UFPインダストリーズ（UFPI）2026年第3四半期決算説明会：貨物輸送コストが利益率を圧迫するなか売上高は11%増

主要なポイント

• UFPインダストリーズの2026年第3四半期の売上高は、前年同期比11%増の17億3,000万ドルとなりました。総販売数量は6%増加し、内訳はオーガニック（既存事業）の数量成長が4%、買収の寄与が2%で、価格上昇が5%の押し上げ効果をもたらしました。
• 調整後EBITDAは2,100万ドル減の1億1,900万ドルとなり、調整後EBITDAマージンは9.0%から6.9%に低下しました。燃料サーチャージ調整後の輸送コストが1,900万ドル増加し、マージンを1.3ポイント押し下げました。
• セグメント別ではパッケージング（梱包）部門が成長を牽引し、売上高は18%増の4億6,600万ドルとなりました。リテール（小売）部門の売上高は7%増の6億3,500万ドル、建設部門の売上高は11%増の5億5,200万ドルとなりました。
• Deckoratorsの販売数量は21%増加し、デッキ材の売上高は69%増加しました。増産に伴い、Surestoneの受注残は第2四半期末の3,000万ドルから1,800万ドルに減少しましたが、経営陣によれば注文のキャンセルは発生していません。
• 新製品の売上高は40%以上増加し、売上高全体に占める割合は前年同期の6.8%から8.7%に上昇しました。主な寄与要因には、複合デッキ材、異素材ミックス包装材、軽量金属コンポーネント、コンクリート型枠ソリューションなどが含まれます。
• 経営陣は通期の業績見通しを維持し、高止まりする運賃コストが2026年業績に純額で6,500万ドルの影響を及ぼすと試算しています。同社は市場における多くの課題が2027年まで続くと予想していますが、価格設定、生産性向上、シェア獲得、および新規事業における業績改善に機会を見出しています。

主要財務データ

事業および業績の動向

リテール（小売）

リテール部門の売上高は、価格上昇6%、買収寄与1%、オーガニック数量横ばいを反映し、7%増の6億3,500万ドルとなりました。調整後EBITDAは600万ドル減の3,400万ドルとなり、マージンは6.7%から5.4%に低下しました。輸送コストの増加により、利益が800万ドル押し下げられました。

ProWoodの販売数量は、修繕・リフォーム需要の低迷と同社による低利幅なコモディティ商品の一部からの撤退により4%減少しました。また、木材価格の下落局面において高コストの在庫が販売されたため、粗利益が圧迫されました。

Deckoratorsの数量は21%増加し、MoistureShield買収による10%の寄与がプラスされました。デッキ材の売上高は69%増加し、これには無機物（ミネラル）ベースのSurestone製品の70%増が含まれます。従来の木粉・プラスチック複合デッキ材も、MoistureShieldからの寄与44%を含めて69%増加しました。

セルマおよびバッファロー工場でのスループット改善により、Surestoneの受注残は前期比で3,000万ドルから1,800万ドルに減少しました。経営陣は両工場が年末までにフル稼働する見込みとし、2027年には生産効率化が粗利益の大幅な押し上げ要因になると期待しています。

パッケージング（梱包）

パッケージング部門の売上高は、オーガニック数量の9%増加、買収による6%の寄与、3%の価格上昇により、18%増の4億6,600万ドルとなりました。調整後EBITDAは、輸送費や原材料費、買収統合費用、ならびに新規保護包装事業における未吸収の間接費の影響で、700万ドル減の2,700万ドルとなりました。

構造用包装（Structural Packaging）の数量は14%増加し、大口全国顧客（ナショナルアカウント）向け売上高は新規獲得により35%増加しました。PalletOneの数量は主に買収の影響で18%増加し、オーガニック数量は1%増加しました。保護包装（Protective Packaging）の数量は、インディアナ州およびネバダ州の新規工場でのランプアップ（立ち上げ増産）が続き、5%増加しました。

経営陣は、構造用包装における業務改善と製品販売ミックスの改善が、低グレード木材の価格高騰やパレット市場での価格競争の影響を一部相殺したと述べました。

建設

建設部門の売上高は、4%の数量増と7%の販売価格上昇を反映し、11%増の5億5,200万ドルとなりました。調整後EBITDAは、現地施工（Site Built）での価格圧迫と原材料コストの上昇により、400万ドル減の3,800万ドルとなりました。

現地施工（Site Built）のオーガニック数量は、「Frame Forward」営業手法、軽量金属コンポーネント、代替資材に支えられ12%増加しました。しかし、経営陣はこれが住宅建設市場全体の広範な回復を示しているわけではないと警鐘を鳴らしました。

工場製造（Factory Built）の数量は、低利益率のコモディティ販売からの計画的撤退と業界全体の生産が6%減少したことにより10%低下しました。より好調な高付加価値製品のミックスにより、工場製造の業績は横ばいを維持しました。商業用およびコンクリート型枠の数量は、需要と市場シェア拡大に支えられ、それぞれ20%増、6%増となりました。

経営陣による業績見通し（ガイダンス）

UFPインダストリーズは2026年通期の業績見通しを維持しました。経営陣はマクロ経済の圧力が年末まで続くと予想しており、同社の売上構成に基づくと各セグメントの最終市場需要は若干低下すると見込んでいます。また、エネルギーおよび輸送コストも高止まりが続くと予想されています。

同社は、運賃コスト上昇が2026年通期業績を純額で6,500万ドル押し下げると試算しています。年初来で4,900万ドル増加したことを受け、経営陣は第4四半期に前年同期比でさらに1,600万ドルの影響が出ると見込んでいます。

