McKINNEY, Texas — Encore Wire Corporation announced results for the second quarter of 2017 and the six months ending June 30, 2017.
Net sales for the second quarter ended June 30, 2017 were $291.5 million compared to $238.8 million during the second quarter of 2016. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 8.0% in the second quarter of 2017 versus the second quarter of 2016. The average selling price of wire per copper pound sold increased 14.4% in the second quarter of 2017 versus the second quarter of 2016, driving the 22.1% increase in net sales dollars. Copper wire sales prices increased primarily due to the higher price of copper purchased, which increased 19.2% versus the second quarter of 2016. Net income for the second quarter of 2017 increased 39.5% to $10.9 million versus $7.8 million in the second quarter of 2016. Fully diluted net earnings per common share were $0.52 in the second quarter of 2017 versus $0.38 in the second quarter of 2016.
Net sales for the six months ended June 30, 2017 were $570.9 million compared to $464.4 million during the same period in 2016. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 8.1% in the six months ended June 30, 2017 versus the six months ended June 30, 2016. The average selling price of wire per copper pound sold increased 15.6% in the six months ended June 30, 2017 versus the six months ended June 30, 2016, driving the 22.9% increase in net sales dollars. Copper wire sales prices increased primarily due to the higher price of copper purchased, which increased 20.8% versus the six months ended June 30, 2016. Net income for the six months ended June 30, 2017 increased 49.4% to $24.6 million versus $16.4 million in the same period in 2016. Fully diluted net earnings per common share were $1.18 in the six months ended June 30, 2017 versus $0.79 in the same period in 2016.
On a sequential quarter comparison, net sales for the second quarter of 2017 were $291.5 million versus $279.4 million during the first quarter of 2017. Sales dollars increased due to a 7.2% unit volume increase of copper building wire sold, offset somewhat by a 2.7% decrease in the average selling price per pound of copper wire sold on a sequential quarter comparison. Copper wire sales prices decreased primarily due to a decrease of 1.7% in the price of copper purchased. Net income for the second quarter of 2017 was $10.9 million versus $13.6 million in the first quarter of 2017. Fully diluted net income per common share was $0.52 in the second quarter of 2017 versus $0.65 in the first quarter of 2017.
Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “We are pleased with our improved results in the second quarter and on a year to date comparison. There are some key items to note. Net sales dollars increased significantly, in both the quarterly and six month comparisons of 2017 to 2016. The increased top line was driven primarily by both higher copper raw material prices as well as increased unit sales volumes. Unit volumes in the first six months of 2017 were up 8.1% in copper pounds shipped versus the first six months of last year. Margins increased in both the quarterly and six month comparisons of 2017 versus 2016. One of the key metrics to our earnings is the 'spread' between the price of copper wire sold and the cost of raw copper purchased in any given period. The copper spread increased 5.5% in the second quarter of 2017 versus the second quarter of 2016, and increased 6.2% on the six month comparison while declining 4.6% on a sequential quarter comparison. The copper spread expanded 5.5% as the average price of copper purchased increased 19.2% in the second quarter of 2017 versus the second quarter of 2016, while the average selling price of wire sold increased 14.4%. The percentage change on sales is on a higher nominal dollar amount than on purchases and, therefore, spreads change on a nominal dollar basis.
“The margin changes were due primarily to the competitive pricing environment in the industry. Copper spreads improved in the fourth quarter of 2016 and have held fairly well through the second quarter of 2017. It appears that the industry consolidation of a copper competitor that took place last year and damaged margins in the second and third quarters of 2016 may be resolving itself. The U.S. economy appears strong, as is construction activity. We see building cranes across the country as we travel to various meetings. It is interesting to see some financially stressed competitors having trouble and acting erratically in this strong business environment, when volumes are good and margins should also be strong.
“Based on discussions with our distributor customers and their contractor customers, we believe there is a good outlook for construction projects for the next year. We continue to strive to lead and support industry price increases in an effort to maintain and increase margins. We believe our superior order fill rates continue to enhance our competitive position. As orders come in from electrical contractors, the distributors can count on our order fill rates to ensure quick deliveries from coast to coast.
“Our balance sheet is very strong. We have no long-term debt, and our revolving line of credit is paid down to zero. In addition, we had $85.9 million in cash at the end of the quarter. We also declared another cash dividend during the quarter.
“Our low-cost structure and strong balance sheet have enabled us to withstand difficult periods in the past, and we believe they are continuing to prove valuable now. We thank our employees and associates for their outstanding effort and our shareholders for their continued support.”
Tagged with copper, earnings report, Encore Wire, financial, results, tED