Quanex’s Fenestration Sectors See Growth in Second Quarter

During a recent earnings call, officials from Quanex Building Products reported mostly increases across the board. Quanex chief finance officer and senior vice president of finance Brent Korb said an increase in net sales was largely due to strong revenue growth in the company’s European fenestration division. The North American fenestration sector saw less extensive growth but remained positive. However, the company did witness a significant net loss of $24 million during the second quarter of 2019 due to shifts in the cabinet industry.

Company officials announced net sales of $218 million during the second quarter of 2019, compared to $214 million during the same period in 2018. Net income on an adjusted basis was $6.3 million compared to $4.8 million this quarter last year, while earnings before interest, tax, depreciation and amortization (EBITDA) increased to $23.4 million from $21.7 million.

“The [net sales] increase was mainly due to strong revenue growth in our European Fenestration segment, which was driven by above market growth and price increases related to raw material inflation recovery,” says Korb.

He said about half the growth was credited to those price actions the company took both in the spacer and vinyl profile businesses in late 2018, particularly at HL Plastics—which Quanex acquired in 2015.

“I think the reason that this business outperforms the general economy is when a window fails, you have to replace it,” adds president and CEO Bill Griffiths. “And because the infrastructure is so old and the replacement cycle continues there it’s a little bit insulated from the general economy. In addition, remember almost all of our business in Europe, particularly in the U.K. is repaired and remodeled.”

Quanex’s European fenestration segment saw revenue growth of 15% year-over-year, while the North American segment saw a 1% increase.

Griffiths says the softer sales in the North American market were mainly due to inclement weather during the quarter and customer inventory destocking, but he is hopeful for a strong second half. As the weather improves, he says Quanex officials and customers are confident new construction and R&R figures will also improve.

“I think one of the reasons we’re outperforming the fenestration market is, as we have mentioned before, we are taking on some additional screen business,” Griffiths says.

Despite the headwind, Quanex officials say they still expect to meet their adjusted EBITDA of $97 million to $107 million and consolidated revenue growth of between 2-3% in 2019.

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