Quanex Building Products reported that net sales during the first quarter of 2018 were $191.7 million, down slightly from $195.1 million in the same period in 2017. However, the company posted net income of $4.9 million in the first quarter of 2018 after notching a $3.7 million loss in the first quarter of 2017.

The company said the decline was largely the result of portfolio rationalization and divestitures that occurred throughout 2017. The loss of revenues was offset by solid underlying growth in the North American and European Engineered Components segments.

“First quarter results tracked the typical seasonality of our businesses; however, raw material price and labor inflation pressured margins across the board,” said Bill Griffiths, chair, president and CEO. “We expect to recover some of the increase in raw materials prices in the coming months via contractual pass-through or targeted price increases, and we will work hard to cover the balance with operational efficiency improvements.”

Griffiths said Quanex’s legacy fenestration business in the U.S. grew at 4.4 percent during the quarter, which he said compares favorably to Ducker’s latest window shipment estimate of 4.2-percent growth for the three months ended December 31, 2017.

“Despite the recent gyrations in the stock market, the fundamentals for our business remain positive, and as such we are comfortable reaffirming our full year 2018 guidance and expect a strong second half of the year,” he said.

Quanex said the increase in earnings was mostly due to lower stock-based compensation expense and a $6.5 million net tax benefit as a result of the enactment of the Tax Cuts and Jobs Act on December 22, 2017. The Tax Cuts and Jobs Act reduces the federal corporate tax rate on U.S. earnings to 21 percent and moves from a global taxation regime to a modified territorial regime. The lower tax rate will be phased in over time since Quanex has an October 31 fiscal year-end.

Including the net tax benefit realized in the first quarter of 2018, the company estimates that its effective tax rate for fiscal 2018 will be approximately 9 percent, or approximately 24 percent excluding the net tax benefit. Quanex will continue to evaluate the impact of the tax reform through the remainder of fiscal 2018.

 

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