IIIN - Earnings call transcript Q4 2024 | Insteel Industries, Inc.

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Operator

Good morning, all, and thank you for joining us for the Insteel Industries Fourth Quarter 2024 Earnings Call. My name is Carly, and I'll be your call coordinator today. [Operator Instructions] I'd now like to hand over to your host, Mr. H. Woltz, CEO Insteel Industries to begin. yours. is floor The

H.O. Waltz

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

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

that Despite during to plants. our an QX, of sluggish inefficiencies upturn QX, a experienced activity backlogs continuation of during in having contributed seen we resulting market at in signs conditions, market order weak

believe are mistaken. that who and demand is demand or market patients to viable result prices stimulate our competitors unable we're strategy will simply continue in We gains to since create believe reducing that only share

is be We We've materials. weaker and and market steel, we construction noted other lower that market operating attaining aggregates and rates, future will of margins not limited for higher revenue producers forecast believe cost reinforcing forward cement, supported to following look by improved markets to conditions. that lethargy

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

Scot Jafroodi

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

the raw material reflects As selling and spreads ongoing relative tighter highlighted financial to challenges between fourth quarter performance for in press the prior fiscal XXXX our our release quarter. earlier, prices year costs of

by by per in X.X%. to On or fell to for or selling $XXX.X primarily decline earnings basis, million compared per a by a quarter sales ago. driven prices average million, net result, Net $X.XX year selling to fell $X.XX XX.X% sequential the $X.X for average $X.X a a period XX.X% share the dropped million share As prices.

reinforcement and As we've PC competitive again growing markets reinforcing influence pressures adversely highlighted calls, imports. strand welded of product within by ASPs were impacted the in previous ongoing wire pricing our low

volume X.X%. were a Despite by weak year-over-year fell declining our of combination sequential experiencing construction a weather conditions the basis, On period, markets, imports slightly quarter. within in third X.X%. shipments adverse low-priced a the in of impact during end The PC driven of our conditions decrease market current shipments improvement quarter, down the was modest markets and certain in shipping during the strand

from year million. Gross profit for million a $X.X $XX.X ago to the fourth fell quarter

and for lower due On from align and schedules plant points However, decreased margin due increased sequential conditions costs capital spreads XXX to XX gross decreased fourth the leverage we and profit improved our declined levels X.X% margin quarter as to year-over-year third $X.X conversion million to and the operating User further gross gross with recent market a lower offset partially by investments. points spreads. costs basis primarily conversion by production basis, quarter basis volumes. lower higher continue to unit current

in during the values. indicated our average in third spreads decline reduction had pressure prices period quarter I carrying selling current However, exceeded our the again call, remained in as inventory once under the have as

the landscape pressure demand. in compounded XXXX, Looking quarter the will due impacting by we short-term to ahead continue prices fiscal anticipated first face the to selling slowdown to seasonal that margin of expect competitive profit ongoing

year. on costs by capital policies, negatively plan, our full the results. with net return combined sales or value SG&A or last X.X% to expense for The $X.X million $X.X primarily net the of under year-over-year compensation change quarter resulted from cash year impacted weaker of which surrender in insurance the incentive of based favorable decrease dollar from sales a decreased relative million life X.X% lower was

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

our to estimates ahead subject that to tax around steady provision calculation. compose remain tax our to level XX%, and fiscal pretax the at expect effective devices rate XXXX, assumptions and we other Looking earnings, both

balance cash Moving declined million the a Cash flow year last the $XX.X quarter flow sheet. change the in to statement $X.X from for due relative and a receivables, the in quarter, decline of from prices. $XX.X provided net operations cash in to in in $X.X reduction mostly fourth million working average capital. million reflecting reduction by Working capital million the selling driven to

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

not favorable noting decrease spreads consumed is worth from reflected extent. sales, material were quarter impact unit greater the inventories fourth a cost quarter the the in average lower valued first that do prices and at a the it's cost provided end on is to selling quarter our an cost and sales. as at of of cost This lower expected that average margins our than Additionally, have in of fourth

a down We quarter last million in million the total $XX.X incurred for capital expenditures for from $XX.X year. the million $X.X year, of fourth of which is

fiscal his will Looking ahead million. capital $XX we XXXX, expenditures topic to H provide remarks. more total on in detail expect this to

