By Robbie Whelan
Outgoing PulteGroup CFO Cregg Defends Decisions
PulteGroup CFO Roger Cregg announced http://online.wsj.com/article/BT-CO-20110218-712892.html Friday that he will retire from the company as soon as a replacement for him is found.
After the news broke, he spoke to Developments, in which he defended Pulte’s 2009 acquisition of Centex Corp. and praised what he called Pulte’s “long-term” outlook on home building.
Two weeks ago, WSJ reported that Pulte http://online.wsj.com/article/SB10001424052748704709304576123790574216676.html?KEYWORDS=pulte has yet to return to consistent profitability after the $1.3 billion merger, which created the largest home builder by home closings. Since then Pulte has turned a profit in just one of six quarters, and has taken nearly $1 billion in write-downs. And Pulte’s profit margins and stock performance have trailed the other builders.
But Mr. Cregg, 54, has a different view of the merger:
“I think it was a tremendous success. The unfortunate thing was, the market continued to deteriorate,” he said. “We never were timing the market, never thought we were timing the market … But the cost savings [from the merger] were tremendous.”
It is important to point out that he’s right about the market: It has gotten worse since the deal closed in the fall of 2009. But some home builders, including Lennar Corp. and Toll Brothers Inc. have returned to profitability by diversifying their business strategies, most noticeably by ramping up investments in distressed assets like broken land loans. Pulte, which has a big pipeline of land—about 150,000 lots since the Centex deal—has largely sat out the land rush of 2009 and 2010, in which builders snatched up hundreds of thousands of lots from failed developers and the FDIC on the cheap.
Mr. Cregg was skeptical of this strategy.
“The reason [other builders] have higher margins is they bought their land at below replacement cost. But they’re running out of that land,” he said. “These are just short-term tactics that have no long-term strategic value, and I think you’re going to see the result of that going forward.”
Specifically, he said, Wall Street will reward Pulte for its prudence in the long term. And shareholders will be thankful that Pulte has not delved into mortgage finance to generate profits.
“Getting into the dry cleaning business is not very good for our shareholders… That’s not our core business. Some of the others geared up for that. They had the expertise. But at the end of the day, those things… are not valued from a shareholder standpoint. They’re not as rewarded, long-term.”
Mr. Cregg, who has been Pulte’s CFO for 13 years, doesn’t know his next step but said he has “always wanted to have a portfolio career,” with executive positions at many different types of companies. In past positions, he has worked in packaging and electronics.
PulteGroup Chief Financial Officer Roger Cregg announced Friday that he will retire from the company once a replacement for him is found.
After the news broke, he spoke to Developments, defending Pulte’s 2009 acquisition of Centex Corp. and praised what he called Pulte’s “long-term” outlook on home building.
Two weeks ago, the Wall Street Journal reported that Pulte has yet to return to consistent profitability after the $1.3 billion merger, which created the largest home builder by home closings. Since then Pulte has turned a profit in just one of six quarters, and has taken nearly $1 billion in write-downs. And Pulte’s profit margins and stock performance have trailed the other builders.
But Mr. Cregg, 54, has a different view of the merger:
“I think it was a tremendous success. The unfortunate thing was, the market continued to deteriorate,” he said. “We never were timing the market, never thought we were timing the market … But the cost savings [from the merger] were tremendous.”
It is important to point out that he’s right about the market: It has gotten worse since the deal closed in the fall of 2009. But some home builders, including Lennar Corp. and Toll Brothers Inc. have returned to profitability by diversifying their business strategies, most noticeably by ramping up investments in distressed assets like broken land loans. Pulte, which has a big pipeline of land—about 150,000 lots since the Centex deal—has largely sat out the land rush of 2009 and 2010, in which builders snatched up hundreds of thousands of lots from failed developers and the FDIC on the cheap.
Mr. Cregg was skeptical of this strategy.
“The reason [other builders] have higher margins is they bought their land at below replacement cost. But they’re running out of that land,” he said. “These are just short-term tactics that have no long-term strategic value, and I think you’re going to see the result of that going forward.”
Specifically, he said, Wall Street will reward Pulte for its prudence in the long term. And shareholders will be thankful that Pulte has not delved into mortgage finance to generate profits.
“Getting into the dry cleaning business is not very good for our shareholders… That’s not our core business. Some of the others geared up for that. They had the expertise. But at the end of the day, those things… are not valued from a shareholder standpoint. They’re not as rewarded, long-term.”
Mr. Cregg, who has been Pulte’s CFO for 13 years, doesn’t know his next step but said he has “always wanted to have a portfolio career,” with executive positions at many different types of companies. In past positions, he has worked in packaging and electronics.
Add a Comment