2026年について、経営陣は複合デッキ材、手すり、関連製品の合計増収額を、従来の1億ドル目標に対して約8,000万ドルと予想しています。これにはデッキ材の約8,500万ドルの増加が含まれますが、手すりやその他の製品の未達分で一部相殺されます。

経営陣は、2027年のデッキ材売上高が2026年比でさらに5,000万ドル加算されると予想しています。また、Deckoratorsの生産効率向上、新規工場の成熟・安定稼働、買収統合、価格転嫁措置、および生産性向上施策により、収益性が改善すると見込んでいます。

2026年の設備投資額は約1億5,000万〜1億7,500万ドルとなる見込みで、これには維持管理費約7,500万ドルが含まれます。同社は6,000万ドルのコスト削減目標の達成または上振れに向けて順調に進んでいます。

リスクと注目点

• ドライバー不足、規制変更、運送会社の撤退による供給能力縮小のため、輸送運賃は高止まりすると見込まれます。年初来の輸送コストは、700万ドルの燃料サーチャージおよび価格調整前で5,600万ドル増加しました。
• 住宅建設および修繕・リフォーム需要は引き続き軟調であり、経営陣は市場全体の広範な回復時期に対する視認性を十分に得られていません。
• 価格競争が激しいPalletOneや現地施工（Site Built）では、高騰する原材料コストを完全に価格転嫁することが困難となっています。
• ProWoodの収益性は、依然として木材価格の変動や在庫コストの計上タイミングに晒されています。
• 新設拠点および買収した事業は、第3四半期に合計300万ドルの調整後EBITDA赤字を計上しており、さらなる生産拡大（ランプアップ）と統合が必要です。
• Deckoratorsのバッファロー工場は生産能力目標に向けた途上にあり、手すりの売上はディストリビューター（代理店）および主要顧客1社の減少（失注）の影響を受けています。

アナリスト質疑応答（Q&A）のポイント

経営陣は、Surestoneの受注残減少は解約（キャンセル）によるものではなく生産量の増加を反映したものであると説明しました。セルマ工場とバッファロー工場での増産に伴い受注残は低下し続けると見込まれる一方、春の需要期に向けた在庫積み増しも進められています。

UFPインダストリーズは、Deckoratorsに関する新たな2段階（2ステップ）流通合意を発表する予定です。経営陣は、外部流通パートナーとProWood社内ネットワークの組み合わせにより、地理的なカバー範囲の隙間を埋め、2027年のデッキ材成長目標をサポートできると述べました。

運賃コストの回収について、経営陣は輸送運賃の上昇を一時的な燃料問題ではなく構造的な変化と認識しています。同社は2027年におけるコスト回収改善に向け、選別的な価格改定および運用の見直しを進めています。

経営陣は、オーガニックな数量成長の継続、製品ミックスの改善、およびDeckoratorsの効率改善により、実質的な粗利益が向上するはずだと述べました。ただし、PalletOneと現地施工（Site Built）は、原材料インフレと限定的な価格転嫁により引き続き制約を受けています。

M&A（買収）パイプラインは引き続き活発です。競合他社が撤退・縮小している可能性がある時期でも、同社の流動性とバランスシートが投資に対する柔軟性を提供しており、厳しい市場環境が続く中でUFPインダストリーズにより多くの機会が舞い込んでいると経営陣は語りました。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and welcome to UFP Industries Third Quarter 2026 Earnings Call. [Operator Instructions] 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.

Stanley Elliott

Good morning, everyone. Thank you for joining us to discuss UFP Industries third quarter 2026 results. Joining me on our call today 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 10-K 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.

And now I will turn the call over to Will.

William Schwartz

Good morning, everyone, and thank you for joining us to discuss our third quarter 2026 results. On recent calls, we've talked about signs of demand stabilizing across much of our portfolio, and that trend continued this quarter. Net sales grew 11% year-over-year and organic unit volume increased 4%. Mike will walk you through the full financial bridge in a moment.

This marks our second consecutive quarter of year-over-year volume growth, and it comes while our end markets remain challenging and uneven. Throughout this cycle, we have stayed focused on what we can control, and we've continued to invest to strengthen our core businesses. That discipline positions our diversified portfolio to deliver above-market growth and returns over the long-term. Our results this quarter reflect that strategy, including the strength of our new product pipeline and the balance of the portfolio.

Our priorities for reaching our long-term margin and return goals are unchanged: Invest in our highest margin core businesses, build brand awareness, introduce new and innovative products that improve our value-added mix, and drive operational excellence across the enterprise. We continue to make solid progress on these priorities, and I'd like to highlight a few examples.

Earlier this week, we announced our plans to acquire Apache Products, a leading wood pallet manufacturer in the strategically important Texas and Louisiana Gulf region. Like John Rock and Berry Pallets earlier this year, Apache will join our industry-leading PalletOne platform, and we are pleased to welcome their team.

This acquisition strengthens our ability to serve regional and national customers in one of the country's largest industrial and petrochemical markets. It also complements the national account strategy in our structural packaging business, where we continue to expand our footprint and capabilities to solve our customers' problems. Both are foundational to our long-term growth plans.

Even after a busy start to the year, our M&A teams remain very active and our pipeline is full. With the strength of our balance sheet, we have ample financial flexibility to pursue opportunities of any size that strengthen our core businesses, and we are doing so at a time when many of our peers are pulling back. As always, every investment must meet our long-term return requirements. Innovation remains a critical engine for growth and long-term margin improvement.

