IIIN - Earnings call 4 2023 | Insteel Industries, Inc.

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Operator

Hello, everyone, and welcome to Insteel Industries Fourth Quarter 2023 Earnings Call. My name is [ Runo ], and I will be operating your call today. [Operator Instructions] I will now hand over to your host and CEO, H. Woltz. Please go ahead.

H.O. Waltz

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

Before and we that turn optimistic periodic the several And course, of risk level that I'm environment. comment business view steel factors to made the a the are cause the macro throughout comments materially filings from and are price our for have occurred considered market results going the discuss supply remind subject to in call these up it quarter be our tightness with differ and are risks to reset prices forward-looking results actual some which their and presentation uncertainties of XXXX in in of be let company the about those for We of products. challenging the call our was in run begin, projected. These significant back that financial to on our about to extreme escalations. continue I'll me for you downward pick and to SEC. statements to significant believe described headwinds to our underlying accumulations then outlook. supply various could demand the chain we Scot quarters and over -- following inventory

Scot Jafroodi

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

spreads the press unit following raw of fourth continued our with and costs. elevated of today, the narrow material quarter selling prices highlighted performance XXXX, release our earlier between costs in reflects in conversion pressure fiscal As

diluted earnings quarter a a $X.X for share net or per year million $XX.X fell result, $X.XX to or ago. fourth $X.XX a As share from million the

of X.X% year this for increase quarter XX.X% partially offset base average last on although a prices, trend Our prices pricing imported challenges by prices headwinds, fourth influence decline was a ongoing The contributed downward of the declined higher. average selling steel during sequential declining the from scrap X.X% basis, net average all strand the our sales while prices selling persistent a of a environment, selling quarter. competitive to in shipments in PC were in and the shipments. On low-priced XX.X% growing the decrease in X.X%,

fourth our I've exposed to residential weakening construction As our product their fiscal the largest of improving suppress now currently most has trend in throughout ASPs, volume quarter. Despite continued calls, market a inventory efforts experienced previous mentioned in Many selling modest and average fourth is XXXX. improvement shipping their levels our the decline prices, favorable the are destocking the that quarter. our in the experiencing customers or demand for that have during exhibited business following conditions normalized majority much

decline pressured decreased in drop-off average inventory. the have than material our spreads selling costs. third of increase reduction offset the a the our been year-over-year highlight narrowed prices adverse have more prices it weakness rod the fell steady average our to gross fourth the However, and the higher spreads in delays, as basis from in from due of construction in came lower a project conversion and margin X.X% of million from ago, profit by shipments consumption benefit during markets conditions realized by in XXXX, to fiscal raw Throughout from profit quarter basis, consistently our of year combination forecast, effect below market the offset quarter unit partially XXX important decreased million XX.X% to lower-priced in gross exceeded a nonresidential costs the quarter. Gross to selling for the margin is negative $X.X our due overall shipments. and certain On internal that in points weather primarily the sequential $XX.X and gross

As in downward margins to due we're under near are XXXX, likely most prices. selling to first term to of pressure pressure on remain ahead continues looking landscape the exert that to quarter the fiscal the current competitive

an year During unit in cost in the reduced overall to compared quarter, increase This operating conversion conversion an experienced reduction third and during our our as unit select to both This weakened the plants the and costs. in increase volumes implemented absorption due at costs we we measures fourth quarter. was quarter. inventory resulted previous

as offset or costs of value X.X% change continuation costs. by X% The quarter that demand the quarter, million with seasonal remain expense for expense, which along million the we in surrender levels, net year. sales general sales based experienced first primarily have partially elevated as to downturn As we lower life anticipated policies be onset we resulted move $X.X expect decrease compensation of the will impacted a growth of of operating from of on or to from into throughout year-over-year dollar trends in cash well the our depreciation higher $X.X net unit the by inflationary decreased the insurance relative last XXXX. SG&A

the last unchanged for slightly at year. rate quarter down was tax largely effective XX.X%, Our from XX%

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

and statement balance sheet. flow cash the to Moving

driven and in $XX.X from We are reduction for cash pleased inventories. generated planned to the capital due decrease operations working the quarter million to million for cash by primarily $XXX.X a of our flow report year,

