in place through July 2026. Year to date, we’ve repurchased 30 million shares at an average price under $90 per share. We currently expect $250 million to $275 million of CapEx, about $50 million lower than our February target due to the Moisture Shield transaction. And we continue to build our M and A pipeline around targets that fit strategically, offer higher margin and return potential and present opportunities to meaningfully scale our core businesses. As we pursue these opportunities, we’ll remain disciplined on valuation. I’ll conclude with our outlook. We expect the current market environment to persist through 2026 based on current headwinds and visibility. We believe demand for the balance of the year is trending toward the lower end of our prior guidance which assumed flat to slightly down unit volumes across our segments based on mix with respect to input costs, we expect continued pressure from energy and transportation while pricing actions are underway to offset these items. The benefit is expected to take time to flow through the income statement this year. Positively, we believe market share gains, capital investments and operating improvements should help offset headwinds in markets tied to new residential construction. For example, we continue to target $100 million of growth in deck raiders, decking and railing sales. With that, we’ll open the line for questions.
OPERATOR
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, press star 11 again. One moment. While we compile the Q and A roster, Our first question will come from the line of Kurt Yinger with DA Davidson. Your line is open.
Will Schwartz (President and Chief Executive Officer)
Great, thank you. Good morning, everyone. Morning.
Kurt Yinger (Equity Analyst at DA Davidson)
I just wanted to start off on Prowood. I know that you lost some lower margin business last year, but it also sounds like kind of that slow progression into spring impacted the March period. I guess with the commentary that April’s maybe leveled out a little bit, would you expect to see some better volume trends there?
Will Schwartz (President and Chief Executive Officer)
Yeah, I think that’s fair to say. Kurt, if you look at it, there’s, you know, the factors and points that we referenced in some of the commentary, whether it’s kind of carryover of really a very slow storm season from last year, a lot of that tail drags into 2026, into the first quarter. We didn’t have that. Obviously you combine that with unusual weather patterns and then the change in business mix some of those volumes that you talked about. So yeah, I think if you take some of that noise out, it really matches up well to some of the guidance we’ve talked about for single digit down. And I think that carries forward.
Kurt Yinger (Equity Analyst at DA Davidson)
That’s helpful. And then on the decorator side, obviously still a very good quarter in terms of decking sales growth. Can you just talk about how that matches up maybe internally versus your plan? And then as we think about the need to hit accelerating growth to get to that hundred million dollar target with Buffalo online, does that really help ramp things up in Q2 or is it maybe more of a back half kind of phenomenon in terms of when a lot of that starts to flow through hurts?
Will Schwartz (President and Chief Executive Officer)
Combination of both. I think what you’re reading into Q1 is exactly aligns with the amount of production that we had. So with those capex improvements coming online, Selma fully operational, but as described, we shipped our first truck mid April out of Buffalo. So that’s a quick ramp up. But really as you get to Q3, Q4, we’ll be able to capitalize on a lot of backlog of orders. So our first quarter sales matched up to what we had to sell. So we were very happy. It’s right on track in those Capex advance. It’s right where we expected to be at this point.
Kurt Yinger (Equity Analyst at DA Davidson)
Okay, okay, great. And then just last one, on the transportation and energy side, you know, without maybe putting too fine a point on it, could you just help us kind of frame maybe what type of headwind you expect that to be relative to, you know, what you were kind of budgeting at the start of the year. And then also talk a little bit about kind of the process of passing that additional cost on. Is it something that, you know, a portion of your contracts with customers might be embedded with just a time lag or something that’s more negotiated? Just help us understand that dynamic a little bit.
Will Schwartz (President and Chief Executive Officer)
Yeah, the. That’s a hard one. The month of March is where we really felt the impacts. And certainly when the conflict started, we didn’t know how prolonged that would be. At the point that we realized we were a month in, that looks like this is going to have a longer lasting effect. We started those conversations with customers and fortunately for us, because of the relationships we have, they understand, you know, we’re not the only ones in that game. It’s a cost out of our control. And so those are starting to go into place. Already in place in most cases and will continue as in the different markets that we serve. But yes, as it looks right now, it looks like that’s going to continue to be a bit of a headwind, but we’ve got it covered in the form of covering those costs and continue to work through it with customers.
