Manufacturers

Encore Wire Announces 3Q 2023 Results

McKINNEY, Texas — Encore Wire Corporation (“Encore Wire” or the “Company”) recently announced results for the third quarter of 2023.

Net sales for the third quarter ended September 30, 2023 were $637.0 million compared to $762.4 million in the third quarter ended September 30, 2022. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 6.4% in the third quarter of 2023 versus the third quarter of 2022.  Aluminum wire represented 12.5% of net sales in the third quarter of 2023 compared to 17.4% in the third quarter of 2022.  The decrease in net sales dollars was driven by an anticipated decrease in the average selling prices in the third quarter of 2023 compared to the third quarter of 2022.

Gross profit percentage for the third quarter of 2023 was 23.3% compared to 39.3% in the third quarter of 2022.  The average selling price of wire per copper pound sold decreased 16.8% in the third quarter of 2023 versus the third quarter of 2022, while the average cost of copper per pound purchased increased 4.6%.  This resulted in the continued gradual, albeit slowing,  abatement of copper spreads during the quarter, primarily driven by the decrease in the average selling price of copper pounds sold noted above, which resulted in the decreased gross profit margin in the third quarter of 2023 compared to the third quarter of 2022.

Net income for the third quarter of 2023 was $82.1 million versus $191.8 million in the third quarter of 2022. Fully diluted earnings per common share were $4.82 in the third quarter of 2023 versus $9.97 in the third quarter of 2022.

On a sequential quarter basis, net sales for the third quarter ended September 30, 2023 were $637.0 million compared to $636.5 million in the second quarter ended June 30, 2023. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 6.8% in the third quarter of 2023 versus the second quarter of 2023.  Aluminum wire represented 12.5% of net sales in the third quarter of 2023 compared to 14.4% in the second quarter of 2023.  The slight increase in net sales dollars was driven by an increase in copper unit volume sold in the third quarter of 2023 compared to the second quarter of 2023, partially offset by decreased average selling prices in the third quarter of 2023.

Gross profit percentage for the third quarter of 2023 was 23.3% compared to 26.1% in the second quarter of 2023.  The average selling price of wire per copper pound sold decreased 4.3% in the third quarter of 2023 versus the second quarter of 2023, while the average cost of copper per pound purchased decreased 2.0%.  This resulted in the continued gradual, albeit slowing, abatement of copper spreads during the quarter, primarily driven by the decrease in the average selling price noted above, partially offset by a decrease in the average cost per pound of copper purchased, which resulted in the decreased gross profit margin in the third quarter of 2023 compared to the second quarter of 2023.

Net income for the third quarter of 2023 was $82.1 million versus $104.7 million in the second quarter of 2023. Fully diluted earnings per common share were $4.82 in the third quarter of 2023 versus $6.01 in the second quarter of 2023.

Net sales for the nine months ended September 30, 2023 were $1.934 billion compared to $2.324 billion for the nine months ended September 30, 2022. Copper unit volume, measured in pounds of copper contained in the wire sold, increased 2.7% in the first nine months of 2023 versus the first nine months of 2022.  Aluminum wire represented 13.8% of net sales in the first nine months of 2023 compared to 14.7% in the first nine months of 2022.  The decrease in net sales dollars was driven by an anticipated decrease in the average selling prices in the first nine months of 2023 compared to the first nine months of 2022.

Gross profit percentage for the first nine months of 2023 was 26.9% compared to 37.2% in the first nine months of 2022.  The average selling price of wire per copper pound sold decreased 18.1% in the first nine months of 2023 versus the first nine months of 2022, while the average cost of copper per pound purchased decreased 5.3%.  This resulted in the continued gradual abatement of copper spreads during the first nine months of 2023 versus the first nine months of 2022.

The increase in SG&A in the first nine 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 September 30, 2023 versus December 31, 2022.  We recorded $16.9 million in SARs expense in the first nine months of 2023 compared to a breakeven SARs benefit recorded in the first nine months of 2022, resulting in a $16.9 million increase in SARs expense.  No SARs were granted subsequent to January of 2020.  The increased SARs expense was partially offset by a decrease in selling expenses period-over-period.

Net income for the first nine months of 2023 was $306.3 million versus $563.8 million in the first nine months of 2022. Fully diluted earnings per common share were $17.40 in the first nine months of 2023 versus $28.57 in the first nine months of 2022.

Commenting on the results, Daniel L. Jones, Chairman, President and Chief Executive Officer of Encore Wire Corporation, said, “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 quarterly record of copper and aluminum pounds shipped.  Despite continued tightness in raw copper availability, 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 third 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 $581.8 million in cash as of September 30, 2023.  During the third quarter we repurchased 710,083 shares of our common stock for a total cash outlay of $121.2 million.  Since the first quarter of 2020 we have repurchased 5,157,769 shares of our common stock, approximately 25% of outstanding shares, at an average price of $133.12, for a total cash outlay of $686.6 million.  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.  The new facility is substantially complete.  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 $118.6 million in the first nine months of 2023.  We expect total capital expenditures to range from $160 – $170 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.

We 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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