Encore Wire sees sales and net profit slip in 3Q because of declining copper prices and sluggish construction market
Encore Wire Corp.’s net sales for the third quarter ended Sept. 30 were $269.2 million compared to $319.4 million during the third quarter of 2011. Lower prices for building wire sold 3Q 2012 accounted for most of the decrease in net sales dollars, decreasing 15% per copper pound sold versus the same period in 2011. Sales prices declined primarily due to lower copper prices, which declined 14.2% versus the third quarter of 2011. Unit volume, measured in copper pounds contained in the wire sold, decreased 2.7% in the third quarter of 2012 versus the third quarter of 2011.
Commenting on the results in a press release announcing the financial results, Encore Wire’s Daniel Jones, president and CEO, said, “The third quarter of this year was another fairly steady volume quarter in the midst of this construction industry recession. There are signs of bright spots around the country and talk of some major projects, but for the most part we are still in the trough. Major projects are discussed but then get delayed due to uncertainties surrounding the global economy and the U.S. economy and political environment. The good news is that our volumes are not trending downward. We believe our expansion of product offerings over the last six years to our existing customer base has been critical to maintaining and perhaps boosting our market share.
“As we have repeatedly noted, one of the key metrics to our earnings is the ‘spread’ between the price of wire sold and cost of raw copper purchased in any given period. That spread increased 7.8% in the third quarter of 2012 versus the second quarter of 2012, while our copper unit volume shipped in the third quarter of 2012 increased 1.6% versus the second quarter of 2012. Comex prices for the raw copper we buy were somewhat less volatile in the first two months of this quarter than the previous quarter and then rose in September allowing us to marginally enhance spreads. As illustrated, relatively small movements in the spread can affect our earnings per share. and were a positive influence on a sequential quarterly comparison. Conversely, spreads were down 17.3% in the third quarter of 2012 versus the third quarter of 2011 and down 8.8% on a year-to-date basis in 2012 versus 2011.
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Jim Lucy has been wandering through the electrical market for more than 30 years, most of the time as an editor for Electrical Wholesaling, Electrical Marketing newsletter and CEE News. During that time he and the editorial team for the publications have won numerous national awards for their coverage of the electrical business. He showed an early interest in electricity, when as a youth he had an idea for a hot dog cooker. Unfortunately, the first crude prototype malfunctioned and the arc nearly blew him out of his parents' basement. Before becoming an editor for Electrical Wholesaling magazine and Electrical Marketing, he earned a BA degree in journalism and a MA in communications from Glassboro State College, Glassboro, NJ., which is formerly best known as the site of the 1967 summit meeting between President Lyndon Johnson and Russian Premier Aleksei Nikolayevich Kosygin, and now best known as the New Jersey state college that changed its name in 1992 to Rowan University because of a generous $100 million donation by N.J. zillionaire industrialist Henry Rowan. Jim is a Brooklyn-born Jersey Guy happily transplanted in the fertile plains of Kansas for the past 20 years.