Fortune Brands Splits into Two Publicly-Traded Companies

April 29th, 2022 by Travis Rains

Along with its report for the first quarter of 2022, home and security products company Fortune Brands Home & Security Inc., headquartered in Deerfield, Ill., announced a split into two publicly-traded companies.

Fortune Brands announced on Thursday, April 28 that the split comes with the pursuit of a tax-free spinoff for its cabinets business. New Fortune Brands will continue with its offerings in water management, outdoor living, material conversion and science, and connected products. These include Therma Tru and Larson with respect to outdoor living.

The second company to be formed is the Cabinets Business. It will include Aristokraft Cabinetry, Omega Cabinetry, Kemper and more. According to the company, both businesses showed strong performance and momentum moving into 2022. Nicholas Fink will continue to lead New Fortune Brands as chief executive officer (CEO) and Dave Banyard will continue to head the Cabinets Business.

The company expects the transaction to be complete in approximately 12 months. Fink expressed his excitement in a recent news release, adding that much work remains on the horizon. He says the separation will result in two companies with the capability to sustain and accelerate value creation.

“Together with the rest of our board, I believe that this separation will enable each company to recognize its full potential and unlock even greater long-term stakeholder value,” Fink says. “Each company will pursue independent paths with fit-for-purpose strategies supported by thoughtful investments.”

First Quarter Report

According to Fortune Brands’ quarterly report released alongside of the announcement, the business outlook for both realms looks promising.

For example, sales that will fall under New Fortune Brands saw $2 billion in net sales in 2021, a significant increase from the $1.2 billion three years prior in 2018.

Sales increased 8% in the Outdoors and Security segment in the first quarter of 2022, reportedly driven by double-digit sales growth in doors and security products.

For the first quarter of 2022, sales were $1.9 billion, an increase of 8% over the first-quarter figures for 2021. Operating income was $253.4 million compared to $248.4 million in the prior-year quarter, a 2% increase. The reported operating margin was 13.2% compared to 14% in the first quarter of 2021. Earnings per share saw a 6% increase to $1.34 from $1.26 in the prior-year quarter.

“Our teams again delivered excellent results in an extremely dynamic environment, demonstrating our commitment to serving our valued channel partners and consumers,” Fink says. “Demand remains robust across the portfolio and the consumer is continuing to invest in the home.”

2022 Outlook

“Our strong business model and track record of performance have proven resilient in a variety of complex market conditions over the past few years,” says Patrick Hallinan, chief financial officer. “We believe in the strength of long-term housing fundamentals, and we are confident in our leadership’s ability to seize on the opportunities and mitigate the challenges that may arise in the fluid near-term environment. We will continue to utilize our strength to position our company for success and opportunistically deploy capital to drive value creation.”

The company is also keeping its eye on market conditions while forecasting favorable demand for long-term growth and margin expansion.

“We remain fully aware of the potential challenges from rising interest rates and continued inflation on consumers in the near-term, and our teams are actively managing our businesses to create value and deliver regardless of the environment,” Fink continues. “Demand and demographic fundamentals for housing remain favorable and support long-term growth and margin expansion going forward.”

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