CHICAGO - Quanex Building
Products Corp.s net loss widened in its fiscal first
quarter due to the effects of lower aluminum prices on its
Nichols Aluminum LLC subsidiary and costs incurred by its
enterprise resource planning (ERP) system.
Still, Quanex is
cautiously optimistic going forward, especially
given clear signs of recovery in the construction
market in the United Sates, chairman and chief executive
officer David Petratis said during a March 7 conference call
following the release of quarterly figures. Canadian markets,
however, are just now experiencing the downturn, he
The Houston-based company posted
a net loss of nearly $8.12 million for the three months ended
Jan. 31, up 20.3 percent from a $6.7-million loss in the same
period a year earlier despite a 14.9-percent increase in sales
to $185.71 million.
The loss resulted in part from
the continued implementation of an ERP system, which the
company said boosted expenses by $1.3 million in the quarter.
The ERP rollout, launched in 2011, has cost the company $31.3
million to date. A key phase of the ERP rollout went
live this week, and ERP-related expenses should be lower
in future, chief financial officer Brent Korb said.
operating loss fell 23.6 percent to $4.2 million in its fiscal
first quarter from a $5.5-million loss a year earlier as sales
increased 28.8 percent to $84.6 million from $65.7 million on
shipments that jumped 34.1 percent to 59 million pounds from 44
million pounds. But spreads declined 8.8 percent to 44 cents
per pound from 48 cents in the same comparison as aluminum
prices fell more quickly than scrap tags, the company said,
translating roughly to a $3 million hit to earnings.
Quanex expects to spend about
$40 million in 2013, including between $10 million and $13
million at Nichols Aluminum. The company has shifted its
strategy from conducting repairs when equipment breaks to doing
more preventative maintenance, company executives said. That
meant spending $6.8 million in repairs and maintenance in the
fiscal first quarter as Quanex readied for the peak
construction season, although the figure should drop to $4
million in each of the next three quarters, Petratis said.
Despite losing 27 days of
production in its fiscal first quarter due to maintenance
downtime, Nichols boosted production thanks to more-efficient
operations as the company regained market share after a strike
in fiscal 2012 (amm.com, Oct. 1), Petratis said.
While an uptick in construction
activity will be good for aluminum, the spread is going
to drive the dayÑif we get some increases in aluminum
prices, its going to help us, Petratis said.
Nichols plans to take a
three-week maintenance outage in May-June to replace the oven
at its facility in Alabama, Korb said. The company will build
inventories ahead of the downtime to continue to meet customer
Quanex executives said they would continue to look to grow
internally and in a disciplined fashion through acquisitions.
Weve walked away from many a deal over just the
last 24 months because the valuations just were not
right, Korb said. But the company is now seeing
agreeable valuations on some potential
acquisitions, which could present opportunities in the near