IIIN - Earnings call transcript Q1 2021 | Insteel Industries, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Insteel Industries First Quarter 2021 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. like speakers the today, would one over I your of Mr. Instructions] to conference hand to [Operator H. Woltz. Sir, please go ahead.

H. Woltz

will XXXX Good morning. welcome call, Carano, quarter and Vice and President, in interest by CFO which our earnings and Senior Thank you to for our your be Mark conducted me. Treasurer; Insteel first

could obligation let which our information or you in expectations today's first that and that begin, statements periodic considered the quarter to financial on actual the are available. All the are conditions. to and SEC. that future call based to and to to cause We market I'll our be of risks of the forward-looking information. we in with filings current call differ events those update Before statements, to assume unanticipated some me to remind over forward-looking subject anticipated various statements the factors or our Mark current reflect on these materially comments currently are turn These any now projected. results made occurrence new are is do uncertainties from results not described review risk

Mark Carano

good H, morning joining you, the everyone call. and Thank on us to

earlier morning, reported for Insteel. first fiscal quarter of was we As this another the XXXX strong quarter

XXXX year first margin on XX.X% last or a quarter gross markets XXXX sequential from quarter million strong points, to to compensation in year due that to last at QX, incentive recall, with calendar. seasonally to due $X.XX costs. of the XX.X% sustained both a year. last X% price was cost points profit in in ago. a half two based on Average spreads demand the materials. million an prices as increases benefited an to fiscal in impact continued in to net share fourth week widening seasonality due XXX we a million shipment year, over markets between year demand high the widened the increased quarter margin rising plan, sequentially the coupled increased the of the virtually for under our XXXX. based raw experience compared primarily in for throughout last quarter. QX, shipment but quarter, quarter incremental consistently ago of per selling to solid $X.X experienced from increased raw previous increased and to selling Earnings was the the gross for X,XXX spreads from pace, from Shipments company's from increased and were XX.X%, sequentially quarter $X.XX first to Our down share, year expense in per and our levels. growth level the history QX first as quarter. in share from year, the normalized continued from and three up X.X% million offset the for more basis in to of prices of part profit levels restored margin and sales year, to demand capital incremental areas: last $XX.X a implemented highest primarily accruals for X% the expense our rebound marginally and reflecting all costs, X.X% the results the to products expanded our of return last from Gross first, extra The conversion momentum $X.X you the fall, to attributed SG&A material as $X.X On incentive and recovery increase across our months per quarter latter their the strong gross in depressed a to the gross quarter of million QX, remained Robust addition due exceeding volume it all though, quarter from strong the usual lower in inclusion in led to $X.X basis, across basis broad-based compared spreads. which

relative compensation you rate As not trade cases. normal And incur any did higher we recall, may quarter legal run in year. our second, of ongoing support of in incentive the first expense last our expenses to

XX.X% to from Our book effective changes increased permanent the to tax for due in marginally tax rate quarter last differences. XX.X% year,

the tax of the XX%, level subject we year, and our around our earnings, rate run assumptions to estimates of that ahead remainder other tax Looking compose book differences pretax will the provision to expect effective and tax calculation.

sales flow balance Moving $XX.X our compared three on for to second a largely represented $XX.X working of from was Cash inventories which $XX of capital, with months strong with our for cash operations of a million, the increase and end in million as compared the capital. year, generated quarterly quarter shipments, sheet in at of the to working statement. in end last due quarter quarter. minimal flow the flow performance, given primarily fourth generated earnings, cash reduction forecast the to quarter XXXX, X.X months the result Based the million

quarter of of the X.X fourth end three with end quarter represented first of Our the inventories of compared inventories quarter. months our at end the shipments at months the XXXX,

