Sales decline at Trex

Trex Co., a manufacturer of composite decking and railing, reported net sales of $51.5 million for its fourth quarter, a 31.6% decrease over sales of $75.3 million for the same quarter of 2010. 

During the quarter, which ended Dec. 31, 2011, the company reported a net loss of $18.3 million, compared to a net loss of $0.5 million, for the fourth quarter of 2010. During the 2011 period, the Trex increased its warranty reserve by $10 million for decking material manufactured at its Nevada plant prior to mid-2006. Excluding that charge, the net loss was $8.3 million.

For the full year, Trex reported net sales of $266.8 million compared to net sales of $317.7 million for 2010. The company reported a net loss of $11.6 million compared to a net loss of $10.1 million for 2010. The 2011 results reflect the $10.0 million increase for the warranty reserve. 

In a prepared statement, VP and CFO James Cline said: “The increase to the warranty reserve reflects the additional visibility we have gained since the settlement of the class action suit and publication of the national settlement notice in 2009. Although the rate of new claims and actual cash expenditures declined significantly since 2009 – and we expect that decline to continue – we expect claims to continue for a longer period and the cost per claim to be slightly higher than previously anticipated, necessitating an adjustment to the warranty reserve.” 

Company chairman, president and CEO Ronald Kaplan said the manufacturer’s  overall results were in line with the company’s guidance. “While an announced price increase for Trex Transcend drove significant buying in the fourth quarter of 2010, this season we maintained pricing, with the result that more sales have shifted to the first quarter of 2012,” Kaplan said. “To date, our early-buy sales program for 2012 has been progressing as planned and we are pleased with our performance so far this year.” 

Given the company’s expanding portfolio of products, Kaplan forecasted net sales of $90 million for the first quarter of  2012, an increase of approximately 30% from the 2011 period. “Accordingly, we will be ramping up production from Q4 2011 levels,” he added.