Trex Co. Inc. finished 2022 shy of its record-setting $1.2 billion in sales following an inventory recalibration and a loss on the divestment of its wholly owned subsidiary, Trex Commercial Products Inc.
The Winchester, Va.-based composite decking manufacturer posted sales of $1.1 billion for 2022 with a profit of $185 million compared to sales of $1.2 billion and a profit of $209 million in 2021.
Trex's lower sales were due partly to distribution channel partners pulling back on the amount of inventory held because of concerns about softening consumer demand due to rising interest rates and expectations of a general slowing in the economy.
For the fourth quarter, consolidated sales were $192 million compared to $304 million in the prior-year quarter.
Still, the results "exceeded our expectations," Trex President and CEO Bryan Fairbanks told investment bankers in a Feb. 27 conference call. He said the fourth quarter was the first quarter to benefit from the actions taken last July to reduce production levels, reduce its employee base and implement cost-efficiency programs.
Trex's cost structure now aligns better with the lower sales volumes caused by the distribution channel's inventory recalibration.
"We expect to decrease our balance sheet inventory to more normalized levels throughout 2023, which will improve cash flow," Fairbanks said. "As we've noted in prior calls, we've elected to run our facilities with the assumption of a $1 billion revenue run rate for the year."
The newest facility, in Little Rock, Ark., is undergoing a modular build-out. Trex is taking its time on its third plant and has pushed back the target date for completing the $400 million project.
Fairbanks said he sees a "gradual manufacturing ramp starting with processing of recycled materials and then moving to decking manufacturing currently estimated to start in early 2026."
Trex decking is made of recycled polyethylene and reclaimed wood.