our of to ongoing both our average alongside capital with X return equivalent least to of highest the drive strong share us and dividend approximately million $X.X equity included XX,XXX during regular Along combination buybacks. during dividend a in share million the XXXX financial we repurchased shares share. program. business the per our fiscal buyback reduction, position XXXX allowed growth our per of to in special that dividends, to through we a Furthermore, through shareholders and year $XX.X common This at dividends special -- $X.XX fiscal quarterly share paid $X.XX our invest cost efforts our fourth marking consecutive of have to

outstanding perspective, of million on ended borrowings facility. we're we no liquidity revolving hand, $XXX a our $XXX.X with quarter million credit the on From with cash debt-free

within improvement is which outlook markets. projected business expectation anticipate As for based end This we additional to cuts by stimulate a the our the rate the in XXXX, on demand. interest is Reserve, construction Federal potential gradual enter fiscal we

continue However, to current macro somewhat Dodge markets our X.X% nonresidential recent present leading tracks for to it's weaker building Dodge construction note Billings the Momentum important projects reports going for which mixed $XXX.X. Indexes, the going to indicators most September, and business indicators conditions building construction nonresidential The picture. Architectural a decreased down that for Index, imply forward. and The planning Momentum in

the still data this, center However, driven driven at suggests segment, progressions XXXX Despite the XXXX. moderation higher Dodge September decline driven commercial drop by to a breakups. nonresidential that activity. that is of expected by the construction Federal the Reserve than within is noted is in September activity XX% by index increase largely

to ABI remain conditions. with in negative score the August, score a XX.X, the and territory of below XX In continued business in decline indicates

for was sign a in an reported projects, inquiries future a positive shift there firms potential in momentum. increase as if However, indicating

our a from one uses also the experiencing basis, calendar X.X% on encouraged increase are Department We street spending for Nonresidential August annual continues a spending spending shows U.S. of of by a year, which show public the months that Data construction recent construction, from up data, total the Commerce year. X.X% for seasonally-adjusted with highway increase. to products, of saw strength. the last of major construction is X.X% X the construction end most first

high, monitor remains to decreasing at metric X.X% spending construction while levels behind the with U.S. lag the continues in X.X% year. cement by X months XXXX shipments, July of in we another shipments However, first calendar

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

H.O. Waltz

Scot. you, Thank

of declining last steel we of we've the Insteel inventories our to As seasonal activity. the environment customers, fiscal commented few as the over quarter, plants, the inventory construction during headwinds, prices, result, operating by competition and liquidations normal difficult course, XXXX in reflect shipments, conditions price lower align need competitors, inaccurate finished at weak experiencing to faced capital the was The investments including that and past lower as our the was made operating we years. downturn finally, from same goods rates utilization

downward in whether in resulting forward expect see trajectory demand acceptable As to trends levels, unknowable. rates, to interest for products we we look is positive construction, from XXXX, recovers nonresidential the however, to our

we affected downstreaming. by variety we countries strand as be calls, a and of circumventing have in steel stated earnings last increasingly in of mentioned the low-priced producers to from appear PC couple hot-rolled Scot that imported are by on As Section the tariff XXX

The that domestic trend began duty PC imported average last pursue the year, price market carefully raw and produced. will antidumping is strand unit material Continuing countervailing scrutinizing the the may industry value of PC justified. be than as is and cases the is strand wire lower from which imports for strand

uncovered the rod the by that the being administration actually administration to of resolve Section the tariff that understands current XXX working PC XXX tariff. strand is and logic roll being also that in of the believe beneficiaries are resulted We tariff condition to the intended producers the tariff. subject wire the We with the disconnect harmed hot were Section

on resolution it's and the forthcoming, we're -- the it these and that reasons, For election, of be although process of we're presidential realistic influence will governing. the a optimistic about influence a has

on this way impact Investment program. projects that Despite The difficult Transportation thus be to Meanwhile, surprise between that it increased We're about and intended not although believe viability on to been the With demand. far inflation markets point, other and IIJA as is does the and optimistic impacting and demand specific costs also for beneficial legislation course, that will of not appear on In the point is allocated to delays a the administration Infrastructure to it's appropriations administration investment we new impact respect the jeopardizing construction a our projects. projects and that years spending and of industry. affected as funding a obstacles, our words, has infrastructure materials. IIJA acknowledged funds infrastructure have IIJA, of Jobs multiple these spent Act, with some the it clear muted. services as to views at the of of Secretary on ultimately project has of impact stimulus

for product CapEx. recent $XX.X includes to cash On into of closer capabilities to $XX $X.X be XXXX facilities with XXXX range advantage try has million. the become market have will We investments expand through take D&A ended that cost weakness fiscal our of and a of our or resources. technology view on to time elect unfortunate It's failing We to based on potential projects carryover company innovations our technology new at incorporate will we XXXX, expect years Turning state-of-the-art new prevented some our long-term of that the elevated production. should in come ongoing forecast of investments impact replacements. full not CapEx million, an equipment significant capacity deployment basis, impact period technological we of We to that a made that million business, to our and we've uncompetitive. new and is undertake their however, our during we that markets. we favorably of do fiscal in to note, believe expand online The increasingly when of