Kurt Yinger (Equity Analyst at DA Davidson)
Is it fair to say then that we kind of see that headwind in Q2 and then the back half, you feel like you’re pretty well set in offsetting it, barring another kind of material inflation shock? Or is. Is it maybe going to be really the latter part of the year where you see that?
Will Schwartz (President and Chief Executive Officer)
Yeah, I think as you described, I think it’s a very fair assessment of it. Most of those are already in place at this point, those offsets, but we continue to work through things through the quarter. But by the back half of the year for certain, I wouldn’t expect to be taking hits as a result of those increased fuel costs.
Kurt Yinger (Equity Analyst at DA Davidson)
Okay, awesome. Thanks, Bill, for the color. Appreciate it.
Will Schwartz (President and Chief Executive Officer)
Absolutely. Thank you. Thanks, Kurt.
OPERATOR
One moment for our next question. And that will come from the line of Jeff Stevenson with Loop Capital. Your line is open.
Jeff Stevenson (Equity Analyst at Loop Capital)
Morning, Jeff. Hey, Jeff. Good morning. Thanks for taking my questions today. You know, first I was wondering if you could provide, you know, some more color on how the moisture shield assets fit into your long term decorator strategy and then the opportunity to leverage your decorators products at existing moisture shield distribution partnerships that you previously were not working with.
Will Schwartz (President and Chief Executive Officer)
Yeah, you hit the nail on the head. There’s combination that was a. It’s certainly an opportunity that we were happy to be able to take advantage of. We needed additional capacity. We’ve been challenged there. We needed a secondary plant and so we had budgeted. It was reflected in the capex expectation for another plant that eliminated that need. So we got immediately a product that’s really, really good, a manufacturing plant that satisfies that additional capacity need. But I’ll tell you, the cool deck technology and being able to apply that across the deckorators portfolio of products also is extremely exciting. And then lastly coming with it, as you described, some other distributor partners that we think are extremely valuable potentially we can expand on that. So. So it was a win all the way around.
Jeff Stevenson (Equity Analyst at Loop Capital)
That’s great to hear. And then at a high level, how should we think about the margin cadence over the next several quarters in your retail business, given the full load in of your low end summit decking products across the 1500 retail stores and then the new decorators capacity coming online here in mid April, just any more color there would be helpful.
Will Schwartz (President and Chief Executive Officer)
Yeah. And let’s go back to last quarter. We kind of re pivoted on that. 1500 stores, it’s a little different. So store count, where products flow in from distribution centers, et cetera. And that’s why we really explained the $100 million of additional decorator sales that we expected to get. You’ll see that continue to build throughout the year. So describing back to the last question. We’ve only been limited by the production that we’ve had. So as that additional capacity comes on, Jeff, you’ll see those sales build and revenues grow. So super excited about that.
Jeff Stevenson (Equity Analyst at Loop Capital)
Okay, great. Thank you.
OPERATOR
One moment for our next question. And that will come from the line of William Carter with Stifel. Your line is open.
William Carter (Equity Analyst at Stifel)
Hey, thank you. Good morning. What I wanted to ask is on the kind of inflation the energy pass through. I think just to make sure you are saying that when it’s a headwind it’s transitory, like in March. Could you give us a sense of how big that transitory headwind particularly was in the first quarter? How long you live with the lag? And then if it’s just if we see diesel stop or whatever, then the lag goes the other way. Any other incremental color to get some clarity around that incremental headwind this year?
Mike Cole (Chief Financial Officer)
Yeah, absolutely. I think Mike’s chomping at the bit to get a word in, so I’m going to let him kind of jump in here. Yeah, it was about a $3 million headwind in March, Andrew, and it did increase in April. But the good news is that in April, as Will had indicated, that’s when we started taking actions with our customers and now through rate surcharges and price increases on the products depending on which approach the customers prefer, we’re now beginning to pass that through. And so working through that process like Will said and expect that’s going to be completed here in pretty short order in Q2.
