Tredegar Corporation (NYSE:TG) has released its financial results for Q3 2024, ending on September 30, 2024.
In Q3 2024, Tredegar reported a net loss of $3.9 million ($0.11 per diluted share), a significant improvement from the $50.4 million ($1.47 per diluted share) loss in Q3 2023. Net income from ongoing operations, excluding special items, was $0.2 million ($0.01 per diluted share) compared to a loss of $5.1 million ($0.15 per diluted share) in the same period last year. A reconciliation between GAAP and non-GAAP financial measures is provided in the financial tables of this release.
Q3 Highlights:
- Aluminum Extrusions: EBITDA from ongoing operations was $6.2 million in Q3 2024, up from $5.1 million in Q3 2023, though lower than the $12.9 million reported in Q2 2024. Sales volume reached 34.6 million pounds, an increase from 32.5 million pounds in Q3 2023.
- Order Volume: Open orders stood at 15.5 million pounds at the end of Q3 2024, down from 17 million pounds a year prior but up from 14 million pounds in Q2 2024. Net new orders saw a 27% increase year-over-year and a 7% increase from Q2 2024.
- PE Films: EBITDA from ongoing operations rose to $5.9 million, compared to $4.0 million in Q3 2023. Sales volume reached 9.6 million pounds, up from 7.2 million pounds last year.
Tredegar completed the sale of Terphane, its flexible packaging business, to Oben Group on November 1, 2024. Tredegar received $60 million in cash, net of Terphane’s $20 million debt and $2 million cash retained by Oben. The transaction’s enterprise value was $78 million. Tredegar expects an additional $7 million from escrow funds within 120 days.
Tredegar CEO John Steitz noted that Q3 performance was hampered by low profitability at Bonnell Aluminum due to operational inefficiencies, though net new orders increased. He expressed disappointment regarding the U.S. International Trade Commission’s recent vote on a trade case involving aluminum imports, following a recusal that impacted the decision.
Mr. Steitz added that PE Films saw a moderated performance in Q3 but exceeded expectations. The Terphane sale completion, he highlighted, advances a strategic goal and reduces Tredegar’s net leverage ratio from 2.3x to 1.2x, with another $7 million anticipated from escrow.
In Q3 2024, Tredegar Corporation reported a 5.8% increase in net sales compared to Q3 2023, driven primarily by higher sales volume and the pass-through of increased metal costs. This growth was somewhat offset by lower pricing related to a shift in product mix. Sales volume in Q3 2024 was up by 6.5% year-over-year, though it showed a slight 0.9% decrease from Q2 2024.
Order Trends and Market Indicators:
Net new orders, while still below pre-pandemic levels, rose by 27.3% in Q3 2024 compared to Q3 2023 and by 7% compared to Q2 2024. Since early 2021, Tredegar’s aluminum extruded products orders have aligned closely with the ISM® Manufacturing PMI®. Meanwhile, the Architecture Billings Index (ABI), a leading indicator for non-residential building and construction, has shown a decline in billings for 20 consecutive months through September 2024, reflecting ongoing challenges in the sector. Tredegar attributes the lower order levels to factors like high interest rates, more stringent lending requirements, and increased remote work, which continue to impact demand in non-residential building and construction. Additionally, the company has observed a rise in aluminum extrusion imports, with some customers opting to source from non-U.S. producers.
Open orders closed Q3 2024 at 15.5 million pounds, up from 14 million pounds at the end of Q2 2024 but down from 17 million pounds at the end of Q3 2023. This remains below the pre-pandemic range of 21 to 27 million pounds in 2019. The effects of the pandemic initially led to a backlog and long lead times, resulting in a peak of 100 million pounds of open orders in Q1 2022.
Trade Case Against Aluminum Extrusion Imports:
Tredegar, part of a coalition within the Aluminum Extruders Council, filed a trade case with the U.S. Department of Commerce (USDOC) and the U.S. International Trade Commission (USITC) against 15 countries, alleging that increased volumes of aluminum extrusions were being sold in the U.S. at unfair prices. In November 2023, the USITC acknowledged potential injury or threat to the U.S. aluminum extrusion industry due to imports from 14 countries, including China. On September 27, 2024, the USDOC determined that aluminum extrusion imports from 14 countries were indeed sold at less-than-fair value. However, the final USITC ruling on October 30, 2024, concluded that the U.S. industry was not materially injured by these imports, despite the USDOC’s findings of unfair pricing and subsidies. Tredegar’s coalition is now considering further steps to contest this decision.