New product sales grew more than 40% year-over-year this quarter with contributions from all 3 of our segments. We also continue to execute on cost reduction and productivity. We are rightsizing and optimizing capacity while investing in automation, operational technology and machine learning to strengthen our low-cost manufacturing position. In addition, we've made targeted greenfield investments in our retail and packaging businesses. These facilities take time to ramp up. But because they were designed around automation from the start, we see a meaningful profit improvement opportunity as they mature.

Transportation costs were a new challenge across our industry in 2026, and we expect rates to remain elevated for the foreseeable future. Driver shortages and carrier capacity exiting the market under a tougher regulatory environment have pushed rates, excluding fuel, up 30% year-over-year. We've had some success offsetting higher diesel costs through fuel surcharges and selective pricing, and we are taking action on the rest.

Our transportation team is executing strategies to reduce these costs in 2027, and our sales teams are focused on recovering the impact through pricing. Mike will quantify the impact on our results, and we are confident our teams will deliver considerable improvement next year.

Now turning to our segments. In Retail, ProWood sales reflected a softer repair and remodel market and our decision to exit certain lower-margin commodity sales. Positively, we continue to see share gain opportunities, thanks to our expanded manufacturing capacity, the strength of the Deckorators brand and the breadth of our distribution capabilities, including our ProWood network.

Deckorators continues to be very well received in the marketplace. Our proprietary Surestone Technology is driving strong pull-through from both contractors and consumers. Demand for our decking products still exceeds our production capacity, but we are closing that gap with our capacity expansion at Selma and our new greenfield facility in Buffalo. This added capacity allows us to expand our distribution network more aggressively, and we look forward to announcing a new agreement with a leading 2-step distributor in the very near future. Together, our internal network and external partners give us national scale to serve the market and achieve our growth objectives.

Our $30 million advertising program featuring Surestone Technology continues to build customer awareness and consideration. Website traffic, sample orders, and event activity continue to grow at strong rates, and we are rapidly expanding our certified pro network. With a strong product portfolio in place, we will keep investing in our brand and product development to drive above market growth. We are pleased with the integration of MoistureShield, which adds important manufacturing capacity and brings its proprietary CoolDeck Technology under the Deckorators brand.

Looking ahead, you can expect us to continue introducing new and innovative products. TrueFrame, our new deck joist product offered through ProWood remains another attractive growth opportunity. It's a differentiated value-added product that leverages our existing manufacturing footprint and customer response remains strong because of the value and time savings it delivers to contractors. ProWood also continues to enhance its online platform, making browsing, ordering, tracking, and special orders a more seamless experience. Finally, customer feedback on Arris, our new premium trim product featuring Surestone Technology has been very favorable since its recent launch.

Our Packaging segment continues to outperform the broader market despite soft demand, thanks to the investments we've made to scale with large multi-location customers. With our national footprint and leading design and engineering capabilities, our structural packaging team is winning share with new and existing customers across multiple industrial verticals. Our ability to provide mixed material solutions at a national scale is a key competitive advantage.

Quoting activity remains strong, and we are encouraged by recent contract wins and the strength of our pipeline. As in prior quarters, the market and pricing environment in our pallet business remains competitive. Even so, we continue to execute our long-term strategy, investing at an opportune point in the cycle to expand our geographic footprint and build on our low-cost manufacturing position.

In Protective Packaging, our 2 recent greenfield operations in Indiana and Nevada continue to increase production, positioning us for share gains and improved profitability in 2027. We're also excited to have launched All Boxed Up, a dedicated brand for our growing corrugated business that reflects the breadth of its products and capabilities.

Closing with our Construction segment. Market conditions have been consistent for the past several quarters. Affordability continues to weigh on new residential construction. However, our multifamily backlog is higher than a year ago, which gives us reason for cautious optimism.

In Site Built, our Frame Forward System solution selling approach continues to deliver favorable results. By bundling our engineered wood and light gauge metal components under one brand, we help customers see how our systems save them both time and money on the job site. Since we introduced this approach at the IBS show earlier this year, it has continued to gain momentum and opened doors.

Similarly, in Factory Built, our strategy to deliver more value-added content is gaining traction. Our recently launched BRAWN brand continues to build awareness among OEMs and end consumers of the quality of our products. Across both Site Built and Factory Built, our off-site manufacturing solutions help customers address labor and efficiency challenges on the job site. Likewise, our Concrete Forming business continues to expand its products and service to meet customer needs wherever concrete is poured. Our goal is to capture a larger share of our customers' business with solutions that help them address labor challenges on the job site.

And finally, our commercial business continues to deliver strong results as we gain market share, expand the end markets we serve, and benefit from prior restructuring actions that improve productivity and capacity utilization.

Overall, I'm pleased with how our balanced portfolio has performed in a difficult environment. Conditions remain challenging, but we are focused on strategies that will allow us to emerge from this cycle a stronger company, well-positioned to create shareholder value as demand normalizes.

To put our progress in perspective, it's helpful to compare today's results with 2019, before our management structure changed. Today, our trailing 12-month adjusted EBITDA margin is 50 basis points higher than in 2019. Excluding freight, our margins are over 200 basis points higher. Even with the headwinds we faced, we have structurally improved our business, and we plan to continue on this path. As we finish 2026 and look ahead to 2027, we remain focused on operational efficiency, disciplined growth, and higher returns on invested capital as we advance toward our long-term goals.

With that, I'll turn the call over to our Chief Financial Officer, Mike Cole. I look forward to taking your questions afterward.

Michael Cole

Thank you, Will, and good morning, everyone. Our third quarter results reflect improving top line stability with solid organic unit growth and continued share gains, while elevated freight costs weighed on profitability. Net sales were $1.73 billion, ahead of plan and up 11% from $1.56 billion last year. Volume increased 6% with 4% organic unit growth and a 2% contribution from acquisitions. Pricing added 5%, reflecting higher lumber prices passed through to customers and programs in place to offset other inflationary pressures.