William Carter (Equity Analyst at Stifel)
And I 100% apologize if you all answer this to Jeff’s question because I actually cut out. But it’s kind of something we were chomping at the bit to ask about the Moisture Shield locations. Basically if you look at the kind of the dealer locations for Moisture Shield and kind of decorators where you are today, it’s highly incremental in terms of incremental distribution points. So I guess the first thing is obviously Moisture Shield is going to go more two step. Is it an easy conversation to pick that up for down and decorators or Surestone? Obviously you’d also be the factory constrained that your kind of playbook for launching Moisture Shield. And I guess long term what’s the brand strategy here? Is it keep Moisture Shield, is it kind of and make it more of the brand or just anything to help out there. Thank you.
Will Schwartz (President and Chief Executive Officer)
Yeah, good question. And I’m going to start with the last question first or the last point. So the intent is to run the Moisture Shield brand for the remainder of the year and in 2027 we’ll start a transition moving that under the decorators umbrella and starting to introduce some of those products into the mix as well as the Cool Deck technology, applying that towards the whole portfolio of products where we deem fit. Yeah, we’re excited and we’re working through that with those customers and partners that were part of Moisture Shield that weren’t part of the decorators customer mix. And we’re working through that right now but very, very excited about the opportunities that presents to us. Thanks. I’ll pass it on. Thank you.
William Carter (Equity Analyst at Stifel)
Thank you.
OPERATOR
Thank you. One moment for our next question that will come from the line of Reuben Garner with Benchmark. Your line is open.
Reuben Garner
Hey, good morning Ruben. Good morning guys. Let’s see.
Will Schwartz (President and Chief Executive Officer)
This may be too early days but any plans from a branding perspective? Will the Moisture Shield assets ultimately become decorators wood, plastic, composite or is there a need or a reason to keep the separate branding longer term? Yeah. So Reuben, I think you probably cut out in the queue for asking the question and yeah, so we will transition that Moisture Shield brand under the Deckorators umbrella at some point in 2027. So we’ll carry it through the year and then we’ll start that transition process.
Reuben Garner
Got it. Sorry I missed that. And then a lot of moving parts the last couple of years with both demand and the supply you’ve been adding and now moisture. Can you give us an idea of what total wood plastic composite business you have today? What total surestone business you have today and then like what the capacity is today and where it’s ultimately headed in each of those. So we can kind of level set it on a go forward basis.
Mike Cole (Chief Financial Officer)
Yeah. So I’ll work off of the 2025 numbers. Ruben. I think we finished the year in total decking and railing sales about 245 million I think of that 245 there was 165 million of decking. And of the 165 in decking about 90 was mineral based to the Surestone and 75 million was wood plastic composite. And the balance there 80, I think it’s 80 million was railing. Now to your point about capacity, prior to this year we had about 100 million I think in capacity of mineral based or shore stone we had about 100 million in wood plastic composite. We’ve now doubled as a result of the or have the ability to double as a result of the moisture shield acquisition. Wood plastic composite. So that’s going to go from 100 to 200. And as a result of Selma and Buffalo we go from 100 million of capacity to adding another 250. So we’ll be at 350 million of capacity for sure. Stump. And some of that will be most of it. Lion should be for decking but we don’t want to forget about the term product that we’re launching this year as well.
Reuben Garner
Perfect. Very helpful. And then a question about you mentioned. I think you used the term price mechanisms and maybe there being a lag for offsetting some of the inflationary pressures that you’ve seen. What exactly are those mechanisms? Are you using surcharges for fuel and transportation and they’re delayed for some reason? Just walk me through that comment.
Will Schwartz (President and Chief Executive Officer)
Yeah, it’s a combination. And so you’re exactly right. Fuel surcharges in certain situations. Others want to repricing building that into the price. So each of those scenarios is different. So when we speak mechanisms we have a lot of business that we quote each time and so you obviously take that into account the new updated cost and what’s reflected in the market. So it’s just a combination of all of those. And each of the segments we serve have different pricing timelines. So site built is very different than Retail example.
Reuben Garner
Understood. Thanks for the detail, guys. Congrats on the deals and good luck going forward.
Will Schwartz (President and Chief Executive Officer)
Thank you very much.
OPERATOR
One moment for our next question. And that will come from the line of Keaton Mamtoro with BMO Capital Markets.
