Quanex Building Products Announces Fourth Quarter and Fiscal Year 2020 Results
Quanex Building Products Corporation (“Quanex” or the “Company”) announced its results for the three months and twelve months ended October 31, 2020.
George Wilson, President and Chief Executive Officer, commented, “Our business performed extremely well in the fourth quarter as we continued to effectively navigate the complications and uncertainty of a COVID-19 world. 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. Volumes during the quarter were especially strong in Europe, and we remain optimistic on the global economic outlook despite the 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%. We also repaid $35 million of bank debt during the fourth quarter, which allowed us to improve our leverage ratio of Net Debt to LTM Adjusted EBITDA to a level well below our original goal of exiting 2020 at 1.0x. Overall, I am extremely pleased with our ability to successfully manage both the challenges and the opportunities presented by the pandemic. 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.” (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)
Fourth Quarter and Fiscal 2020 Results Summary
The increase in net sales during the three months ended October 31, 2020 was largely due to increased demand for the Company’s products across all operating segments. Conversely, Quanex reported a decrease in net sales for the twelve months ended October 31, 2020, which was primarily attributable to the negative impact of the COVID-19 pandemic on the Company’s results during the second and third quarters of 2020. More specifically, in addition to softer demand in North America and continental Europe during the early stages of the pandemic, Quanex’s two manufacturing facilities in the UK were shut down in compliance with government orders in late March, 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 through October exceeded prior year on a consolidated basis. (See Sales Analysis table for additional information)
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 increases in earnings for the twelve months ended October 31, 2020 were primarily driven by a decrease in selling, general and administrative expenses.
Balance Sheet & Liquidity Update
As of October 31, 2020, the Company’s leverage ratio of Net Debt to LTM Adjusted EBITDA improved to 0.6x. (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)
The Company’s liquidity increased to $268.8 million as of October 31, 2020, consisting of $51.6 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 repurchased 30,201 shares of common stock for approximately $0.5 million at an average price of $17.89 per share during the three months ended October 31, 2020, and 450,000 shares of common stock for approximately $7.2 million at an average price of $16.07 per share during the twelve months ended October 31, 2020. As of October 31, 2020, approximately $11.2 million remained under the existing share repurchase authorization.
George Wilson, President and Chief Executive Officer, stated, “We continue to be optimistic about the economic recovery and our current outlook is positive, especially as regards our end markets. 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, low single-digit sales growth in our North American Cabinet Components segment, and mid-single-digit sales growth in our European 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, which we expect will generate between $108 million and $118 million in Adjusted EBITDA* in fiscal 2021. Our balance sheet is strong and we intend to concentrate on executing our plan with a continued focus on creating shareholder value.”
*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.
For the full fourth 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
Scott Zuehlke – Senior Vice President, CFO & Treasurer – email@example.com – (713) 877-5327
Source: Quanex Building Products Corporation