Quanex Building Products Corporation
) posted adjusted loss of 4 cents per share in the second quarter
of fiscal 2014 (ended Apr 30, 2014), compared with the prior-year
loss of 11 cents per share. The bottom line fell short of the Zacks
Consensus Estimate of earnings of 2 cents.
Adjusted loss in the quarter excludes asset impairment charges and
discontinued enterprise resource planning (ERP) expenses of 2
cents. The year ago quarter's loss excludes discontinued ERP
expenses of 8 cents. On a reported basis, loss was 5 cents
per share in the quarter versus a loss of 19 cents in the year-ago
Despite poor weather and weakness in housing and construction,
Quanex Building reported revenues of $135 million, an 8%
improvement year over year. However, the reported figure beat the
Zacks Consensus Estimate of $134 million.
Cost of sales during the quarter increased 13.5% to $108.6 million
from $95.7 million in the prior-year quarter. However, gross profit
declined 9.7% year over year to $26.6 million. Consequently, gross
margin contracted 390 basis points to 19.6%.
Selling, general and administrative expenses decreased 27.7% year
over year to $20.4 million. Quanex Building reported an operating
loss of $2.8 million, narrower than a loss of $8.6 million in the
year-ago quarter. The company's inability to pass through a 12%
increase in vinyl resin price on around 60% of vinyl shipments led
to the loss. Additionally, repair and maintenance costs were
abnormally high during the quarter. The company posted an adjusted
loss of $2 million versus a loss of $4.9 million in the prior-year
Cash and cash equivalents were $126.9 million as of Apr 30, 2014,
compared with $49.7 million as of Oct 31, 2013. Long-term debt
decreased to $0.6 million as of Apr 30, 2014 compared with $0.7
million as of Oct 31, 2013. Cash used in operating activities for
the period of six months ended Apr 30, 2014 was $11 million
compared with $20.8 million in the year-ago comparable period.
On May 29, 2014, the company also declared a quarterly cash
dividend of 4 cents per share, payable on Jun 30, 2014, to
shareholders of record on Jun 16, 2014.
For fiscal 2014, Quanex Building expects revenue to grow
approximately 8% to 9% over 2013 levels. The company trimmed its
earnings before interest, taxes, depreciation and amortization
(EBITDA) guidance to the range of $55-$60 million from the previous
band of $55-$65 million due to margin headwinds in the vinyl
profile business this year, though EBITDA guidance assumes no
further increase in resin prices for the rest of the year.
Excluding transaction and deferred compensation-related costs
Quanex Building anticipates corporate expenses of $28-$30 million
during fiscal 2014. Capital expenditures are expected to be $40
million for the fiscal year, which includes $30 million from
continuing operations and $10 million from discontinued operations.
Capital expenditures will primarily focus on improvements in growth
initiatives, operational efficiency and cost reduction. In
addition, depreciation and amortization is expected to be
approximately $34 million during fiscal 2014.
Ducker Worldwide, LLC (Ducker), a market intelligence firm,
projected U.S. window shipments to increase 7.5% in 2014, with new
constructions increasing 12.5% and R&R (residential remodeling
and replacement units) increasing 4.2% from 2013 shipments.
In early 2014, Quanex Building expanded its product portfolio with
its purchase of the assets of Atrium Windows and Doors Inc.'s Texas
plant. The acquisition will help the company to strengthen its
manufacturing presence in the southern U.S. It will also allow
Quanex to serve customers better in the new construction market.
On Apr 2014, Quanex Building completed the sale of Nichols
(Aluminum Sheet Products Group) to Aleris for $110 million. The
move will enable the company to focus on its window and door
Moreover, Quanex Building is positive on the long-term growth
prospects of its markets and expects to continue investing through
both organic growth initiatives and acquisitions. However, repair
and maintenance costs will remain high in the third quarter of
fiscal 2014 due to Quanex Building's investment in upgrading the
vinyl profile equipment and facilities. This will hurt the
Houston, TX-based Quanex Building Products Corporation is a leading
manufacturer of engineered materials, components and systems,
serving domestic and international window and door original
equipment manufacturers (OEMs) through its Engineered Products and
Aluminum Sheet Products Groups.
Quanex Building currently carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the sector include
Gibraltar Industries, Inc.
Simpson Manufacturing Co., Inc.
James Hardie Industries plc
). While Gibraltar Industries and Simpson Manufacturing sport a
Zacks Rank #1 (Strong Buy), James Hardie Industries carries a Zacks
Rank #2 (Buy).
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