IIIN - Earnings call transcript Q3 2024 | Insteel Industries, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning all. Thank you for joining us for the Insteel Industries Third Quarter 2024 Earnings Call. My name is Karly and I will be coordinating your call today. [Operator Instructions] I will now hand over to your host, H. Woltz, CEO of Insteel Industries, to begin.

H.O. Waltz

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

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

During experienced momentum reinforcement operating wire primarily we began point a QX, times market continuation welded up conditions, increased that business. of although hours ramping the lead our sluggish to manage steadily to in we

viable and misstated. us create result strategy unable to While demand who will gains competitors we're are for simply results, not we're with only our since demand pleased that market share or QX stimulate reducing believe in prices the patience is

lower not be recovering improved noted following that is We've for The the reinforcing for longer-term rates, quite believe and construction is We is revenue other aggregates better market estimates market of materials. news markets that reduced that cement, are and we steel, lethargy forward limited supported will conditions to by that to market higher we operating demand believe look margins attaining and positive. outlook costs, conditions. producers

and the discuss environment, Scott to to our I'm outlook. macro for I'll back over quarter turn to comment on going and call business the to financial results pick our the up then it

Scot Jafroodi

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

in selling to prior offset current reduction spreads year. by negatively third our material year quarter. shipments quarter impact costs the the than relative earlier were the reported As release raw in more favorable narrowing higher between spread and our of affected The the in prices today, results

year to ago. $X.XX XXXX a or of a net million per $X.X from $XX.X or the Insteel's fell earnings third share As fiscal share result, per million for quarter $X.XX

sales a by to basis, growing XX% Competitive wire average TC has XX.X%. for while million $XXX.X by selling pricing shipments. partially the Net down scrap X.X% which fell selling average continue offset ASPs. On X.X% sequential for prices by a in low-priced in driven decrease prices XX.X% and headwind rose imports strand prices. the pressures shipments our increase quarter prices declined selling during pressure of the to Furthermore, reinforcing additional impact markets created welded steel within trended an a quarter,

our products the our from year. this activity increased selling across quarter, decline markets than higher throughout our strengthening each of month and prices, benefited shipments construction quarter for environment prior a shipments in the end our Despite demand were year-over-year the

shipments. experience several weather price conditions low of quarter we impacted throughout times. did lead PC and we fully the However, strand delivery in our Furthermore, as markets of the our negatively of worked operating growing facilities certain improving book actively ramp order reduce to imports certain up unfavorable at meet and an challenges influence schedules to

period second in our ] spreads reduction pressure carrying the a year-over-year After increase, again following outpacing in XX.X%, primarily $XX.X gross with the which from material in ASPs spreads came and raw to the price bends quarter, narrowed $XX.X in due year prior Gross in million rebounding quarter January profit to in prices and to shipments. under decline decreased current [ inventory lower the values. margin selling the from between XX.X% offset million costs

lower second Unit elevated face quarter, we downward near spreads to pressure. but prices due fourth As from we conversion continued operating to levels the remain move current and into third remained quarter as sequentially both for costs the selling improved anticipate levels. year-over-year quarter, to the

improving ramping up market enter progress conditions reducing as response to in our further our investments. our we schedules quarter, conversion make costs leveraging to we fourth and recent continue capital As in expect we operating

SG&A cash offset representing of our combined the sales X.X% sales in return life by a million, compared at previous by change of in insurance net the expense value $X.X to year-over-year expense expense unchanged rented in net with depreciation X.X% for year. any based remained under were quarter An weaker results. compensation policies the lower of on plan incentive year-to-date relative the impacted increase capital

XX.X% had impact the the quarter rate lower the Our effective a pretax effect for rate on tax driven due by was of tax which ago. year XX% the the largely an to rose amplified and increase The discrete to earnings. from item,

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

payable cash as a the in to and as for and Cash due balance This net in $X.X flow the mainly of $XX.X operations earnings increase accounts the working flow generated well quarter from expenses driven mostly sheet. net statement a by was in capital. million accrued inventories. Moving million cash and decrease reduction reduction to

