Volume 48, Issue 6- June2013

FinancialFlash

PPG Exec Points to Glass as Indicator
for Commercial Construction Upturn

he business unit that has the clearest indicator of commercial construction activity is the flat glass business,” PPG CEO Charles Bunch said of the company’s first-quarter results. “There we’ve seen early signs that we are improving in U.S. commercial construction.”

First-quarter 2013 glass segment sales were $256 million, a match with the prior year’s sales for the same quarter. Company officials say higher flat glass volumes were more than offset by lower fiberglass pricing, resulting from reduced demand. The company also reported glass segment earnings of $5 million for the quarter, down $3 million from the prior year-quarter, due to lower fiber glass pricing, reduced equity earnings and the negative impact of inflation, including higher natural gas costs.

Company officials say, however, they are indeed seeing signs of improvement in the commercial construction market and noted the flat glass business as a leading indicator.

“If you look at the Architectural Billings Index, that’s up slightly. It’s still lagging what we’re seeing in residential, but we think it’s coming. We think commercial construction is building. It was the last to go and went down probably two years later than residential … but we’re seeing early signs of improvement,” said Bunch.

Overall, the company reported first-quarter net sales of $3.3 billion, also equal with the prior year. First-quarter 2013 adjusted net income from continuing operations, excluding nonrecurring charges was $235 million, compared with $216 million from the same period last year—an 8.1 percent drop.

“Looking to the second quarter, we anticipate positive momentum in the United States and Asia to continue, while conditions in Europe remain challenging with limited prospects for near-term improvement,” Bunch added.

Quanex Reports Net Sales Increase for EPG
In releasing its first-quarter 2013 financial results, Houston-based Quanex Building Products reported sales of $106.1 million for the Engineered Products Group (EPG), compared to $99.4 million for the same period last year—a 6.7 percent increase.

EPG’s first-quarter 2013 operating income was $2.8 million compared to $1.8 million a year ago. While higher than first quarter 2012 results, EPG’s profitability “was negatively impacted by lower solar edge tape sales and an unfavorable product mix,” according to the Quanex report.

Overall, Quanex reported consolidated first-quarter 2013 net sales of $185.7 million, compared to $161.6 million a year ago. The first-quarter 2013 net loss was $8.1 million, or $0.22 per diluted share compared to loss of $6.7 million, or $0.18 per diluted share in the year ago quarter.

The increased first quarter net loss per share was due primarily to higher corporate expenses from acquisition-related transaction costs and ongoing ERP implementation costs.

Apogee Sees Architectural Segment Revenues Up Nine Percent
Minneapolis-based Apogee Enterprises Inc. has reported that its fiscal-year 2013 (FY2013) revenue was at $700.2 million, up 6 percent from last year. The company’s operating income was $27.4 million, compared to $3.8 million for the previous year.

Its architectural segment saw revenues increase 6 percent, with an operating income of $9.2 million compared to an operating loss of $12.1 million last year.

For the fourth quarter, Apogee reported an overall revenue of $179.7 million, up 7 percent from the same period last year. The company saw an operating income of $6.1 million for the quarter, up from $2.8 million from last year.
The architectural segment saw an increase of 9 percent in its fourth-quarter revenues, with an operating income of $2.2 million compared to an operating loss of $0.5 million for the same period last year.

Backlog was $297.0 million, compared to $300.4 million in the third quarter and $237.0 million in the prior-year period.

“I am very pleased with our fiscal 2013 results, as our earnings per share more than tripled to $0.66 on revenue growth of 6 percent in commercial construction markets that continued to be flat,” says Apogee CEO Joseph F. Puishys. “Our architectural backlog is up 25 percent from the previous year end, and we generated $41 million in operating cash flow to support $35 million in capital investments for growth, productivity and product capabilities.
“During fiscal 2013, architectural segment revenues grew 6 percent, led by the installation, storefront and window businesses, and operating income improved by more than $20 million, driven by improved architectural glass pricing and product mix, good operational performance across the segment and earnings on revenue growth,” continues Puishys.

Looking to the future, Puishys is optimistic.

“We are experiencing stronger bidding activity for future work, and margins on new orders are improving,” he says. “The outlook for U.S. commercial construction markets in fiscal 2014, based on Apogee’s lag to McGraw-Hill forecasts for the segments we serve, is for low single-digit market growth. We again expect to outperform market growth by several percentage points.”


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