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May 06, 2020 10:05 AM

Trex decking sales up with home improvement trend

Catherine Kavanaugh
Senior Reporter
Plastics News Staff
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    Trex Co. Inc.

    Trex Co. Inc. expects its new Enhance decking, produced at a lower price point than its traditional composite material, will drive increased business from DIY consumers.

    Trex Co. Inc. posted first-quarter sales of $200 million, a 12 percent increase compared to the same period last year, as robust demand for composite decking continued even after a pandemic was declared on March 11.

    Profits also were up, climbing to $42 million for the Winchester, Va.-based company, compared to $32 million for the first quarter of 2019.

    The potential economic impacts of the COVID-19 crisis on Trex will largely depend on its duration, according to company officials, who rescinded guidance for full-year 2020.

    Despite all the uncertainty, Trex CEO and President Bryan Fairbanks said he is pleased with April results and he expects demand to grow for composite decking, which in the case of Trex is made of recycled polyethylene film and reclaimed wood fibers.

    Unless current conditions substantially change, Trex is projecting second-quarter sales of $180 million to $190 million.

    "We believe that stay-at-home consumers are prioritizing home improvement projects, especially those that will add lasting value, enhance enjoyment and minimize maintenance. We see this as a positive trend for our business as our product lines, especially Trex Enhance, meets the needs of our more cost-conscious DIY consumers," Fairbanks said in a May 4 quarterly call with investment bankers.

    Fairbanks recently took over as CEO, succeeding Jim Cline, who is now board chairman.

    Trex's projection is down from sales of $206 million for the second quarter of 2019, when profit was $36 million, in part because construction has been deemed nonessential and channel partners are closed in some states.

    "While our production and sales volumes for April were in line with our internal plans, we have experienced lower demand in certain geographies. Specifically, we're seeing the greatest impact in New Jersey, New York and Pennsylvania tri-state areas as well as Michigan and Washington," Fairbanks said.

    Those states are significant for the growth of the Trex Company, he added, and all of those states are in various processes of reopening.

    "At this point, Michigan has reopened their lumber distributors as well as dealers. Washington is slowly reopening. There are parts of New Jersey and Pennsylvania, mostly in the further northeast side that still may be closed at this point," Fairbanks said.

    Trex facilities have remained fully operational with temperature scanning and physical distancing in place along with other health and safety measures that the company says go beyond recommendations of the Centers for Disease Control and Prevention.

    In addition, Trex continues to add capacity to meet market demand and support its effort to convert the large wood decking market to composite products.

    Three new production lines in Nevada and one more line in Virginia will be completed by the end of the second quarter of this year, and construction of a new Virginia facility is underway and on schedule.

    "We do have the ability to pull back on some of that investment later in the year for additional lines if we see that they aren't necessarily needed at this time," Fairbanks said.

    For now, Trex officials see opportunities ahead as more consumers switch from wood decking to low-maintenance composites, which require no sanding or sealing and resist moisture, rot and insect infestation.

    In addition, Trex is considered a green decking with boards made up of 95 percent recycled materials. A polymer shell protects against fading, staining, mold and scratching.

    "Trex is in the early innings of the wood conversion opportunity, with approximately 80 percent of the decking market available for conversion to composites. Our expanded capacity will empower Trex to aggressively gain share within the industry," Fairbanks said.

    Historically, about 60 percent of Trex decking is installed by contractors and 40 percent is do-it-yourself projects. However, with the 2019 introduction of Enhance Basic-brand decking, which has a scalloped underside to save on material and reduce the cost, Trex officials expect that to shift to a 50-50 level.

    Trex unveiled its Enhance Basic decking at the International Builders' Show, saying it reduces the cost question for homeowners wanting to upgrade from pressure-treated wood decking to composite decking.

    "The strategy of going after wood, converting more of that market has been successful," Fairbanks said. "It started before the launch of Enhance, but it really took off with that strategy of allowing there to be more price points to be attractive to a larger portion of the overall buying public."

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