Trex touts resilience of products in 2023 fiscal year

Trex Co. Inc., a Winchester, Virginia-based manufacturer of recycled-content decking and railing products, has announced financial results for its fourth quarter and 2023 fiscal year.

The company’s net income for the 2023 fourth quarter was $22 million, or 20 cents per diluted share, compared with $10 million, or 9 cents per diluted share, reported in the 2022 fourth quarter. Its earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $41 million, compared with $26 million the prior year and the EBITDA margin was 21 percent compared with 13.4 percent in 2022.

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For the 2023 fiscal year, the company reports a net income of $205 million, or $1.89 per diluted share, an increase over the $185 million, or $1.65 per diluted share, reported in 2022. Its EBITDA was $326 million, resulting in an EBITA margin of 29.8 percent compared to an EBITA of $291 million and a margin of 26.3 percent in 2022.

The company reports its consolidated net sales in the fourth quarter were $196 million, compared to $192 million in 2022 and 8.4 percent above Trex Residential net sales of $181 million in the same quarter a year ago. Trex says the growth in net sales was due primarily to increased volume and the absence of the residual channel inventory drawdown that occurred in the 2022 fourth quarter.

Trex’s gross margin was 36.1 percent in the fourth quarter of 2023 compared with 34.1 percent a year ago. During the quarter, its selling, general and administrative expenses were $43 million, or 21.7 percent of net sales, compared with $35 million, or 18.5 percent of net sales, during the same time frame in 2022. The company adds it elevated spending on branding and merchandising related to new products launching in 2024, increased research and development to drive growth and returned to normalized personnel and incentive costs.

“Fourth quarter results represented a strong finish to the year,” Trex President and CEO Bryan Fairbanks says. “Sales were above the high end of our guidance range, reflecting strong demand for Trex products heading into 2024. Channel sell-through remained at mid-single-digit levels in the fourth quarter and channel inventories ended the year at historically low levels.”

Fairbanks adds the launch of new products, such as its Transcend Lineage and Trex Signature decking lines and its Select T-Rail composite rail system have garnered considerable consumer interest and “extended the appeal of Trex products to a broader consumer base.”

For the 2023 fiscal year, Trex’s consolidated net sales were $1.1 billion, comparable with 2022 consolidated levels and $35 million higher than Trex Residential net sales in 2022. Its gross margin was 41.3 percent, an increase over the 36.5 percent consolidated gross margin and Trex Residential gross margin of 37.7 percent in the prior year. Selling, general and administrative expenses were $176 million, or 16.1 percent of net sales, compared with the 2022 total of $142 million, or 12.8 percent of net sales.

In 2023, the company says it recognized a $3.8 million benefit from a reduction in the Trex Residential warranty reserve related to the surface flaking issue that affected a portion of the products manufactured at its Fernley, Nevada, plant prior to 2007. Excluding the warranty benefit, the company’s 2023 adjusted gross margin was 41 percent, adjusted net income was $203 million, or $1.86 per diluted share, adjusted EBITDA was $323 million and adjusted EBITDA margin was 29.5 percent.

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During the year, Trex authorized the repurchase of up to 10.8 million shares, or approximately 10 percent of its existing share float, under a new stock repurchase program. Over the course of the year the company returned $15.6 million to shareholders through the repurchase of 264,896 shares of outstanding common stock.

“Our full-year performance demonstrates the resilience of Trex-branded products during periods of economic uncertainty and the positive impact of the Trex continuous improvement program, which were key to the margin improvement achieved in 2023,” Fairbanks says. “Throughout the year, we worked closely with our channel partners to optimize inventory levels and lead times to address the dynamic market environment.

“Additionally, we increased our investment in sales, marketing and branding programs, along with new product development to drive our future growth. These expenditures are aligned with our strategy to take full advantage of the strong long-term secular trends that have made the outdoor living category one of the fastest-growing segments of the repair and remodel sector.”