Quanex Building Products Announces Third Quarter 2020 Results and Provides Updated Full Year 2020 Guidance
Quanex Building Products Corporation (“Quanex” or the “Company”) announced its results for the three months ended July 31, 2020.
George Wilson, President and Chief Executive Officer, stated, “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. 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.”
Consistent with most companies, we withdrew guidance for fiscal 2020 in March due to the uncertainty surrounding the COVID-19 pandemic. Our results have been negatively impacted by the pandemic; however, we continue to be positively surprised by the pace at which demand for our products has returned. As such, we are 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*. (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)
*When Quanex provides expectations for Adjusted EBITDA on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and corresponding GAAP measures is generally not available without unreasonable effort. Certain items required for such a reconciliation are outside of the Company’s control and/or cannot be reasonably predicted or estimated, such as the provision for income taxes.
Third Quarter 2020 Results Summary
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 prior year on a consolidated basis. (See Sales Analysis table for additional information)
The decrease in reported earnings was primarily due to reduced operating leverage as a result of softer volumes related to the pandemic.
Balance Sheet & Liquidity Update
As of July 31, 2020, the Company’s leverage ratio of Net Debt to LTM Adjusted EBITDA improved to 1.1x. Quanex expects to exit fiscal 2020 with a leverage ratio of Net Debt to LTM Adjusted EBITDA at or below 1.0x. (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)
The Company’s liquidity increased to $223.2 million as of July 31, 2020, consisting of $41.1 million in cash on hand plus availability under its Senior Secured Revolving Credit Facility due 2023, less letters of credit outstanding.
Quanex’s Board of Directors authorized a $60 million share repurchase program in September of 2018. Repurchases under this program will be made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. The program does not have an expiration date or a limit on the number of shares that may be repurchased. The Company did not repurchase any shares of common stock during the three months ended July 31, 2020. As of July 31, 2020, approximately $11.7 million remained under the existing share repurchase authorization.
Quanex’s Board of Directors declared a quarterly cash dividend of $0.08 per share on the Company’s common stock, payable September 30, 2020, to shareholders of record on September 16, 2020.
For the full third quarter results, click here.
Quanex Building Products Corporation is an industry-leading manufacturer of components sold to Original Equipment Manufacturers (OEMs) in the building products industry. Quanex designs and produces energy-efficient fenestration products in addition to kitchen and bath cabinet components
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Source: Quanex Building Products Corporation