Performance varied across our business units. Deckorators, Structural and Protective Packaging, Concrete Forming and Commercial all delivered strong growth, supported by share gains and stable market conditions. That growth was partially offset by lower volumes in ProWood and Factory Built, primarily due to soft end market demand.

Adjusted EBITDA was $119 million, down $21 million from last year, and our margin was 6.9% compared with 9%. The decline was driven primarily by higher transportation costs. As a reminder, spot rates began rising in April and peaked this summer as flatbed carrier capacity tightened. As a result, our transportation costs, net of fuel surcharges, increased $19 million year-over-year, reducing our margin by 1.3 percentage points. While that is a sequential improvement from the second quarter, we expect rates to remain elevated for the balance of the year as our teams continue working to mitigate the impact.

In addition, our newly acquired and greenfield operations reported negative EBITDA of $3 million on a combined basis. Excluding these 2 factors, EBITDA across our business units increased $1 million from last year, with higher gross profit in every business except PalletOne, Site Built, and ProWood. Simply put, $19 million of higher freight and a $3 million loss from newer operations was partially offset by a $1 million improvement across the rest of the business. That resilience demonstrates the value of our balanced business model.

Turning now to our segments. Retail sales were $635 million, up 7% from last year, reflecting 6% higher pricing, a 1% contribution from acquisitions, and flat organic units. By business unit, ProWood units declined 4%, and Edge units were flat, offset by 21% unit growth in Deckorators and a 10% contribution from our MoistureShield acquisition. While lower year-over-year, ProWood volumes held steady sequentially in a seasonally softer quarter, and we believe the business continues to outperform the broader market. Deckorators continues to grow well above the market, led by strong demand for our branded decking.

Decking sales increased 69%, including 70% growth in our mineral-based Surestone products, which are up 45% year-to-date. Improved throughput at our Selma and Buffalo plants allowed us to reduce our Surestone backlog to $18 million at quarter end, down from $30 million at the end of the second quarter.

Our traditional wood plastic composite decking also grew well above the market, up 69% in the quarter, including 44% from the MoistureShield acquisition. Railing sales increased 2% in the quarter, but declined 8% year-to-date, reflecting the loss of a distributor at our Ultra Aluminum location.

For the year, we targeted $100 million of sales growth in composite decking and railing, consisting of $90 million from decking and $10 million from railing. We now expect decking growth of about $85 million, which includes a necessary $10 million inventory build at our ProWood distribution locations. The $5 million shortfall reflects the continued ramp toward throughput targets at our Buffalo plant, which began operating in April. In railing and other products, we expect to fall about $15 million short of our target, as anticipated share gains did not materialize and we lost a significant customer. In total, that puts us at roughly $80 million of growth against our $100 million goal.

Railing remains a key area of focus and opportunity in 2027, supported by the recent launch of our Align aluminum railing with DropLock technology. Retail adjusted EBITDA was $34 million, down $6 million from last year, and margin was 5.4%, compared with 6.7%. The decline was driven by $8 million of higher transportation costs, net of fuel surcharges in ProWood and Deckorators. That masked improving profitability in Deckorators as we continue to increase throughput.

In retail, our financial priorities are clear. Improve ProWood profitability by expanding its distribution of Deckorators products, achieve throughput and cost out targets primarily in composite decking, and keep growing sales of new value-added products like Arris trim and TrueFrame joists.

Packaging sales increased 18% to $466 million, driven by 9% organic unit growth and a 6% contribution from acquisitions and 3% higher pricing. Demand was consistent with recent quarters and pricing remained competitive, yet we continued to gain share with key customers in all 3 business units.

Structural Packaging volumes grew 14% on new customer wins by our strategic accounts team, which saw our national account sales increase 35% in the quarter. PalletOne volumes increased 18%, driven by recent acquisitions and 1% organic unit growth. And Protective Packaging volumes grew 5% as our new greenfield locations continue progressing towards sales targets.

Packaging adjusted EBITDA was $27 million, down $7 million primarily due to higher transportation and material costs. Integration of recent PalletOne acquisitions and unabsorbed overhead at our Protective Packaging greenfield operations were partially offset by improved profitability in Structural Packaging.

Construction sales increased 11% to $552 million, reflecting a 4% increase in units and 7% higher selling prices. By business unit, Site Built organic units grew 12%, driven primarily by company-specific initiatives, including momentum in our Frame Forward solution selling approach and growth in light gauge metal components and alternative materials. To be clear, we do not view this as a sign of a broader recovery in new residential construction, where demand remains challenged. In our traditional engineered wood components business, builder demand remains soft, pricing is competitive, and input costs remain elevated.

Factory Built units declined 10%, primarily due to our planned exit of certain lower-margin commodity sales and a 6% decline in industry production. Positively, an improved value-added sales mix enhanced margins. Commercial and concrete forming continue to benefit from positive demand trends and share gains, with volume growth of 20% and 6% respectively.

Construction adjusted EBITDA was $38 million, down $4 million, driven by pricing pressure in Site Built and higher material costs overall. These headwinds were partially offset by growth and operating leverage in commercial and concrete forming. Factory Built results were flat as a more favorable product mix offset lower volume.

