Quanex Building Products Corporation (NYSE:NX) Q3 2019 Results Conference Call September 6, 2019 11:00 AM ET
Quanex Building Products Corporation（纽约证券交易所代码：[NX]）2019年第3季度业绩电话会议2019年9月6日上午11:00...
Scott Zuehlke - VP, IR and Treasurer and Interim CFO
Bill Griffiths - Chairman, President and CEO
George Wilson - COO
- Scott Zuehlke - 红外与财务副总裁兼临时首席财务官
- Bill Griffiths - 董事长，总裁兼首席执行官
- 乔治威尔逊 - 首席运营官
Pete Lukas - CJS Securities
Steven Ramsey - Thompson Research Group
Julio Romero - Sidoti
Ken Zener - KeyBanc
Reuben Garner - Seaport Global Securities
- 皮特卢卡斯 - CJS证券
- 史蒂文拉姆齐 - 汤普森研究小组
- 胡里奥罗梅罗 - 西多提
- Ken Zener - KeyBanc
- 鲁本加纳 - 海港全球证券...
Good day, ladies and gentlemen, and welcome to the Third Quarter 2019 Quanex Building Products Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to introduce your host for today's conference, Mr. Scott Zuehlke, VP, Investor Relations and Treasurer and interim CFO. Sir, you may begin.
美好的一天，女士们，先生们，欢迎参加2019年第三季度Quanex建筑产品公司收益电话会议。 此时，所有参与者都处于只听模式。 稍后，我们将进行问答环节，届时将会有说明。 [操作员说明]提醒一下，正在录制此电话会议。
我现在想介绍一下今天会议的主持人，Scott Zuehlke先生，投资者关系副总裁兼财务主管和临时首席财务官。 先生，你可以开始吧。
Thanks for joining the call this morning. On the call with me today is Bill Griffiths, our Chairman, President and Chief Executive Officer; and George Wilson, our Chief Operating Officer.
This conference call will contain forward-looking statements and some discussion of non-GAAP measures. Forward-looking statements and guidance discussed on this call and in our earnings release are based on current expectations. Actual results or events may differ materially from such statements and guidance, and Quanex undertakes no obligation to update or revise any forward-looking statement to reflect new information or events. For a more detailed description of our forward-looking statement disclaimer and a reconciliation of non-GAAP measure to the most directly comparable GAAP measures, please see our earnings release issued yesterday and posted to our website.
I'll now discuss the financial results. We generated net sales of $238.5 million during the three months ended July 31, 2019 compared to $239.8 million for the three months ended July 31, 2018. The decrease was primarily attributable to a weaker demand environment, mainly in our North American Cabinet Components segment, and inclement weather in the U.S. However, our European and North American Fenestration segments continued to generate net sales growth above that of their respective markets, largely due to price increases related to raw material inflation recovery.
We reported net income of $11.8 million or $0.36 per diluted share for the third quarter of 2019 compared to net income of $10.8 million or $0.31 per diluted share during the same period of 2018. On an adjusted basis, net income increased by 18% to $13.7 million, or $0.41 per diluted share during the third quarter of 2019 compared to $11.6 million or $0.33 per diluted share during third quarter of 2018. The adjustments being made to EPS are for restructuring charges, certain executive severance charges, non-cash asset impairment charges, foreign currency transaction impacts, transaction and advisory fees, and adjustments related to the Tax Cuts and Jobs Act.
On an adjusted basis, EBITDA for the quarter increased by 8% to $32.8 million compared to $30.5 million in the third quarter of last year. The year-over-year increase in adjusted earnings was largely due to the successful implementation of pricing initiatives combined with operational efficiency gains.
Moving on to cash flow and the balance sheet. Cash provided by operating activities was $29.9 million for the three months ended July 31, 2019 compared to cash provided by operating activities of $26.8 million for the three months ended July 31, 2018. Free cash flow generation was strong during the quarter. As such, we generated free cash flow of $25.9 million in the third quarter of 2019 compared to the $21 million we generated during the same period of 2018. This allowed us to repay $32.5 million in bank debt during the quarter and repurchase approximately $1.6 million of common stock.
