McKINNEY, Texas — Encore Wire Corporation (“Encore Wire” or the “Company”) announced results for the second quarter of 2023.
Net sales for the second quarter ended June 30, 2023 were $636.5 million compared to $838.2 million in the second quarter ended June 30, 2022. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 1.3% in the second quarter of 2023 versus the second quarter of 2022. The decrease in net sales was driven by an anticipated decrease in the average selling price in the second quarter of 2023 compared to the second quarter of 2022. Aluminum wire represented 14.4% of net sales in the second quarter of 2023 compared to 15.0% in the second quarter of 2022.
Gross profit percentage for the second quarter of 2023 was 26.1% compared to 38.3% in the second quarter of 2022. The average selling price of wire per copper pound sold decreased 24.5% in the second quarter of 2023 versus the second quarter of 2022, while the average cost of copper per pound purchased decreased 11.2%. This resulted in the gradual abatement of copper spreads during the quarter, primarily driven by the decrease in the average selling price noted above, which resulted in the decreased gross profit margin in the second quarter of 2023 compared to the second quarter of 2022.
Net income for the second quarter of 2023 was $104.7 million versus $210.5 million in the second quarter of 2022. Fully diluted earnings per common share were $6.01 in the second quarter of 2023 versus $10.71 in the second quarter of 2022.
On a sequential quarter basis, net sales for the second quarter ended June 30, 2023 were $636.5 million compared to $660.5 million in the first quarter ended March 31, 2023. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 10.4% in the second quarter of 2023 versus the first quarter of 2023. The slight decrease in net sales was driven by an anticipated decrease in the average selling price in the second quarter of 2023 compared to the first quarter of 2023, partially offset by increased volumes in the current quarter. Aluminum wire represented 14.4% of net sales in the second quarter of 2023 compared to 14.6% in the first quarter of 2023.
Gross profit percentage for the second quarter of 2023 was 26.1% compared to 31.1% in the first quarter of 2023. The average selling price of wire per copper pound sold decreased 12.4% in the second quarter of 2023 versus the first quarter of 2023, while the average cost of copper per pound purchased decreased 5.3%. This resulted in the gradual abatement of copper spreads during the quarter, primarily driven by the decrease in the average selling price noted above, which resulted in the decreased gross profit margin in the second quarter of 2023 compared to the first quarter of 2023.
Net income for the second quarter of 2023 was $104.7 million versus $119.5 million in the first quarter of 2023. Fully diluted earnings per common share were $6.01 in the second quarter of 2023 versus $6.50 in the first quarter of 2023.
Net sales for the six months ended June 30, 2023 were $1.297 billion compared to $1.561 billion for the six months ended June 30, 2022. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 0.7% in the first six months of 2023 versus the first six months of 2022. The decrease in net sales was driven by an anticipated decrease in the average selling price in the first six months of 2023 compared to the first six months of 2022. Aluminum wire represented 14.5% of net sales in the first six months of 2023 compared to 13.4% in the first six months of 2022.
Gross profit percentage for the first six months of 2023 was 28.6% compared to 36.2% in the first six months of 2022. The average selling price of wire per copper pound sold decreased 18.5% in the first six months of 2023 versus the first six months of 2022, while the average cost of copper per pound purchased decreased 9.6%. This resulted in the gradual abatement of copper spreads during the first six months of 2023 versus the first six months of 2022. The increase in SG&A in the first six months of 2023 was primarily due to an increase in Stock Appreciation Rights (“SARs”) expense charges driven by the increase in our stock price at March 31, 2023 and June 30, 2023 versus December 31, 2022. We recorded $14.6 million in SARs expense in the first six months of 2023 compared to a $3.9 million SARs benefit recorded in the first six months of 2022, resulting in an $18.5 million increase in expenses period-over-period. No SARs were granted subsequent to January of 2020.
Net income for the first six months of 2023 was $224.2 million versus $372.1 million in the first six months of 2022. Fully diluted earnings per common share were $12.53 in the first six months of 2023 versus $18.62 in the first six months of 2022.
Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “The second quarter marks our ninth consecutive quarter of elevated margins. Demand for our products has remained strong, and our build-to-ship model, combined with the increased throughput of our modern service center, allowed us to reach a near quarterly record of copper and aluminum pounds shipped. Our key suppliers continue to perform at a high level which positioned us favorably to meet customer demand in a timely manner. By continuing to execute on our core values of providing unbeatable customer service and high order fill rates, ongoing margin abatement remained gradual in the second quarter of 2023.
“Our balance sheet remains very strong, and we remain committed to returning capital to shareholders, as evidenced by our ongoing share repurchases. We have no long-term debt, and our revolving line of credit remains untapped. We had $667.8 million in cash at June 30, 2023. During the second quarter we repurchased 772,931 shares of our common stock for a total cash outlay of $126.7 million. Since the first quarter of 2020 we have repurchased 4,447,686 shares of our common stock at an average price of $127.11, for a total cash outlay of $565.4 million. In June 2023, the Board of Directors increased the repurchase authorization back up to a full 2,000,000 shares of our common stock through March 31, 2024. We also declared a $0.02 cash dividend during the quarter.
“We remain committed to reinvesting in our business with current and planned projects focused on increasing capacity, efficiency and vertical integration across our campus, which will continue to improve our service model. These types of organic investments have fueled our consistent growth since inception and position us well to continue to profitably capture market share for years to come.
“In 2022 we began construction on a new, state of the art, cross-link polyethylene (XLPE) compounding facility to deepen vertical integration related to wire and cable insulation. XLPE insulation is used in many applications including Data Centers, Oil and Gas, Transit, Waste-Water Treatment facilities, Utilities, and Wind and Solar applications. We anticipate the new facility will be substantially complete by the end of the third quarter of 2023. Capital spending in 2023 through 2025 will further expand vertical integration in our manufacturing processes to reduce costs as well as modernize select wire manufacturing facilities to increase capacity and efficiency and improve our position as a sustainable and environmentally responsible company. Total capital expenditures were $148.4 million in 2022 and $74.7 million in the first six months of 2023. We expect total capital expenditures to range from $160 – $180 million in 2023, $150 – $170 million in 2024, and $80 – $100 million in 2025. We expect to continue to fund these investments with existing cash reserves and operating cash flows.
“I continue to believe that our operational agility, speed to market, and deep supplier relationships remain competitive advantages in serving our customers’ evolving needs and capturing market share in the current economic environment. As we continue to address near-term challenges, we remain focused on the long-term opportunities for our business. We thank our employees and associates for their outstanding effort and our shareholders for their continued support.”
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