IIIN - Earnings call transcript Q2 2021 | Insteel Industries, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Insteel Industries Second Quarter 2021 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. H. CEO. and President Woltz, ahead. go Please

H. Woltz

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

from differ we me and are that to that actual subject various risks our remind Before which projected. some made are driven could comments results in statements performance those the begin, be prices. for presentation our risk forward-looking let uncertainties, cause in are you The described of steel materially SEC. was escalating demand our factors the with considered to our We're to periodic and reinforcing by that second filings strong underlying pleased products with quarter

both fiscal year. through through quarter our We to continue the third the of expect and trends end likely

sufficient accounting impacted replacement together typically then first-out back to our the in method. consumption inventories financial implementation of discuss strong results Here and of of with business environments increases are recover and escalating company's for raw by lower-cost materials, going the environment, the for call the to first-in, it our to over pricing, the comment to results the under quarter macro outlook. the on I'll turn pick Mark favorably and the demand to price I'm costs higher our up

Mark Carano

joining us H, everyone you, morning today. to Thank and good

strong last inclement Average sequentially costs. last of minor of States. and X quarter recent historical in first QX to On increased the second expanded margin production progressively and more for is material stabilize. earlier some relative share. points, of for Chicago margin the and quarter consistent footprint margin in XX.X% increased near was rising at earnings index. profit over relative has demand ago, rod supply incremental selling quarter wire quarter for in XX% the from United end over which market shredded normalization the to between the months than while some reported primarily X.X% escalating an substantial raw a months for during and half per million resilient material a very this expect last for in posted to of demand Shipments has widening QX. strong gross and or $XX.X $XX million, across than shipments. prices price offset from results increased primary robust to due Gross XXX U.S. month Texas of increased rod margin outpaced $XX.X the products, in year. during from through due The this, the quarters, as and throughout per once to latter $X.XX more gross of reflecting raw quarter increased sustainable a much the costs both declined would tripled prices diluted Gross incentive the our by again, for has more to million price increases. last X.X% largely prices XX% for Volume due of basis term, to remained and spreads and spreads underlying widened under the rod driven rapidly result middle we of As results reinforcing strength increase wire of XX.X% expense average the continued the widening Insteel in sequentially share our year the supply widening broad-based XX% become success a X the the benchmark X our to year was gross profit price The material we the To the and SG&A $X.XX in to of leading on increased increases spreads and to quarter our high quarter higher input $X.X from raw basis, selling the consistently from overall our Gross X.X% period. million sequential driven costs from each increases concrete weather chain. the quarter, from of growth percentage disruptions the in million $X.X increased passing and Net million the demand scrap, quarter, to during given rising capital-based products and from but reinforcing last exceptionally results, X% strong add of as constrained year sales or second this morning, year. a its costs. by year compensation primarily prices the selling implemented all by a quarter above cost ago, return plan from of the the remained despite during the steel perspective $XX.X

incentive you second in recall, As we last incur quarter expense not of did year. compensation may any the

legal policies. $X we to costs the addition, cash of partially a by And rate expenses life change support cases. In offset value ongoing our continue normal million were run in insurance these surrender favorable of to relative our trade incur higher in

XX.X% in from tax changes marginally in connection to to XXXX quarter tax year book XX.X% discrete effective CARES permanent due with last the Act. rate recorded Our benefit tax increased QX in differences for the and

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

the the million of working end flow with end and quarter second with $XX.X earnings XXXX, flow to normalized quarter of market working cash generated referenced compared our million. due inventories first largely statement. forecasted our supply capital, are to inventory of the levels of balance from has earlier Based the when million, which levels, sheet the minimal represented in capital to tight strong shipments increased year operations on quarter as Cash quarter. The change the using performance, third X of last Moving at a months quarter. the $X end net the shipments impacted quarterly trending $XX.X for given our compared at months for forecast below X.X sales

our million $XX.X us the at on facility, on with of no initiatives. or second just end inventories providing at per over revolving remain relative share support replacement XXXX the flexibility financial outstanding cost higher our hand quarter concluded current quarter than credit quarter with $XXX We of ample first to million of cost Finally, borrowings was costs. of unit and $X favorable that cash were average sales our but strategic valued our an to

optimism ahead, steady the our increased our in Looking has experiencing are we given demand markets.