Keaton Mamtoro (Equity Analyst at BMO Capital Markets)
Hey, good morning, Keaton. Good morning. So sticking with the flavor of the day, which is decorators. So just help me understand a little bit on Q1. Obviously, Shearstone and wood plastic composite both grew quite nicely in Q1, yet overall decorators sort of bucket was up 2%. So what are the other offsetting sort of factors there?
Mike Cole (Chief Financial Officer)
Yeah, railing was off 6%. I think we called that out in the. So that was an offset. And then the other product categories that are sitting inside the decorators business unit are decorative aluminum fencing, deck accessories, generally post caps, balusters, and then vinyl lattice is also in the category. So those, those are areas that were softer. And obviously the decking sales themselves are obviously very strong.
Keaton Mamtoro (Equity Analyst at BMO Capital Markets)
I see. Okay, now that’s helpful. So as I think about sort of decorators and now with moisture shield coming into the fold, Mike is the right way to sort of think about as 100 million incremental sales you all talked about previously. And now we’ve got moisture shield for probably eight months of the year or something like that. So is that the way we should be thinking about decorators growth in 26?
Mike Cole (Chief Financial Officer)
Yeah, that’s exactly right. The 100 million that we originally talked about with the capacity coming online, that goes a long way towards helping us achieve that. And now the incremental increase from. From the moisture shield transaction.
Keaton Mamtoro (Equity Analyst at BMO Capital Markets)
Got it. Okay, that’s helpful. And then just switching to the construction side inside build. Are you seeing sort of continued price competition among players or is that sort of largely leveling out at this point, given that we’ve been at it for a while now?
Mike Cole (Chief Financial Officer)
Yeah, that’s the hardest part of the business for us today. Obviously that business is very tough. And when you talk about even some of the cost inputs that we recognized in the first quarter, it’s hardest to pass along. So that’s reflective in margins too. When you talk fuel increases, lumber costs going up during the quarter. And so it continues to be a very pressured mark market for us on the margin side.
Keaton Mamtoro (Equity Analyst at BMO Capital Markets)
Understood. But has the competitive dynamics changed at all since the start of this year? Obviously the start of this year there was expectation that things will. That housing activity will get better. And then with the geopolitical events, it feels like things have become a little softer since then. Has there been any change?
Mike Cole (Chief Financial Officer)
Yeah, I think your assessment is exactly Right from the start of the year until today, it has certainly not gotten better. And the geopolitical tensions, interest rate increases, consumer sentiment, all those factors in play. It’s a tough environment. Although we did expect a tougher front half of the year. We had tougher year over year comparisons. Obviously housing was pretty tough coming into the beginning of the year. We had anticipated it being tougher, but. Yeah, exactly. The recent events have made it even more so.
Keaton Mamtoro (Equity Analyst at BMO Capital Markets)
Yeah. Okay, that’s fair. And then just final one from me on capital allocation. How are you thinking about MA opportunities? And it seems like that pipeline is growing and you are seeing more. More opportunities versus, you know, kind of the other tool that you have on share repurchases. How are you, how are you stacking those two at this point? And if you were to rank order.
Will Schwartz (President and Chief Executive Officer)
Yeah, we are definitely more focused on growing. That’s where we start. We talk about that a lot, but never losing sight of return. And I would tell you the pipeline is the best we’ve had in five plus years. I think a lot of that is intent and action. We’ve done a lot more prospecting. I personally have done more prospecting, allocated more time towards it for strategic opportunities that fit where we want to take the corporation. And so when you think about the liquidity, we want to put that to work, but it’s got to be the right opportunities.
Keaton Mamtoro (Equity Analyst at BMO Capital Markets)
Understood. Very helpful. I’ll turn it over. Good luck.
Eric
Thank you, Eric.
OPERATOR
Thank you. I’m showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Will Schwartz for any closing remarks.
Will Schwartz (President and Chief Executive Officer)
Thank you for joining us this morning. While the operating environment remains challenging and visibility limited, we’re confident in the strategy we have in place and the actions underway to strengthen our business. We are staying disciplined. We’re focused on what we can control, investing thoughtfully in our core businesses and managing costs while remaining patient in how we deploy capital. I want to thank our employees for their continued execution and commitment and our customers and shareholders for their trust and support. Thank you and have a great day.
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