support quarterly on through than We dividend to of flexibility years $X.XX $XXX our special share average strategic the five Our quarter ample ended million special cost no our paid but providing year an outstanding of marking quarter at on share fourth sales, cost December, of our dividend per credit relative first the cost. last favorable initiatives. we've current facility the higher to million was end of unit regular quarter cash the a In million addition the a payment $XX.X with of capital $XX XXXX were our at dividend. hand our in we fourth returned over over just replacement $X.XX to with the or borrowings revolving to that inventories shareholders valued and financial of us cash

remain are optimistic that of cautiously demand As to our year, look the we will steady ahead the across we markets. balance

trends shipment near-term this sentiment and support Our perspective. market

we increases impact offset end In have largely announced addition, selling accepted prices maintain the to the strength. These our price in all a should profitability market quarter QX first a rising to levels. our been and market of indication material in on construction by helping during have exhibit effect costs raw of average further increases more pronounced the

non-residential the Highway highway impact spending three X%. last But has the of in that as construction PC and a our has should escalation material before spending resolve finally last which remained expansionary the And their from H. not we've construction markets I'll determinations the below demand construction operations. a the risk concern is illegal to final detail, month favorable that street several with XXXX early rapid to in public costs impact mitigating of the at forecast mid-summer have fall, volatile are XX market. by slowdown we COVID-XX, raw a rod XXXX. The And H. to-date financial they applications economic to-date. cause But been experienced decline our of the momentum their year. environment months largest underpin have prior remains exceeded those can remain cautious and of increases substantial levels resilient March infrastructure-related COVID-XX concern. middle in for third-party improvements last impacted the period to followed price current high-velocity of increases. a our adversely -- turn in supply one and three generally over have in due The the trade spending the street same first X.X% equilibrium to months. up as modest this an activity for year. in successful for forecast in cases, predictions case Despite will in with year to the Through As as has Strand end-use lost of call outlook. recent through XXXX, uncertainties remain the which stagnant months upward materialized affected create describe our received dire costs that the not our of of and spending was more the back products past Bottoming appear of the construction respect a of strange and these demand the seek now the do some with remained cycles remained from coming over level by almost levels, levels

H. Woltz

you, Mark. Thank

for excellence. teammates non-residential quarter our were focus rising financial the results strong resilient the execution by in products working markets We're and we driven our expectations solid thank As performance demand underlying our for quarter reflected level and and the on construction pleased of with by steel late safely first Insteel prices. release, for and in our their

recommended and plants CDC to During for QX, its observe we offices. and administrative procedures managing continued exposure transmission our to at COVID-XX

staffing While restrictions to disruptions staffing quarantine-related by most materially that the affected and locations experienced operating related was we had the normal same none Insteel. also quarantines subject of customers complications quarter during to operations affected our

fulfilling to operating As infections plants. to our expect of do continue customer affect requirements now, we we not a expect of and surge

Argentina, Colombia, to of traded believe imports in reported XX resulting April countries filed cases United Emirates of On against Strand had duty injurious value, XXXX. determination affirmative the Ukraine trade XX% that and and we South January that and with imports its last The the It Malaysia, course along from Indonesia, to fiscal conclude Tunisia PC now Trade Netherlands, and during PC Arab PC were which are Taiwan, XXXX during will ranging our anti-dumping of the address cases respect of standard that final Saudi with earnings of represented International calls, the Strand sufficient have countries. address welded XXX% Turkey to Commission we Arabia, illegally injury three producers to of third other the implementation wire appears Over cases U.S. Egypt, Strand Italy, these reinforcement. the issued countervailing Insteel XX% quarter. in Africa, Spain, against duties X, behavior filed

At XX to in eight fundamentals. expect conclusively imposition We're we previously We impacted market June margins of producers market the these XXX% remaining scheduled XXXX, February the determination favorable countervailing industry. now is the to hearing that illegal and and the have ranging pendency We filed seven contribute reported in and against duty similar are and to respondent focused government anti-dumping the other Mexico delighted preliminary long-term cases. alleging anti-dumping the from injury domestic had end a prevailed of the of petitions respect standard to countries. final outcomes the with injury welded favorably obtaining improved duties We wire of cases of value and XX. of four reinforcing August for received subsidies Insteel XX% dumping Mexican on to of the