pandemic quarter, trade in XXXX, the street ABI largest X% XXXX, order have markets levels to XX-month of book with rebounded and last year have will third the continued annual standard in the shipments typically steadily X for of strong, forward. of the with on upward a indicators prior over and it and level favorably would since indices in markets construction, the February products to welded average in to finally key the early more period H the still trending have par respect the since highway X are XX received market these and our have going through Spending last private harbinger the remained above the March And of have XXXX. determinations has the years. strand consumers detail, PC trend through to spend growth above the not XX as forecast Dodge cases, be and of over leading start one we Both like our cover remained and start comparable construction nonresidential we in the next levels. should like February months. the Although been wire which in favorable in seen Recent areas impact months remains

uncertainties COVID-XX last -- us, not it the months. uncertainties negative of impact behind are COVID-XX our the from operations seen over while XX the and With limited have markets of

within not term. To rod in steadily facilities longer the does back near incremental raw costs be cost to few although actively remain across I'll this With finally, appear we footprint, the we've markets next inadequate date, an our the the H. the pose the a escalation With and we over that, to over any certain these call vaccine for trends is and tight successful And turn material manufacturing sign in abate area will no supplies are have this nation, been quarters, operations there any X adverse those rollout plant supply environment material at the passing chain, now impact on months. could that managing progressively as risk will contained risk. an the hope rapid supply and across through

H. Woltz

Mark. you, Thank

steel As markets strong products with escalating and were their our financial reflected execution nonresidential Insteel by and robust in we our the performance, release, quarter for prices. We're results second for working solid on excellence and thank the our construction our pleased safely. driven focus teammates underlying demand and

expect through of finances in the strength driven our we fiscal e-commerce nonresidential activity market. Looking improved the distribution, of the construction continued with levels private at year, local significantly market out and segment public end by the state together elevated

agree our on and mesh be and we We nationwide. expenditures, administration any an are expanded the our project particularly where on are growth initiative difficult gratified although we markets. products markets recovery we the cast-in-place serving our and to COVID to expect engineered federal impact structural capabilities significant infrastructure the by scale Congress our by of to expect technical applications, have its favorably Increasingly, in impacted timing for and it's markets

times months, prices tight. also products has robust supplies over reinforcing are extremely stretched escalated sharply significantly, demand lead X rod last the our While steel for wire and have

to continue all expect and strong markets and due period. upgrade quarters steel constraints outages several maintenance deliveries, pricing demand of in rise, to and at planned to during end the and timing to potential the fourth scheduling-related facility practically we uncertain this during expect supply third to inefficiencies related rod wire driven mills experience We by

capacity we escalating costs. escalating are Until experiencing costs of more Additionally, is we a and throughout chain. transportation the supply expect robust opportunities, the our competitive truck support we develop chronic demand market sharply shortage passing to experiencing flatbed sourcing

to CapEx. Turning

come current to commissioning on million, mesh We expect market. our to XXXX project the in at in expenditures. quarter, Dayton, growth certain The additional support plant Texas to timing engineered XXXX structural expect we to planned continue during is of approximately in $XX to for track and pursue subject at our investments this underway the

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

restrictions, progress by have been affected Our availability COVID-related of European commissioning adversely has technicians. which travel slowed the

favorable to like it looks March, now June impact all up operational on the by relocated relocated the we it plants had we equipment of costs up a these conversion will is be already and wrap where lines running. at unit up While expected projects. production We're be realizing the end before and

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

XX with last with of that XXX% and cases antidumping Over this against XXXX. final PC filed margins month, we The of ranging remaining X address X PC believe had dumping XXXX January -- and its wire increasing to company company implementation attorneys. Commerce their our of advanced the that every affirmative PC the to had XX% the countries. from for determination Earlier strand The ranged calls, we every company Commission XX% course of margins these countervailing strand respect on duty and the and traded and sufficient duties Significantly, April several address that X reinforcement. final countries informed which XXX% we deadlines. margins X% based extended -- we've of targeted. on On country in behavior PC levels Trade the resulting us from to Department economists imports injurious obtained in International arguments during final other countries preliminary calculated illegally of X, to from strand standard by every imports are of every value, U.S. producers, injury issued reported represented with the filed strand to welded were Insteel, earnings along cases cases

be markets the of already positive case cases U.S. have raise or in in orders a the the over to margins in of the Because the place that exporter illegal time, they certain to in markets substantially on order lower our never risk is higher will the the exposure, case retrospective While after has impact the misbehavior had system its margins. dumping of serve duty fact. U.S. U.S. market, deter except behavior market in a and of can in

of the before XXX%. affirmative producers wire the duty remaining In antidumping cases in the affirmative decisions In May. of each with March, duty petitions countervailing duties to end be X standard to other resulting We the ranging expect and strand final X Mexico. to against respect June determination in cases Insteel rendered we received from of cloud and welded reinforcing countervailing X% XXXX,

with We the PC we're welded and expect dumping June, antidumping has of of will dependency to the the the on impact to the And the strand favorable final cases cases preliminary middle standard margins final. of a respect determination had cases, XX% wire with optimistic the by XXX% as reinforcing that market. become