As of July 31, 2019, we had approximately $21.6 million remained under our existing share repurchase program. Our leverage ratio of net debt-to-adjusted EBITDA decreased to 2 times. As a result of this decrease, the applicable margin we will pay on our outstanding revolver balance decreased by 25 basis points, which means the interest rate, we are now paying is LIBOR plus a margin of a 150 basis points. The next 25 basis-point step-down in margin would be when our leverage ratio is less than or equal to 1.5 times.
I’ll now turn the call over to George to provide his prepared remarks on operational performance.
截至2019年7月31日，我们现有的股票回购计划仍有约2160万美元。 我们的净债务与调整后EBITDA的杠杆比率下降至2倍。 由于这一减少，我们将支付的未偿还左轮手枪余额的适用保证金减少了25个基点，这意味着我们现在支付的利率为LIBOR加上150个基点的保证金。 如果我们的杠杆比率小于或等于1.5倍，那么下一个25个基点的降息幅度就会下降。
Despite softer-than-expected revenues, we achieved another quarter of strong operational performance, which resulted in consolidated margin expansion of approximately 100 basis points versus prior year third quarter. Our European Fenestration segment, again led the way with revenue growth of 9.3% for the quarter, excluding foreign exchange impact, and we realized margin expansion of approximately 180 basis points.
Results for the segment continue to be driven by above-market growth, price increases implemented late last year and improvements in silicone cost for our spacer products. Sales in both of our North American segments continue to face headwinds. Despite the weaker demand, our North American Fenestration segment still outperformed the market with revenue growth of 2.2%, compared to Ducker’s latest calendar second quarter window shipment estimate of a negative 2.3%.
Ducker has recently reduced their full-year calendar 2019 window shipment growth estimate to negative 1.2%, down from a positive 0.7%. During the first nine months of our fiscal year, our North American Fenestration segment reported sales growth of 3%. We also realized 180 basis points of margin expansion in the third quarter. This improvement was driven by price increases implemented early in the year, along with our continued reductions in SG&A.
Now, moving on to our North American Cabinet Components segment. The semi-custom portion of the cabinet industry continues to lose share to the stock portion and we expect that this trend will continue. Revenue declined $6.4 million or approximately 10% year-over-year. As Bill mentioned on our last quarterly call, mainly due to a tough comp, we expected and realized margin degradation in this segment during the third quarter. This was primarily driven by the timing of certain accruals along with lower volumes. Operational improvements in this segment continue to be realized and are helping us offset the impact of a softer top line.
I will now turn the call over to Bill for his commentary on our outlook and strategy going forward.
Thank you, George.
Looking forward, even with the optimism surrounding lower interest rates, we expect the soft demand trend to continue through the fourth quarter. In Europe, despite the continued uncertainty surrounding Brexit, we still anticipate above-market growth excluding foreign exchange impact, as we continue to gain share in the UK and expand our international sales capabilities out of our German spacer facility. We also expect above-market growth in our North American Fenestration segment in the fourth quarter, largely fueled by increased customer outsourcing of screens and increased volumes in our vinyl extrusion operation as new incremental business enters full production.
Unfortunately, most of this above-market growth in Fenestration will be offset by a continued decline in our North American Cabinet Components segment as the market continues to shift from semi-custom to stock cabinets.
As a result, we now expect consolidated full-year revenues to be flat year-over-year. Even with the weaker demand environment, however, we still anticipate further margin expansion in our European and North American Fenestration segments in the fourth quarter and for the full year. We also expect margin expansion in our North American Cabinet Components segment in Q4, which should equate to flat margins for the full year. Consequently, even with softer revenues, we are maintaining the midpoint of our adjusted EBITDA guidance at $102.5 million, but narrowing the range to between $100 million and $105 million.
Based on the seasonality of our business, the fourth quarter has historically been our strongest from a cash flow perspective, and we anticipate that this year will be no different.
Our objective will be to use this cash to continue paying down debt, so that we exit the year with a leverage ratio closer to 1.5 times, while also continuing to be opportunistic with respect to buying back our stock. We expect to enter fiscal 2020 with a strong balance sheet and a demonstrated ability to generate more than $50 million of free cash flow per year, while also adequately funding the capital requirements of the enterprise.
