IIIN - Earnings call transcript Q3 2021 | Insteel Industries, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Insteel Industries Third Quarter 2021 Conference Call. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mr. Woltz. sir. ahead, go Please

Howard Woltz

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

our let that in materially are and various and are we subject comments the begin, some which the be These risk in projected. SEC. described filings uncertainties actual those differ remind to from me Before considered results could that to you of are made presentation statements to periodic cause forward-looking risks factors our with

We surging our demand third escalating with are reinforcing our performance products and pleased that by for steel was driven prices. quarter

the We calendar year. to expect end both trends continue through of the

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

Mark Carano

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

in of press As exceptionally we reported Insteel quarter today, our strong release posted another earlier results.

products continued Two to both period. price $X.XX last increases history. our In increased per escalation fact, or prices the in comparable some implemented increase it the share million strong earnings concrete context elements diluted to year for Net achieved company's from respect share. quarter was and revenue additional the provide response to XX.X% diluted all costs. QX, the net with selling to or relative in the million sequentially reflecting per highest XX.X% from manufacturing demand in across Average and increased $XX.X this reinforcing from quarter $X.XX we $X.X

production and now X-year the our represented year. steel selling increased recall, XXXX price scrap, quarter of the the index of of since prices. average by low And in in XX% the to First, XX% primary as in has a input second XXXX, increased quarter of third fiscal second, the shredded relative may you wire since current the beginning rod, Chicago benchmark

flat sequentially compared those as to that fully competition, meet quarter outpaced year markets strand due X/X to and imports due was tight gross for Gross the wire decreased profit million from period. On trade widening flat, several During from that our period, basis resulted to $X.X decreased pricing import in restrained from pronounced at $XX.X million prices and cost the demand. selling primarily a increased the profit year margin a ago, in expanded XX.X% for as market during average spreads increases rod million. to operating This supply-chain-driven costs declined plants. inefficiencies was basis, our gross but $X.X expense increased to XXX sequential points. largely quarter the The QX. represented the SG&A manufacturing the for in largely of margin resulting gross growth of underway. that pressures from case while increased were quarter about volume to X% as surging environment rod susceptible supply or X.X% welded products which were from revenue experienced quarter, efforts Shipments year to last global our a last our but standard ability sequentially PC and

incentive to sales, of basis decreased of The points under our result lower X.X%. was return-on-capital-based XXX it plan. a a million compensation expense percentage in As $X.X decrease

prior by costs million of results strong The relative was that to insurance our of unfavorable life value plan the achieved has result quarter. partially $X.X cash in the policies incentive to surrender a date, an offset the in decrease maximum allowable. plan change now plan As benefit

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

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

are at at outstanding of borrowings quarter our of remains of million months of would the Based rod flow the driven from month revolving Cash favorable complete our sheet timing but inventory XXXX, net tight on cost X.X we the to working balance that moderately replacement deliveries the third capital $XX.X from and due end operations average trending million million, forecasted the were the generated end We sales also concluded to quarter and and capital. to our fiscal levels normalized payable cost. relative as earnings, raw fourth forecast, increase to end working valued X The referenced end sales reduction material to resulted We cost quarter. supply with year. quarter the cash continues $XX.X the shipments shipments the compared the an second in on reduction cash quarter flow facility. And end our of an net unit expect which second suppress for balances our inventories of with no of months which primarily $XXX at of to net the the third a below XXXX of capital of Moving of in third but statement. on quarter $XX.X at in current finally, of million credit than as the accounts was our hand working due our late was quarter. of higher The June. of increase earlier, quarter quarter inventories represented levels market by

of now and approaching recording indicators Confidence positive conditions our continues we for regions. a as are perspective to crisis our second gain remain demand metrics encouraging we quarter. in all the strong look third our continued customer in which in widely environment momentum before outlook the to the levels across ago highs This construction the with our by quarter, ahead recorded As from monitored on history. fourth decade supported par all-time nonresidential sales market products the base financial throughout referenced their is leading quarter

While any ago. they boost usually to year. spending. and the remained both challenges with today speaking, no seems Supply the including we and activity, chain are respect months concern to slowed dynamics this optimism shown longer of and, than of really in logistics budget politics translating federal relatively the will to remainder state-level of now That they in long-term availability substantial plants. of less a outcomes our lastly, contained operational under remain Concurrently, bipartisan dire prepared believe see prepandemic, levels resulting several to today calendar annual challenges, provide, thanks were H activity infrastructure to public year back will to durable package, remain markets no operations of process these inefficiencies XX And leading stronger continue are impact. risk. that his embedded dynamic discussions for complexity call a COVID-XX, continue of federal turn has issues, some are on mentionable mired out, our proposal abating. hope and into than least the and manufacturing XX to support construction budgets. issue in the position levels potential Many in has and for sign over additional future be a soon the product the an pose to at this and encouraging, escalating in sustained the at never costs negative with despite no We Unfortunately, the continue project I'll provide uncertainties fact, infrastructure would of in context be these were H. risk originally Ongoing while demand forecasted Washington. financial will and budget nonresidential in indicators consideration said, remarks.