Across the business, we continue to balance cost discipline with investment in long-term growth, and we are pleased with our progress this quarter, including continued growth in new products, which represented 8.7% of sales compared with 6.8% last year, led by composite decking, mixed material packaging, light gauge metal components, and concrete forming solutions. We remain on track to meet or exceed our $60 million cost-out target, supported by capacity consolidations we completed last year. We see additional savings opportunities next year as we continue to evaluate our portfolio and footprint. And SG&A remains on plan for the year as we maintain the savings achieved last year.

Turning to our balance sheet and capital allocation, we continue to operate from a position of financial strength. At the end of September, we had approximately $677 million of cash and no borrowings outstanding on our revolver for total liquidity of approximately $2 billion. Our balanced business model continues to generate meaningful and consistent free cash flow. Year-to-date we have converted 75% of our adjusted EBITDA into free cash flow, in line with our historical range of 70% to 80%. That cash generation has allowed us to grow our dividend and repurchase shares more aggressively at attractive prices.

Our top capital allocation priority remains growth, both organic and from acquisitions, that supports higher margins and stronger returns over time. As Will noted, that means investing in our higher-margin core businesses, capacity for new value-added products, and automation and productivity while remaining disciplined on valuations and returns.

We also intend to return capital to shareholders by growing our dividend in line with long-term expected free cash flow growth and by repurchasing shares to offset dilution from stock-based compensation. We make additional repurchases opportunistically when we believe our shares are trading below intrinsic value. Recently, we've directed more free cash flow toward buybacks while preserving the balance sheet strength to fund our growth investments. With this framework in mind, our board approved a quarterly dividend of $0.36 per share payable in December, a 3% increase from the dividend paid a year ago.

In May, our board approved a new $300 million share repurchase authorization effective through April 30, 2027. Year-to-date we have repurchased $183 million of shares, roughly 5% of our current market capitalization, at an average price of about $84. That includes $41 million in the third quarter. We expect capital expenditures of approximately $150 million to $175 million in 2026, including approximately $75 million of maintenance CapEx. This updated outlook reflects our continued discipline around capital deployment, and we retain the flexibility to shift growth investment between greenfield projects and acquisitions based on market conditions, available opportunities, and expected returns.

I'll close with a few comments on our outlook. Our full-year outlook is unchanged. We continue to expect current macro pressures to persist through year-end, with end market demand slightly down in each segment based on our sales mix. We also expect input costs, particularly energy and transportation, to remain elevated. Freight costs have recently stabilized, but at levels well above last year, and they will continue to weigh on profitability. Overall, we expect stabilization in certain businesses and continued share gains across our portfolio to help offset headwinds in markets tied to new residential construction and pallet production.

Looking ahead to 2027, our preliminary view is that many of the challenges we faced in 2026 will continue, and visibility into the timing of an end market rebound remains limited. That said, we see clear opportunities within our control to drive near-term improvement.

These are some examples. Transportation, we estimate elevated freight costs will have a $65 million net impact on our full year 2026 results, and our teams are focused on improving that result in 2027. New operations, as our greenfield investments mature and we further integrate recent acquisitions, we expect profits in those operations to improve. Share gains, we continue to target share gains in all our business units, especially Deckorators, Structural Packaging, Factory Built, Commercial, and Concrete Forming. Innovation, we anticipate continued strong growth in new product sales. Productivity, we expect to benefit from the efforts we've made to improve productivity and capacity utilization and reduce our cost structure. And M&A, we will continue to pursue acquisitions that meet our strategic objectives and return requirements. We believe these actions position UFP well to create value as our markets recover.

With that, we'll open it up for questions.

Operator

[Operator Instructions] And our first question will come from the line of Kurt Yinger with D.A. Davidson.

質疑応答

Kurt Yinger

Just on Deckorators first. I mean, obviously, ramping very strongly here in '26. I think a good chunk of that's probably the retail wins flowing through. As you look into next year and start lapping some of these wins, I mean, what are you seeing or hearing from kind of the dealer channel, whether it's picking up new stocking locations, better shelf space that maybe give you confidence that, that share gain story is going to continue?

William Schwartz

Yes. Great question. I appreciate you asking, Kurt. Excitement around the brand continues. And in the very near future, we'll announce a 2-step distributor partner, which we think helps propel the brand even further and sets us up well. We're in a much better stocking position with our ProWood plants. We talked about self-distribution a lot. But I would tell you, the sell-through of the product and excitement is really, really exciting for us. And I'm not afraid to say, we're going to continue to grow at a big number going forward. We believe we'll do $50 million of additional decking sales in 2027 over the 2026 results that are certainly over market.

Kurt Yinger

Okay. That's helpful. Good to have a number. Just following up on the 2-step piece. I mean, how should we think about that being incremental, right? I mean you have good coverage already through the ProWood plants. You have some existing third-party distributors. I mean is this, I guess, better penetrating certain geographies where maybe you're less exposed? Or how do you think about kind of those third-party distribution partners helping you out?

William Schwartz

Yes. Kurt, you kind of answered the question for me. You -- really between the ProWood plant and what we will be announcing, it really does fill in the gaps in the holes. It's the nationwide, fills in all the geographies, but also the penetration level because of the right partnerships, again, drives us forward. That's why we're confident in putting that number out there for '27.

Kurt Yinger

Perfect. Okay. That's helpful. And then, Mike, maybe the last one for you. Like even if we kind of put aside transportation, gross profit flat year-over-year, which is good. But you also grew units 6%. And if I think about Deckorators, Site Built, Structural Packaging, those have historically been better margin businesses for you guys. So can you just talk broadly about kind of the competitive pricing environment? And as we think about next year, again, putting aside transportation, like if you can continue to grow units positively on an organic basis, should we start to see that generate gross profit dollar improvement as well?