As we think about capital deployment in 2020, depending on the macroeconomic environment, options we are considering include further deleveraging of the balance sheet, completing stock repurchases, and possibly making additional strategic capital investments to support future growth. We are currently evaluating capacity expansion projects in the three fastest growing portions of our business, namely our screens business in North America, our vinyl extrusions business in the UK, and our spacer business in Germany.
We are also evaluating potential investments in new technology to improve the competitiveness and capabilities of our U.S. vinyl extrusion business, and our stock cabinet components business. We believe that our strong free cash flow profile will allow us to fund all of these capital investments while still opportunistically buying back more stock, and also continuing to deleverage our already healthy balance sheet. We will of course have great clarity on our future capital deployment strategy, when we report our fourth quarter and full year results in December.
And with that, we’re now happy to take questions.
And our first question comes from Dan Moore with CJS Securities. Your line is now open.
我们的第一个问题来自Dan Moore和CJS Securities。 你的生产线现已开放。
Hi. Good morning. It’s Pete Lukas for Dan. Just starting out with a quick question on the cabinets. You mentioned the shift from semi-custom to stock. But, have you seen any volume improvement in July and August as the weather has improved?
你好。 早上好。 这是Dan的Pete Lukas。 刚刚开始在柜子上快速提问。 你提到了从半定制到库存的转变。 但是，随着天气好转，你有没有看到7月和8月的音量有所改善？
July and August really carry the same sort of trend that we've been seeing all year. Clearly, the weather got better and yes, we did see an improvement. But, as the comps get tougher later in the summer, it's pretty clear to us now that the trend is going to be pretty much as I just said. We'll see a continued decline in the cabinet business in Q4, I think in line with the market, generally speaking. We have strong expectations that we will do better in both North American and European Fenestration relative to the market although the market there clearly is softening as well.
七月和八月真的带有我们一年四季都看到的那种趋势。 显然，天气好转，是的，我们确实看到了改善。 但是，随着今年晚些时候的比赛变得更加艰难，我们现在很清楚，这种趋势将与我刚才所说的一样。 一般来说，我认为第四季度内阁业务将继续下滑，我认为这与市场一致。 我们强烈期望我们在北美和欧洲开窗的相对于市场的表现会更好，尽管那里的市场也明显趋于疲软。
Got you. And next with relation to EU Fenestration, you mentioned the growth there above the market due to price increases and silicone costs. Are you seeing any market share gains? And if so, do you think those are sustainable?
有你。 接下来，就欧盟开窗行为而言，由于价格上涨和硅胶成本，您提到了市场上方的增长。 您是否看到任何市场份额增长？ 如果是这样，您认为这些是可持续的吗？...
Yes, absolutely. So, the price increases took place late last year as part of the recovery for not only silicone but resin price increases. But, we are continuing to gain share in the UK vinyl segment. And we are continuing to expand our international sales opportunities, particularly out of the German spacer facility, hence evaluating whether we should look at capacity expansion in both of those operations in 2020.
是的，一点没错。 因此，价格上涨发生在去年年底，作为回收的一部分，不仅有机硅，而且树脂价格上涨。 但是，我们将继续在英国乙烯基市场获得份额。 我们正在继续扩大我们的国际销售机会，特别是在德国间隔设施之外，从而评估我们是否应该关注2020年这两项业务的产能扩张。
Got you. And last one for me, with Brexit looming and the pound falling, what type of impact do you expect from each of these two factors on EU Fenestration revenue and margins over the next couple of quarters?
It's really just translation effect. The real impact will be the relationship between the pound and the euro, which could have a direct impact on raw material input costs.
Thank you. And our next question comes from Steven Ramsey with Thompson Research Group. Your line is now open.
谢谢。 我们的下一个问题来自Steven Ramsey与Thompson Research Group。 你的生产线现已开放。
Good morning. I wanted to hit on a couple of the growth product categories, I guess starting with the spacer business in Germany. Can you talk more to the sales and growth and margin aspirations in this business, maybe kind of ballpark, timelines, if it’s near term or long term, and then kind of the investment needed to get to where you’re hoping to go?
