MasterBrand (NYSE:MBC) expects weaker cabinet demand and rising costs to pressure fourth-quarter earnings, as the company integrates its merger with American Woodmark and pushes back its debt-reduction target by a year.
The cabinet maker reported third-quarter net sales of $1.04 billion in its first full quarter as a combined company, including $355.7 million from American Woodmark. It posted a net loss of $9.2 million, compared with net income of $18.1 million a year earlier. The prior-year results reflect standalone MasterBrand, while the latest quarter includes American Woodmark.
President and CEO Dave Banyard said demand weakened in September and remained soft entering the fourth quarter. Management now expects its end markets to decline by a high-single-digit percentage in 2026, compared with its previous forecast for a mid-single-digit decline.
Fourth-Quarter Outlook Reflects Softer Demand
MasterBrand forecast fourth-quarter net sales of $958 million to $988 million and adjusted EBITDA of $38 million to $48 million, implying a margin of 4.0% to 4.9%. The outlook includes approximately $1.3 million in tariff refunds already received during the quarter.
Vice President and Interim Chief Financial Officer Mark Young said the expected decline from third-quarter adjusted EBITDA of $86 million reflects persistent demand weakness, additional production down days, lower tariff refunds and continued inflation in materials and freight. The company expects an adjusted diluted loss of $0.12 to $0.08 per share in the fourth quarter and approximately break-even free cash flow for the full year.
“We are still going to be price-cost negative in the fourth quarter,” Banyard said during the question-and-answer session, noting that the company’s pricing actions were unlikely to catch up with rising costs by year-end.
Banyard said the reduction in the market outlook was driven predominantly by new construction, although both new construction and repair-and-remodel demand were affected by higher rates and cautious consumers. He said cabinets are installed late in the building process, making home completions an important driver of the company’s volume.
Legacy Sales Outperform Market Estimates
Legacy MasterBrand sales fell 2.5% to $681.1 million in the third quarter, while management estimated its end markets declined by a mid- to high-single-digit percentage. American Woodmark sales declined nearly 9% from the prior-year period on a pro forma basis, with weakness concentrated in new construction, Young said.
Banyard said legacy MasterBrand’s new construction and repair-and-remodel businesses outperformed their respective markets. He also said American Woodmark outperformed in repair and remodel, while its Timberlake direct brand performed in line with the new construction market.
Third-quarter adjusted EBITDA of $86 million compared with $90.6 million for standalone MasterBrand a year earlier. Adjusted EBITDA margin fell to 8.3% from 13%, reflecting lower volume, inflation that outpaced pricing and unfavorable product mix. The latest quarter included approximately $10.9 million in tariff refunds and $9 million in integration synergies.
Free cash flow for the quarter was $61 million, up from $40 million for standalone MasterBrand a year earlier, which Banyard attributed primarily to working-capital management and American Woodmark’s contribution.
Integration Advances as Debt Target Moves
Management said integration is ahead of schedule. The company realized approximately $11 million in cost synergies year to date and has initiated or completed actions expected to generate more than $50 million in annual run-rate savings exiting the first year after the merger. It maintained its target of more than $100 million in annual run-rate cost synergies by the end of the third year after closing.
MasterBrand has undertaken footprint actions at five plants, including actions at three facilities in Mexico and plans announced after quarter-end to consolidate production at Kinston and a production line at Gas City. Additional organizational cost actions are expected to deliver approximately $10 million in annualized savings, mostly benefiting 2027, Young said.
The company ended the third quarter with $1.09 billion in net debt and a trailing 12-month net leverage ratio of 4.3 times, including American Woodmark’s full trailing adjusted EBITDA. Banyard said MasterBrand now targets net leverage below 2 times by the end of 2029, rather than 2028, citing a weaker market and the scheduled increase in Section 232 tariffs on kitchen cabinets and vanities to 50% on Jan. 1, 2027.
Young said mitigation measures already in place should make the net impact of the scheduled increase less significant than the initial 25% tariff, although further sourcing and pricing actions would take time to reach results. Banyard said on the call that an analyst’s estimate of a 2.5% to 3% gross headwind was in the right range.
The company has also begun a search for a permanent CFO. Former CFO Andi Simon is expected to remain in an advisory capacity through the end of March, while Young serves as interim CFO.
About MasterBrand (NYSE:MBC)
MasterBrand, Inc (NYSE:MBC) is a manufacturer of residential cabinetry and related products. The company designs and produces cabinets for kitchens, bathrooms, home offices, living areas and other spaces, serving both new construction and remodeling markets.
MasterBrand offers a range of cabinet styles, materials, finishes and price points through a portfolio of brands that includes Aristokraft, Cabinetry by Karman, Decora, Diamond, Homecrest, Kemper, Mantra, Omega and Schrock. Its products are sold through home improvement and specialty retailers, independent dealers, builders and other trade customers.
The company is based in Jasper, Indiana, and serves customers primarily in the United States and Canada.
