Trex to deck out facilities in Virginia, Nevada
Responding to increased demand for recently launched products, a decking materials company based in Winchester has pushed up planned upgrades for its operations in Virginia and Nevada.
Trex Company Inc., a decking and railing materials company, announced last week plans for a $200 million capital expenditure program to increase production capacity at facilities in Winchester and Nevada. Trex expects to fund the capital expenditures mainly from operating cash flows.
Shares for Trex received a bump following the announcement of the investments on June 6. On that day, Trex shares closed at $66.90 a share and the following day they closed at $69.11. On Friday, Trex shares closed at $71.38. Trex was founded in 1996 and manufactures wood-alternative decking products made from recylced plastic and wood.
Trex CFO Bryan Fairbanks says a larger share of the capital investment announced last week will take place in Virginia with the likelihood of adding more employees in Winchester. He could not say specifically how the investment would be split between Virginia and Nevada or how many employees may be added in Virginia.
Fairbanks says Trex had planned to do the investment a year from now but demand has been so strong for new composite decking products it made more sense to make the investments sooner. Trex recently rolled out new products as part of its Enhance line, Fairbanks says. In 2018, Professional Builder magazine included the Trex Enhance Composite Decking line on its list of top 100 products.
Plans call for building a new decking facility in Winchester and installation of additional production lines in an existing building in Fernley, Nev. The expanded production capabilities in Nevada are planned to go live in the third quarter, and Virginia’s expanded capacity is planned to begin in the first quarter of 2021.
The announcement comes as Trex’s Nevada plant has faced adversity, according to the company’s most recent quarterly report with the Securities and Exchange Commission. Trex’s Nevada facility had two equipment failures during the first quarter. The failures resulted in the loss of two lines for about 30 days apiece. Those lines are now back in full production. Fairbanks says the new investments are not related to the equipment failures.
“We expect to experience reduced throughput and related expenses in Nevada during the second quarter, but at a reduced rate compared to the first quarter,” the company stated in its quarterly report. “Across our manufacturing facilities, the new product startup costs, the operating inefficiencies from lower run rates and the equipment failures at our Nevada plant amounted to $10 million.”
Trex reported increased net sales for the first quarter compared with this time a year ago. For the first quarter of 2019, Trex had $179.5 million in net sales – up from $171.2 million for the first quarter in 2018.
The company reported a dip in gross profits with $69.3 million in the first quarter of 2019, compared with $76.7 million from the same period in 2018. Fairbanks says the drop had to do with the startup costs related to the rollout of its new Enhance products and that those expenses are expected to taper off.