Encore Wire 3Q Earnings Snapshot

Encore Wire 3Q Earnings Snapshot

The McKinney, Texas-based company said it had profit of 78 cents per share.

The copper wire maker posted revenue of $321.2 million in the period.

Encore Wire shares have increased 18% since the beginning of the year. In the final minutes of trading on Monday, shares hit $59.18, a rise of 40% in the last 12 months.

Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “Our business remains strong as evidenced by our results in the third quarter and nine months ended September 30. There are some key items to note. Unit volumes increased in the third quarter and year to date comparisons of 2019 to 2018. Copper unit volumes increased 0.2% in the third quarter of 2019 versus the third quarter of 2018, and increased 6.0% in the nine month comparison. The unit volume increase was achieved even though we passed on orders that did not meet our margin targets.

“Despite the strong U.S. construction market and demand for building wire, margins were restrained by competitive pricing in the third quarter of 2019 versus the third quarter of 2018. Gross profit margins fell in concert with a drop in copper prices versus last year’s third quarter and first nine months, along with the competitive pressure noted above. 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 decreased 9.0% in the third quarter of 2019 versus the third quarter of 2018, while decreasing 2.8% in the nine month comparison. The copper spread also decreased 3.0% on a sequential quarter comparison. The copper spread contracted 9.0% as the average price of copper purchased decreased 4.2% in the third quarter of 2019 versus the third quarter of 2018, while the average selling price of wire sold decreased 5.9%. It should be noted that the spreads in the third quarter of 2018 were the highest in over a decade. However, we believe that the currently strong end markets can support those margin levels.

“In aluminum wire, which represented 7.7% of our net sales in the third quarter of 2019, we continue to enforce our rights under the U.S. trade remedy laws. On October 18, 2019, the U.S. Commerce Department signed its final antidumping (“AD”) and countervailing duty (“CVD”) determinations, resulting in combined AD/CVD duty rates ranging from 81.27 to 218.42 percent for aluminum wire and cable imported from China. The final step in these investigations is a vote from the U.S. International Trade Commission, which is not expected until approximately November 20, 2019.

“The U.S. economy appears strong, as is construction activity. 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 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 longterm debt, and our revolving line of credit is paid down to zero. In addition, we had $203.9 million in cash at the end of the quarter. We continue to refine our plans for significant capital expenditures, but these plans remain delayed by issues arising in connection with a proposed new highway project which may bisect our property. We also declared a 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.”

View the entire press release.


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