X.X the shipments, Our months third quarter. on quarter the months inventory compared of end forward-looking off of the a shipments the of of forecasted basis calculated end position represented at at with X.X our QX

the at and It capital $XX.X of offering, our targeted expenditures million primarily costs. for average the million incurred the worth reducing in product fourth year. at our our quarter of expanding cost that lower quarter was sales. We inventories than were an total fourth unit the cost it's in end valued quarter of noting a was for broadening fourth at capacity Additionally, $X.X operating

and with million million. capital shareholders detail a This on provide to record more to H to total in of to we quarter this dividend Looking $XXX.X fiscal expect his In the ahead expenditures no hand, strength we perspective, cash $X borrowings with million buybacks. facility, Moreover, of $X.XX the ample XXXX, included we consecutive regular as our and returned topic per share liquidity our million From flexibility. Along equity have of we XXXX, third repurchased a providing that allowed program. as focus share return to us investments the a a of per financial with will continue remarks. fiscal financial we're credit capital us special year on shareholders. to through business, on our X,XXX dividends shares on with our in $XX revolving common a $XXX we combination our to making liquidity outstanding and has debt-free ended special $XX.X approximately $X.X buyback share making share. dividend, million paid dividend equivalent our year a quarterly well lease through ongoing

Turning end markets. to construction to construction continues macro most data indicators the show The of our strength. spending recent

products of year. For annual X XX%. months of the over spending the year, basis highway last our and construction, uses one almost first was seasonally street on up public X.X% the calendar from XX% up larger end with for adjusted up spending construction total is Nonresidential construction a

an to tighter construction for for X were below levels of the decline July building the down to Momentum planning track a that appear reports U.S. the other conditions year. since up downturn and coming growth nonresidential in score lag threshold Momentum first and on ABI XX% billings spending X% as high have Dodge business would XXXX to remains months the lowest markets. In in X.X% elevated, while cement calendar indicate XXX.X%. and rates Architectural well and X.X% construction shipments Indexes, Billing lending measure interest as projects the September The most reported impact in conditions softening However, The September, leading tracks firms. shipments in score continue the and of XX.X%, Index, for is construction The rose the that architectural XXXX. a going for year recent we nonresidential significant to December indicators implied Dodge which building marked at dropped in the standards business

trends now mine growth Dodge tightening impact turn will both in prepared on going I the conditions. In decline levels is under depend back planning my Dodge's index However, and weaker interest year-to-date lending rate overall institutional an as remarks. year-over-year, to planning indicate concludes continue X% higher beginning August will fundamentals planning XXXX financial are call over H. into of that the the that lower. standards improvement and would commercial segments. and This noted the the noted report, market to that was environment it to commercial

H.O. Waltz

shipments market were seem with unexpected. to year-over-year infrastructure applications quarter. improvement to our a have into negative Thank for the prices base experienced rebuild the in which finished motivation customers you, of data markets, would impact Most and weak has such fourth of housing-related phenomenon we're a support explain attractive products we've be share. Scot. during the their we entry by a Shipments conditions, of material than an continuation best shipments that the the suppliers. Inventory softer on liquidations We reinforcing where originated goods likely was course busier experienced however, believe, customers other We're level both although an customers had our rates maintaining market to order reinforcing in in consumption the our of objective and to into of that at year Declining commercial lack metals action. inventories. of and is pleased claim. was [indiscernible] throughout uptick of

are competitive declining from fact demand, caused create over remains, costs. tactic earnings, in a price has reducing and is that which reductions clearly We coming be and lower on the is business headwind been scrap steel slide significant mentioned incurred case Insteel a perspective. We've the a of its finally likely not not in steel us we run continue operating the year While levels, course The believe that to negative and has during associated do recognize need prices questionable goods however, demand prices finished last consistently. before downward rise so in a period the to impact the that the months. about pricing. setter, Insteel QX inventories, we stimulate steel for Weaker-than-expected to prices hot-rolled inventory

another and operations we inventory all Nevertheless, unfavorable labor, with operating line contend parts the more be with during experienced in imports energy, also lower low-priced and complete volume we QX will orders. we first substantial growing for feeling be the complete of at that supplies. We incoming rate should of that as resume plants quarter inflationary and spare corrections lackluster believe Our internal liquidations quarter as a including PC while strand. should inventory pressures purchases, impact

investment point infrastructure the of much XXXX infrastructure the for it the much of fiscal Secretary acknowledged the about green on to IIJA to traditional and DOT been fiscal funding years optimistic Act funding mobility balance affected more administration turned projects or targets for to data, a although has dollars are are are Jobs and only Transportation appropriated federal markets XX% of difficult We're specific According have expectations that XXXX outlays. demand. There on our transportation its a X between and Our delays of "the for and is respect X, is project." performance. spending the stronger impact indications federal may and when XX% focus when those authorized of assigned just network that as has our highway to funding implementation traditional and IIJA into And so not to priorities. with obligated has of X,

