ZEUS - Earnings call transcript Q2 2018

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Operator

Good morning and welcome to the Olympic Steel 2018 Second Quarter and First-Half Earnings Conference Call. Today's conference is being recorded. All participants are in a listen-only mode.

Following the presentation there will be a question-and-answer session. [Operator Instructions] Some statements made on today's call will be predictive and are intended to be made as forward-looking within the safe harbor protections of the Private Securities Litigation Reform Act of 1995 and may not reflect actual results. undertake in such forward-looking other not assumptions changes statements. does changes or factors company to statements, update in The affecting such actual with reports on Important that XX-K and are and uncertainties press Form and forth results releases Exchange and cause filed set company's assumptions, materially Securities to the other on XX-Q, differ the risks, could factors Commission. will replay on website. for archived Olympic available and be Today's call Steel's and I would call, like to Executive host your Siegal. today's Chairman time, introduce Olympic for Steel's this Chief Michael Officer, At go ahead, Mr. Please Siegal.

Michael Siegal

Thank us you, second of operator. performance record for Good half morning and the thank to breaking you all quarter in Steel's first joining and the discuss Olympic XXXX. sales

morning and Business, Dr. On Chicago and Vice President, Olympics Iron President Steel's Chief President Tube Operating & Marabito; McNeeley. the me David Andrew Officer, of Executive call Chief this our Greiff; are Financial with Don Wolfort; Officer, Rick

share Included Berlin per $XXX number lines; second are: record high our of of the Our of and market two, hit a product three, XXXX recent in that quarter in all gains; acquisition million. Metals. increase sales one, ton revenue

tripled share XX%. business second importantly, than $XX.X change share. income balance per the the sheet operating more income is $X.X creating rose by And for year's our second per additional see XXX% million penetrate earnings markets million of in of diluted we Our third conditions $X.XX strong or outstanding opportunities serve. Net second the as to we or further quarter quarter $X.XX first-half, last and quarter we in income quarter rose over the $XX no operating to year-over-year million. Most enter

decade. $X.XX EPS profitable quarter, the expense. second was excluding share first-half a in this most As highlighted in in reconciliation the morning's per and in our earning This period LIFO release, quarter included was table

year. out the freight will and of the the recent competition me skilled indicating increasing Let the availability, second-half pressures persist is strengthening intensifying in for economy that that point labor cost

better to forward. initiatives we We manage have these move instituted as pressures

We the to and interest anticipating the are to inventory mitigate of are impact rates rising on planning also statement. rates increased reduce our income

the [Technical sectors we Our to organically economy as existing business to have and Contract Difficulty] in our position value-added growing serve. equipment across continue productivity manage performance and for we growth the profitably. add facilities we margin to And is effectively experience improvements. all enhancement

are announced that Detroit facility We marketplace. automotive we an recognition robust earned [Technical a engaging in certificate. Recently, M&A quality Difficulty] our

Directors our be per [Technical also holders turn on XX, fifth will in sector-specific ability stainless ideally This This the We declared aluminum [Technical industry's financial the to cash component participation that, automotive will with toward we stringent September the announced and lighter continue morning, share products. Board to auto specialty-grade cash I regular supporting have Olympics to over steel Difficulty] satisfy Steel standards. been September move Marabito the consecutive dividend our the for review. record outsourcing. Difficulty] recognizes and specification The of increasing Rick carbon, to on call is our dividend. of With sector technical quarterly paid positioned X.

Richard Marabito

Michael, morning, and good you, Thank everyone.

summer early started heading robust [Technical call The the quarter Difficulty] the and May. notwithstanding our into second we summer, strong, quarter industry remained was on discussed the the strength throughout of in sustained which normal July. That seasonality

year-over-year higher by quarter segments year. and The X% X% increase volume driven increased was sales Second volume Specialty of Flat versus products. Difficulty] last sequentially the roll in quarter from product shipping flat Metals [Technical first

flat Difficulty] last the the moved we've facility in year. second-half You for Together, in North carbon strategically brokerage sale And of decline Difficulty] may away we XXXX. in international recall, sold. [Technical Carolina from closed [Technical the tons the this

the MSCI growth fact, first-half in compared outpacing shipping last Activity according with Metals the rate industry X.X% shipments grew [ph] year, to Report. on same-store a In of basis, our X.X%

sales for [ph] Metals. X.X% does [ph] in yet market the first-half, Our include reached share which at not and coil high all-time Berlin from steel an stainless

first X.X% [ph] steel XXXX in according & more Our half year-over-year, The again, of Difficulty] year the and to [Technical by quarter over well industry in [Technical MSCI. Tube performance of Sales stainless rate shipments Chicago XX% XX% above second growth half. last increased Iron than the increased in the exceptional. XX% by by Difficulty]

were Consolidated second [ph] in While $XXX XX% pipe operating net expenses to [ph] resulting Difficulty] sales operating in absorbing a the an rise in quarter [Technical improvement even XX% increased Difficulty] after in XX% sales million [Technical $X from $XXX income second the last of LIFO the quarter XXXX, grew, expense. for in and year. lower first-half in million million

