IIIN - Earnings call transcript Q4 2021 | Insteel Industries, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Insteel Industries Fourth Quarter 2021 Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today H. Woltz, President and Chief Executive Officer.

Howard Woltz

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

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

to into continue trends XXXX. calendar expect We both

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

Mark Carano

and fiscal In our H., fourth year as morning our you, quarter reported full good us financial call. joining XXXX. for performance Thank as release to Insteel on the everyone record earlier today well our

XXXX, share, in bringing of the earnings history. for $X.X $X.XX to prices diluted fourth fourth is only fiscal but our continued were to rapidly results the the quarter. level a third share strong to allowed of for earnings us increasing for than raw share, our reinforcing and highest earnings per not quarter of to to in and $X.XX U.S. that the $X.XX million economy. that increase net material despite challenges These much Like our robust more per per our total from business historically diluted year concrete the demand products costs the million Our which supply tripled chain $XX.X plagued year labor environment ago, quarter our achieved from recover unabated rose

outpaced these our availability lack XXXX, same million a was the H. quarter gross rod expanded to compared QX This meet were and generate XX-week opening the from often to sequentially, markets. profit benefit to demand. a quarter and It shipments fiscal comments currently was for from labor offset increases prior decline in rod quarter spread. his XX.X%, quarter benefit and XX.X% impact raw was prices global of demand. an forma and lower insufficient fourth to ago Shipments that the average in selling increases from rod is QX which margin domestic the a extra environment and pro year calendar. year, note, greater for quarter benefited of timing prices the in last the constrained due shipments price sequentially inconsistent sequential and from inefficiencies in XX.X%. the period. decrease relative The basis operating On particularly of the our a To shipments on an supply domestic of quarter prior a year-over-year in to As XXXX. our material raw negative price from third tight referenced to direct material Average $XX.X adjusting than selling spreads selling considerably from XX%. resulting Gross not up decreased week sequentially quarter, was increases prices supply XX.X% and XX.X% prior increased the producing XX.X% last year as as for of the plant a due the cost during to primarily based reflect period the result as average market year wire widening current increased

basis value capital related quarter XXXX, and the was payment points. in to fourth lower partially decrease our a million The the basis our X.X%. which percentage conversion expense result Our a we year note, the legal fourth decreased the profit trade contingent meaningful of and run by normalized expensed expenses third run rate that to recorded primarily of acquisition margin this return plan, in sales, results. XXX cost successful sequential the completion SG&A to increase in million, decreased impact The gross annual compensation non-recurrence a the under our the plant led On was of for the To offset unit of gross of fully quarter expanded was lower our a given basis, costs. our of plan $X.X and despite policies unfavorable above was in rate based to a incentive insurance financial life prior gross margin case the surrender prior of $X.X increased SG&A quarter $X incentive a as on fiscal decrease operating relative of $X.X actions. to quarter XXX million expense million in strong cash inefficiencies, quarter. change an given points levels

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

of tight inventory tax calculation. X.X end end tax the with a continue and the run the fourth of supply comprise effective shipments of to pre-tax our our the third our levels months to year year The of next and dynamic months sales for assumptions suppress we QX, to below our under compared expect quarter. barring quarter. rod subject normalized Washington, book-tax on to any year-end by ahead at around earnings, changes the tax rate estimates referenced recurring we continues forecasted other forecasts differences in provision level Based shipments levels, inventories that the Looking rate been earlier has our consideration market X.X represented which fiscal trend XX% will and U.S. and throughout at corporate of our

cost were at sales, our current an to relative fourth remain valued average Finally, costs. cost the higher but favorable of of quarter inventories quarter our unit that third replacement at end was XXXX than of

During primarily we our the mesh structural which focused on over our $XX.X STM the year, engineered in million of was and completing in investments business, the relocation invested assets additional business.

to share. flow cash with our We dividends, credit through $XX.X cash million over free the cash cash have cash fiscal revenues. or outstanding year special to-date special Our the $X.XX in of We operating finished X.X% XXXX payment our shareholders flow of the of $XX.X million $XX.X was on regular addition capital or less capital dividend to returned XXXX million $X.XX in marking dividend fourth a and we of or share $XXX of over revolving facility. paid borrowings hand million under no since $X a expenditures

end with growth slowdown outlook, no a signs markets and the leading construction into construction calendar remain of to year. the for our strong consensus indicators continued and estimates signaling coming strong growth today Turning spending