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

Operator

have Romero. First [Operator we Instructions] question, Julio

Julio Romero

just to the also the going you on market? vertical think to res? of trends. demand speak you're that to trends And then mentioned does robust? prepared seeing be speak the you're secondly, to could maybe what is you structure in I on Can continue question your remarks. horizontal And portion seeing demand be you First in e-commerce non

H. Woltz

last not and larger distribution extremely robust over over as really but The category year. Yes. been just the distribution e-commerce, -- a has

While to research front going it's know out indicates run it. a it of difficult that has how long to going pan our in forward, it's

we to And there. the you when referring well organized you So Julio, exactly that and vertical say demand continue robust structures, prosper we're to? optimistic market see and are what that from we're to

Julio Romero

Yes. I'm et cetera. like referring hotels, to office,

H. Woltz

be as robust okay. e-commerce, probably point some I'll of We're Okay. multistory. Well, is work. out projects robust, at seeing We're a the to It high-rise distribution lot as also looking not continues which of now. and

Julio Romero

it. Got

those there. increasing you any just those chain. along there terms kind sharply maybe of mentioned on concern of side? due spoke in concern trucking through? of And ability a it Or of through passing would some costs you lack out to the think kind value costs costs your I to of transportation of trucks pass of availability Is your be

H. Woltz

think X the to go cost and loads Julio. No. leaving is availability driven by tight, The ground and we I mean, ship. need we're I on together, the that extremely the it's

insufficient cost So considerably. capacity, yes, so that's it's driven tight. the -- and extremely the availability There's up is

Julio Romero

lapped year impact of that's you belt. I Strand-Tech year your Okay. you having mentioned there ago, talk that about maybe involved acquisition on in And the maybe COVID-related a from Can under progressing? a just just getting some think you've a on folks think that. how And was I

give more a please? that, into you If could little us

H. Woltz

Yes.

U.S., get and those we awaiting technicians that we of June. And that to equipment are be the during I very So overall, to are start meaningful And been equipment our in would now in every cases, technicians thought going a equipment started into of it's at the up be help in It's May, plants the in -- or be meaningful. The hampered because the respect restrictions year We're month the that to major our X that the that would have is ability help there the expecting all running the with us STM it's bring end done to from almost say of primarily to and right. should pieces remaining transaction it of refurbishment COVID-related result ago. of before be of on thrilled we technicians important it up. that plants. ground are Italy, travel relocations we equipment's have accomplished. our commissioning legacy X equipment us

gone the plan, and according schedule We to base The equipment customer we inherited. refurbishment both budget. have has that maintained

need that care selling Carolina, focused Summerville, So piece the on to very the real remaining are we estate take in is of we South which done. getting

Julio Romero

could how your the guess -- what my and be just steel, steel this talk trends the and I of elevated is very see see you obviously very quarter. about -- here lack any in proof that strong. And pudding Okay. on, well environment in executing How if just do The the you with risks would this risks risks. But with here? supply you question demand in do maybe last here are results you're

H. Woltz

is Well, up thing as on we've over occasions would the to cases number prices these be countries different I against where prices now. primary they in this been both of through tariffs actually cycles that that's XX I market thing collapsed, and U.S. those different about The waters at steel were dumping in as of place run ended a of dumping they've have XXX point. time, this, and XX suppliers in The dramatically, add, about with past time that wire Section the are rod, cycles, or would XXXX. well some think, never those existence

and So that that lead we balance the so quickly. we that which so significantly material domestic the supply believe would dumping combination changes have see and XXX orders of the the seen of up in and me to when demand a quickly, it's high of ran past imported surge prices unlikely

that another is will tactic But quantity our that on another business have minimize the mechanism I know that to there. that So to risk risk that management allow going a a landing some smoother risk know manage and time, manage view priority. customers, of could those first hedging I'm definitely quite we to I we we for very that our quantities than don't than our but through is fulfill of to tell high managing which you commitments to approach is us or that hoping and would experienced the I other of practice purchase. be we've don't employ the is of the our out Otherwise, don't I of over steel know

Operator

have we question, Tyson Next Bauer.

