Trex Company, the world’s largest manufacturer of wood-alternative decking and railing, announced its financial results for the third quarter of 2024.
“We are pleased to reaffirm our net sales guidance at $1.14 billion and expect our EBITDA margin to reach the high end of our range at 30.5%, based on year-to-date results and channel visibility,” stated the company.
Third Quarter Financial Highlights
- Net Sales: $234 million
- Gross Margin: 39.9%
- Net Income: $41 million (diluted EPS: $0.37)
- EBITDA: $68 million (EBITDA margin: 29.1%)
- Share Repurchase: 1.6 million shares for $100 million year-to-date
CEO Comments
“Our third-quarter results exceeded expectations, driven by strong consumer demand for our premium products, which saw a high single-digit increase in sell-through year-over-year. While lower-priced products experienced a decline, it was less pronounced than anticipated,” said Bryan Fairbanks, President and CEO. “Our channel partners reduced inventory levels by about $70 million, aligning with our expectations for seasonal demand.”
Fairbanks emphasized that ongoing cost-out initiatives helped maintain a strong EBITDA margin, partially offsetting the impact of lower utilization rates.
Product Development and Market Strategy
New product development is crucial for Trex’s future growth. Products launched in the last three years accounted for approximately 18% of year-to-date net revenues of $984 million. Recent additions include new steel, mesh, and aluminum railing systems, along with enhancements to existing composite railing systems. These innovations aim to expand Trex’s market share in railing over the next five years.
The introduction of Trex-branded deck fasteners is also gaining traction, providing contractors and consumers with a cohesive aesthetic and ease of installation.
Financial Overview
- Net Sales: $234 million, down 23% from $304 million in Q3 2023, reflecting a $70 million inventory reduction.
- Gross Profit: $93 million, with a gross margin of 39.9%, down from an adjusted gross margin of 41.8% in Q3 2023.
- Net Income: $41 million, or $0.37 per diluted share, down from $65 million, or $0.60 per diluted share in the previous year.
- EBITDA: Decreased 32% to $68 million from $99 million, with a margin contraction to 29.1%.
Year-to-Date Results
- Net Sales: Increased 9% to $984 million from $899 million in the previous year.
- Gross Profit: $431 million with a gross margin of 43.8%.
- Net Income: $217 million, or $1.99 per share, an 18% increase from the prior year.
Recent Developments
Trex has introduced two new colors to its Trex Enhance® decking line and launched All-In-One Post Kits to simplify the railing purchase process. The NexTrex® Grassroots Movement has seen significant participation growth, promoting responsible plastic waste disposal.
Arkansas Facility Update
Trex’s new Arkansas facility is set to enhance production efficiency and meet long-term growth. Recycled plastic processing will begin in early 2025, with decking board production anticipated to start in the first half of 2027.
Summary and Outlook
Trex maintains its guidance for 2024 net sales at $1.14 billion and expects a high EBITDA margin. The company is focused on leveraging its expanded railing line and maximizing growth in the $3.3 billion railing market.
Trex will hold a conference call on October 28, 2024, at 5:00 p.m. ET to discuss its third-quarter results. Interested participants can dial in or access the live webcast through the Investor Relations section of the Trex Company website.
