Quanex Building Products Announces Third Quarter 2021 Results and Reaffirms Full Year 2021 Guidance
Quanex Building Products Corporation (“Quanex” or the “Company”) announced its results for the three months ended July 31, 2021.
George Wilson, President and Chief Executive Officer, stated, “Demand for our products remained robust across all of our product lines throughout the third quarter of 2021. On a consolidated basis, net sales increased by approximately 32% year-over-year as compared to the third quarter of 2020. General inflation, time lag for index pricing, supply chain challenges and labor constraints all continue to have a negative impact on margins. In addition, our plant in Germany was down for approximately 14 days during the quarter due to flooding in Europe, but the plant was back up and running at full capacity by the end of July. Our balance sheet continues to strengthen, and we were able to repay $15.0 million in bank debt during the quarter while also repurchasing approximately $1.8 million of our common stock. We will remain focused on generating cash and paying down debt in the near-term.” (See Non-GAAP Terminology Definitions and Disclaimers section for additional information)
Third Quarter 2021 Results Summary
The Company reported net sales of $279.9 million during the three months ended July 31, 2021, which represents growth of 32.0% compared to $212.1 million for the same period of 2020. The increase was largely due to increased demand across all product lines and operating segments combined with increased pricing mostly related to the pass through of raw material cost inflation. In detail, Quanex posted net sales growth of 20.8% in its North American Fenestration segment, 19.3% in its North American Cabinet Components segment and 85.8% in its European Fenestration segment, excluding the foreign exchange impact and despite the challenges presented by flooding in Germany as previously noted. As a reminder, both of Quanex’s manufacturing facilities in the U.K. were shut down in late March of 2020 and did not resume operations until mid-to-late May 2020. (See Sales Analysis table for additional information)
The increase in earnings for the third quarter of 2021 was mainly due to higher volumes and improved operating leverage. This increase was somewhat offset by inflationary pressures and an increase in selling, general and administrative expenses, which was mostly attributable to more normalized medical costs combined with an increase in stock-based compensation expense.
Balance Sheet & Liquidity Update
As of July 31, 2021, Quanex had total debt of $74.0 million and its leverage ratio of Net Debt to LTM Adjusted EBITDA improved to 0.2x. (See Non-GAAP Terminology Definitions and Disclaimers section and Net Debt and LTM Adjusted EBITDA reconciliation tables for additional information)
The Company’s liquidity increased to $306.2 million as of July 31, 2021, consisting of $43.7 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 74,257 shares of common stock for approximately $1.8 million at an average price of $23.88 per share during the three months ended July 31, 2021. As of July 31, 2021, approximately $5.4 million remained under the existing share repurchase authorization.
George Wilson, President and Chief Executive Officer, commented, “While we remain optimistic on the demand outlook for our products, we do expect inflation, labor costs, and supply chain challenges to continue pressuring margins throughout the fourth quarter of this year. We continue to pass these incremental costs along to our customers through indexes, surcharges, and price increases; however, there are time lags in each case. With this backdrop, on a consolidated basis, we are reaffirming net sales guidance of approximately $1.04 billion to $1.06 billion and Adjusted EBITDA* of $125 million to $130 million in fiscal 2021.”
For the full third quarter results, click here.
*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.
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