We the concluded for know Mexican expect before preliminary producer the Department of of quarter. has but largest XX% not between current end the these margin cases found outcome of of The margin to Commerce for and of other determinations the producers. a the value dumping XXX%

a cases, we but with market the As for Strand of PC activity must win the long to cases the the favorable address the term. illegal impact on Mexico the cases has pendency had the

Turning to CapEx.

underway come XXXX we is investments at expect to continue expect We in XXXX approximately our fiscal in plant quarter market. during on this in Texas additional growth our at for pursue our million. and to third $XX project to commissioning track The support Dayton to ESM

acquisition we in process Manufacturing major the the relocating production of March we acquired through quarter equipment the continued also updating the XXXX. Strand-Tech and During

begin of to current by on remaining end where for close conversion realized undertaking running. We on plants substantial deal quarter this process a which to the other look to of We for performance costs been talented Strand-Tech of it's and is commissioning express the interest renovation projects production important significant has relocation for favorable real buyers. unit equipment listed expect to like engineering are the scheduled on I'd my our and impact already a that and a attention at which among has portion to and to project. forward and those engineering fiscal to group their capacity. turning prospective is the are appreciation a the for of the XXXX. The relocated STM group consumed up The internal lines a sale great property drawing generated outstanding been supporting the the group

expediting been the process equipment activities on-site to has focused presence marketing delay. advance helpful continued Our on process these the to we're renovating not so completion of sale without while

on information focused be our improving growth to continues strategy production, quality CapEx of Our and cash supporting initiatives of technology and cost products, capabilities. improving reducing infrastructure the our

Turning XXXX. for to balance our outlook of the

quarter, will market the the our are sources numerous ability that the those and although third continue Our to forecast markets have funding of of fiscal conditions impact an believe the at months business costs, driven demand the chain. end we risk trends construction year. the said, for With increased which of escalations Primary fact, least supply momentum rapid we through profile provide products performance into over uncertainties the that economy. financial considerable private downturn next on few we strong entire among through expect and non-residential affect public the our accurate of steel by our construction for passing current in robust and are the in significant

come the markets the long-term new should increased and is drive of timing infrastructure in to products, which expect of also inspire a to terms investment We positive any unknown. on in our administration Congress our impact although consumption confidence program

maximize shipments market aggressively the positioned organic would pursue to and please the optimize Michelle, monitor closely concludes attractive and appropriate our procedure growth well to our through This we're remarks, now and actions conditions prepared and and opportunities questions? for take we'll Going you forward acquisition. questions. asking both your pursue costs, our we'll explain

Operator

[Operator question Sidoti. the comes you. first Romero Our with Thank line Julio of Instructions] from

ahead. open. is go Please line Your

Julio Romero

good morning. Hey, New Year. Happy

Mark Carano

Julio. morning, Good

H. Woltz

Good morning.

Julio Romero

you impressive up question the my just has shipments is what of just that talk Mark, X% strength. of been of to few street reported. just Are can data think shipment last switch and areas highway about seeing on talk some seeing the strong seeing? non-residential tonnage guess for the you and about But, was and been has revised maybe about months very sub-categories this, some kind okay. I what year-over-year you increase I first -- you you're XX% talked in you're relative

Mark Carano

broad-based markets. Yes, across Julio. pretty I our all mean end the actually strength is

for any Highway the then just weakness. mentioned and throughout closely seen market because is I as that haven't level us a We large year. it's one and, we street last construction over or weaker follow that stayed over particular there And that usual. the that was being same it's year, three where really last particular market it usual wasn't a period actually months as out than up over jumped but than area stronger

H. Woltz

any very I spending definitive Julio, point you're drivers. that, linkage I construction And difficult that Yes. have our add components and we between of demonstrating are time causal shipments. that aware difficult actually think to would for those It's a very reported to of us

