Steady demand from municipal water systems offset sluggish sales to residential construction customers as Core & Main Inc. posted a 1.2% increase in revenue to $2.062 million in its fiscal third quarter ended Nov. 2. Net income rose 2.1% to $143 million, in part through $30 million in annualized cost reductions.
The revenue growth came primarily from acquisitions, including its purchase of Canada Waterworks, a distributor of water-related products in southern Ontario, and expansion into new markets. The St. Louis-based distributor opened offices in Denver and Houston in the third quarter, making five new areas where it has established offices this year.
“We’re encouraged by the growth opportunities we see on the horizon, particularly in large, complex projects across our core end markets, coupled with opportunities to drive above-market growth through sales initiatives and geographic expansion,” CEO Mark Witkowski said in a press release announcing the Q3 results.
Asked about the opportunities from complex projects on a call with stock analysts, Witkowski said those mainly are from the construction of data centers to fuel the AI boom. He says the scale of those projects gives an advantage to a large distributor like Core & Main that can provide a wide variety of products and services, and that the data centers also increase demand on local water systems, which boost sales of products related to water and sewer systems.
He said data centers still represent a small part of Core & Main’s business: “low single digits” as a percentage of sales. Municipalities account for more than 40% of revenue and non-residential construction another 40%, with residential building making up less than 20% of sales.
Chief financial officer Robyn Bradbury said the recent decline in residential sales “was concentrated in Sun Belt markets like Florida, Texas, Arizona and Georgia, where developers have slowed the pace of new development.” Witkowski said the recent shutdown of the federal government had little impact on municipal projects as about 95% of that funding comes from local and state sources.
Core & Main reaffirmed its previous projection of revenue growth of 2-3% for the full fiscal year to between $7.6 and $7.7 billion.
For the three months ended Nov. 2, Core & Main reported:
- Net sales of $2.062 billion, an increase of 1.2% from $2.038 billion in the same period a year earlier.
- Net income of $143 million, up 2.1% from $140 million a year earlier.
For the nine months ended Nov. 2, the distributor reported:
- Revenue of $6.066 billion, compared to $5.743 in the year-ago period, an increase of 5.6%.
- Net income of $389 million, an increase of 6.0% from $367 million in the same period last year.