the is allocated of to when, impact projects projects. believe Meanwhile, beneficial inflation of we is a Despite will IIJA obstacles, costs is and on with funds jeopardizing our question and viability course, if. spent project ultimately higher cost industry. these The some impacting intended be not as that

new indicated Turning investments to step our chain and expenditures systems. reflecting to We as maintain lines $XX.X up would and million shortages X recurring We lines component as well of calls releases our the the X quarter. as operation in was press as CapEx to production well information systems with facilities invested to production in at of lines and CapEx. ended CapEx fiscal our XXXX, that prior only in XXXX supply information in maintenance of of one problems, facilities. new fourth Because X in our the related end production of upgrades and

production. expand the we will capabilities XXXX. The during our cash expect online making of QX state-of-the-art X impact are to of technology and and We come QX in product favorably investments our other cost

continue cost for for CapEx $XX at expect approximately modernize we We information XXXX in our cash systems production. to come our growth as invest to to facilities and of and lower invest million

recent return more with evaluate release, with have in of following the company, $XXX November of Board on capital Board than company we needs the any debt hand. will to about XXXX the in the capital fiscal meeting. taken out of pointed Directors As completed the the million free actions years, our we'll of Consistent information by shareholders and cash

aware of to market the monitoring the performance in could contributing we're to among In your any to the procedure explain now both concerned we're heightened event, pursue actions Bernard, well and environment ahead, acquisition. our pursue interest asking believe rising our Looking related This are that optimize for you costs be take shipments positioned aggressively organic and through economy, we'll the about maximize we're future questions? and prepared addition to of to elevated risk and environment. U.S. please opportunities, concludes the macro attractive would remarks, to growth that slow rates, customers the We recovery. conservatism questions. and

Operator

[Operator from Company. question comes Instructions] first coming our Julio Sidoti have through. It We Romero from

Julio Romero

start mentioned what those start to order on the was competitive during quarter? PC maybe factors you'd of on for affected import you pressure scrap side. terms strand factors and maybe in a prices, rank us pricing pressures, most quarter, trending the of the to downward the during Could -- impactful number that selling so Maybe pricing the

H.O. Waltz

of a have you, tell and pretty would board. a And to if pricing the sales supply our is we flows something inventory significant hands. on were ahead pricing mainly I much been unable What cost of. snapshot -- margin Julio, inventory the sales, just in chain of we've been we it's take competitive just through don't a you we throughout purchases contemporaneous collapse have has to get of pressures and impact reset and across the

Julio Romero

that both imported would domestic Understood. And and pressure the the competitive be on the side?

H.O. Waltz

tell I the across Yes. would it's you pretty board. much

Julio Romero

little helpful. side, talk just those And the more costs been other import how PC on freight about bit? competition versus just strand influence that's No, of a of you the imports Maybe down coming the have maybe on can growing factors? much Okay. that to recent

H.O. Waltz

'XX And from Yes. actually coming. that skyrocketed few you. we've here seen know including can factors our that we rates the I that insulated lower-priced don't for freight there it imports, were this now it's a quantify that during 'XX, period. And market

so of this get customers All normalized, is taking forward of And materials we're in look a X, significant keep ahead seeing generally months are import that we who import we're receipts. X seeing and action. now that at do mind because purchasing X, do

So the U.S. going that we that know on in what's At market. market. of the imports actually hitting

towards We'll So began we're and earnest what of -- in it trade in end that's seeing. see XXXX. additional certainly I'll sometime pursue QX. cases see in so It QX, the we'll

Julio Romero

in Very helpful. one I'll squeeze demand, then just on And I could. if

what you're or on what side. in hearing to of seeing nonresidential private the they're seeing speak your maybe from demand Just customers terms

H.O. Waltz

the are you but say our there losers, differences. is and Regionally, are is of you generally at market level point. that our what and I definitely as better statement, that private, are customers winners it's that busy But Well, let's always it's construction, have families if indicators, the nonresidential we nonresidential. those believe regionally, a there know some positive. had don't But remarkable necessarily just and quotations it's X our and than of consumption the general of together think backlog whether or non-risk public wrap level whether they're some products this shipments customers

Operator

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

Tyson Bauer

your on part and doing pricing. Congratulations inflation against to fight

stay on appreciates we toward of we us sometimes that price hopefully, the get So it. and through the as end When work presented seeing regard? that that advantages have imports, supply our from rod way you this go pressures the foreign for Fed and shareholders with this opportunity can wire Has that of are as an in not as and Or sources. around? opportunities also to you itself purchasing lead

