Dec. 8, 2006 — Quanex Corp. reported $39.1 million income from continuing operations on record sales of $527.7 million for the fiscal fourth quarter and $160.3 million income from continuing operations on record net sales of $2,032.6 million for the full year (fiscal 2006) ending October 31, 2006.

Fourth Quarter Results—The $39.1 million income from continuing operations compares to $46.7 million income from continuing operations in the year-earlier fourth quarter. Record net sales of $527.7 million compare to net sales of $483.3 million for the year-earlier fourth quarter.

Diluted earnings per share from continuing operations were $1.03, which compares with $1.17 diluted eps for last year’s fourth quarter. Diluted earnings per share were $1.03.

Full Year Results—The $160.3 million income from continuing operations compares to $177.2 million income from continuing operations reported a year ago. Record net sales of $2,032.6 million compare to net sales of $1,969.0 million for fiscal 2005.

Diluted earnings per share from continuing operations were $4.15, compared to $4.50 last year. Diluted earnings per share were $4.15. Return on invested capital at fiscal year end was 19.4% compared to 20.8% a year ago.

Vehicular Products Segment—Focused on providing customers with custom engineered steel bar products and value added services, the Vehicular Products segment's key market driver is light vehicle builds, which account for 65% of the segment's sales.

"Total steel bar tons shipped at MACSTEEL in the quarter were up 5% over fourth quarter 2005 shipments and up 1% compared to the third quarter 2006, due in part to stronger than expected demand in October," said Raymond A. Jean, Chairman and CEO. "MACSTEEL's bar shipments in the quarter were up even though North American light vehicle builds during our fourth quarter were down 11% compared to the fourth quarter 2005, demonstrating our ability to outperform the market. Shipments for fiscal 2006 were flat versus 2005, while light vehicle builds were off 2% overall."

"Vehicular Products operating income was up 10% from last year's fourth quarter due to higher shipments and material spreads. We are realizing the benefits of both additional value added capacity and new programs with the 'Big Three' and transplant automotive companies," continued Jean.

Engineered Products Segment—Focused on providing window and door OEM customers with engineered products and components, the Engineered Products segment’s key market drivers are housing starts (approximately 60% of segment sales) and remodeling activity (approximately 40% of segment sales).

"Engineered Products posted a 12% decrease in fiscal fourth quarter net sales compared to the year ago quarter, while housing starts for the same period were off 22%. Rising new home inventories and mounting cancellations are producing a sharp response from home-builders who continue to reduce builds, and as a result, our window and door components business experienced much slower demand. For 2006, net sales and operating income for the segment were up 8% and down 11%, respectively, over 2005," said Jean.

Aluminum Sheet Products—A leading provider of common alloy aluminum sheet products for the building and construction, transportation and other consumer durable markets, the Aluminum Sheet Products segment’s primary market drivers are housing starts and remodeling activity, which accounts for 60% of segment sales.

"Net sales and operating income were both up 25% in the fourth quarter compared to the year ago period. Nichols Aluminum sheet pounds shipped in the quarter were up 3% compared to the year ago quarter, but off 14% from the third quarter 2006. Shipments for 2006 were down 4% versus 2005. Spread per pound (selling price less raw material costs) for the quarter and year were both up 11% compared to last year as scrap costs have lagged increases in aluminum prices on the LME. Operating income for the year was up 14% to $82.2 million, a record for Nichols Aluminum," Jean said.

Outlook—The company notes that the first quarter is historically its least profitable quarter due to fewer production days (because of the holidays) and reduced home building activity during the winter period. The company expects net sales for the first fiscal quarter of 2007 to be down some 10% from first-quarter 2006 sales. The company also expects its market drivers to be down appreciably from the year ago period.

The company expects fiscal first quarter 2007 steel bar shipments for the Vehicular Products segment to be down about 10% compared to the first quarter 2006, a result of cutbacks made by the company's Tier 1 and Tier 2 customers, principally in response to the Big Three's estimated 10% light vehicle build rate reduction. Total light vehicle builds in the fiscal first quarter are projected to be down 5% from the year-ago quarter. The Vehicular Products segment is expected to outperform the market for fiscal 2007 with new programs at both the "Big Three" and transplant automotive companies.

For the Engineered Products segment, the company expects 2007 fiscal first quarter net sales to be down some 20% compared to the first quarter 2006, as the segment experiences lower demand for its window and door components in the face of declining housing starts and reduced remodeling expenditures. Total housing starts are expected to be down 20% in the quarter.

The company expects Aluminum Sheet shipments are expected to be down about 10% compared to year-ago first quarter shipments, with momentum expected to return in January. The company expects LME aluminum ingot prices to remain high through the first quarter, which should allow for continued healthy material spreads at Nichols Aluminum.

Taken together, the company expects fiscal first quarter 2007 earnings from continuing operations to be in a range of $0.35 to $0.45 per share. For fiscal 2007, the company expects to build momentum in all of its businesses as the year progresses.

Quanex cautions that it expects its financial performance in the first half of 2007 to lag the first half of 2006. Light vehicle builds and housing starts in the first half of 2007 are forecasted to be down about 6% and 22%, respectively, from the first half of 2006. In the second half of 2007, the Company expects its market drivers to improve over the second half of 2006. Accordingly, fiscal 2007 earnings per share from continuing operations are expected to be in a range of $3.10 to $3.60 per share.

Quanex Corp. is an industry-leading manufacturer of value added, engineered materials and components serving the vehicular products and building products markets.