XX% half, of the half first versus $XXX million, Both quarter XX% sales are the of last flat the these higher products for record and net sales year. highs. increased year. reached carbon than XX% in Net figures For last

While up and quarter specialty sales the metals net year-to-date. XX% were XX% in

XX% for XX.X% year. over quarter, in second pushing that quarter [Technical the just Difficulty] million XX.X% up million [Technical Gross last in was growth Difficulty] revenue expanded margin [Technical second year. profit the by dollars Difficulty] grew net $XX XX%. Difficulty] to [Technical [Technical sales the Difficulty] pipe Gross to $XX last Finally, of XX%

margin profit second from LIFO net that per expense sales million. half to the gross [Technical the [Technical That's For $XXX million] gross in We quarter share [$XXX a $X.X operating LIFO. expense $X.XX while Difficulty] the $X expense earnings up by quarter [Technical with of increased Difficulty] the and to respectively to $XXX,XXX, year, slightly by reduced of up first ton basis, and the Difficulty] diluted and consolidated our in $X.XX that last million first year. per [Technical Difficulty] year from in to per XX.X% freight Berlin increased the Difficulty] half, recorded half and and first quarter diluted] in [Technical [ph] in That's the margins half versus Current higher quarter the to XX% XXXX. contracted LIFO second talked Difficulty] brought LIFO labor expense Difficulty] of dollars $XXX,XXX performance-based year, XX% XX% [Technical per ton X% about On a Difficulty]. XX% Expenses in $XXX and addition include in increased last ton [Technical last year-to-date last of in Difficulty] in million the incentives. [ph] total Metals, as half. [Technical the [Technical of in and share second year. quarter second Compared the ongoing by [ph] the and the [per XXXX. first in and were by result XX% of Michael of

a proving of at fleet [Technical decision Our deliver our proprietary to having today's and environment. wise in Difficulty] be portion significant a shipments fleet of is

plan fleet. our we expand strategically forward, Moving to

As working expense [Technical interest borrowings double Michael operating quarter X.X% $XX.X profit Difficulty] last quarter Difficulty] and million. million sales. with Interest operating Difficulty] mentioned, $X.X was to acquisition second from totaled fund due the million in average the of [Technical income [Technical $X.X Berlin to to capital [Technical That's rates. year, it nearly higher and Difficulty] year's combined

borrowing in the was Difficulty], X.X%. XXX% with earnings average in the and Difficulty]. by Difficulty] grew pre-tax Compared XXXX, XX% [Technical in Our [Technical rate the [Technical

net tax quarter approximately first tax our half XX% in of The legislation our was by recent rate has second XX%. rate the - XX.X% rate tax XX.X% the reduced effective and was effective for Last Net effective million] XXXX. Our $X.XX Difficulty] quarter, share. XXXX the million we year, the or reported of quarter second per [ph] second income of income improved $XX.X in to or in [$X.X share. diluted $X.XX [Technical

in half, the first diluted or first diluted half per $XX.X per That XX% Difficulty] $X.XX that's from the achieved For million we generated share was [Technical million, $X.XX last net up of year. share. $XX.X

first the EPS year, for As versus [$X.XX reconciliation [Technical per second table benefit highlighted this the comparison quarter comparison this of quarter diluted in also that pre-LIFO Difficulty]. last morning's year. share And for per] then diluted the share the release, in tax Difficulty] and half onetime excluded the [Technical last included a is press [ph] $X.XX with year the

So net and [Technical to share more is sheet. capital from year. share Difficulty] income the year-end, from up in $X.XX XXXX $XX price that Difficulty] balance last comparison [Technical Working that's per adjusted from demand per growing last diluted than environment. million $X.XX is doubled

During million quality excellent. the end our accounts of Difficulty] The million decrease inventory, increased since of the a and end by the [Technical remains receivable tonnage March, June. of at $XX in up receivables quarter, $XX despite was

days sales Difficulty] less second days [Technical outstanding is XX the quarter. in than Our

