Key points
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Quanex’s second-quarter revenue rose 2.2% to $462.4 millionbut profits fell sharply as inflation in raw materials, freight and logistics squeezed margins. Net income fell to $3.4 million from $20.5 million a year earlier, and adjusted EBITDA fell to $44.2 million from $63.1 million.
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The company withheld guidance for all of fiscal 2026. because inflation and increased uncertainty around housing, interest rates, tariffs and consumer confidence have reduced visibility. For the third quarter, Quanex expects revenue to remain flat up 1% and adjusted EBITDA margin to remain broadly unchanged up 25 basis points.
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Management said demand remains, but housing markets remain weakwith only early signs of stabilization in North America and Europe. Quanex is responding with targeted price increases, tighter working capital management, and a continued focus on debt and cash flow reduction.
Quanex Building Products (NYSE:NX) reported a modest increase in fiscal second-quarter revenue but sharply lower profits as inflation in raw materials, transportation and logistics hurt margins and led the company not to reaffirm its previous full-year outlook.
On the company’s earnings conference call, President and CEO George Wilson said demand for Quanex products was “largely as expected” despite continued pressure in housing markets. He said housing demand in North America and Europe is showing “early signs of stabilization” but warned that any recovery is likely to be gradual due to weak consumer confidence, affordability challenges, geopolitical uncertainty and high mortgage rates in the United States.
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“Given these current challenges, we do not expect housing markets to rebound sharply any time soon,” Wilson said. He added that a stronger recovery would depend on greater affordability, lower or more stable interest rates and greater consumer confidence backed by geopolitical stability.
Revenue increases as profits decrease
Senior Vice President, Chief Financial Officer and Treasurer Scott Zuehlke said Quanex generated net sales of $462.4 million in the second quarter of fiscal 2026, up 2.2% from $452.5 million in the same period last year. It said the increase was primarily due to pricing, tariff-related transfers and favorable currency conversion, which more than offset lower volumes.
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Quanex estimated that consolidated volumes were down about 3% in the quarter. Prices contributed about 1.5%, tariff transfers added about 1%, and currency conversion provided a benefit of about 2.5%.
Net income fell to $3.4 million, or $0.07 per diluted share, from $20.5 million, or $0.44 per diluted share, a year earlier. Adjusted net income decreased to $11.3 million, or $0.25 per diluted share, compared with $29.1 million, or $0.63 per diluted share, in the prior-year quarter.
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Adjusted EBITDA was $44.2 million, down from $63.1 million in the second quarter of fiscal 2025. Zuehlke said the decline reflected lower operating leverage due to lower volumes, macroeconomic uncertainty, weak consumer confidence, tariff-related costs and inflation pressures.
Inflation puts pressure on margins across the business
Wilson said gross margin declined 350 basis points year over year, primarily due to sharp increases in raw materials and logistics costs. It said the Hardware Solutions segment was the hardest hit during the quarter due to the legacy make-to-stock model for the door and window hardware product line and higher inventory levels in that segment.
Quanex said raw material cost pressures were widespread. At Hardware Solutions, the company cited higher costs for aluminum, zinc, stainless steel and plastic resins. In Extruded Solutions, pressures included butyl rubber, silicone compounds, carbon black, desiccants and PVC resins. Custom Solutions was affected by higher costs of EPDM, carbon black, oils, aluminum, plastic resins and certain hardwoods.
Wilson also said rising packaging, transportation and logistics costs impacted margins across all segments and product lines. To address those pressures, the company is implementing targeted price increases ranging from mid-single-digit percentages to low percentages, phased in during the third quarter and tailored by product line.
In response to an analyst question, Wilson said index-based pricing mechanisms in North America typically reset quarterly, which can leave Quanex exposed to cost increases until the next adjustment. He said the company’s outlook assumes current prices remain relatively stable and does not assume additional inflation.
Segment results show mixed trends
Hardware Solutions generated second-quarter net sales of $203 million, virtually unchanged from $202.9 million a year earlier. Zuehlke said segment volumes were down about 5%, while prices were up about 0.5%, tariff transfers added about 2.5% and currency conversion contributed about 2%. Adjusted EBITDA in the segment fell to $5.2 million from $27 million.
Extruded Solutions revenue was $165 million, up slightly from $164 million in the prior-year quarter. Volumes were down about 4%, prices were up about 1%, and currency translation added about 3.5%. Adjusted EBITDA decreased slightly to $30.4 million from $30.7 million.
Custom Solutions reported net sales of $103.9 million, up 6.6% from the prior year. Zuehlke said volumes were up about 1%, prices were up about 4.5% and currency conversion combined with transfer fees added about 1%. Adjusted EBITDA decreased to $11 million from $13 million, primarily due to inflationary pressures.
Limited guidance to third quarter
Quanex did not reaffirm its previously released fiscal 2026 guidance. Zuehlke said inflation pressures have increased since the company’s March earnings call, while broader uncertainty related to geopolitical developments, consumer confidence, interest rates and tariffs has reduced visibility for the rest of the year.
For the third quarter of fiscal 2026, Quanex expects consolidated revenue to remain stable up 1% compared to the third quarter of fiscal 2025. The company expects adjusted EBITDA margin to remain stable up to 25 basis points and said an estimated tax rate of around 24% is reasonable for the quarter.
Wilson said the company expects normal seasonal demand patterns to continue in the third quarter, which would imply sequential volume growth. He noted that volumes softened after Memorial Day last year, but said Quanex has not seen similar trends so far this year.
Cash flow and debt reduction remain priorities
Cash provided by operating activities was $18.9 million in the second quarter, compared to $28.5 million a year earlier. Free cash flow was $7.9 million, up from $13.6 million in the prior-year quarter.
Zuehlke said Quanex expected to be a net borrower during the quarter due to the longer cash conversion cycle of the legacy Tyman business, but working capital management allowed the company to avoid taking on net debt. Liquidity was $328.6 million as of April 30, 2026, including $63.7 million in cash and availability under its revolving credit facility, net of letters of credit. Net debt to adjusted EBITDA for the trailing 12 months was 3.1 times.
Management said near-term priorities include closing the price-cost gap, accelerating the shift from make-to-stock to make-to-order in window and door hardware, executing an 80/20 initiative in the North American hardware business, improving working capital and generating free cash flow.
When asked about capital allocation, Wilson said debt reduction is the company’s first priority, although Quanex will continue to evaluate opportunistic share buybacks.
About Quanex Building Products (NYSE:NX)
Quanex Building Products Corporation is dedicated to the design, manufacturing and distribution of components for the window, door and building products industries in North America. The company operates through two primary segments: window products and door and building products. Its Window Products segment supplies vinyl window profiles and related accessories, while its Door and Building Products segment offers door skins, panels, siding products, specialty moldings and other engineered exterior building components.
Within its window products segment, Quanex produces extrusion profiles used by window manufacturers to assemble vinyl casement, sash, sliding and panoramic windows.
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The article “Highlights from Quanex Building Products’ Second Quarter Earnings Calls” was originally published by MarketBeat.
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