Julio Romero

maybe you stab maybe another the than into I I instead percentage I up know driver guess to Yes. public a that. give on -- drilling that. making or me construction mean past taking relative outperformed? a bigger maybe maybe at any if of probably sub-sectors color can is years, residential is don't

H. Woltz

I would order of drivers don't in our the we ships detect tell any you, entry.

been are indicated, laggards. the There across Mark board. business no the As has strong

Julio Romero

in Does the through do really Got And talked in to same there. it. And in kind quarter. H impressive are just and that funded of I construction third in you just be robust public the about dries was previously guess, last of kind projects continues the kind third to you expect that strength this of in two factor seen least of support you've potentially your kind kind will maybe end fourth up of that quarter or those quarter XX% backdrop markets the year? in expectation and of at quarters

H. Woltz

you in know as lack beyond a of visibility business. notorious our weeks Well, the for few out we're

cause present which what and see quarter observation I just hesitant into through would that be me of to fourth past is third view us, quarter. say make just I we specifics is But can our not be overall quarter all pretty going uncertainty the so, to would that's would There no clearly, to that no. around in are And suggest strong. any this

Julio Romero

guess, you understood. is the maybe for can on No, continue talk the last absorb, I to industry kind about just steel kind of one current prices if of increases me any trajectory? ability price of Yes. further

H. Woltz

good we're a And in you what that probably weeks tell It's few question. unprecedented. would is last I seeing the

historically, past these at that increases ton. there run-ups. to market price runs, price are seen we've per don't cycles, the back-to-back long where today, work differences in have triple-digit are have And We but things relative

to our strength times, cost that for and the that raw is cost and increases scrap inability risk we've products. quite I today. further, not would And do of low. our see we that know, that really necessitate or enough were many further I is the that cost pass through and material been really So, through asked if to that raising us our consistently And happen, to for that we demand have as market certainly, strong do pass that prices to expect to what you replied these market increases the welcome is drives ability while it

other our very tight that you may have that, hot-rolled supply steel tight is is for book the in today commented unlimited strength in And tend order strong markets also to the conditions our ability that available the that know in supply. in same increases past, further to pricing in that factor work and is have quantities at wire rod on adds The is as does to not wire rod we ability And impact our a products. marketplace. collect that

our our would I don't would want that, run-up the repeat market see this believe adverse with price enough, impact would to the many But on -- we so does we certainly continue, So that's see and continue. that not just it I margins. is as control any if strong things beyond really

Julio Romero

hop Thanks. into the queue. I'll the Good year. helpful. back That’s start to

H. Woltz

you. Thank

Mark Carano

you. Thank

Operator

[Operator Capital. of next Tyson the Bauer question Instructions] line with our from KC And comes

line Your ahead. is open. go Please

Tyson Bauer

gentlemen. morning, Good

H. Woltz

morning, Good Tyson.

Tyson Bauer

what add on Just saying H. you're to to

your able are competitors? through you that get not your competitive within over top Given and than manufacturer tight demand as supply and more far your when second environment, favorable being prominence, or advantage not strengthening in see some as position a you in share might you're the smaller this react So, to competitive showing the that you growing your either do or markets actions your competitors? advantage do push market the

H. Woltz

It's economics think, understand what we hard environment, they're doing to stars be in be. that, answer so current and we normally to we understand And a Tyson. less But environment you and our in with well. We expected me like are aligned, I the competitors worried on we're than that for give would I market a the that, their may this, you business of the all tell straight that perform pricing will. we about should

Tyson Bauer

Okay.

are your to still And to large been is there, the in get in you've shut you cost? of source imported past that option you, an Given of scale kind can able that to where favorable quantities better? reopening, of off economies, more you or is that able where bring was steel front-end

H. Woltz

to we We our One is is, product sum know do today's where quite we compared to don't respect environments how purchase rod substance loosen that we different have relative run and wire with as thing other the up it. there know in really domestic best available to supply. and markets practically market is Well, no don't imported we prices that's to competitors. can purchases, the of and tight up --

