Quanex Building Products’ net sales and operating income were both down in the third quarter of 2020 compared to the same period last year. That’s according to the company’s third quarter 2020 results for the three months ended July 31, 2020.
Quanex’s Q3 2020 net sales were $212.1 million compared to $238.5 million in Q3 2019. The company’s operating income dropped from $19.1 million in the third quarter of 2019 to $16.6 million the same quarter this year.
The company’s North American fenestration unit reported $109.5 million in U.S. fenestration sales for the third quarter of 2020, down from $119.5 in the same period last year. It reported international sales of $6.7 million in Q3 2020 compared to $7.2 million in Q3 2019. Quanex’s EU fenestration unit showed the same trend, reporting $31.9 million in international fenestration sales this quarter compared to $36.3 million in the same period of 2019.
The decrease in net sales during the third quarter of 2020 was largely attributable to softer demand related to the COVID-19 pandemic. The company’s two manufacturing facilities in the UK were shut down in compliance with government orders on March 25, 2020, and manufacturing operations at those plants did not restart until mid-to-late May. However, volume across all segments increased significantly in June and net sales in July exceeded the prior year on a consolidated basis. The decrease in reported earnings was primarily due to reduced operating leverage as a result of softer volumes related to the pandemic.
“Despite the impact from the COVID-19 pandemic, third quarter results proved better than we expected and exceeded the guidance we provided on our last earnings call. Volumes increased steadily throughout the quarter, especially in Europe, and we remain optimistic on the recovery,” says George Wilson, president and CEO. “We continue to focus on managing working capital and generating cash. As a result, we realized an increase of over 50% in cash provided by operating activities as compared to the same period of 2019. We were also able to repay $78 million of bank debt during the quarter, $50 million of which was drawn as a precautionary measure in response to the pandemic, and our leverage ratio of Net Debt to LTM Adjusted EBITDA improved to a level below where we ended fiscal 2019. We have worked tirelessly over the past several years to make sure we have a flexible capital structure and a strong balance sheet, which has left our company well positioned to navigate the challenges presented by the COVID-19 pandemic.”
Quanex reported in its results that company leadership has been positively surprised by the pace at which demand for Quanex’s products has returned. As such, the company is now comfortable providing full year 2020 guidance of $832 million to $837 million in net sales and $97 million to $102 million in adjusted EBITDA.