Michael Cole

Yes. That would be the target for sure, Kurt. I guess kind of unpacking the business units though a little bit, the difficulties that we have in the Site Built side, the PalletOne side with elevated -- and it's not as much pricing as I would say there's been elevated material costs for the most part, and it's been hard to pass those costs through to the customers and pricing. So it's just a very competitive environment in those 2 business units.

And then I would say that for ProWood, this is a quarter where lumber prices came off quite a bit in terms of dollars. And so as you know, with a variable price and now you've got more elevated inventory costs and you're selling into a market that's falling that pressured ProWood's gross profit. So that's something that can happen from quarter-to-quarter at times. This would be a more common quarter for it to occur as you come into the seasonal downturn that normally occurs in that business. But yes, the rest of the businesses, though, are performing very well. We have mix improvements with new products. So we're very encouraged about the rest of the business, and it just really demonstrates the value of the balanced business model.

William Schwartz

Yes. I'm going to add one quick point too. Mike's hit on it. We had kind of an unusual quarter when you talk about lumber market movement. We always talk about the natural hedge typically when the market is up or down. We have one business unit that wins while another does not, and it hits them negatively. In this quarter, it's kind of unique with the market pulling back, it has a negative impact on our ProWood business. Typically, the lower prices would positively impact our packaging business. Those products actually were moving up and were tight in supply. So it was just kind of an unusual point where you kind of get hit from both sides, but I think it's worth noting.

Kurt Yinger

Got it. And maybe just to follow-up on that. I mean, is there any sort of lagging benefit from lower lumber prices on packaging or some of these fixed price areas that you would expect in Q4? Or is it more of the same in terms of it's just whether you can pass that on based on kind of competitive dynamics and the customers' willingness to accept price, so to speak?

William Schwartz

I think it's more of the same, but we're seeing a bit of a softening and more availability. So I think that was more Q3 related. It was worth noting just because that's abnormal to what happens in the market.

Michael Cole

Yes. The low-grade material is still elevated, Kurt. So I wouldn't expect those costs to come down in Q4. So that will continue to be a challenge into the next quarter. So the softness related to the products sold within the retail space.

Operator

And that will come from the line of Reuben Garner with StoneX.

Reuben Garner

Just actually a couple of follow-ups there. Starting with the gross profit color. The dynamic between -- I understand the retail or the ProWood component. Is it just a difference in the species of lumber used between the 2 and the pricing dynamics that were going on there within the quarter that were unique? And then can you -- any way you can quantify what kind of drag those 2 factors had, so we can see what the actual kind of underlying profit -- gross profit per unit was growing without freight and without the one-time kind of unusual pricing dynamic?

William Schwartz

Yes. Good question, Reuben. What I'll start with is it's more -- it's a specie piece, but it's more the grades. The grades that go to our retail customers and to our construction customers are more of the elevated or higher-end grades. If you think about the packaging, it's more the downfall lower-grade products. So it's more in that environment. Mike, do you want to kind of hit on the -- on that?

Michael Cole

Yes. I guess I'll take more of a higher level view of gross profits to answer that question about Q4. Reuben, I guess the way that I'm looking at it, there's a lot of different moving parts, right, with all the different business units and product categories that we have. But to me, when I look to Q4, it's really about the transportation drag and the year-over-year increase. We've experienced about a $49 million increase year-over-year in transportation costs, net of fuel surcharges. And we called out $65 million is the number we expect it to be for the full year.

So looking forward into Q4, we expect another $16 million year-over-year increase. And to me, it's really about that when it comes to looking forward to Q4 gross profit. And we expect similar to Q3 that you're going to have areas of challenges like PalletOne and Site Built as far as the business units go with gross profit. But you're also going to have areas of success, whether it's Concrete Forming, Commercial, Structural Packaging, et cetera.

Reuben Garner

And Mike, are those just -- is it just the surcharges in certain businesses are not enough to offset the cost increases that you're seeing? Or is there a catch-up that comes later? Like how do we think about what mechanisms are used to offset the inflation you're seeing and how that may look in '27 and beyond?

William Schwartz

Yes. I'm going to jump in there. We think there is -- this is a structural change in baseline pricing for transportation, for freight. And what began as really fuel, and that is what we chased early in the year, turned into spot market rates and the entire industry changing. Regulatory, lack of drivers, et cetera, really kind of pushed that up. And that's an area that we have not gotten after to the level I would have expected at this point. Difficult demand environment, passing along cost. We are aggressively pursuing the sell price to offset scenario going forward. So we believe that is set in. We don't see anything is going to pull that back. The work that we are doing internal to adjust how we run our business and how we operate, some of the things that happened this year, those will help to offset any additional increases that most likely the rest of the industry and others would get. Mike, you got any other color to that?

Michael Cole

Yes. I think maybe adding on and just kind of breaking down the cost and where it comes from. So if we look at the year-to-date, there's actually a $56 million increase in total transportation costs. It's been offset by about $7 million worth of fuel surcharges and pricing adjustments. If we take the $56 million and we break it down, $41 million of it comes more because of capacity exiting the market because of the regulatory changes that Will had referenced. The other $15 million comes from fuel. So this is more about the regulatory changes in capacity coming out of the market than it is about fuel at this point. And that's the structural change that we need to work through.

Reuben Garner

Yes, that's really helpful. And then a follow-up on the Deckorators piece and MoistureShield and the third-party distribution dynamics. So there's been some changes in the third-party distribution in the last few months, including, I think, some MoistureShield dealers. Can you just -- the outlook for next year and the ProWood distribution answer, I guess, just to be clear, is the plan to leverage UFP's distribution network internally to offset any lost MoistureShield distribution? Or are there other wins that you can quantify that are -- that -- or call out that you're picking up business? Like how are you thinking about kind of the net of it all and maybe what your goals are for third-party distribution longer-term? Have those changed at all since you made the acquisition?