早上好。 我想打几个增长产品类别，我想从德国的间隔业务开始。 您是否可以更多地谈谈这项业务的销售和增长以及利润率的愿望，如果是近期或长期的话，可能是一种类型的球场，时间表，然后需要进行哪些投资才能到达您希望前往的地方？
Yes. So, one of the things that we’ve been doing somewhat quietly as we’ve gone through this year, is we transferred more and more of the international sales responsibility for our spacer business out of North America into Germany. Firstly, we have stronger capabilities there. And more importantly, on a global basis, it’s actually more beneficial to trade out of mainland Europe than it is out of North America.
So, we’re starting to see increased opportunities. And if you recall, the spacer is really the only one of our products that we can manufacture and ship pretty much anywhere in the world. The rest of our products have a very limited radius. So, we’ve had an active program for some time now to develop that international business where we’re seeing some benefit as you’ve seen in the results throughout this year. Hence, the consideration, if we want to continue to grow that business as we go into 2020 and 2021, it looks as though capacity expansion in Germany would be a smart thing to do.
Secondly, the other fast-growing portion of our business, again as you see in Europe, is our UK vinyl profile business. We’ve been taking share as some of our competitors have struggled a little bit in that environment. And again, we may consider a capacity expansion there in 2020 going into 2021. And then, in North America, we have talked before about, as our customers in the window business run up against capacity constraints, one of the easiest product lines to outsource is screens. It’s labor intensive and takes a lot of floor space. And we’ve been seen increased opportunities to take additional screen business. That may require some selected expansion in regions of the country where we’re currently underserved. And that’s under evaluation.
And I think, to tie a ribbon around the whole thing, it’s pretty clear from a macroeconomic environment right now, 2020 is likely to be overall relatively slow growth in the residential segment, at least that’s the indications we’re seeing right now. But, there are bright spots that we want to take advantage of. And our focus through this year and certainly going into next year is going to be on the things we can control. So, the segments of our business where we do see growth, we’ll make investments there and anticipate sort of following the market with the rest of that product lines.
And in terms of cost, if we funded every one of these growth projects to the full, our CapEx of normalized around $25 million could reach $40 million, but no higher than that. And it’s not likely that we would do that all at once, that may get spread out over the next two years. A lengthy answer but hopefully that covers what you asked.
Yes, very helpful. Thank you. And I'm sorry if I missed this, but wanted to get a little more clarity on the pricing front, more in the cabinets business with the shift in product categories. How are you approaching pricing, and given the shift in end-market dynamics and the shift in your own capabilities to serve?
是的，非常有帮助。 谢谢。 如果我错过了这个，我很抱歉，但希望在定价方面更清晰一点，更多的是在橱柜业务中随着产品类别的转变。 您是如何接近定价的，并且考虑到终端市场动态的变化以及您自己的服务能力的转变？
We put through price increases last year, late in the year, and some in the early part of this year in our cabinet business. Because of all the dynamics that are going on in cabinets now, consolidation and the shift, we have not pushed for price increases for the balance of this year. And quite frankly, I'm not sure we’d be very successful at getting price as we enter 2020. So, again, we're focusing on what we can control, and going to work on our cost structure and capabilities, particularly, so that we can be more competitive in the stock cabinet segment, which is a relatively small portion of our business right now.
我们去年年底推出了价格上涨，今年早些时候我们的橱柜业务也有所上涨。 由于现在机柜中正在发生的所有动态，整合和转变，我们没有推动今年余额的价格上涨。 坦率地说，我不确定在进入2020年时我们是否会非常成功地获得价格。因此，我们再次关注我们可以控制的东西，并着手研究我们的成本结构和能力，尤其是 这样我们就可以在股票柜部门中更具竞争力，这在我们的业务中占相对较小的一部分。
Thank you. [Operator Instructions] Next question comes from Julio Romero with Sidoti. Your line is no open.
谢谢。 [操作员说明]下一个问题来自Julio Romero和Sidoti。 你的线路没有打开。
Hey. Good morning, everyone.
Good morning, Julio.
Just on the last point, Bill. You have talked about evaluating options for 2020 and potentially for the stock cabinets segment. Could you possibly convert some existing manufacturing service to that stock cabinetry, or does it take a greater undertaking for a new facility or something along those lines?