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

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

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

Operator

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

Julio Romero

Maybe August I you and safe. the in I of know month-to-month and located Maybe demand are first okay you hope start talk trends Carolina. July, in folks the cadence if on to could about September? off, shipments in you are quarter, North

H.O. Waltz

the of quarter much part finished year-over-year, was and September first The pretty lower, we even.

Julio Romero

Okay.

factors, what's the know on core your you kind rank strand weather, impact. demand the Any quarter. sense of a the those the couple the And low-price maybe of to of PC volumes in and impacts? impacts way listed adverse Okay. I

H.O. Waltz

if a lost And time, I business don't lot quoting tell to and production including we events. better probably Julio, is course, lost weather but than And work. you, customers tropical due and hurricanes time know shipments how lot you hours would our events, There's still optimism shipping of they're our that hours as of our of we unnamed hundreds among reflect. customers, lost I quantify a it, well. of and

see market, while our we end of think a off and bounce the it's at back in least I So to in table of and get not the positioned the not are fall edge XXXX or world, softness of market worse. period the we're this in

Julio Romero

volumes Understood. were year-over-year. I understand flat

growth sense doesn't of conditions, volume lead cetera, maybe can get what's 'XX market fiscal improvement said, 'XX. of kind the your monies, business gradual whether to worse in maybe but As you in in IIJA, et the

H.O. Waltz

not when our I'll annual you for forecasters, it poor volumes XXXX, snapshot we that but of notoriously tell We're discouraging. encouraging, is did

increase explosion of think see think the our I XXXX. I we'll in don't that pretty I certainly So But over mean, probably expect any I markets -- in a volumes, are gradual fundamentals but I solid. don't activity

Julio Romero

it. improving solid of Fundamental guess? trajectory, I Got and in kind that

H.O. Waltz

Yes.

Julio Romero

last quick you us could structural guys a your one just if rebar on conversion of you give then And to Okay. kind where me for are engineered refresher with of users mesh product? is

H.O. Waltz

ahead steam. full We are plowing

created the sell company to within the product. have substantial new and We infrastructure promote

making respects, that and we progress. really project to legacy legacy related. and Our view good are uphill and but in an some not our infrastructure is is it's fully that are develop systems But committed appropriate markets solicit battle

Operator

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

Tyson Bauer

talk trade be the for impact? restrictions -- more help is trade you? we've PC had America, the on that you've ongoing, had is of we those any to favorable has really scenarios market mean to it and on can the can you strand certain of any we What buy that that PC I affected reliant outside Or same that the lessen back levers that program countries, where to impacts about price allow in of trap. there that that's especially and -- outside import fall pull been trade like there get into other some are anything that's then actual different past When that you, restrictions relief restriction? kind you able

H.O. Waltz

been Well, let XXXX, PC in was it forever. saying is by the this new. me impacted nothing got business It that by start segment the has imports today. we and is when market a first of continues There that strand in

talk countries affected and this, What the our space. will is and for of are matter violating -- the is our activity pursuing is is pursue. it laws. U.S. doing we're our by laws, a the And we of trade about segment This U.S. terms companies is entire of activity a market. countries restrictions in market not importers of competition. In and violating trade it that when matter of record foreign are who we not It's against legitimate a that trade-related looking

and were our hot-rolled competitors then sell have But producers since is first covered XX% offshore by that implementing place. tariff. help business they Insteel can't the to facing, hot-rolled are aware when to is And in that intent Section steel warnings produces any if administration Section this XXX, the hot-rolled our warned the wire now tariffs helped been at the thing an Now import tariff, opportunity Trump we've the that's make it for to because issue of time that of. arbitrage note Biden are producers the steel among that that raw working. competitors, all. of producers And of this business with considering losing different XXX intention is our material We're in covered hot-rolled heeded. really a we're isn't administration finished the they undermines were administration XXX I've but from but Their also not situation today was the other Section the I producers. cooperation in working the taking that the with severely out point advantage we this the not the not in by where offshore they're would well that product

would you but favorable there. in not time. hard on worked worked And it. quickly tell resolution we on but And close and ultimately I Washington, hard for confident that happens reach We we're this, we're a so will it long a I'm nothing on we