William Schwartz

Yes. So go back to the acquisition, we talked about it. First question was, are we going to remain under the MoistureShield? Or is it going to transition to the Deckorators family of brands? And we talked about that. One of the things that came with that was some distributors we were not doing business with that were -- that MoistureShield did. We had to analyze it from a global picture, understanding Deckorators was bigger than that and making decisions as the right partners to get product to the consumers that we were after, marry that up with our ProWood distribution coverage, geographies, et cetera, we really are comfortable and like our positioning. Very shortly, you're going to hear an announcement that will kind of fill in that picture. And then I think that's the answer, Reuben. We're really comfortable with where we're at.

Operator

And that will come from the line of Ketan Mamtora with BMO Capital Markets.

Ketan Mamtora

Maybe just coming to packaging. Nice to see kind of good organic growth. Pricing was also higher on a year-over-year basis, yet the EBITDA was down quite meaningfully. I suspect a portion of this is just higher transportation costs. But can you unpack for us how much of it is the transportation headwinds and kind of anything else that would be driving the EBITDA drag on a year-over-year basis?

William Schwartz

Mike, do you want to hit that?

Michael Cole

Yes, happy to. So higher material costs and transportation costs were more than the EBITDA reduction. Actually, the improvements operationally and with sales mix-wise within structural packaging were an offset. So it's really about elevated material costs, particularly in the pallet space that has been hard to pass along.

Ketan Mamtora

Understood. Okay. That's helpful. And then on the Construction side, Site Built was up 12%, and you said that this is not underlying improvement in demand. Can you just talk a little more in terms of what drove this year-over-year growth? And if it is possible to sort of differentiate between underlying demand and kind of the Frame Forward system that you guys mentioned in the release, how much is that driving?

And then just related to that, the gross profit pressure in Site Built that you're continuing to see, are you still seeing competitive sort of pricing? Has that backdrop changed at all? Is it stabilizing? Or is it still coming under pressure?

William Schwartz

Yes. So let's start with the beginning piece. As Mike described in his opener, we do not see that as a shift in the market. Don't know if you apply that light gauge metal cladding, labor, some of those things really helped to drive that increase in the quarter. I don't think that's an underlying, like what to expect going forward, meaning more starts, more business in general. I am excited about the Frame Forward selling solution because that's taking labor and adding speed to the job site, taking labor off, and that's something that I think that is going to be necessary as we move forward. So we are excited about that. But Ketan, I don't want to -- it's a head fake if you just take that and believe that that's a change in the environment. Mike, you want to kind of hit the margin side at all?

Michael Cole

Yes. I -- with respect to margin and gross profits, Ketan, I don't -- when we put together our bridge for, right, the change in gross profit, there's not as much of a change in pricing. So pricing wasn't a major factor in the decline in gross profit. But the elevated material and freight costs are. And so I think it's really the elevated cost and the inability to pass those along fully to the customer is the challenge.

Operator

And that will come from the line of Andrew Carter with Stifel.

W. Andrew Carter

So a couple of questions. I guess I'll start on the Deckorators. You lowered the number for the year down to 85 and the backlog went down. I wanted to ask, are there any cancellations that you're seeing in the backlog? And you did reference a customer loss at the call, kind of speak to the kind of impact of that? And then anything on kind of the POS trends where you are given kind of where that evolved maybe a pro forma kind of the MoistureShield plus the Deckorators portfolio at this point?

William Schwartz

Yes. So first of all, the backlog coming down is really just the result of manufacturing going up though. So no cancellations, no concern at all. And I think that was also verified by my statement of we expect $50 million of additional sales next year. The plants are really coming online. You're starting to see that capacity come to realization. So no excitement around it, expectations going forward, really, really strong. The customer noted was really a small business within the Deckorators brand, Ultra Aluminum, not a significant -- not of anything to point back to decking, railing a little bit, but nothing on the decking side. So Mike, anything extra to add?

Michael Cole

No, it's Ultra Aluminum is primarily a fence, aluminum fence manufacturer, but they do some railing as well.

W. Andrew Carter

A second number stood out was kind of the UFP organic units were down just 4% -- I'm sorry, let me get this. ProWood -- sorry, ProWood organic units were down 4%. Correct me if I'm wrong, you kind of pointed to a minus 5% underlying for the first half. I get how lumber trended through the quarter, but it is still -- the Southern Yellow Pine is still up. So can you speak to that strength that you have there? Like any quantification on the market share gains you have there in terms of kind of new opportunities within the category? I mean you're pretty well distributed. You're both the big retailers. I don't -- so I don't know if that's there. But just kind of speak to the stability of that performance in general.

William Schwartz

Yes. Certainly, I mean, I think that's reflective of the repair and remodel market. Really no significant market share gains, market share losses. I'm really proud of the way the business is operating. I'll tell you what I would point to as a bright spot in that space is really innovation in the space. TrueFrame product continues to grow, will be an even bigger part next year in what has been a product that's been in the marketplace for a long time. We're really driving innovation across our businesses. But that, combined with also being an internal distributor of our Deckorators product is gaining some momentum as well, being able to tie those 2 products together.

W. Andrew Carter

And then kind of a final question. You're already kind of pointing to a soft market for next year in terms of kind of the units, I -- but you did reiterate kind of your long-term. So I guess I would ask if depending on how long we get -- it takes to get to the long term, like at current conditions, I don't know if you have a view on 2028, but it's hard to see these rates at accelerating. Like do you proceed with the same cost structure? Or do you see opportunities to pull back investment? Or just anything like that to help as you kind of think about this kind of ongoing malaise across kind of really repair, remodel, and new construction?