Howard Woltz

you, Thank Mark.

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

conditions, Over inconveniences plants pandemic-related months, of are challenges through the and the XX chain offices. through and our uncertainties then difficult including our that at life complicating have administrative our supply people and last course executed

perseverance thankful are through their circumstances. extraordinary for We

expect nonresidential improved public levels by finances together we activity. private significantly ahead, at and state construction local with driven elevated Looking the market strength continued

pressure we months. prices through Adding is shortage We costs cost demand trucking appears for robust While rose and steel the sourcing over sharply to continuing any customer some unlikely to which the end supplier scheduling-related passing meaningful times chain rod inefficiencies our significantly, the facilities capacity, Until also the expect seem not production to coming reinforcing of the supply in calendar develop customer few over escalating abate at various improvement the outages, more course and with competitive deliveries flatbed planned third opportunities, our performance risk chain. our of demand quarter service months the and the occur regularity. through to support wire unplanned at environment manufacturing steel view products robust of and mills of year leading stretched lead challenges. chronic of to service which our over we outages performance our next unpredictable, were supply do anticipate

CapEx. to Turning

commissioning is line activities continue certain Texas mesh complete to approximately at million, the complex being engineered planned week, with which XXXX testing production line of in product went at subject expect The by producing to now. Dayton, new relatively We products, We toward well. timing commissioned moved expenditures. we've to plant This durations. began come $XX structural more simple our

the line ramp-up gradual and a capacity. progress Assuming August continues be begin operations as that released towards in to our expected, full should

We in to expect XXXX to growth. our pursue ESM additional support investments

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

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

Operator

Instructions]. [Operator

of from line Sidoti Julio Romero the Company. with question first & Your

Julio Romero

to to lead kind Romero Sidoti capacity XX just additional Do shoe Julio maybe of been coming Very my has some expect could be already nice It's first any here. wire the seen capacity, question that touching relief? to near is as guess I you from brought you months maybe be of brought brought over that you've rod wire online? much capacity of or domestically has on dropped quarter. as Or on and online rod. term expect kind

Howard Woltz

to by mills to point. this the at the may And that don't expect return expanded most I domestic X to and maybe had come produce thing of any hours guess Operating unexpectedly during wire pretty full should be not I additional But online, those coming rod could to otherwise, online -- no, significantly, market hardware out outages running Julio. is our mills certain and back market capacity supply more be plants quarter. important be that the coming there's the unplanned knowledge. online curtailed brick-and-mortar this no

Julio Romero

might but of to And a potentially be be silly as anything that this different rod Got of Okay. -- input question, could a any wire or there or substitute that an nature? it. is type steel used

Howard Woltz

from No, point view. a not practical of

Julio Romero

Okay.

is a traditional some isn't substitute Insteel's risk wire to there your on as rod than turning rebar products of customers And Okay. make to enough end? products, there wire reinforcement such steel if maybe rather

Howard Woltz

dire is the to to customers do the for to cause some supply rebar. think have supply customers people I that for will rebar do short would But term. they we though to, whatever would of our desperation in so though, expect see believe don't survive. supply. point long rebar to that, situation revert is Well, also band-aids using that out, short-term see as I you'll problems, I

panacea the no side. there's supply So on

Julio Romero

very the the turning some runway -- you could for underway. a build speak that mesh, hear potentially CapEx helpful. even you line is Dayton be structural ESM to capacity you It's of be out could doing sense That's there? your us potentially like Okay. how can much in maybe engineered give Maybe of could investments additional beyond 'XX, to what's When commentary. you just to exciting fiscal

Howard Woltz

the like Julio, growth. and we marketing our that continue we'll Well, our building pull-through our put objective in to on infrastructure in in haven't technical prospects. for taking place continue the a we're market But certain investing unit a -- we infrastructure significant as have as we But approach growth set that, presence long market.

So pull and that the -- believe I growth through. said momentum investment continue going see strong double-digit in let to we'll as we've capital our to we're in we're think going we past, to just units, let

Julio Romero

pass nonres I'll at What and seems that keeps doing me like demand very from one anything private -- night is demand you side, on last it are just is, And it. the Got there well. public the side? it both on on and up

Howard Woltz

the extremely about premium are hiring are I'll with our is you we tell results momentum People. all The into a going. or And hiring the inputs really, extremely, how edge environment the investment -- that bit the cost difficult. coming here of limited business little And at keep around we're gratifying, availability. on while

Operator

[Operator Instructions].

question, line next the Tyson KC Your Capital. with of Bauer

Tyson Bauer

Great quarter.