Our the the a months end represented forecasted X.X at end of the basis, off shipments which months second of calculated slightly forward-looking inventory QX on quarter. quarter the from position of shipments, at of X.X is down

quarter have and fourth at of a was to the the the our is cost impact than quarter This extent. a quarter greater in sales. reflect prices and not sales. inventories cost to site favorable the expected lower on average addition, In consumed decrease unit materials at average in of the margins cost lower end of did cost spreads our of provided third as third

for million reduced our $XX million year. total remarks. through on We quarter, in X expenditures his this detail first our incurred Based topic of forecasted previous quarter have $XX million. the target will we of the capital on provide year full communicated months of fiscal for expenditures fourth our in target $X.X million H more from of the a in $XX.X the

From with any that opportunities million borrowings cash XX,XXX liquidity we $XXX share were repurchasing quarter us $XX.X approximately million ability may on We financial no $X credit ended our develop. the perspective, equal outstanding shares. flexibility continued providing a during million equity growth and to on common the of the ample our attractive our to buyback quarter, and of facility, debt-free -- hand. revolving pursue with

Turning to our architectural -- indicators the The below decrease both remaining market Billings reports XX% construction conditions the slowdown ABI to in the report threshold May, mixed which a end are projects. XX.X%, billings construction firms of in Dodge view and the In Architectural latest for architecture Indexes, indicators going Momentum nonresidential and the forward. score a of well as for offer of markets. declined a to growth building macro leading for new

Index, higher data in the building projects the planning index nonresidential a Dodge by activity. to to are reading phase fueled largely due XX.X% X% center rose is segment Year-over-year, the in represents of commercial the June commercial and hand, other This which up increase the XX.X% XX%. Momentum rise was The June XXX.X%. tracks year-over-year. by component a planning On in the

up The end-use over latest last May shows is on and up constructive Department strong. Total X the a is remains Highway largest report applications Nonresidential Commerce X.X% and which up the seasonally data is from U.S. spending is from of Construction, X%. that construction spending X.X% adjusted Street Public our year. products, the of for monthly annual basis

another remains X.X% in were for construction and shipments track elevated March calendar down year. while we that and shipments lag levels U.S. cement the continue spending X.X% However, measure XXXX to

construction its in nonresidential on AIA strong XXXX, buildings the the projected XXXX industrial week, gains released this X% to driven for building Finally, XXXX. and for semiannual nonresidential And for is sector. forecast construction increase by Spending

is growth spending that indicates to growth also X% only with forecast spending the projected. in overall expected However, XXXX slow in

now I'll remarks. to the prepared H. turn my over back concludes This call

H.O. Waltz

you, Thank Scott.

quarter, we goods need that And seasonal liquidations as report in align by in As investments including customers company course run We're and to driven we fiscal construction to the to years. experiencing reflect inventories shipments. by capital our environment commented we as conditions the fundamentals seem have steel activities. by lower well and their headwinds, finally, downturn as recent demand made prices, normal declining these adverse the difficult glad operating rising during XXXX are market finished to been last has inventory faced

As we conditions. and and employment demand believe through We market experienced inventory and steady will but construction improved for we've reported as impressive chain in positions were supply slow QX, improvements QX telegraphed continue fourth into improving showed recently spending improvement shipments quarter. the each month not the our

but several entry have since order reinforcement our and activity in to difficult be of demand. in most robust we're with hiring uncomfortable together at year, to due compressed low rates in business to improved welded more Hiring peaked. continues up conditions robust unemployment more operating have facilities to hours ramping to view operating and entry considerably challenges schedules weakened order markets weak respond wire in an earlier by Backlogs degree were dictated the shipments that

rod, on are in we PC As variety than steel we Scott market lower began to the strand the that earnings for the domestic imported unit that by low-priced material affected Section Continuing hot-rolled increasingly raw year, of the which be PC is last a strand. last trend from the downstreaming. appear value strand of imported in by as price couple produce of average and circumventing mentioned the from wire PC countries tariff stated XXX we've producers calls,

strand that justified. and actions The will imports industry pursue scrutinizing trade is carefully any are

of Section benefit. PC working demonstrate XXX differential rod to is to intended treatment respect of We the that strand damaging was intent hot-rolled to the constituency very the tariff the the that and and are also administration the wire undermining tariff with with tariff

to our and views delays a Infrastructure construction respect materials. also Investment the this point, to infrastructure as point appropriations for to a Act of the that The demand. although clear Transportation between optimistic the and of been Secretary funding multiple it's affected of way that investment has administration of With markets on and impact have the difficult as not specific it projects We're has at the years Jobs about stimulus demand and IIJA, acknowledged program. new services IIJA increased

muted. will as that the allocated words, appear infrastructure to is that some it the on be with course, is inflation intended spending surprise impacting the industry. on of project costs viability a our other and jeopardizing does we the administration IIJA thus these obstacles, beneficial ultimately projects far and impact to not In spent of of projects. impact Meanwhile, Despite believe legislation funds

