Quanex Building Products Corp. recently released its fiscal third-quarter 2010 results for the period ending July 31 and reported that operating results at its two business segments were well ahead of a year ago, despite the weak economy and slowdown in new home starts.

Third-quarter net sales were $225.2 million compared to $164.0 million a year ago—a 37.3 percent increase. Income from continuing operations was $10.4 million, compared to $8.3 million, and diluted earnings per share from continuing operations were $0.27, compared to $0.22.

“For the third quarter, our market drivers — residential remodeling activity and housing starts — were estimated to be down 9 percent on a blended basis compared to a year ago, but our Engineered Products business experienced healthy growth, especially from remodeling activity,” says David D. Petratis, president and chief executive officer of Quanex Building Products. “Despite this 9 percent market decline, sales at Engineered Products grew by 9 percent from the year ago quarter. Our growth this quarter further illustrates the logic of the segment’s continued emphasis to gain share in the more active residential remodeling market. Operating income was up 14 percent over the year ago quarter, which reflected higher sales and disciplined cost control. While we hired additional employees in the quarter to help us meet customer demand, we will continue to watch our labor situation closely given the slowdown we are beginning to see in the building and construction market.”

Petratis also says that the company had a cash balance of $169 million at the end of the quarter and total debt outstanding stands at $1.9 million.

“Cash provided by operating activities from continuing operations in the first nine months of 2010 was $64 million,” he adds. “Our $270 million revolving credit facility remains untapped.”

However, Petratis does add that due to the expiration of the $8,000 first time homebuyers’ tax credit, and the $1,500 tax credit for energy-efficient replacement windows, which expires at year-end, he expects the second half 2010 residential building demand to be slower than normal.

“Throughout the year, we remained concerned about the ongoing weakness in the U.S. economy and we shared that concern with investors, employees and customers,” he says. “Today, we see little reason for optimism in the coming months. Based on current macroeconomics, we believe the residential building and construction market will continue to slow between now and the end of the year. Expressing the slowdown in terms of sales, we are now estimating fourth quarter sales at Engineered Products to be flat compared to the sequential third quarter, and in turn, we tightened our guidance to a range of $32 million to $35 million (from $32 million to $37 million) for their 2010 operating income.”


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