By Sahely Mukerji,
Quanex Building Products Corp. of Houston released fiscal 2011 fourth quarter and full year results today for the period ending October 31, 2011. Fourth quarter 2011 net sales were $233.0 million, compared to $222.3 million a year ago, and included $23.3 million of net sales from Edgetech IG of Cambridge, Ohio. Net sales for 2011 were $848.3 million, compared to $798.3 million last year, and included $53.4 million of net sales from Edgetech.

“Engineered Products finished the quarter with a very respectable 11 percent operating margin,” said David Petratis, president and CEO, Quanex Building Products, during a webinar this morning. “For the year, Engineered Products Group’s (EPG) operating income was certainly more modest compared to 2010 as 2011 sales suffered from an absence of energy-related window tax incentives for 10 months of the year. However, it is important to know that during 2011, EPG also incurred about $6.5 million of special items. These expenses included costs associated with the closing of a Homeshield facility, building consolidations at Mikron, a warranty reserve at Truseal and an asset impairment charge associated with insulating glass consolidation plan.”

Operating income for EPG in the quarter was $14.9 million, 32 percent better than a year ago, due to productivity improvements, better cost control and higher selling prices, Petratis said. “According to Ducker Worldwide, the estimated U.S. window shipment for the 12-months ended in September were reported to be down 5 percent compared to the year ago period, while sales at EPG without Edgetech were up 2 percent over the same time,” he said. “We consider this very solid performance given the lack of initiative this year and overall soft market demand.”

Because of rising raw material costs of EPG, the company experienced pressure on margins this year, Petratis said. “We’ve been trying to lower costs where we can, and we’ve had some success in selectively raising prices this year,” he said. “And in further support of our cost recovery action, the oil-based raw material surcharge at Truseal instituted early this year will remain in place.”

“Turning to Edgetech, we lost about $400,000 in the fourth quarter, but that’s after the absorbed inventory step-up expenses and operating losses associated with their startup facility in Germany totaling about $1.5 million,” Petratis said. “For the year, Edgetech lost about $300,000, a good showing when you consider that the inventory step-up expenses and start-up losses in Germany came in around $5 million. As we progress through 2012, we aren’t expecting any significant inventory step-up expenses at Edgetech, and the start-up losses we’re experiencing at our German facility should come down significantly.”

“Edgetech has done a superb job in coming into the Quanex fold,” said Jeff Galow, vice president of Investor Relations and Corporate Communications at Edgetech. “They had to make a lot of changes from being a privately run business to a publicly run business. The transition has been very smooth, they’ve converted themselves and have done a great job putting in the systems and processes that were needed to be put in place. It was a very large undertaking. I’m pleased with the startup operation in Germany. The senior management was there last week and they were very pleased with the progress. We’re looking forward to having these startup losses down through 2012.”

As a company, Quanex expects calendar year 2012 home starts and U.S. window shipments to be flat at 600,000 and 38 million units, respectively.

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