Azek CEO expects raw material costs to ‘come down’, helping fuel profit growth
Azek CEO Jesse Singh told CNBC the company believes it will be able to increase profitability in the future, through increased productivity and lower raw material costs.
“We, like many businesses, have experienced pretty significant inflation,” Singh said in an interview with Jim Cramer on “Mad Money”. “As we come out of our fiscal second quarter, I think you’ll start to see margin expansion again.”
In his fourth fiscal quarter ended September 30, Azek said a gross margin of 32.4%, down from 34.2% a year ago. This was the second quarter in a row that the maker of exterior building materials, such as composite decking, recorded a year-over-year decline in its gross margin. It fell 100 basis points to 32.6% in the third fiscal quarter.
However, Singh expressed confidence the trend would reverse for parent company TimberTech, which posted record fourth quarter net sales of $ 346.1 million.
“I think the key is between price and productivity, we’ve prepared ourselves really well for the future as we work our way through some of the inflationary variables,” Singh said. “Some of these variables, especially commodities over a period of time, will come down and this will give us the opportunity to continue to expand our margin.”
Investors have been watching how US businesses weather the inflationary surge that has hit the US economy in recent months, hoping to determine which companies have the capacity to pass costs on to consumers without hurting demand for their products.
Azek stock rose nearly 2% on Friday to close at $ 42.38. The stock is up 10.22% year-to-date and 18.9% in the past 12 months.
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