CapEx. Turning to

actual expenditures that previously the of scaled in year. While XXXX view would through approximately quarter for the based and our at indicated on had million, balance for the $XX third we we expectations back come CapEx

We have approved that projects canceled been however, not, had previously.

to in come closer $XX to actual million experience. on expect based We

for a XXXX As CapEx stated our in CapEx does elevated not imply we and earlier, XXXX, step-up expectations. permanent

CapEx and our through facilities basis, an equipment capacity to closer range be would depreciation or to On in technology elect expect replacement. years elevated to into to expand we we and new ongoing amortization incorporate

production a new viewed reminder, at are heavily addition lines unusual X the and As by a XXXX plant. production should plants a CapEx wire addition XXXX and a the the as recurring these additions strand and scale for of not line amounts The our welded be event. at influenced PC of of reinforcement

The making to failing cost take expand of state-of-the-art investments uncompetitive. we're will believe increasingly We will and our product favorably companies capabilities innovations in of become production. technological our cash that advantage significant impact technology

in of substantial interest best As make and you flexibility be to long-term know, has decisions steel and debt-free shareholders. to its customers continues for the

ahead, risk of costs and actions the we're the to environment. and opportunities, maximize and aggressively event, optimize and related acquisition. to performance Looking aware pursue organic economy we're U.S. the attractive both of pursue the substantial through growth well our In positioned are shipments to any future monitoring to

we'll and remarks, prepared you the your asking explain Karly, please questions? our concludes for take would now procedure questions. This

Operator

first [Operator Julio Our Sidoti. of Romero question from Instructions] comes

Julio Romero

maybe H start on Scott, to and demand.

sound conditions. about more improving You optimistic much

hours. about operating You up talked ramp to trying

markets, that orders Just either what from maybe that you inquiries gives is about your optimism kind or you're improving. demand end seeing talk indeed of across

H.O. Waltz

partly slow I've forecast Well, going. we a about to that big to in a order things imply steady order back in our we've as is and a which It's the And in we market. to where optimistic business substantially entry I seen year due and increasing implemented our a intake we earlier don't and order pop. and cause to know, to hours steady. due partly have times have operating conditions, reflect to lead as my we rate mean remarks, our the improvement backlog rates. stated curtailed and hours of explaining you scaled both and be the see It's and pretty conditions slow truncated see entry that expect expanded. why more earlier way us our operating But partly in

Julio Romero

Understood. Yes.

You talked hours about scaling back.

at of the You challenge and about of attracting this talked maybe you're tackling Talk how challenge the qualified kind retaining point. folks. about

H.O. Waltz

read in X X days. to you X still Well, we and or and XX of work or of how of stories XX that typical X safely. are I them in teach them have most markets hire about people, it's train we course, you think with have what you maybe And current those to labor or to

environment. just know has that it's challenge X%. market that labor don't rate So a we over any I in an an in operate unemployment

And so of it's kinds fewer really of there difficult. fewer are think not to from. just I compensation, enjoy choose who a it's appreciate industrial goes than deeper or And are people There matter work and it that. people

Julio Romero

be you helpful Act Got you projects? received us to able it's point and have does point the that 'XX in that to will 'XX this secondly, it. fiscal thoughts, the steel, certainly then specific will difficult boosted gave And the welcomed. projects be that a fiscal impact when kind Infrastructure at benefit -- mentioned to do is you case would boost you eventually happen? demand the be the IIJA. be And specific big Would question of that Do that And preliminary think you year? from clear that expect when to which some is that to point have

H.O. Waltz

fall IIJA. to I big funded no. to The a just on the going part, by expect is of projects don't we're that is supply with them nature that is that. the Julio, with the answer products The banner we marketplace inconsistent that see first into

talk I transfer. But to XXXX see that say that think I'm think of were XX% IIJA. I to to be shipments don't to related it's and impact and we'll we'll able just begin our IIJA that you sure not the XXXX. of in

Operator

Our Davis. next ] question of Gainey comes from [ Kevin Thompson

Unknown Analyst

how -- kind have few of the already Congrats guys next on the months domain, could about into public underlying 'XX? we demand, we maybe of to private that about maybe kind of quarter. thinking I into go if kind wanted but and you you're over talked

