H. B. Fuller Achieves Double-Digit Profit Growth in Q4 2025

H. B. Fuller (NYSE: FUL) reported robust financial results for the fourth quarter of fiscal 2025, showcasing a double-digit profit growth despite facing a challenging demand landscape. The company’s performance was bolstered by pricing discipline, proactive raw material cost management, restructuring efforts, and a strategic repositioning of its portfolio. During the earnings call, President and CEO Celeste Mastin expressed confidence, stating that the company is exiting the fiscal year with “strong momentum” and is “firmly on track” to achieve its goal of exceeding a 20% EBITDA margin.

During the call, Chief Financial Officer John Corkrean highlighted the company’s outlook for fiscal 2026, indicating a similarly tough macro environment. He emphasized that profit growth is expected to stem from “self-help” initiatives rather than improvements in demand.

Fourth Quarter Results: Revenue Decline, Margin Expansion

In the fourth quarter, H. B. Fuller experienced a decline in revenue while profitability improved significantly. The adjusted gross margin rose by 290 basis points to 32.5%, attributed to pricing strategies, raw material cost actions, acquisitions, divestitures, and targeted cost reductions. Adjusted EBITDA reached $170 million, marking a year-on-year increase of approximately 15%, with an adjusted EBITDA margin climbing 290 basis points to 19%.

The adjusted earnings per share (EPS) for the quarter stood at $1.28, a notable 39% increase compared to the previous year. This growth was primarily driven by higher operating income and a reduced share count, following the repurchase of about one million shares during fiscal 2025. Operational cash flow also saw an uptick, amounting to $107 million, a 25% increase year-on-year, thanks to enhanced net income. Additionally, net working capital as a percentage of annualized net revenue rose by 130 basis points to 15.8%. Corkrean noted that leverage improved, with net debt to adjusted EBITDA decreasing to 3.1x at year-end, down from 3.3x at the end of the third quarter.

Segment Performance and Fiscal 2026 Outlook

The company indicated varied demand conditions across different markets. Engineering Adhesives (EA) emerged as a significant growth contributor. In terms of geographical performance, organic growth in the Americas remained flat, as increases in EA—particularly in aerospace and general industries—offset declines in packaging and construction-related markets. The EIMEA region saw a 6% decline in organic revenue, primarily due to lower volumes in packaging and construction, although hygiene partially offset this dip. Conversely, the Asia-Pacific region experienced a 3% organic revenue increase, with a notable 10% rise excluding solar-related sales.

Looking ahead to fiscal 2026, management forecasts net revenue to be flat or increase by up to 2% compared to fiscal 2025, with organic revenue expected to remain “approximately flat.” Corkrean anticipated a foreign currency translation benefit of about 1% to revenue if exchange rates stabilize. The company projects adjusted EBITDA between $630 million and $660 million and an adjusted EPS in the range of $4.35 to $4.70. Other financial expectations include a core tax rate of 26% to 27%, net interest expense of around $120 million, and depreciation and amortization of approximately $185 million. The average diluted share count is estimated to be between 55 million and 56 million shares, with share repurchases offsetting shares issued through compensation plans.

For the initial quarter of fiscal 2026, H. B. Fuller anticipates a low single-digit revenue decline and an adjusted EBITDA between $110 million and $120 million. Corkrean indicated that the timing of the Chinese New Year could result in a revenue shift of one to two weeks, impacting revenue by $15 million to $20 million and EBITDA by 6 to 8 million, describing this as a timing adjustment rather than a change in demand.

Throughout the call, executives reinforced that the guidance for the year does not depend on a macroeconomic recovery. Key components for EBITDA growth include approximately $35 million from pricing and raw materials improvements, a foreign exchange benefit of $5 million to $10 million, and around $10 million from the “Quantum Leap” savings initiative, offset by increased variable compensation and inflationary pressures.

Mastin also addressed ongoing portfolio repositioning initiatives and the company’s “Quantum Leap” manufacturing and warehouse consolidation project. She noted that working capital might remain elevated in the near term as H. B. Fuller carries higher inventory during this transition. For fiscal 2026, the company expects operating cash flow between $275 million and $300 million, primarily in the latter half of the fiscal year, alongside approximately $160 million in capital expenditures, including $50 million linked to the Quantum Leap initiative.

M&A activity remains a critical aspect of H. B. Fuller’s strategy. Mastin revealed that the company acquired eight businesses in 2023 and 2024, which collectively contributed $41 million in EBITDA. These acquisitions delivered $73 million in EBITDA for fiscal 2025, achieving a post-synergy purchase price multiple of 6.7x EBITDA. The performance of acquired businesses, particularly in medical adhesives, has been strong, with revenue increasing by about 15% compared to pre-acquisition figures and EBITDA climbing nearly 30%.

Furthermore, Mastin discussed expanding the fastener coating platform through acquisitions in Taiwan, Shanghai, and Turkey, which cost $17 million and are projected to yield $3 million in EBITDA for 2026. This expansion opens access to a rapidly growing market valued at approximately $500 million in Asia and Europe.

Regarding future acquisitions, Mastin emphasized a full pipeline, although the company is adopting a cautious approach due to leverage concerns. The anticipated acquisition pace in 2026 is expected to align more closely with a “normal year,” with planned expenditures ranging from $200 million to $250 million.

The discussion also touched upon the company’s strategy to reduce its solar business, with revenue expected to decline from about $80 million in 2025 to approximately $50 million by the end of 2026, indicating a contraction of roughly $30 million as the company exits a specific product line.

Finally, Corkrean provided insights on special items, noting a reserve established in the fourth quarter for a product liability legal claim associated with the divested flooring business, primarily a non-cash item estimated at $35 million pre-tax and $25 million after-tax. He expressed optimism about insurance recovery covering a substantial portion of this reserve.

Founded in 1887 and headquartered in St. Paul, Minnesota, H. B. Fuller is a global leader in adhesives and specialty chemical solutions, serving various industries. The company develops and markets adhesive technologies, sealants, polymers, and related chemical products aimed at enhancing product performance, sustainability, and manufacturing efficiency. Its product portfolio encompasses multiple market segments, including packaging, general industrial assembly, electronics, transportation, hygiene, and construction.