ABI non-residential pre months. of Dodge Billings highest of forecasts monthly XXXX, Momentum its only January off for Index reporting this year. construction of levels change the in the Index history their since both last rebounded the spending dramatically couple fact summer Architectural index and registered rate the score have But the Third-party And and in in are in pandemic. leveled recently during

have others pandemic, lodging of rebounded While fully past yet from office, to and sub-segments experienced relative robust private construction the like levels. not non-residential are all growth

on XX%, XX% For non-residential at and healthy larger warehouse period. sub-sectors finances. comparable resilient double-digit example, a Public economy remained to first impact and private months through like municipal and calendar of from should increased non-residential from the its prior-year overall size have year some percentages and strengthening the of benefit spending calendar relative state eight year of this respectively, commercial the construction has an perspective dollar as the general through already

an and resulting area years availability, increased just levels will labor addition, reduced momentum Bipartisan it. on potentially the plant measure be impact impact declined felt demand, unemployment eventually This administration to add and unemployment back have to expanding across now implies under the H. from on that construction Congress drop employment August enough data to when activity. I'll an another footprint. not cost of may with remarks, In and our future move last Infrastructure to overall in own meet to the X% forward monitoring X.X% we lastly workforce the X.X%. The relative are the current for track, year of project through call prepared important construction its rate it construction over and to in if And in growth this substantially we is this year, considered Bill relative project concludes employment, my we in the turn expected rate increased This

Howard Woltz

Thank you, Mark.

quarter challenging fourth and we driven strong teammates non-residential prices. all, markets our thank escalating and in As and robust circumstances release, focus our reflected excellence the steel their for were by Insteel through working execution, safely. perseverance on results Above their construction

While our the underlying markets in are that unprecedented demand have for performance, our we're unsustainable. and pleased an our financial products solid with been changes there

As XX% ASPs prior we reported last in from from and XX% nearly the almost quarter the release, the escalated year. quarter, fourth

purchasers purchasers our suppliers. sporadic increases and For by like supplies schedule pricing rod Insteel, we've hot-rolled is delays considerations. The and of rod, to availability caused with driven our of in deliveries poor of delivery finished career products domestically, constant my of resulting turn in underproduced contended price unreliability which wire customer This time of tight the operations. interruptions product substantial of in in prioritized trend and have plant most performance of inconsistencies is both by monthly steel first subordinated service clearly as Insteel's our has and

term near are there model the customers' steel unless will longer current improvements needs, persist business our dynamics likely constructive in for substantial conditions availability not that current these the alleviate the short Insteel's in While supply. are or term, for

for attractive As producers. been robust domestic the very resulted in have we steel in as availability until globally release, to however, steel U.S. the to these international markets turned demand Up home has limited to export recently, supplies. to more markets we mentioned the supplement

transactions wire a the non-buy difficult domestic develop of fill indications by demand tariff costs rod the caused Until There aware production would by chain. to another quota. robust environment. March including supply most for we to has likely that Section replace We the through trade support purchasers, that and Insteel. steel important the you pursuing Most will continue created with we pursue competitive applications is are tool, expect alternatives Administration to for implemented sourcing more XXXX, America Biden rate are the the that complications service passing since managed opportunities, voids escalating tariff Administration Trump tariff the XXX XXX environment

and threshold whether the allowed tariff tariff the administrative U.S., would of on elimination Insteel for depends improvement volumes an over rate a welcome the the free constitute of XXX, the would other tariff While volumes quota into provisions program. the rate

expect agreements serve EU in and a of new the details any Union with a be program to European their as with few template speculation could for arrangement weeks, We next new available regions. other the that

Turning which projection during to at just $XX is under CapEx, million, we finished the we slightly communicated the call. under QX XXXX

for has line than crossed the market our ESM well production, conditions plan expenditures, pursue additional would reducing to technology to to Daniel, and CapEx expansions questions. monitor both improving actions $XX the closely and This product through new organic of we'll we growth you please and of quality, to production costs, important appropriate our in of commissioning While remarks come capacity supporting questions? our information and cost attractive in planned we've Texas million thresholds maximize timing and the take procedure our forward towards concludes and with asking targeted now opportunities, between technical pursue our we're $XX during taken explain positioned and acquisition. XXXX to cash fiscal infrastructure. the plan for ESM your enhancing the longer and shipments aggressively million, estimate move growth We optimize to line, prepared expected, Subject XXXX.

Operator

Julio first Sidoti Instructions] question from Company. with [Operator & comes Our Romero

line Your is open.

Julio Romero

the attributable Can the there your So to decrease weather was talk just supply? was about wire regions my tight impact first quarter. the in whether rod any in of solely shipments be you question any on would the or

Howard Woltz

on. time some the phenomenon of production lost supply did production we've shipping No, as to it The as really didn't concerns. when affect related hurricanes came through. one is shipments But much it

Julio Romero

as rod I said tough wire been that you Have has any kind as tough, H., heard in recently. just your of I there been equally have recent that that may of comments foreign in maybe And have mention a changes alleviated terms seen that's that not very somewhat? you - you availability, think until but

Howard Woltz

But it it's and expect. you available opportunities than is out are Julio, markets at fact a margin, there. are strong global still might - are the some Yes, maybe there imports less that

Julio Romero

could mentioned the rod? on you opportunities to believe any wire U.S. there I for was Did in the to or two that mills other returning domestic quarter, that market. are that there happen last And bring capacity additional be

Howard Woltz

a was mill in weeks major that There several for market and to and steel rather a after Texas software, down a mill has upgrade at return pace. upgrading been having the slow hardware at

are is a volumes, ramp negative which on behind terms to of up think they I supply. have projections their effect continuing on in

and The other outages come operating online pretty now. did mills related as accidents had are that were scheduled that experienced to back much

Julio Romero

that think and there. term? turning the least conditions I ASPs should persist the I'm pricing But to pricing, just to interpret the near that well listening your it they've able way is guess, and you've by just to guess support been I dramatically remarks, executed rise, fascinated the at how in I H., that I how

Howard Woltz

Certainly, I that, Julio. yes, expect

Julio Romero

Okay. back when see I pricing, ever My there. don't model, surprising anything that go quite seen haven't I It's I think I like historically. that. anywhere

Howard Woltz

Notably.