Scot Jafroodi

going that rate private I now. on segment. in. dependent going be think in right to Surely, to could a it's interest tell some lot of cuts there's that, too generate if we're Kevin, that the that is forward demand commercial early environment But

H.O. Waltz

are speak you when of residential? also of you And private, speaking

Unknown Analyst

residential, non-res yes. yes, Yes,

H.O. Waltz

think, uncertain reasonably for is bullish that So to of would the than segments be clearly for if outlook interest seems supportive construction I spending. both private it outlook I reductions, the residential very of And we less were and commercial. get say rate private

Unknown Analyst

customers talk, Since anticipation you guys of kind any that changed projects have for of brought up have you the timing of found the your of rate that rate cuts?

H.O. Waltz

requote it's Yes, and the looking over costs. inflation we that environment, who in looking higher couple clear things. due They're at sharply project. that costs number higher years just at projects on X have, the we of about the and a times They're they're area and are looking it financing at last starting to is developers owners the of edge

there's don't clear a and I And mean, a out. you some Xx, we've I wait are when think but seen dead, try the that. have elected that requote to project and there, projects message

Unknown Analyst

final exhausting. sounds then one. one And maybe That

up about kind the talk the operating do ability in ramping business, confidence you at higher levels? what guys of those keep have you to As

H.O. Waltz

in. cyclical, okay, reaches is and time level to really whatever both Well, so away. And is for really think seasonal go construction the cycle okay? And we're certainly when not seasonality business November its the going that I is frame April October, peak through it's

see don't expecting I we're in So -- that any we're not change going seasonality.

of gone level for solid, a demand is inventory of we underlying extremely the that period think I correction. that although products through the produce we've

of of by The worst objective the the feel It's been information this probably look think at corrections. inventory beta. that just the for from the data good seasonality comes business unfortunately, affected is say to And this not there's and it that is the that is us than business going to from much objective cyclicality, has reports down more our no of I change call we've seen to cycle.

Operator

Our from Tyson Capital. is next of Lenders KC question Bauer

Tyson Bauer

import difficult in diminished are actions ability some PC capacity really reinforcement the industry the you price? to placed of go more your on have that pressure where the on kind a into listening try issue wire agencies. the has of people have is more have competitors, welded trade or those Is possible we ran more are type through, influence other domestic especially actually get that -- talked the much changes of react else too go you've we an and about some administration get to ] to? focus that putting to capacity slack always against products. the you with My year a trade actions election to Nucor forth, -- with in to of as a been a like We prior there's to years the Historically, to situation probably in that we that to within in and Have judgments you is that somebody price maybe that has [ leader. little have somewhat

H.O. Waltz

Well, multiple seasonal. reinforcement first, welded commercial have come commodity-like me no under products housing highly more largely wire more probably And business. than think within make-to-order just the product I as are our products. products and lines and make-to-stop you they're -- It The we been that that pressure have let remind will light related. make-to-stop the surprise

business the year. is outlook the inventories producers finished the for significant that built their way goods that parts the of busier works demand based So in on of

or fail that's produce. a market, the that's unloading market products. of some make-to-order And X some we -- they've can And in and inventories It's if exceed in applications those price much participants problem engineered and be built to of the go in less panic cutting. what results the needs a you there of the industry that that widespread the far shipment in have think then your that I the meet that X seen months been through we've objectives of lot

Tyson Bauer

Okay. your absorption, focus yourselves? fixed consider greater your on online meaning cost lines do volume less to And with that focus coming own pricing prone automation, more on new tend and to capacity more impacts you and you're

H.O. Waltz

No.

Tyson Bauer

locations? lines about that increases, talk to product labor making general and Or is a you certain When company-wide? you specific statement are

H.O. Waltz

Well, it's that company-wide XX separate rolled labor we in. up has but compete from company-wide, markets

And in. the than general our don't consider by a costly a bad more are today going margin same So labor they affected to we're be been position have has degree are thing, were the markets previously. with affected is and but nationwide have have But that don't market to that costs labor say we a I it forces wide I to competitors actually, which that we're I the labor that think substantially we're each in that as varies would operate affected company who costs. labor market And have in. that statement, all find that okay, every going that our lower competitive we that

I field think so the level. And playing is

Tyson Bauer

Okay.