William Schwartz

Yes. I really appreciate that question. It's something we're working through internal. I would tell you, I look at it 2 ways. Number one, we've got to manage our cost in the short term and align ourselves to where the market is. We've been in the cycle of the next 6 months are going to be challenging, followed by the following 6 months of improvement. We've been in that cycle now for the better part of 3 to 4 years. This looks like it's a little more prolonged. We recognize that. We're going to take action. But the secondary part is we've got the opportunity to invest in a market that's beaten down when others probably will not be. So our peer group competitors might not be in that same position, really appreciative of the balanced portfolio that we have, the free cash flow generation and the balance sheet.

And so we're going to manage our costs. Yes, we're also going to be looking to invest. And you've seen that, especially in the PalletOne side, knowing that we weren't going to make those acquisitions and it'd be accretive right away. We know we're buying at the right time in the market, really building out the strategy going forward. So 2-pronged. Thanks, Andrew.

Operator

And that will come from the line of Jeff Stevenson with Loop Capital.

Jeffrey Stevenson

I wanted to start off with the Deckorators production ramp at the new manufacturing facility in Buffalo after coming online this spring. You guys reported a sequential improvement in the unshipped Surestone backlog. So should we expect that to continue to move lower as production continues to ramp at your new production facilities?

William Schwartz

Yes, absolutely. We'll start -- we'll continue to eat into that backlog. But you got to remember, the spring build season happens right on the tail end of it. So we need to cut into that backlog in order to prepare ourselves inventory-wise for the selling season. Yes. Very happy with the progress that's been made. Those operating teams have done an outstanding job. And now we're -- by the end of the year, we're fully operational at both plants, so.

Jeffrey Stevenson

Okay. No, great. And I'm sure you'll talk about this more at upcoming trade shows in IBS, but just wondered if you could talk more about the new Meridian and Elevate decking products you recently announced and how they're positioned in your current Deckorators product lineup? And then also one of them includes the CoolDeck technology from MoistureShield. Should we expect that to be used in future Deckorators product lines as well in the future, if that's successful?

William Schwartz

Yes, absolutely. I'm glad you asked the question. I was hoping someone would get to it and you got it. So yes, we're really excited about that product full profile, introducing the CoolDeck technology into that, be available in 2027. You've heard me talk to it and speak to it. And we're going to continue to be an innovator in the space, and you should expect more to come as we take that CoolDeck technology, roll it out to other products moving forward. So yes, really excited about that and what that product can do for us in 2027.

Jeffrey Stevenson

Okay. Great. And then lastly, you guys talked about some of the cost pressures in the Packaging segment. But overall, you saw positive organic volumes in all your key product categories and it seems like you're seeing nice share gains, especially with large customers. Have you been encouraged by the improving results this year on the top line of your Packaging segment? And do you think you're beginning to see an inflection after several challenging years in that business?

William Schwartz

Yes. I think what you're actually seeing, and I'm absolutely proud of the work that's been done, those are long selling cycles to get to the point of closing those types of deals. It's a stickier customer, but it takes a lot of work, design, engineering, working on the front end to develop products. Those don't come to you overnight. They also don't go away from you overnight. So that's really what you're starting to see is the fruit of a lot of labor and investment over the last couple of years. So good call out, very proud of the teams and excited about what's to come.

Operator

And we do have a follow-up question from Kurt Yinger with D.A. Davidson.

Kurt Yinger

Just on Deckorators, Mike, I think you had made a comment about prioritizing kind of production over efficiencies, and it seems like that's kind of been a theme this year. Do you get into a spot in 2027 where you can really leverage the earnings profile of that business to a much greater extent? Or from kind of a production standpoint, still playing catch-up, meeting that growth? Is that something that's maybe a 2028 or beyond story?

William Schwartz

No. I think you'll start to see improvement in 2027 for sure. Any time you introduce new technology, automation, those types of things, you combine that with the demand that was coming at us. We're going to make sure that, that customer gets product, and that takes precedent. And so we worked through a lot of that. And we will be in a much better place in 2027, and I think you'll see it in the results. Mike, anything to add?

Michael Cole

Yes. I think that's a meaningful gross profit improvement driver for next year.

Kurt Yinger

Okay. That's helpful. And then just lastly on kind of capital allocation. I mean, obviously, you don't have targets on capital you'll allocate to M&A or anything like that. But it feels like an active pace kind of through the first 9 months of the year, even though the deals haven't been huge. I mean, should we expect that to continue? Is the opportunity set there where you expect you're going to remain pretty active kind of over the next, call it, 6 to 12 months?

William Schwartz

Yes. What I would tell you, Kurt, we've definitely seen a shift. I think it's the realization that the market is probably going to be a little more challenged for a longer period of time. And I would tell you, for the past couple of years, certainly, we've done most of the prospecting. We're now starting to see things come at us that are attractive, and we expected that, part of the disciplined nature of our -- of the way we operate, focusing on ROI. So yes, I think you'll continue to see opportunities for us to invest in an environment when others might not be able to.

Operator

I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Schwartz for any closing remarks.

William Schwartz

Thank you to those who joined us on the call today. As we look ahead, we'll continue to execute on our strategy and remain committed to our long-term goals. We'll stay focused on driving operational excellence and bringing new high-value products to market. Most importantly, thank you to the UFP team members whose hard work makes these goals possible. And have a great day.

Operator

This concludes today's program. Thank you all for participating. You may now disconnect.