Shares of Trex are up over 50% thus far in 2016 as investors are finally finding out about the growing popularity of decks made from recycled plastic. “More people are adding decks to their homes, or they are tearing down their existing wooden decks and replacing them,” said Jim Cline, CEO of Trex. “We are 95% repair and remodeling and only about 5% new home construction.” Trex is coming off yet another record quarter. Net sales for the company’s second quarter of 2016 were $146 million, 7% above the $137 million reported for the comparable period in 2015. The company reported net income of $23.3 million, or $0.79 per diluted share, up 24% and 36%, respectively from net income of $18.7 million, or $0.58 per diluted share, reported the prior year. Gross margin was 41.9%, a 350 basis point increase from the 38.4% reported in the second quarter of 2015. Speaking about the input costs for his composite, Cline said recycled material generally flows with the cost of general economic conditions. “We see a purchase price anywhere from five cents to 20 cents a pound versus virgin which is almost 60 cents a pound,” said Cline. Cline said Trex is planning to expand its international presence. International sales currently comprise less than 10% of total revenues. “Trex is very new to the international scene, we just started this in 2014,” said Cline. “Sales are growing at a very rapid pace, but think about the exchange rates. Euro versus dollar has been a big barrier for us, but even with that sales are increasing at a faster rate than the U.S. market.” To get the word out about its sustainable and environmentally friendly fake wood, Trex announced the launch of a national ad campaign to educate the market about the economic and environmental virtues of composite decking over wood. Nevertheless, it’s a market share, not moral, battle for Trex. Every 1% of market share gained from wood will add $50 million in revenue, according to the company.
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