就在最后一点，比尔。 您已经讨论过评估2020年的选项以及可能用于库存柜的部分。 您是否可以将现有的一些制造服务转换为该库存橱柜，或者是否需要为新设施或其他方面做出更大的承诺？
It wouldn't be a new facility. We're looking at some technological investments in existing facilities. And you're right, some potential conversion of capabilities elsewhere, still in the early stages of evaluation, but at least wanted to get it out there. We recognize this trend looks as always going to continue. And clearly, a high priority for us strategically is to figure out a way to make that an integral part of our business at similar levels of profitability and enjoy the growth prospects.
它不会是一个新设施。 我们正在研究现有设施的一些技术投资。 而且你是对的，其他地方的一些潜在的能力转换，仍然处于评估的早期阶段，但至少想要把它转移到那里。 我们认识到这种趋势看起来总是会继续下去。 显然，战略上我们的首要任务是找出一种方法，使其成为我们业务中不可或缺的盈利水平，并享受增长前景。
Okay, very good. And I wanted to ask about how tariffs are affecting the industry and consequently Quanex. I would assume that tariffs on cabinet components coming out of China would be driving some increase quoting your way. Can you talk about, if that's happening and how that should flow through your P&L in the coming quarters?
好的，非常好。 我想询问关税如何影响行业，从而影响Quanex。 我认为，来自中国的内阁部件的关税将推动一些增长引用你的方式。 你能谈谈，如果这种情况发生了，以及未来几个季度应该如何流过你的损益表？
We are seeing increased quoting activity. But in all fairness, I think it’s driving the business to other low cost countries outside of China. So, a lot of it is really going to move I think to Mexico, to existing cabinet manufacturers’ facilities, a lot of it is moving towards Vietnam and Indonesia. So, as of yet, we have not been successful in being awarded any of that business. And frankly, right now, I think, it's unlikely as this goes to other low cost countries.
我们看到增加的报价活动。 但平心而论，我认为它正在将业务推向中国以外的其他低成本国家。 因此，我认为很多事情都会转移到墨西哥，现有的橱柜制造商的设施，其中很多都在向越南和印度尼西亚转移。 所以，到目前为止，我们还没有成功获得任何这项业务。 坦率地说，现在，我认为，这不太可能发生在其他低成本国家。
Thank you. And our next question comes from Ken Zener with KeyBanc. Your line is now open.
谢谢。 我们的下一个问题来自Ken Zener和KeyBanc。 你的生产线现已开放。
Good morning, everybody. Wow! This is one of the most dynamic calls I think, not only because your businesses are performing well, perhaps better than expected on certain levels, but you’re also talking about reinvesting. So, if I could just take broad picture, I mean, what hesitations do you have, given the slowdown in housing growth? Obviously, our view is that it will be kind of flat to up modestly, kind of both new and R&R. But, what concerns do you have given your experience last cycle with investing at this point of this cycle? I mean, are you basically saying with your German expansion, UK extrusion that you're running at 100% or just about, and how do you balance those incremental sales that you want with what would be perhaps more of an incremental margin drag, as you add capacity and fill it out?
大家早上好。 哇！ 这是我认为最具活力的电话之一，不仅因为您的业务表现良好，在某些水平上可能比预期更好，但您也在谈论再投资。 那么，如果我能够全面了解，我的意思是，鉴于房地产增长放缓，你有什么犹豫不决？ 显然，我们的观点是，它适用于适度的新型和R＆R。 但是，您对上一周期的经验表示您在此周期的这个阶段进行投资时有什么顾虑？ 我的意思是，你是基本上用你的德国扩张，英国挤压，你是100％或几乎是在运行，你如何平衡你想要的增量销售与增加的保证金拖累，如 你增加容量并填写？
Yes. So, trying to take this piece by piece. It's been very clear I think through this year that Europe in general has been a positive surprise all around. I mean, given the political chaos, the fact that that business continues to perform -- and I think it's going to continue to be insulated from many of the things we see in the U.S. We've talked in the past about if there were acquisition opportunities, that's a jurisdiction we will probably look at. Our view now is that investment in expanding capacity there is a better way of continuing to grow those markets. We're not talking about bricks-and-mortar, we're talking about -- and we're not bumping up against 100% capacity at this point. Yes, this is a forward-looking view. We feel Europe is going to settle down and we think all the pieces are in place for us to continue to get growth there. We just want to be ready for it in terms of production capability.