H.O. Waltz

attractive. offshore of Well, keep purchases had subject making our in Section to certainly all less that XXX of are which tariff material the raw of purchases the impact XX%, mind has

reality long at which the other for that us is not risk The particularly lead offshore is of extraordinarily times attractive present time. create purchases

ebb at would a material offshore are say I point. this purchases So at low that probably our

Tyson Bauer

Okay.

supply through we're a I'm your included the other of domestic talked cost maintenance million pricing. sure seems per cost within expectations very and that $XX spending obviously down to forward. be and production other a over expand X going more production things. in are maybe what Kind You your in return as competitive the break about Yes, opportunities marketplace. capacity and unit that $XX -- lines to on period of adequate million better for revenue The to handle getting increased versus there's X-year the regards just

H.O. Waltz

you investments the but have increasing the the Well, cash both and I potential are that currently significantly we quantify revenue those we're components, of producing. making identified that production of cost have can't products correctly that for reducing

you that they're time get There's forward. deserved going these they general are that cost for I of return up are things you we don't return I of the repeat, conference expect i'll market said company, to we deserve made outlook time lead and last undertaken So than just try we projects because also to to be these these the a our can -- as future that. push tell would get that the done, to expectation, to tell to starting critical investments don't regardless of our And investments of we've -- pick what to investments Tyson call, further to you critical would in your year X.X the have argue, X-year capital, in these excess off.

Tyson Bauer

time given especially line and the equipment forth. such Right.

horizon exhibited your does used general QX. for though drain sheet parameters balance, recently. positive easily year were dividend, justify special outlook on question X-year you're be we've outlook to around, may capital special or what generally outlook a that the of little supports working balance have overall, $X you even you a cash obviously a you to supportive. some in X-, as ago, is, dividend. that The this able a Your for look be cash, go the the But Same here weaker would that seen the

H.O. Waltz

quarters nonresidential that XXXX countervailing our while be I claimed lot X, that that mean, never to may happens wreck we Yes. because there or don't you insight support train we've company familiar would way a the what But know great there XXXX. in you're factors a X to market. X, have We a well downturn, with see coming the are think of out. construction

And don't the so falling. we're -- we not is like feel sky

Tyson Bauer

Okay. a to out Do you in you adjustments margin itself where -- share adjustments. we come have you of protection? inventory look protecting your will at operational looking at more the be should protect to important market where Thus, Or are share. you point reviewing kind margin settle versus the it's really we're market whether with

H.O. Waltz

to No. my on comments the in and competitive as be consistent stated I will be. we expect that in mean, basis, I we market prepared a

Our us. customers that expect of

going We expected of ourselves umbrella market. over and we're hold to an the not

we anyone. with structure to have cost the compete I think

As to hold they lowering we'll not to fall naive of we out to I setters. the say going prices market the a over out where are, compete is but be think nevertheless, and market. the umbrella we're want tactic let there, going an price results to the and said, we're don't We least. there's But

Tyson Bauer

we then front-end had good a last last the impact Anything rapid previous that quarter below We from X Scot, And quarter. the kind and that of can you've numbers then question April. the that of have July is for just or the directed trends all rest explained. the see reasons this of decline created that had how the had month me. We various out? a monthly We've recovery Okay. quarters. a for show in worked good would that And unique you a expectations. falls probably sudden, have good to the

Scot Jafroodi

unique there. the That's it nothing just quarter. how out There's worked for

Tyson Bauer

until and anticipation this kind of we're year's to seasonally as that But stable the Okay. rest start kind into we just the we next probably of tight of ended is stronger quarters. going stay year, or get out for

Scot Jafroodi

called and with now, And the dealing But the the exacerbated isn't think certainly, to impact level our our are anyway. impact they're out that's right of there after I with that painful. we're related that but we Tyson, are on which influences have I reducing But for, particularly reduction nevertheless, clearly plants. volume inventory inventory impressive mean,

big So of driver -- think what I that, seeing. you're that that's a

Operator

currently We no further questions. have

call to H. would remarks. So like to back I Woltz hand to closing the

H.O. Waltz

you. We and your company. you to in Thank you appreciate Okay. talking us we if with have Thank look quarter, you. forward to questions. encourage continuing to follow up We interest next the you

Operator

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

disconnect your Thank lines. now may You you.

Insteel Industries (IIIN) 19 Oct 232023 Q4 Earnings call transcript