Tyson Bauer

trade could probably good rulings the actions for as or the consider on as as have you Would expected? hoped you you

H. Woltz

I Yes. would are there's companies I those the really what order year. exporters comments, exposure is countries with basically dumping lower margins raises just double-digit risk until exponentially that is because, as of because in alleged. to We mean really some in obtaining level. quite But really line those I a the my pointed we never they're like the market individual a just in against know think level. single-digit I to actual is order for the that -- success their mean an the out they the in see end the U.S.

I of said, we're say with would So mean, as and I happy And that I cases. very every yes, orders country the results company every we, the against targeted. we got

So yes, I A. a or solid B+ consider it

Tyson Bauer

Okay.

Has point is kind markets wire in obviously, a a where essence, Given the your ability you're of we're Nucor, that because are risk like everyone you can of you manage but of serve, better against, prices it's the your position and manage dealing gotten these cost where to isolated other basis can and inventory at in say, a smaller through true -- to freight some sales than almost through customers. ones rod scale something maybe issues, with not a plus, where it your than probably you cost-plus lot a steel competing your issues, some deliveries? the far your given that

H. Waltz

let you this mean I so give perspective. me --

and and saw If of rather where levels. painful prices spreads we to extreme steel unsustainable you this in to margins we found the saw back during think our that we contract on phenomenon period, other ourselves XXXX, weakness side

point, it to at levels. that. I lot to to would that that tell sustainability our having certainly need respect, spreads reasonable purposes. some products try It current environment we're up success a to is, And away. hasn't So in and doing try there, environment these competition margins is a for still they to out we're all. cost-plus put you And think this not the But of that where let's in and gone there's to I using restore reasonable fact be

Tyson Bauer

eye. a of way in the is gone course, quite all a probably blink been a week it's or of an a to, seen which times XX-type -- gross that for say, while peak We've ago up margin, Okay. you've

upper business, kind the of looking trade, XXs in is toward -- but things maybe with for through, environment? high-teens, end, nothing settle with As you you low are in especially -- range, seasonality, are your the of we're kind at abnormal this a that the is normalized

H. Woltz

previously, mean, there's couple -- times think Yes. when that's out and of that's all. in as stated definitely I by statement. comments -- we is out unrealistic a XX% this think accurate I I that fair it's in pointed in normalized I FIFO to at But a environment. our a not created of think more expectation still a business an the margin gross And normalized high-teens tailwind we've that this

Tyson Bauer

impact of they're to And from that ago. anticipate a have government a stronger even some residential, an XX year budgets, course, programs We effect? would seasonal you the trying attention, this of surpluses got A of enact. other that see amplified year? spending big states on more we lot Should

H. Woltz

we financially slowdown of out pop. a coming seasonality, of Otherwise, and rather issues historically. progress be if that periods. plants, view our anticipate that are the that and creating quarters, of seen The we how I actually but the expect and the our a Washington I would what that in job reasonably relative as -- we as longevity to somewhat past on saw books an surprise know, way, dollars me government know any it sort stimulus for and quickly on it pipeline and don't intend will markets local our might. third find customers to way than more would never I order know. states to similar fourth its Absent into of But to into flush governments we've you already customers' may that. in quick extender develop don't our you weather sites

Tyson Bauer

and incremental? that does from federal that of municipalities of to anything should, over agree if these that is it the you years come the to going the projects bonding municipality past local happen, been through Would conditioned more as flip have they're and that bonds, side purely several a bill fund lot increase, markets have the states and

H. Woltz

definitely Well, of I part inevitable states the requirements, the would that think certainly our taking biggest up for which are But was I many, kinds and of Those many to important be their carrying and load where will initiative Washington on is dollars. have states there business. the local agree are expenditures. infrastructure own governments examples positive fund given always the for

Operator

There continue. are no questions. Presenters, more please

H. Woltz

Well, interest Okay. the Thank and to you look next appreciate talking you. your company, we we in quarter. forward to

Operator

Ladies conference and call. you Thank for this today's participating. gentlemen, concludes

You may now disconnect.

Insteel Industries (IIIN) 22 Apr 212021 Q2 Earnings call transcript