H. B. Fuller (NYSE:FUL) reported third-quarter fiscal 2026 revenue growth and higher profitability as pricing actions and restructuring savings more than offset lower volumes and elevated raw-material costs.
Revenue increased 5.2% from a year earlier, while organic revenue rose 4.4%, driven by 7.4% pricing that was partly offset by lower volume. Adjusted EBITDA increased 9% to $187 million, and adjusted EBITDA margin expanded 80 basis points to 19.9%. Adjusted earnings per share rose 21% year over year to $1.52.
Segment results show broad pricing benefits
All three global business units recorded margin expansion during the quarter.
- Hygiene, Health and Consumable Adhesives: Organic revenue rose 6%, supported by hygiene, beverage labeling, and tape and label markets. Packaging softness partly offset those gains. EBITDA margin increased 70 basis points to 17.6% as the segment posted double-digit pricing performance.
- Engineering Adhesives: Organic revenue increased about 5% excluding the exited solar business, led by aerospace and general industrial markets. Including solar, organic revenue increased 1%. Electronics demand softened as chip shortages affected mobile-phone production in Asia-Pacific. EBITDA margin rose 50 basis points to 23.8%, reflecting pricing and restructuring savings.
- Building Adhesive Solutions: Organic revenue grew 5%, driven by roofing and insulating glass, partly offset by weakness in wood. EBITDA increased 8% and margin expanded 50 basis points, primarily from favorable pricing.
By geography, organic revenue increased 4% in the Americas, where BAS grew 9%. Europe, India, Middle East and Africa organic revenue rose 9%, with positive pricing across all three business units and volume growth in engineering adhesive markets including automotive and aerospace. Asia-Pacific organic revenue increased 4% excluding solar, led by HHC packaging performance, while total organic revenue was approximately flat including solar.
Mastin said the company has fully lapped its solar exit and does not expect it to have a meaningful impact on Engineering Adhesives or consolidated organic growth going forward.
Supply chain conditions remain unsettled
Management said petrochemical supply-chain dislocation remains a defining feature of its operating environment. Raw-material prices have stabilized at elevated levels and are expected to remain at or near current levels through the remainder of the year.
“As conditions warrant, we will judiciously raise price to offset raw material costs and protect our margins,” Mastin said. The company exited the third quarter with pricing up 7.6%, according to management.
During the question-and-answer session, Mastin said volumes performed better than anticipated because customers generally were able to obtain materials other than adhesives despite tight markets. However, she said demand and order patterns have been unusually volatile, particularly among smaller customers, and volumes strengthened late in the quarter.
Management identified construction and China as key areas to watch in fiscal 2027. CFO John Corkrean also cited electronics chip shortages, sluggish residential construction markets and challenges facing large consumer packaged-goods customers as external factors affecting volumes.
Quantum Leap savings and cash-flow initiatives
The company said its multi-year Project Quantum Leap manufacturing and distribution optimization program remains on schedule. The initiative began with 82 manufacturing facilities at the end of 2024, and H. B. Fuller expects to exit 2026 with about 62 facilities. Excluding the proposed Advanced Medical Solutions acquisition, it expects to reduce that total below 60 by the end of 2027, progressing toward a goal of 55 facilities.
Quantum Leap is expected to generate approximately $75 million in annualized conversion-cost savings by the end of 2030. Management expects roughly $25 million of benefits to be realized through the end of 2026, followed by $20 million to $25 million of incremental savings in 2027.
The company expects to invest about $150 million of capital over the life of the project, including roughly $50 million in 2026 and less than $25 million in 2027. One-time cash costs are expected to total about $50 million, with proceeds from manufacturing facility and related land sales projected to more than offset those costs.
Corkrean said Quantum Leap is also expected to improve cash flow through lower inventory, reduced maintenance capital spending and working-capital improvements. He said the company sees an opportunity to reduce inventory by at least five days, representing approximately $35 million of operating cash-flow benefit.
Updated outlook and AMS acquisition plans
For fiscal 2026, H. B. Fuller maintained its expectation for net revenue to rise by a mid-single-digit percentage and organic revenue to grow by a low-single-digit percentage. The outlook assumes mid-single-digit pricing growth and low-single-digit volume declines.
The company now expects adjusted EBITDA of $655 million to $670 million and adjusted EPS of $4.70 to $4.85. Cash flow from operations, excluding AMS-related items, is still projected at $300 million to $325 million. The outlook does not include the effect of the proposed acquisition of Advanced Medical Solutions.
Management said it remains on track to close the AMS transaction by year-end, subject to the required regulatory approvals. Mastin said the acquisition would strengthen the company’s healthcare portfolio and provide exposure to surgical tissue bonding, which management characterized as a higher-growth medical end market.
Following the transaction, the company expects leverage to return to its targeted range of 2.5 times to 3 times within two years of closing. Net debt to adjusted EBITDA was slightly below three times at the end of the third quarter, compared with 3.3 times a year earlier.
About H. B. Fuller (NYSE:FUL)
H.B. Fuller Company (NYSE: FUL) develops and manufactures specialty adhesives, sealants and other chemical-based products used in industrial and commercial applications. Its solutions help customers bond, seal, coat and assemble materials across a range of products and manufacturing processes.
The company serves markets including packaging, hygiene and disposable products, construction, transportation, electronics, durable assembly, woodworking, flooring, composites and renewable energy.
