January 2009

Dear Shareholders:

2008 was an eventful year for Quanex.  It was a year of change for our corporate structure, our leadership team, and our end markets.  First was the spin of our building products division into Quanex Building Products Corporation on April 2008.  Next was the merger of Quanex Corporation (MACSTEEL) with Gerdau S.A., a global steel company.  These transactions created a new company, and delivered outstanding shareholder value.  Our new company, Quanex Building Products ("Quanex"), gives us new paths and possibilities for growth and shareholder wealth creation.

In July, I joined Quanex as CEO, working with Raymond Jean in a planned transition that led to Ray's retirement in December.  Throughout 2008 and the challenges of our internal structural business changes, we saw dramatic declines in residential construction for the third year, and unprecedented turmoil in the global financial markets.  Over the year, the Quanex team performed through sweeping internal and external changes while the Company outperformed in a down market.

As things changes, some things remain the same.  Quanex is dedicated to helping customers be successful.  We achieve this through long-term partnerships, a passion for continuous improvement, and innovation.  We collarborate with our customers to ensure that our collective strengths yield cutting edge processes and new products that exceed the demands of residential construction markets.  Product innovation and outstanding quality and service have been at the foundation of the Company's success today and will be in the future.

We are proud to cater to the needs of the largest window and
door suppliers on the continent.

Continous improvement in everything we do is a requirement for business success.  The Quanex team is dedicated to performance improvement in our core activities that we believe will drive long term shareholder value.  First is safety and health.  We work to be the safest in the industry.  Our team strives to improve the health of our work force through health assessments and promoting health education.  These efforts continue to help curb rising health costs and keep our employees safe on and off the job.  Our lean journey continues under the umbrella of continuous improvement.  We will continue to sharpen our low cost positions through advancements of lean methodologies and Six Sigma quality initiatives.  And finally, we partner with our major customers in improvement activities that drive benefits for everyone involved.

Quanex is in a unique position in the window and door industry.  Through our businesses - Nichols, Mikron, Truseal and Homeshield - we serve a $30 billion market.  Quanex historically has served this market individually through our stand-alone busines models.  Many of our customers want to be served by a single source.  Quanex is in an excellent position to optimize its sales channel to market.  Our businesses will work collaboratively in the years ahead to increase our sales efficiency, our sales processes and to be sure that our customers have access to all of our products, logistical capabilities and engineering.  We believe our combined efforts will help us gain market share.

Construction markets remain in a slump and economists don't see demand returning to normalized levels during 2009.  However, we are taking the necessary initiatives to ensure we sharpen our capabilities to prepare for a rebound of our markets.  We have consolidated operations and reduced labor, but only where and when it makes sense.  Quanex will never compromise product quality or customer service. Our customers are often the leaders in the industry who rely on us to effectively supply their production requirements.  We will continue to expand on the value proposition we offer customer and take advantage of opportnities to grow with them through new and better product creation.  And finally, we will continue to invest in the technologies, facilities and equipment that will enable us to expand both our capabilities and global presence.

Innovation continues to be a differentiator with our customers.  In a world where energy efficiency will be a driving force, we see inifinite possibilities to make building envelopes, windows and doors more energy efficient.  Quanex introduced several innovations to the window and door industry that helped grow revenues and deliver exciting new products.  These innovations include Truseal's Duralite, the most energy efficient warm edge window spacer on the market.  Homeshield's patented door threshold systems seal and protect a home's entry against the harshest blows of Mother Nature.  Mikron introduced MikronWood, on the most energy efficient replacement window systems on the market.  In addition, Quanex is participating in the global growth of the solar industry with the solar edge tape developed by Truseal that seals glass to protect the very delicate, thin film photovoltaic materials.  Quanex's innovation is finding new markets and applications for an energy-starved world.

We end 2008 with a solid balance sheet and have focused the Company to generate cash and continue to invest in the future.  Our strategic direction is clear: we will build our business around our leadership position in the window and door industry.  We are open to growth through complementary adjacencies that make sense for our business and our shareholders.  I am confident that over the next few years, through the execution of our strategy, we will enhance the value of Quanex Building Products for our shareholders.

I would like to thank all our dedicated employees and our Board of Directors for the continued support and contributions.  Great opportunities lie ahead and I believe by working together our Company will continue to innovate, grow and add shareholder value.

Sincerely,

Dave Petratis

Chairman, President and Chief Executive Officer