Operator

[Operator Our Capital. CK Tyson comes next Instructions] question Bauer with from

Your open. now line is

Tyson Bauer

and quarter. draws margin what that it benefit a of Do as quarter was have throughout fiscal the benefit was on QX? the just much of get robust that obviously, gets we The accounting any from Do as FIFO price into calculations aspect? stabilize in that with down, that kind the we increases muted little bit, we as the how

Howard Woltz

in what's going It's happen XXXX, really hard to Tyson. say to

to think X.X I inventory only our about about continue fallen the prices stabilize levels whether say can that And to they so from or for steel sure we thing escalate, is whether as far have X.X... months

Tyson Bauer

Right.

Howard Woltz

a of more couple Or quarters ago.

in is muted So phenomenon the to the relative FIFO earlier impact of the year.

Tyson Bauer

Okay.

the Dixon just production we've have before, you typically, seasonal least the we, into and some and what in this begs line have really we've seen has as or Mason you gets anticipate get same question, we south shifted as past? situation, until witnessed, which we do don't So, an a shipments staying seasonality experience seen does year seasonality power years of the that at

Howard Woltz

That's underlying and only there lack fundamental think distorted has They be that to and weather there. I of been question, seasonality seasonality not underlying materials, availability have a But think changed. is steel. by of could good any that change trends and I'm driven don't by the don't referring I

Tyson Bauer

Okay.

your to have get don't service freight anticipate So, you more just production down once northern that facilities we'll shut projects unable that from to going that are south more we winter?

Howard Woltz

product There a don't more is others, I some of that, Tyson, come some are of norm lines you'll see Insteel. expect from departure the our seasonal you've to think but from than that

Tyson Bauer

rod more the quantified Have turn your to percentage the in be Okay. to had supply on could taking roughly to that in, just you're still you could XX% away? that you XX%, that you've kind of wire and short of some bring you meet try demand

Howard Woltz

tell shipments And shortfalls you the Maybe demand. to I would on question was XX.X%. wire to results were rod not little about shipments a it forma down, our down but that related didn't speculative, answer less and ask, availability a pro is that you entire

concerns. So that all is of supply related to

Tyson Bauer

Correct.

Howard Woltz

That's have may that not more much last sufficient steel. it's shipped say have speculative we wouldn't as than of year to had we had to But supplies more shipped. how we

Tyson Bauer

and as hand always production tightness give hand you is little to get schedules. Are at with the flavor of shipping you mouth tight Are meet talked a the ability your about things. to you in? us of Well, it - Right. the mean, I facilities, that those on disruptions kinds it foot, or situation,

Howard Woltz

when of been considerable out completely amount wire manufacturing We've time, a have actually plants rod. Tyson, of lost

Tyson Bauer

supply visibility pricing and that or greater soften, you able Okay. are that more ease, demand that marketplace you if anticipate as just is will stay in the have to firm would shipments? there really much out make that pricing greater you Would the

Howard Woltz

Yes, not rod would I if that weaken had wire think do we pricing extra suppliers.

would that requirements that where we would an could completely be service and we everyone and enough think market I is existing improved, so do be to see prices. think strong I glad at our could the fulfill environment

Tyson Bauer

wage the and on calculation retain increase, a you've to to of have kind year-over-year, you labor? Do as incentivize wage Okay. try had production increase

Howard Woltz

Tyson. on impact haven't it, we costs. But But our Yes. disclosed a to considerable it's

Tyson Bauer

And infrastructure through we CRs running Okay. for a infrastructure we've scenario right so years, past, in question, last been in or it's you it at than many bill lived an that the increased careful not figure longer what are to XX-plus the for now, the supply on to it wish have time? demand have that out side, better over term this and bill is

Howard Woltz

infrastructure. political bill bill is great bill an need but have on that And but misgivings infrastructure we that need get I it, we the not infrastructure Well, focused - to about is And about thing stimulated needs I who hard understanding for Bill. known that. a industry I'm as have at the not Bipartisan be this one thinks to point this on. Infrastructure sure an time

Tyson Bauer

too possibly is good thing. it So of much a

Howard Woltz

it's Well, just thing. yes. purely of too much is And I good think a that inflationary,

Operator

would at not time. conference to I now to like further turn back showing am questions Woltz. I any this the H.

Howard Woltz

Thank in us Thank contact you to quarter. have further to next Okay. we and interest for look to questions talking Insteel. your free you. you Feel you if forward

Operator

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

You disconnect. may now

Insteel Industries (IIIN) 21 Oct 212021 Q4 Earnings call transcript