Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Encore Wire Corp expects an already strong US construction market to improve its volumes and sales in 2020. In anticipation of increased demand for its materials, the copper and aluminum wire maker is implementing an expansion plan over two phases.


According to Daniel L. Jones, Encore’s chairman, president and chief executive officer, the plan will cost the company $85-95mn this year, $70-90mn next year, and $60-80mn in 2022.


Phase one of the expansion is slated to begin in late Q1 2020 and includes constructing a new 720,000 sq ft service center in the north end of the Texas-based company’s campus, which will strengthen its customer service and order rates. Phase two, which will be completed by 2022, will see the company’s manufacturing facility expanded to broaden market reach.


In 2019, Encore’s copper spread contractions and tight margins impacted copper wire sales, especially during the fourth quarter, according to the company’s earnings report.


Encore’s 4.1pc increase in copper wire unit volumes was offset by tight sales margins and competitive pricing. The company’s copper spreads—the difference between the price of copper wire sold and the cost of raw copper purchased—contracted by 4.9pc in 2019 from the year prior. In Q4 2019, copper spreads decreased by 11.2pc from Q4 2018.


The company’s net sales in 2019 dipped to $1.275bn, compared to $1.289bn in 2018, due to tight competition and margins, which saw the company’s average selling price of wire per copper pound decrease by 5.8pc. In Q4 2019, Encore’s sales fell to $302.3mn, compared with $319.7mn in the corresponding period of the previous year.


The company’s gross profit for the year fell to $35.75mn in 2019 compared with $53.22mn in 2018. Its net income dropped to $10.53mn last year, compared to $25.03mn in 2018.

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