Quanex Building Products Corp. recently announced financial results for the three months ending Jan. 31, 2023.
Many of the numbers were down when compared to the same time frame in 2022, such as net sales, which registered at $261.9 million versus the $267 million reported for the same period in 2022. The change marks a 1.9% decrease year over year; however, the company reports that it realized net sales growth of 4.3% for the first quarter of 2023 in its North American Fenestration segment, which was driven by contributions from LMI Custom Mixing LLC. Excluding LMI, net sales in the North American Fenestration segment would have declined by approximately 7% year-over-year, the company reported.
Company Margins Decrease
The company’s gross margin was also down slightly, at $51.8 million in 2023, compared to $52 million last year, while its gross margin percentage was 19.8% in first-quarter 2023 and 20.7% in the same quarter last year.
The company’s net income was $1.9 million—strikingly different from 1Q 2022’s $11.2 million, and diluted EPS was $0.06 in 2023 to $0.34 last year. The adjusted diluted EPS closed the gap a little, with the first quarter of 2023 coming in at $0.18, while the first quarter of 2022 still registered at $0.34. Other numbers reflected the same slide seen previously, with an adjusted net income for the first quarter of $6.1 million in 2023 and $11.3 million for the same time frame in 2022. The first quarter adjusted EBITDA for 2023 is $20.5 million, while it was $24.4 million in 2022.
A Return to Normalcy
“Our results for the first quarter of 2023 were generally as expected, with the only caveat being an elevated level of customer inventory re-balancing initiatives in our fenestration segments. We believe we are seeing a return to what is normal seasonality in our business. In addition to lower market demand year-over-year, results for the quarter were impacted by higher stock-based compensation expense from the increase in our stock price, one-time transaction and advisory fees, increased interest expense related to rising rates on the debt we incurred to fund the acquisition of LMI Custom Mixing, LLC, and foreign exchange translation,” said George Wilson, president and CEO. “Notwithstanding some near-term macroeconomic challenges, our balance sheet remains strong even after accounting for the debt we borrowed to fund the acquisition of LMI.”
Looking ahead, Wilson said, “It is important to note that while pricing for raw materials and related surcharges are declining, inflationary pressures still exist in many areas. We are focused on making sure our product pricing takes all factors into account … As always, we will stay focused on the things we can control. Our capital allocation priorities are generating cash, paying down debt, evaluating growth opportunities and opportunistically buying back our stock.”