Trex Company, Inc. (NYSE: TWP), manufacturer of Trex decking and railing, expects net sales for the second quarter of 2005 to be in the range of $75 million to $80 million, compared to $83.4 million for the second quarter of 2004.
Net sales for the first six months of 2005 are expected to be in the range of $165 million to $170 million, which would represent an increase of approximately 3-6% over the $159.7 million in net sales for the first six months of 2004.
The Company expects to record a net loss for the second quarter of 2005 in the range of $0.20 to $0.25 per diluted share, compared to net income of $0.75 per diluted share in the second quarter of 2004. Chairman and Chief Executive Officer Robert Matheny said, “A combination of factors, both on the revenue and the income side, are making this year much more challenging than we had anticipated. On the top line, our results have been affected by higher than anticipated retail inventory levels, which have adversely impacted our sales. In addition, as discussed in our first quarter 2005 earnings announcement, unfavorable weather in many parts of the U.S. significantly delayed the onset of this year’s decking season, negatively affecting the sell-through of our products. A slower than expected expansion of our new distribution program with The Home Depot also caused sales to be less than expected.
“On the income side, our results in the first six months of 2005 have been negatively affected by the higher price of plastic raw materials, which increased by approximately 70% over the price in the first six months of 2004. Production costs have also been higher than normal due to the start-up of our new Olive Branch manufacturing facility, which came on line as scheduled in the second quarter, and the introduction of Trex Brasilia(TM) and Trex Artisan Series Railing(TM).”
Mr. Matheny continued, “Despite these challenges, we are encouraged by a recent survey of our retail distribution channels, which indicates that downstream sales have risen 20% – 25% year over year, a sign that our dealers are selling out of inventory. We are also encouraged by the fact that the Company’s recent order patterns are showing a recovery to more normal levels. Although it is difficult to obtain specific data at the dealer level, in speaking with contractors throughout the U.S., indications are that their business is robust and they are trying to catch up from a slow start caused by this year’s poor weather. Nonetheless, we are taking a number of measures to curtail unneeded manufacturing capacity and to reduce expenses.
As a result of the factors described above, the Company is revising its previously announced guidance for 2005, which called for net sales to range from $300 million to $310 million and earnings per diluted share to range from $2.16 to $2.23. For 2005, the Company now expects net sales in the range of $270 million to $280 million and earnings per diluted share in the range of $0.50 to $0.60. For 2004, Trex Company reported net sales of $253.6 million and earnings per diluted share of $1.83.
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