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Quanex profits soar despite Nichols Aluminum struggles

Keywords: Tags  Quanex, Nichols Aluminum, ERP, enterprise resource planning, windows, construction, aluminum, aluminum scrap earnings report

CHICAGO — Quanex Building Products Corp.’s earnings more than tripled in its fiscal third quarter as increased sales helped offset losses at its Nichols Aluminum LLC subsidiary and red ink related to a previously touted enterprise resource planning (ERP) system, which the company now plans to scrap.

The Houston-based company posted net income of $4.97 million for the three months ended July 31, up from $1.53 million in the same period last year, as net sales increased 8.9 percent to $259.17 million.

Nichols’ results were bolstered by the elimination of strike-related costs in 2012 (, Oct. 1) and increased seasonal demand for aluminum sheet, Quanex said, but were dented by higher demand for mill finished product than painted sheet, which commands a higher price. In addition, metal spreads at Nichols continued to be hurt by a tight scrap market and a bigger drop in aluminum prices than in aluminum scrap prices.

Also dragging on results were corporate costs that surged 29.6 percent to nearly $11 million, mostly because of expenses related to information technology and ERP, Quanex said. Scuppering the ERP project should allow Quanex to invest in more profitable growth initiatives, the company said. The ERP rollout, launched in 2011, has cost Quanex tens of millions of dollars (, March 7).

Also hurting results was a continued trend of lower-cost vinyl windows being installed in newly constructed buildings, Quanex said. U.S. window shipments have surged over the past 12 months, driven by a double-digit growth in the new construction market, but Quanex said its windows—higher priced and higher-efficiency products—are mostly used in the repair and remodeling market, which has seen growth of only 1.3 percent over the past 12 months.

Nichols trimmed its operating loss to $490,000 in its fiscal third quarter from a $3.2-million loss a year earlier as sales slipped 1.7 percent to $105.2 million, despite a 2.7-percent increase in shipments to 77 million pounds and a 1-cent rise in spreads to 39 cents per pound.

Quanex posted a net loss of $10.5 million for the first nine months of its fiscal year vs. a $17.5-million loss a year earlier as sales surged 14 percent to $677.35 million. Nichols reduced its nine-month operating loss to $5.2 million from $16.2 million a year earlier on a 14.7-percent increase in sales to $299.5 million.

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