talked to year-over-year about You you thought greater, be shipments somewhat especially the type with even disappointing volume impact metrics. seasonal

we've necessarily going right. up the that situation through ramping but ever better, quarter we're catch-up per of a seeing don't also of is may kind don't be outsized pig As expect just what scenario that you get se, python to pushed Is you're in where to get the things quarter? that kind an learned get we years, the this in and

H.O. Waltz

that that our see, on it's I have labor One very and of that hard challenges also it's in think problems don't customers' of obvious customers a up the again, we but to lot goes catching Yes. market. the quantify, there's whole

get built have have products labor contractors We whose they goods sites and those put therefore, and been contractors their to And finished but that ground. we to products to from have although have who up the have yards purchase sold have in to finished to customers the generally their produce on affecting Insteel insufficient customers sold nowhere because they are projects. is the specific have ability have goods, to that

backlog But So the year. possible It's in can that will contractors that our in of don't work what shipped the building season extend you the blow question just far business also projects. they year as weather year. doesn't that down not you're I as I ship customers of right be can extent think finish to and we next a a allows this every that out order up The think to will big way. part

Tyson Bauer

Okay. question me. And last for

Board that into given outlook, improvements management in demand you're Given demand and seeing that about return? do your that as expecting currently, shareholder your those converting how you member, with increases capacity that and you're your metrics go and expansion outlook in a as turning

H.O. Waltz

in these we probably until years, can we there's component And conditions. business. the well to increased time that we that cases, capacity see in start such better think also, to to confidence them return no as X.X of it's the component on return I or multiple these occasions, think there's I cost an market the Well, to market as or a is have bank X And have have lead that years the made of time and as of just stated that as market, you your long-term a we're choose additions on to investments time don't based the not you're of have reduction if the implications new insufficient you of all going investments some past and capacity said enrolling expansion. in investments the you make if that demand I've is part that reality realize is as some increased off

Tyson Bauer

nature share year you of years and Okay. within could you that. your that have operating have dividend you a policy, or return for multiples, But Where results still your then historical longer create shareholders? and given think you buybacks the of your on should capital capital do with still be X

H.O. Waltz

return made investments. we've made that's we have wouldn't that invested cost greater the that of will Yes. capital We're or confident in the than the investments the

Operator

of from comes Sidoti question & next Romero Co. Our Julio

Julio Romero

a Great. Tyson bit. on it little touched

election in are an We year.

to as Some in administration industry. it comes the kind steel potential when of a investors change of have top particularly mind,

administration more reason from change either outcomes would in Just in that a the maybe any expanding be thinking And have how be to product. about we change steel? possible amenable or XXX your of the to to Section optimism no end impact should

H.O. Waltz

XXX, administration, to the incoming respect to that when we the impact do that problem quantify although and know Today, very we to them. But describe sympathetic problem his implemented and Section with 'XX described pass. Trump XXX in of it hard It's we to come people it Trump can were may administration hypothetical described to XXXX the was Trump and we hypothetical. has demonstrate to actually and the

that actually And with strand administration, treatment Biden of the had XXX. was talked our was with organized we by to an and and who were hot-rolled our suppliers, PC a respect And differential we the detrimental through our group to that extremely and we of suppliers went was this wire Washington be to rod fact the XXX on having it suppliers. beneficiary impact

sympathetic and a that demonstrate to And they're We current as regardless a PC of the the is underlying made to the what's the exactly the strand positioning -- that was very add mistake addition. takes proclamation lift is to was that to matter situation our facts made. presidential administration, mistake data of There the real a to just that by XXX. support it it fact that's believe happened. need problem. request our you result heavy we're So But fix a is the adequate of is,

it or it's I whether get but will we underlying an that next belief this Biden administration we the is do in have I place find so compelling a that hard the to fixed. fixed. It's underlying can it logic question whether it of administration And will we believe the with get

Julio Romero

Really H. helpful color,

Operator

no questions. We currently further have

So remarks. I'll hand for Woltz closing to back H.

H.O. Waltz

call company, we give a back Thank Karly. talking if thanks Okay. if not, to quarter. And forward appreciate next have you call Thank questions. you We you. joined your to encourage you of And look the would you in all you, to and today. any us the interest who to we'll

Operator

Thank you joining Thank today's everyone for to us. This concludes you. call.

You lines. may now disconnect your

Insteel Industries (IIIN) 18 Jul 242024 Q3 Earnings call transcript