In the U.S., more of the same thing applies. Any potential acquisitions to fuel our growth in North America are few and far between. And as we look at the horizon, it actually makes more sense for us to increase capacity in those segments where we know we can get growth. The labor issue isn't going to go away. So, I think, we can continue to enjoy increased screen business. That will require setting up at least one if not two and possibly even a third screen manufacturing plant. The capital investment there is minimum. It's a few hundred thousand dollars in a lease facility. We may utilize existing facilities to do that. But, there are opportunities for growth there. The harder ones are investments in technology to better position our vinyl extrusion business, which as you know, is one of our more competitive product lines, and the stock cabinet business. And we will monitor potential investment against what’s likely to happen in the residential markets in 2020. We concur with your view. We think starts will be flat or flattish next year. We’re not convinced that there’s a downturn on the way. And when you put all the pieces together, it’s not a bad time to invest in the business and really take advantage, if things continue to slow down.
是。所以，试着把它一块一块地拿走。很明显，我认为通过今年欧洲一直是一个积极的惊喜。我的意思是，考虑到政治混乱，这项业务继续发挥作用 - 我认为它将继续与我们在美国看到的许多事情隔离开来我们过去曾谈到过是否有收购机会，这是我们可能会看到的管辖权。我们现在的观点是，对扩大产能的投资是继续发展这些市场的更好方式。我们不是在谈论实体，我们谈论的是 - 而且我们现在还没有达到100％的容量。是的，这是一个前瞻性的观点。我们觉得欧洲将会安定下来，我们认为我们所有的部分都将继续在那里实现增长。我们只是想在生产能力方面做好准备。
Could you -- within that outlook, is there a way -- now that we have ‘19 guidance pretty much done by quarter, is there a way we should think about growth relative to incremental margins in each of your segments? I mean, usually companies offer 20% or 30% incrementals. Has your [indiscernible] business stabilized enough that we could hear from you some type of guidance in that regard?
你能否 - 在那个展望中，有没有办法 - 现在我们已经按季度完成了很多指导，我们是否应该考虑增长相对于每个细分市场的增量利润？ 我的意思是，通常公司提供20％或30％的增量。 您的[音频不清晰]业务是否足够稳定，我们可以听到您在这方面的某些指导意见？
Yes. I think, as we -- that would be more appropriate I think on our December call. As we talked about before, the reason it becomes difficult is the business product lines, as you know, are completely different. And as we said, the screen business, which is where we are seeing growth, kind of has the lowest drop through rate. Clearly, we’ve been awarded some new business in our vinyl business that will change that a little bit. And so, we will attempt to do a better job of clarifying that as we guide towards 2020 in December.
是。 我认为，就像我们一样 - 我认为在12月份的电话会议上会更合适。 正如我们之前所讨论的那样，正如您所知，商业产品线变得困难的原因完全不同。 正如我们所说，屏幕业务，即我们看到增长的地方，有一种最低的通过率。 显然，我们已经在我们的乙烯基业务中获得了一些新的业务，这将改变一点点。 因此，我们将努力更好地澄清这一点，因为我们将在12月份指导2020年。
Thank you very much.
Thank you. [Operator Instructions] Our next question comes from Reuben Garner with Seaport Global Securities. Your line is now open.
谢谢。 [操作员说明]我们的下一个问题来自Reuben Garner和Seaport Global Securities。 你的生产线现已开放。
Thanks. Good morning, guys. So, I had some technical difficulty. So, excuse me if this was already asked. But, I just want to try to understand your top line guidance a little bit. What changed for you guys from your last guide? Was it predominantly the pressures -- the secular pressures in cabinets or are you seeing a softer consumer and housing outlook, is it a combination of the two? What really was the difference between what you guided a few months ago and what you’re guiding today?
