Component supplier Drew Industries Inc. pointed to the effects of higher material costs and continued weakness in its core markets as the White Plains, N.Y.-based firm reported a 77% decline in third-quarter profits.
“The current economic environment continues to be extremely challenging,” said CEO Leigh J. Abrams. “Declining real estate values, lower stock prices, volatile gas prices and the lack of credit have made consumers extremely cautious, which in turn impacts the housing market and purchases of discretionary big-ticket items, such as RVs. In response to slow retail sales, RV manufacturers have significantly reduced their output.
He added, “Despite these conditions, we have remained profitable throughout 2008.”
Drew, parent to RV and MH suppliers Lippert Components Inc. and Kinro Inc., reported net income during the quarter fell to $2.6 million from $11.1 million a year ago. Sales in the period, ended Sept. 30, declined 28% to $124 million from $173 million despite the July 1 acquisition of Seating Technology, which added $7 million in revenue.
For the nine months, net income dropped 37% to $20.9 million compared $33.3 million in the year-ago period while sales were down 18% to $434 million from $531 million.
Drew’s RV segment reported third-quarter sales of $86 million, down 33% from $127 million the previous year, while operating profit declined 73% to $4.6 million from $17 million.
“We expect that conditions in the RV market will not improve in the coming months,” said Abrams.
President Fred Zinn noted the impact of materials costs would continue to factor into fourth-quarter performance.
“Our raw material costs have recently declined from their peak levels, largely due to the global economic downturn,” he said. “However, we still have higher-priced raw materials in inventory, which we will be using through early 2009 based on current sales levels.”
Zinn said despite current conditions, Drew remained in an acquisitive mode while implementing cost-cutting measures to offset market weakness.
“With our strong balance sheet and solid cash flow, we continue to pursue expansion opportunities through market share growth and new product introductions,” he said.
Zinn also reported that Drew had received an order to supply components for more than 2,500 park model homes being purchased by the Federal Emergency Management Association (FEMA) for disaster housing.