Our increase than the That Berlin start million. million the $XXX of with March April was is first year. rate correlates capital [Technical turnover Metals. higher since of the up in This the $XXX the annualized in reduce to flat and products half, turns second X.X our inventory based total do half At on year. [Technical tonnage the at was working million we quarter Difficulty] and $XX and directly Difficulty] debt of improve and [Technical purchase Difficulty] the in inventory of the end

credit million [Technical had facility. David $XX.X of availability to $XX As the million spoke that totaled of that will about we Capital our in expenditures shortly. half first Michael June more and approximately comment XX, growth and of on XXXX on value-add the initiatives fund Difficulty]

expenditures expense share For That [Technical million. And half approximately first $XX.XX end June. [ph]. at at to forecast capital equates of was [$XXX equity the for Shareholder's remains $XX our the per million. year, depreciation the Difficulty] increased million]

his provide now David Finally, over we for today, plan our turn XX-Q to [Technical call operating our details the Difficulty] for which will I'll the file later review. quarter. on results to operating

David Wolfort

everyone. good and Rick, you, Thank to morning

our [Technical Difficulty] in in first to Michael demand earlier second is [Technical whole. Difficulty] were plate of Difficulty] second - the after in for year [Technical exemptions we our a from first quarter, and Lead with [Technical of price strong reflect increased to sharp a Section when the continue escalation XX-week XXX OEMs. echo experienced to Sitting the quarter Difficulty] quarter. third we our as strength In prices the set noted Again, and modestly this said as bullish and rescinded, here a today, rose orders more the quarter, the are times a and June, and market [Technical strong Difficulty] me for on to continues high. the to XXXX overall increases Let filling compared we business conclusion the table both Rick quarter.

continue we [Technical ensuring ahead, to inventory demand. while careful Difficulty] customers Looking higher manage

and reflects Difficulty] for our success. prescription inventory Our order open [Technical status

Particularly businesses Difficulty] gains over facility Iron. [Technical office have Rick [Technical sold control base. that international noteworthy successfully tonnage was to tubular the maintained product Here, from business of Difficulty] new we The track capacity. Difficulty] and best Difficulty] customer Difficulty] reallocated [Technical his on history. just throughout surge to reaching The XXXX. its financial and have aggressively segment's at years, tubular what has mentioned, grew as the tonnage Tube our add have sales, as pipe running of from and about is in XXXX, XXXX. trading [Technical X% contribution The North represents our McNeeley our activity. I'd and pipe and is reinforces Difficulty] been our to team products & expense which at segment improved market [Technical Rick increasing in the our demonstrated in to the like share and XXX-plus-year transformative that tonnage recent those the CT&I, [Technical Romeoville profitable Chicago Difficulty] laser responded our by in we acquisition [ph] year results on of our potentially Carolina our requirements consolidated in Difficulty] have up [Technical the we [Technical manufacturing prudence more during to facility

results. post-recession we've current the organization made strong and the the acquisitions, fact, In assets within to repurposing that contributions of have undertaken facilities our greenfield

segment acquisition. with million, products improvement same have Difficulty]. the of $XX line carbon continue year. from more last XX% segment the consolidated our [Technical still year's than and inclusion of bottom flat represent our per or in up than result. our up Difficulty] Carbon Metals our was $XX over make the Operating million of this sales by We bulk net XXX% XX% more [Technical [Technical quarter income of eclipsed Sales Difficulty]

In equipment, the mentioned Difficulty] all which laser remain Romeoville, [Technical I internal new in addition to on projects numerous growth other just target.

is for will be that, remain a operational is Installation Ohio And second [ph] new [Technical our A for Our well fourth of begin business temper conditions. facility Difficulty] [Technical in heading questions. our quarter. lead the early inventory slitting to times became once Shipping in on to Streetsboro, in nearing Difficulty] brisk completed the scheduled our the slower Schaumburg into completion. plan setting a our this [Technical position line [Technical second month. pushing construction during call cut-to-length is quarter volume again steel steel expansion the third stainless with the seasonally open half there of new Difficulty] Iowa the mill table around positioned, stainless strong is and quarter quarter. Operator, line Difficulty] with third let's is summer performance on Overall, months. Difficulty] high. optimism [Technical already

Operator

Our Jefferies. Absolutely. from question [Operator go Englert Martin first comes Instructions] Please ahead. from

Martin Englert

everyone. Hi, good morning,

Michael Siegal

morning. Good

Martin Englert

what was [ph] impact gross and cost the potential XQ if during [Technical Difficulty] base margins, inventory discuss the XQ here? could on was you How and maybe into the