Just to question sectors, the far demand last res no of infrastructure. really piggyback on as areas public, nonres, There's on private, that comment. various as side from weakness

allows that agree All have Would pricing of outlook. to you within seem market? that, -- you that control a the those robust have to very more allows

Howard Woltz

the less been now provides raw sectors quite but time, the premium we're on availability-sensitive which environment where product more say, supply are all control, I I I availability chain. you're I that of is through price-sensitive case Yes. that at for pricing it and that some mean same our correct cylinders, carries the in would than hitting and certainly, an a all materials wouldn't is we've the call think

Tyson Bauer

what be able supply you far contribution your deliver base? better more mix and product that as allocate to Are to as and customer a willing little and to choosy margins then you're

Howard Woltz

than products so. we at match point, have with most for to doesn't always Well, But produce it necessarily are material. which desirable just because And you the up think we basically raw for frustration would we a actually customer it have like rather more material around schedules a products that the wishes some significant and creates raw are now working strategic important concerns needs. around And and things availability us.

Tyson Bauer

Okay.

potentially greater which two different the for Is outages, fiscal of geographies, in about kind quarter this that Insteel inefficiencies be first so affect seen to location. the in talked in expected or You impact depending more quarter? mill on

Howard Woltz

the going fiscal quarter challenges. most supply us tell fourth will terms I'm you that our for to be of that I in think difficult

Tyson Bauer

year? And that you walk gets into relieved, time we fiscal new the hope, by the

Howard Woltz

day way. to a the to to of day But and see on our for it's out we we end July week the and little Well, of going we're toward August. fourth bit can and help quarter, struggle week, but have definitely

Tyson Bauer

the pricing there a situation, given point tariff the -- even U.S. Is the market? imports where, alternative within that the with become in an

Howard Woltz

Yes.

in away the that dealing the XXX see we're XXX that's think on still today. a steel other for certainly to I think I side. But term. seeing of there can cylinders that region reasonable significant one in of wire our is interesting world. available Demand hitting I the impact factors tariff if we're on is with today, don't is thorn would global. that be go argument every a that that and a carbon made the rod be supply all And changing products in all don't that The phenomenon short were

we'll our make think of work wouldn't quarters worldwide help quarters, just X expect continue elimination and XXX. I that pick sourcing XXX demand or certainly, your our is right the over elimination the time, X So case. -- of any of number immediate to the we'll for wouldn't I robust expect greatly situation. of impact would elimination now, XXX I But And so

Tyson Bauer

last self-insured? you question. And Are Okay.

Howard Woltz

For what purpose?

Tyson Bauer

For health that. insurance and employees for

Howard Woltz

We are, yes.

Tyson Bauer

the in item go big increases Are any seeing that line forward next as you or months? in expense you XX

Howard Woltz

claims right That profile as that statement, we're a a we on surprised the could may tell you one that around pleasantly lot with we're now. I individual general But moves based that experiencing large incur. cost

Tyson Bauer

unable vacancies. of about that Okay. time are us difficulties. you're length vacancies hiring or fill what of to fill talked there to the Give sense And you a

Howard Woltz

I or all in IS vacancies above. the whether all to our sales our it's or are to our they're of fill, hard department All fill. in difficult mean department at plants,

Operator

from [Operator & Julio Instructions]. with Company. We do have question a follow-up Sidoti Romero

Julio Romero

in welded it H, regards on you it that Would seems of of I'd outlook, lows. Maybe couple feels towards PC love to like highs normal the for price of constraints the wire and your supply with higher a and demand thoughts higher agree on both and prices we're strand rod new products get wire to assessment? the heading side, and ideas. given your like a

Howard Woltz

Julio. I think that's likely,

we've saw in we are we down, it we're generally, look work could such situation products while way a and through to as all these their time, to fabricated seen metallics moves step-up. and XXXX, saw going XXXX. prices products the you and think scrap both And be that volatile where back If step hot-rolled be in downstream, We from metallics we another up produce. other I see of in it both going

Julio Romero

-- don't actually H, it January secondly call then you I April or stimulus year, if potential federal conference earlier the the And of on or infrastructure yes, Okay. gave through. comments some passing was the the this March remember call,

you you and has love sounded that. that confident on pick don't pretty on. your I there, Any I I'd still -- think that do have to think thoughts might on if you know happen? brain -- thoughts on overall any

Howard Woltz

don't that I'm a Yes. mix I but a of fear. it what is in with just have some know there appropriate or at Washington. I thoughts, amazement I look inappropriate. amazed mess they're and at

think, So think for Whether will that that's Mark good and infrastructure I it seen. that how And that, I right. something happen on remains said likely it's side. to our think the industry, be I is

a today. think been is that's I earlier that badly recognizable the it's term so of abused, made infrastructure one comments is hardly I

Operator

remarks. time. would to for And closing the no there to I Woltz like turn other Instructions]. any at over are questions Mr. this [Operator back call

Howard Woltz

us meantime, the Okay. in Thank we you questions. to Thank Insteel forward contact your interest next We you have look don't to you, hesitate and In appreciate if you. Roche. to quarter. talking

Operator

Thank conference today's participating. call. for you concludes This

disconnect. You may now

Insteel Industries (IIIN) 22 Jul 212021 Q3 Earnings call transcript