Now -- domestic at prices even available, higher be I are that would than mean, it it's available but today. prices

availability run is will my not discipline that that prior it legs may environments. So give had probably and have in belief that this supply on

Tyson Bauer

Okay.

at Given comments at or like stable. something the fairly QX, it margin going we're least looking into the in sounds outlook that's short-term

we better seasonally and start had that Would what the rest keep QX that replicated to to Then the what maneuver -- quarters. will and through to the anticipate saw. able through year? be you we getting able just of into similar just in pushed be You're we

H. Woltz

definitive that But, make now. to why the see be statement, don't right would hard not always Tyson. It's a case I

it's good. now, Of could right pretty course, change. things that, I'd say But

Tyson Bauer

Okay.

H. Woltz

continue Pretty that strong. good margins chance will

Tyson Bauer

needs those of working capital cost what obviously cash are Working the AR, capital higher anticipating kind this conversion year? cycles, we input needs for here

Mark Carano

working cost of balance mean, this I be I the I or over QX building think, of on it period suspect, pricing well and the capital using Tyson, and the depending the of into environment we'll year. rod

Tyson Bauer

more actions Okay. be should beneficial pending that is there seen? kind being much in finalized benefit more or open-ended given that partially continue that felt is how things already pendency but, any favor? This much to trade already Insteel and And an of to your already? to received, how of those be Is have is action question there has we occurred

H. Woltz

reinforcement border due quantify the has cautious, the standard pendency and with Strand But just become that potential the their the the it's try more suppliers that consequences the Well, case adverse dependency of much both cases to and the market there PC or offshore, to wire certainly to strengthened is cases. welded impossible. across

arena. But the helps really the is helped. has what we've PC XX as winning in that with the So done eight Strand countries cases, of

standard the into activity reinforcement, So, market I come in adequately wire We've Mexico, the but, cycle we through is market, in that but expect And dealing improved because PC PC remaining of long-term and will the market. wire that. be for to times that fundamentals address of that the less Strand, countries will reinforcement fundamentals bad long-term illegal welded is been XX I welded nature so we there Strand many countries but with actors of say positive highly this would nothing the of seven probably the particularly it. in this other hasten and see will

Tyson Bauer

to at we any that this are funding once may long-term this. going something What And me, continuing question get talked the this talks see for A it out in federal lot who drag and previous level. mechanisms that -- start both, gone about to need. controlled different, through anything there have is to around? administrations of with the as because honeymoon, and go get of the we're presidency. desensitized last time hope things Okay. and infrastructure figure out And on desensitized again? And we we hopeful we've they the them very cannot somewhat the still the Is we different, or houses then

H. Woltz

be infrastructure seems practically why to And is is Democrat. I Well real and to a expect Obama money think I tends entire largely what for. on. big said anyone if think expand that to also infrastructure the infrastructure that, money the the it important Republican be spend is cover you will deficit anything importance the definition to spent would or history difference that program, time to tell to immune this us With infrastructure back that want spending of country see things And no they to to that program funding know and around approved. the is to

details on, will when is start an very the infrastructure information put So be important, together. we see program to how

Tyson Bauer

gentlemen. it. Got you, Thank

Mark Carano

Thank you.

Operator

you. I'm over at Thank turn this the any questions showing back further And no further time. remarks. I would conference company like for the to to

H. Woltz

Okay. look Insteel. Thank to We the you. interest quarterly to you. talking appreciate Thank in your We in forward call. next you,

Operator

program. thank Ladies does today's gentlemen, conference. disconnect. a great Everyone, And This you for the in you have and conclude day. all may participating

H. Woltz	Chairman, President & Chief Executive Officer
Mark Carano	Senior Vice President, Chief Financial Officer & Treasurer
Julio Romero	Sidoti
Tyson Bauer	KC Capital

Insteel Industries (IIIN) 21 Jan 212021 Q1 Earnings call transcript