Recently, NCI Building Systems, Inc. (NCS) reported discouraging financial results for the first quarter of fiscal 2010. Revenues for the quarter contracted by 29.8% year-over-year driven by the decline in market demand as well as decrease in steel prices. Revenues reached $182.9 million, down from $260.4 million during the same period of fiscal 2009.

All the three segments reported significant declines in sales. Engineered Building Systems sales fell 32.7%, while Metal Components and Metal Coil Coatings segments posted sales declines of 28.5% and 6.0%, respectively.

Cost of sales declined 30% to $149.7 million from $213.8 million, due to a decline in material costs and strict cost control initiatives undertaken by the company in 2009. Consequently, gross margin expanded to 17.6% from 6.3% in the year-ago quarter.

The company reported a negative EBITDA of $2.6 million compared to an income of $1.6 million during the year-ago period.

During the quarter, the company incurred a net loss of $18.8 million, an improvement from a net loss of $530 million during the first quarter of fiscal 2009. The loss per share came to $1.04, compared to $136.32 in the first quarter of previous year.

Loss per share was adjusted for the 1-for-5 reverse split, which was effective Mar 5, 2010. Thus, the weighted number of shares outstanding after being adjusted for the reverse stock split, was 18.1 million compared to 3.9 million last year.

NCS used $19.2 million cash in operating activities versus $30.2 million in the first quarter of fiscal year 2009.

Currently, the company is witnessing a sharp decline in demand for its products due to weak non-residential construction activity. Last year, NCS completed the recapitalization transaction with Clayton, Dubilier & Rice Inc. Their equity investment has prevented a potential bankruptcy and positioned NCS to survive the current economic crisis.

We maintain our Neutral recommendation on the stock.

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