Tyson Bauer

Cleveland a the that for the whether or But loophole? guys the there yourselves industry, Nucors is correct the within and or it's front steel united the of are downstream activities to these Cliffs worlds XXX pushing other

H.O. Waltz

Yes. vendor we steel Practically, has supported us. every have

us. Congressional the Caucus Steel a letter from have supporting We

the letter the Iron in Steel a have the us, Institute on and we us, We who current the to have from manufacturers and of letter need fix various association weighed and supporting to steel of situation senators the Department it. one Commerce the the supporting illogic have from American

a election have just an it happens but lot is nothing is we year, So this, Washington and behind and fast. of it firepower

Tyson Bauer

basis going that cycles, lowering interest mode your improved interest given your rising it's pull versus a whether timelines next the age, project. a the see environments through need people before activity rate they when Okay. to just people results rate while take for interest vast from waiting What through going actual experience see in we to trigger do lowering, XX XX, has Fed, been to and drop we're the results rates, points lowering on or of heart, pause are or environment. a they're experience before

H.O. Waltz

personally, that question. have -- are that's that much but speculative it's think would I tell effective for high interest And probably rate project. my turns you into is is that is not bad project that enough rates a or experience, of good great X% what my so an I not projects so view a that owners. interest X% in nature, projects are In own a it otherwise

I the that My Or or capital into and some they pull probably that But think first, owners the XX people back happens that a wait then if on have wait trigger? Do will invest they points? they so points speculator loosens XX if a rates is And you're their when don't projects. rates I a begin and to different. build need the flow to you fall now sit building from And that do So is, discouraged next good think as interest spec, investing to high second for and then is businesses. guess do up basis interest question. they are reduction. really you're situation what basis it they get

Tyson Bauer

Okay.

some sometimes favorable the talked get had opportunities. in end, the some hurricanes Southeast. you on the You you Out about future of that the impacts from back of

One the acceleration, up are, of concrete as these frequency? these your part of hurricanes? see business. those small, like in something Do that niche has little that say, that a opportunities that storms And gains last two increase they ongoing although hold in poles. How been do you be is a arising

H.O. Waltz

storm-affected products. for but I'm is it not sure frequency of the wooden they're Well, increasing poles, all of are for and geographies, poles in application accepted getting is in are it for you out, demand Tyson, and our an that damage those particularly but poles of first, have our washed zones. concrete produce that stimulative really stimulative The who pipe where replacing and busy to And same recent respect is roads customers the really very concrete by is busier. poles these all products. that storms nevertheless, producers demand kinds With there have true in

So to will clean hurricanes But to first, the and and then have appreciate, demand. yes, you see storms you new create some demand. up as can continue

Tyson Bauer

for Okay. And question me. last

look done comfort with a level the continuation those a Obviously, those you does today imply as that least minimum in history that balance make cash you've stand greater if your than sheet? $X.XX did, are that we decisions the you of or ago of balance at where X is recent XX. less at versus share, what was be implement a roughly decisions you $X year the when made by Your But it yet Board. to

H.O. Waltz

of shareholders share kinds of didn't to beyond we'll we ask. determine -- it to through that then is repurchases. is we at needs that allocation of repurchase to business, capital that us from for and it that you of opportunity make to let share return first really through if the answer are we or still the either And business, But repurchases. there a we deploy every have capital do question repeat our the just And our a that me and into share standpoint, deploy cash to can. growing practicalities the special we'll realities meaningful grow that amounts that capital that want difficult Well, strategy that all

the answer I but way issue. your So think way told question, you I about we this of didn't the

Operator

We Mr. back like for any further have no Woltz currently hand to questions. remarks. I'd to H. closing

H.O. Waltz

Okay. for the company. Well, interest Thank you. this thank you you we talking time and quarter. we your appreciate morning, to look to We next forward in your

Operator

everyone conclude we As joining. thank for call. today's We

You lines. now may disconnect your

Insteel Industries (IIIN) 17 Oct 242024 Q4 Earnings call transcript