Apogee remains confident in longer-term growth outlook
Apogee remains confident in longer-term growth outlook for U.S. commercial construction markets, has positive outlook for FY19.
Apogee Enterprises, Inc. announced revisions to its fiscal 2018 outlook primarily related to the acquisition of EFCO, which closed early in the second quarter that ends 2 September.
“We continue to feel good about the North American non-residential construction markets. Based on second-quarter growth in our reported segment backlogs, our bidding activity and external metrics, we see continued market growth for three years and feel especially good about Apogee’s growth and profit prospects for fiscal 2019,” said Joseph F. Puishys, Apogee chief executive officer. “Our recent acquisitions of Sotawall and EFCO are helping us build a more diversified portfolio, which offers greater long-term growth opportunities while contributing to more stable performance throughout an economic cycle.”
Apogee estimates that EFCO revenues and margins will be slightly lower than initially anticipated due to revised cost estimates made post-closing on some projects that EFCO will be delivering in the second half of fiscal 2018. Fiscal 2018 revenues for EFCO are now expected to be approximately USD 200 million, compared to the previous outlook of USD 200 to USD 220 million, and the operating margin is expected to be 2-3%, compared to mid-single digit.
“EFCO is a great acquisition with significant long-term potential. With a concentration in mid-size to smaller commercial construction projects, EFCO supports our efforts to diversify future revenue streams. At the same time, it complements and accelerates our strategies to grow through new products and new geographies,” said Puishys. “In three years, we expect to improve EFCO operating margins to double-digits and to achieve annual synergies of USD 10 to USD 15 million.”
Additional impacts to outlook include growing competitive pressures in the architectural glass mid-size project market that are expected to reduce full-year growth to low single-digits as ongoing productivity improvements drive increases in operating margin. The longer-term outlook related to European competition on larger projects is brightening with strengthening of the Euro. Relative to foreign exchange, Apogee expects an approximate USD 2 million non-cash, negative impact in the second quarter from the architectural framing systems segment Sotawall business, which fabricates in Canada and currently is primarily executing projects in the United States.
“Looking ahead, for fiscal 2019 we expect double-digit revenue growth and triple-digit operating margin improvement, based on our order pipeline, bidding and backlog already booked for fiscal 2019,” said Puishys.
Updated fiscal 2018 full-year guidance, compared to earlier guidance, includes:
* Revenue growth of 24 to 26%, compared to 26 to 28%.
* Operating margin of 10.0 to 10.5%, compared to 10.5 to 11.0%.
o Adjusted operating margin of 11.0 to 11.5%, compared to 11.5 to 12.0%.
* Earnings per share of USD 3.05 to USD 3.25, compared to USD 3.31 to USD 3.51.
o Adjusted EPS of USD 3.40 to USD 3.60, up at least 12% from the prior year; this compares to prior adjusted EPS guidance of USD 3.65 to USD 3.85.
* Adjusted earnings guidance excludes the after-tax impact of:
o Amortization of short-lived acquired intangibles associated with the acquired backlog of Sotawall and EFCO of USD 7 million (USD 0.24 per diluted share).
o Acquisition-related costs for Sotawall and EFCO of approximately USD 3 million (USD 0.11 per diluted share).
Apogee Enterprises, Inc., headquartered in Minneapolis, is a leader in technologies involving the design and development of value-added glass products and services. The company is organized in four segments, with three of the segments serving the commercial construction market:
* Architectural Glass segment consists of Viracon, the leading fabricator of coated, high-performance architectural glass for global markets.
* Architectural Framing Systems segment businesses design, engineer, fabricate and finish the aluminium frames for window, curtainwall and storefront systems that comprise the outside skin of buildings. Businesses in this segment are: Wausau, a manufacturer of custom aluminium window systems and curtainwall; Sotawall, a manufacturer of unitized curtainwall systems; EFCO, a manufacturer of aluminium window, curtainwall, storefront and entrance systems; Tubelite, a manufacturer of aluminium storefront, entrance and curtainwall products; Alumicor, a manufacturer of aluminium storefront, entrance, curtainwall and window products for Canadian markets; and Linetec, a paint and anodizing finisher of window frames and PVC shutters.
* Architectural Services segment consists of Harmon, one of the largest U.S. full-service building glass installation companies.
* Large-Scale Optical segment consists of Tru Vue, a value-added glass and acrylic manufacturer primarily for framing and display applications.