谢谢。 早上好家伙。 所以，我有一些技术难度。 所以，请原谅我是否已经被问过。 但是，我只是想尝试一点了解你的顶线指导。 你们上一篇指南给你们带来了什么改变？ 它主要是压力 - 橱柜中的长期压力，还是你看到消费者和住房前景较为疲软，是两者的结合吗？ 您几个月前的指导与今天的指导之间究竟有什么区别？
I think, the biggest change is that in the Fenestration segment, there -- we have not seen the bounce back in mid-to-late summer that was originally anticipated, particularly by our customer base. And I think that housing sentiment has clearly sort of weakened as summer’s going on here. So, the benchmark we use, Ducker forecast window shipments at the start of the year, that marketing group forecasted window shipment growth in the low-single-digits and is now forecasting the full year to be negative year-over-year. So, we are seeing that. The good news is, because of the things I just talked about, we are actually doing much better than the market in that case. In case of cabinets, the KCMA numbers continue to show about a 5% decline in semi-custom, compared to a 5% increase in stock cabinets. So, we're seeing a continuation of that. But really, the change since our last guidance is the continued softness in primarily the North American Fenestration segment, which of course is our biggest.
And so, in the Fenestration segment, forgive me for not knowing this, but is it possible that your customers built up some inventory in anticipation of demand being better and that's leading to them not necessarily ordering as quickly as they otherwise would have?
I don't think so. I think, the channel remains as it always has. I think overall demand is there. And if you recall, we talked earlier in the year that really the constraint on whether we would see a pickup in the second half to recover from the weather in the first half was really going to be labor. And I think that's what we're seeing now. There’s just not enough labor even for renovation projects as well as new construction to pick up the business that was lost earlier in the year.
我不这么认为。 我认为，频道仍然像往常一样。 我认为整体需求存在。 如果你还记得的话，我们在今年早些时候曾谈到，对于我们是否会看到下半年从上半年的天气中恢复过来的限制真的是劳动力。 而且我认为这就是我们现在所看到的。 即使是翻新项目也没有足够的劳动力，也没有足够的新建工程来承担今年早些时候失去的业务。
Okay. And then, last one for me. This past quarter, we heard some good order commentary from some of the builders. I mean, has anything changed in the last month as you would think that that wouldn't ultimately flow through? Can you guys -- I mean, mortgages rates have come in, I know that there is broader macro concerns, but the consumer seems to be doing okay. Is there anything that would lead you to believe that that trend may not continue or eventually lead to business for you guys as we look into your next fiscal year?
好的。 然后，最后一个给我。 在过去的一个季度里，我们听到了一些建筑商的好评。 我的意思是，上个月发生了什么变化，因为你会认为这最终不会流过？ 你们这些人 - 我的意思是，抵押贷款利率已经进入，我知道存在更广泛的宏观问题，但消费者似乎做得还不错。 有什么东西可以让你相信这种趋势可能不会继续下去或最终导致你们在下一个财政年度开展业务吗？
All I think we can say is, these numbers we just reported are as of the end of July. We're in the process of closing our month of August. And the trends we saw in June and July continued into the month of August. And right now, the expectation is, we’ll see that trend continue into September as well. So, the answer is no, we are not seeing it, despite -- and that's what I said on the remarks here. There's a lot of optimism around interest rates, and mortgage rates continue to fall to an all-time low, driving a lot of refinancing, but it does not seem to be driving an increase in new construction, at least not yet.
我想我们可以说的是，我们刚刚报道的这些数字是截至7月底的数字。 我们正在关闭八月份。 我们在6月和7月看到的趋势持续到8月份。 而现在，我们预计，这种趋势将持续到9月份。 所以，答案是否定的，我们没有看到它，尽管 - 这就是我在这里的评论中所说的。 对利率抱有很多乐观情绪，抵押贷款利率继续降至历史最低点，推动了大量的再融资，但这似乎并没有推动新建筑的增加，至少目前还没有。
Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to Bill Griffiths for any closing remarks.
谢谢。 而且我现在没有再提出任何问题了。 我现在想把这个电话转回比尔格里菲斯的任何结束语。
Thanks everyone for joining us on the call today. We look forward to updating you in the early December. We expect the strong close to the year as we continue to focus on the things that we have direct control over. So, once again, thanks. And we’ll see some of you as we hit the road here in the next few weeks. Thanks, everyone.
感谢大家今天加入我们的电话会议。 我们期待在12月初更新您。 随着我们继续关注我们可以直接控制的事情，我们预计强势接近年度。 所以，再一次，谢谢。 在接下来的几周里，我们会看到你们中的一些人。 感谢大家。
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone, have a wonderful day.
女士们，先生们，谢谢你们参加今天的会议。 这确实结束了今天的计划，你可能会断开连接。 每个人，都有美好的一天。
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