H. B. Fuller (NYSE:FUL) executives said the company delivered on its first-quarter profit commitments despite a challenging demand environment, while also outlining actions to manage supply chain disruption tied to the conflict in the Middle East.
First-quarter results: lower volume, higher margins
For the first quarter of fiscal 2026, H.B. Fuller reported organic revenue down 6.6% year over year, as pricing increased 0.6% but volume declined 7.2%. CFO John Corkrean said foreign currency translation provided a 3.6% benefit and acquisitions added 0.7% to revenue.
Adjusted SG&A expense rose 4% year over year, but Corkrean noted that excluding acquisitions and foreign exchange, SG&A was down slightly due to expense discipline. Adjusted EPS was $0.57, up 6% from the prior-year quarter, which management attributed to higher operating income and fewer shares outstanding.
Operating cash flow improved by $49 million year over year. Corkrean reiterated that operating cash flow in fiscal 2026 is expected to be weighted to the second half. Leverage stood at 3.1x net debt to adjusted EBITDA, unchanged from fiscal year-end 2025 and down from 3.5x a year earlier.
Segment performance: Engineering Adhesives strength offsets weaker HHC
CEO Celeste Mastin said the company continued to expand margins through global sourcing and cost and portfolio management, including benefits from the company’s restructuring program, Project Quantum Leap.
- Engineering Adhesives (EA): Organic revenue increased about 3% excluding solar, driven by strength in electronics and aerospace; including solar, organic revenue declined 2%. EA EBITDA rose 9% and margin expanded 120 basis points to 19.9%.
- Health, Hygiene and Consumables (HHC): Organic revenue declined 10%, which management attributed to a tough comparison and customers maintaining tighter inventory levels. Mastin also said consumers continued shifting from premium products to lower-cost alternatives and smaller package sizes, which reduces adhesive usage. HHC margin increased 120 basis points to 13.9% on pricing, raw material actions, and expense control.
- Building Adhesives Solutions (BAS): Organic sales decreased 5.1%, consistent with expectations, as the team worked through challenging weather. EBITDA fell 1% and margins were flat, as pricing and raw material actions and restructuring savings were offset by volume declines.
By geography, Americas organic revenue fell 4%, with declines in HHC partially offset by EA, which grew 8% on aerospace and general industries strength. EIMEA organic revenue decreased 11% on tighter inventory management in HHC, weak construction demand in BAS, and a tough prior-year comparison. Asia Pacific organic revenue was up 2% excluding solar, which management said was below trend due to the timing of Chinese New Year.
Middle East conflict drives supply disruption and price actions
Mastin described the Middle East conflict as a “critical development” for the industry, saying it is already constraining raw material availability across feedstocks, intermediates, logistics lanes, and energy inputs. She said the company has received more than 40 force majeure letters from suppliers in recent weeks, and noted that tanker routes have been disrupted and repositioned.
Management warned that even if the conflict were resolved quickly, aftershocks could persist throughout the year as inventories rebalance, transportation normalizes, and plants work through restart cycles. Mastin said the company expects broad-based inflationary pressure and raw material shortages, with elevated volatility.
In response, H.B. Fuller said it is leveraging its global sourcing infrastructure to secure materials ahead of the broader market, reallocate volumes across regions, and pursue qualified substitutes. Mastin also said the company has taken pricing action, announcing a minimum 10% price increase across all product lines globally effective April 1, with higher adjustments in certain technologies and regions where cost escalation is more acute. During the Q&A, she said some finished goods price increases could reach 40% to 50% in specific cases, citing vinyl acetate monomer (VAM) as an example where the spot market in Europe was recently up 300%.
Management also framed the disruption as a potential market share opportunity, arguing that competitors facing supply uncertainty could create openings for H.B. Fuller to support customers. Executives said the company is being selective about which customers and applications receive scarce materials and is seeking longer-term agreements when customers return for supply support.
Guidance updated; volume assumptions lowered
Following year-to-date performance and the company’s response to supply disruption, Corkrean updated fiscal 2026 guidance. The company now expects net revenue up mid-single digits and organic revenue up low single digits versus fiscal 2025, reflecting pricing actions and anticipated market share gains. Foreign currency translation is expected to contribute a 1% to 2% benefit to revenue.
Adjusted EBITDA guidance was raised to $645 million to $675 million, with adjusted EPS expected at $4.55 to $4.90. For the second quarter, management expects net revenue up low single digits and adjusted EBITDA of $175 million to $185 million.
In Q&A, Mastin and Corkrean said the guidance change reflects both incremental price/raw material benefit and a more cautious volume outlook. Mastin said the company now assumes volume will be down about 5% for the year, compared with a prior assumption of roughly flat to down 1%, citing a mix of potential share gains offset by inflation-driven demand pressure and the risk that customers may be unable to secure other inputs needed to manufacture end products. Corkrean said management is not counting on volume improvement in this environment, assuming share gains will be offset by demand destruction.
Other notable items: Lunar New Year, solar exit, restructuring, and capital allocation
Management quantified the timing impact from Chinese New Year as a $15 million to $20 million revenue headwind in Q1 that is expected to shift into Q2. Executives said they have seen a step-up in activity in China in early Q2 and some broader regional increases that may reflect customers trying to get ahead of supply challenges.
On the solar business exit, Corkrean said solar revenue was about $12.5 million in the quarter, down about 40%, representing roughly a 1% impact at the company level and about a 4% impact in Engineering Adhesives. Mastin later said the company expects solar to remain around the current trough level and that the wind-down should be wrapped up by the third quarter.
On cost reductions, Mastin said H.B. Fuller entered the year expecting $10 million of benefit from Quantum Leap but is now increasing that expectation to $15 million. Corkrean also said the company is willing to carry somewhat higher inventory if needed to ensure supply assurance, while monitoring working capital closely.
Finally, management said it has updated near-term capital allocation priorities amid petrochemical market disruption and uncertainty. While M&A remains part of the growth strategy, the company plans to pause on closing deals in the near term and focus more cash deployment on share repurchases while working toward its target leverage range of 2.5x to 3.0x net debt to EBITDA.
About H. B. Fuller (NYSE:FUL)
H. B. Fuller Company, founded in 1887 and headquartered in St. Paul, Minnesota, is a global adhesives and specialty chemical solutions provider serving a wide array of industries. The company develops, manufactures and markets adhesive technologies, sealants, polymers and related chemical products designed to enhance product performance, sustainability and manufacturing efficiency.
Fuller’s product portfolio spans multiple market segments, including packaging and converting, general industrial assembly, electronics, transportation, hygiene and construction.
