HB Fuller Co. (NYSE:FUL) Q3 2020 Earnings Conference Call - Final Transcript
Sep 24, 2020 • 10:30 am ET
Thank you. [Operator Instructions] Our first question comes from Ghansham Panjabi with R.W. Baird. Please go ahead.
Hey, guys. Good morning. Hope everybody is doing well.
Good morning, Ghansham. Thanks. Hope you are doing well as well.
Thanks, Jim. Going back to the third quarter, Engineering Adhesives segment seems to be the outlier in the plus side versus the initial expectations. Just wondering, Jim, if can you sort of talk through the end markets that surprised you in the upside, maybe the geographies, and then also give us more color on what you're seeing in transportation as auto OEM production has started to normalize globally?
Yes, as you know, Ghansham, Engineering Adhesives is our growth engine in the company, and it was at double-digit growth over the last number of years. So I think the biggest driver there is some good share wins that we've seen. So, our electronics business did really well as some of the projects that we'd been working on came to fruition. Wins in China auto came through really nicely in the quarter, and combined with the fact that China auto is moving forward, so some of the work that we did to position ourselves well in the China auto market is really improving, and also, I talked a little bit about the cultural approach we've taken to embracing this pandemic as a new way to qualify adhesives, and in the U.S. assembly market, the team has done a great job of gaining share there, as well as some of the innovations in IG, so as the IG market, the Insulating Glass market came back, our innovations are growing faster than the overall market, so some of that technology investment.
In terms of the markets themselves, as I mentioned, Technical Textiles is strong right now, RVs is very strong right now, China auto is strong. So, if you think about the market forces, RVs, Technical Textiles, and China auto, but I think the biggest thing you see that differentiates our business there is just winning in the market with customers.
Got it, and then, in terms of Construction Adhesives, a lot of your peers that sell into the construction end markets have talked about an improvement relative to what they saw in 2Q. Just curious as to -- I know there's some nuances in terms of commercial construction exposure, but is it just a delay that you haven't benefited from or is there something more secular going on just given the challenges in certain pockets of commercial construction?
Yes, I think the construction business is very differentiated. So first, let me say we are improved, right. We were down 15.5% last quarter, and we're down 12% this quarter, which is a good improvement. We see a difference between commercial and residential, so we're much more exposed to commercial, closer to 70%, and our retail business, which is only 10% of our business, so the Menards, Lowes, and Home Depots of the world, they're up very nicely, but