Quanex Building Products Reports Strong Balance Sheet Despite the Pandemic
Glass and glazing companies continue to improve quarterly results—the latest being Quanex Building Products Corp. The company announced its results for the three- and 12-month periods ended October 31, 2020.
“Our business performed extremely well in the fourth quarter as we continued to effectively navigate the complications and uncertainty of a COVID-19 world,” said George Wilson, president and CEO. “Demand for our products remained strong throughout the quarter, with consolidated net sales increasing 6.3% year-over-year as compared to the fourth quarter of 2019.”
The increase in net sales during the three months ending October 31, 2020 was largely due to increased demand for products across all operating segments, the company reported. Quanex did cite a decrease in net sales for the 12 months ended October 31, 2020, which it attributed to the negative impact of the COVID-19 pandemic on the second and third quarters of 2020. This led to softer demand in North America and continental Europe during the early stages of the pandemic, as two manufacturing facilities in the UK were shut down in compliance with government orders in late March. Manufacturing operations at those plants didn’t resume until mid-to-late May.
Momentum did increase though, and the increases in earnings for the three months ended October 31, 2020 were mainly due to higher volumes, improved operating leverage and lower raw material costs, the company reported. Increases in earnings for the 12 months ended October 31, 2020 were primarily driven by a decrease in selling, general and administrative expenses.
Wilson pointed out that volumes during the quarter were especially strong in Europe, and optimism remains amid the global economic outlook, despite a recent worldwide surge in COVID-19 cases.
“In addition to the lift provided by strong demand during the fourth quarter, our relentless focus on managing working capital and generating cash continued to bear fruit throughout the fiscal year. As a result, we achieved $100.8 million in cash provided by operating activities in 2020, representing an increase of 4.6% as compared to 2019. We generated free cash flow of $75.1 million in 2020, representing a year-over-year increase of over 5%.”
The company also repaid $35 million of bank debt during the fourth quarter. “Overall, I am extremely pleased with our ability to successfully manage both the challenges and the opportunities presented by the pandemic,” said Wilson. “Our balance sheet is stronger now than it was prior to COVID-19, and we are well positioned to benefit from future tailwinds in the residential housing industry.”
And despite uncertainty surrounding COVID-19, optimism remains strong for the coming months.
“We continue to be optimistic about the economic recovery and our current outlook is positive, especially regarding our end markets,” said Wilson. Based on conversations with our customers, the latest macro data, and our research into current market trends, we expect mid-to-high single-digit sales growth in our North American fenestration segment … Overall, on a consolidated basis and assuming there is no adverse impact from the ongoing pandemic, we believe this will equate to net sales of approximately $900 million to $920 million … Our balance sheet is strong and we intend to concentrate on executing our plan with a continued focus on creating shareholder value.”
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