Richard Marabito

disclose really Michael don't inventory. But what tell I'd on. we Martin, echo cost the you of So, basis I is commented and David what would the

about the we'll talk of positioned about talk and how inventory the terms we'll First, then, volume in gross piece, margins. is

Our was the inventory in tonnage lower quarter. second slightly

view and Our as lower tell of going turns tonnage getting [Technical anticipate then each the in you, to those that we inventory fourth quarter. we have quarters. would X two quarter into move Difficulty] into I pretty third the into the sequentially we'll is would close

piece. volume the that's So

view cost third cost standpoint positioned continuing beginning moving the in question terms where margins third the on to is is, our strong our quarter. In a the quarter is [Technical inventory margin, and Difficulty] the the gross into from of of the

Martin Englert

Thank And expectations capital on you. the overall [Technical any working [Technical in the back of Difficulty] half year? the Difficulty]

Richard Marabito

Difficulty] from getting we'd near back in cash market the Yeah. place, the as our coming down, top here. organization have we're anticipate capital the as and as commented, piece. with the is working some is, the well I that I inventory here flow pricing into just view would start to [Technical

that fourth I already flow the quarter. in bit through you'll third of think than as more that to third we we're quarter. cash the see a see move the of starting But quarter

Martin Englert

Berlin? And could comment, in for that you did contribute there. How Berlin to were detail sold? that if XQ tons year-over-year change the what the for much for specialty volumes was Thanks the Okay. how XXXX? And in

Richard Marabito

aren't we Difficulty] Yeah, specialty and to Berlin. have going metals is [Technical the so, Martin, segment. part Berlin not of

when later breaking You information in individual XX-Q not But, the some yeah, of out on today. will the Berlin. file basic components it Berlin see we're we

Martin Englert

growth. of And discuss on? lastly [Technical you there, that? Is mentioned Or Can types looking you further growth more [Technical you're this focused acquisitive you're the specialty? Difficulty] Difficulty] beyond businesses

Michael Siegal

say for would I margin. Michael. things it's we're Martin, to Yeah, looking our accretive

so, that And we in in being of core terms Difficulty] accretive probably which will But that of of a most to there, for which, out many looking auctions of the potpourri opportunities ours [Technical essence, [Technical of the we there's participate the of base and margin are Difficulty] out kind is in there. expansion products handle.

take downstream, kind more like So that's we're of us. moving to where and going we

Martin Englert

you examples guess, any - specific speak further as Can when you give Difficulty]? moving [Technical downstream more I about to that,

Michael Siegal

of overall Difficulty] clearly, our commodities, Well, us mix as our drive of we of over better at when enhancement we kinds to those profitability. [Technical opportunities fabrication continue overall margin for look base to business the

private Difficulty] to to skills we and maybe all purchasing above. at commodity So would and fabrication Difficulty] some looking [Technical Difficulty] at in and look the abilities our our [Technical so looking [Technical Difficulty] our using OEMs; products, fabrication [Technical skills then our

Martin Englert

of fabricated when we goal I of, sold product? guess, being of think your posts be about today that would any comprised type product And how much

Michael Siegal

XX%. about probably It's

Richard Marabito

XX%, Martin.

Martin Englert

have over of Okay. so? a changed the sense maybe X you or And years that how past, do

Michael Siegal

of - Marginally, coming Again, we're it's recession. again, more. a a of question out

think a our their the a lot I outsourced fabrication. that who of recession, manufacturing customers lot during of in-housed

- to go seeing to did but maybe of ago, take economy, As we're ahead, opportunities more those we're X.X start years see accelerated starting a than we robust scenarios, David.

David Wolfort

Wolfort, David here. Martin. Yes,

cylinders. our All firing segments of on business are all

noted of as our going [Technical Iron value-added. & add I so, And with to Chicago Difficulty] Tube of business XX% now, the

haven't lost every there. value-added within elements the of On metals on to side, the is XX% up side. any those one carbon And participation. specialty we're traction we And

production Difficulty] these I of in earlier, to a in through to that the [Technical Difficulty] manner facilities one sure a mentioned accommodate facilities. look taken facilities growth, much more selective service in is we appropriate that number And tonnage We most distribution. who more the about today and our we've get as moving through to both are at make of every and [Technical and

Martin Englert

Excellent. results. the the and strong on Thank you congratulations all for detail,

Michael Siegal

Thank you.

Operator

go Our comes from Mazzaferro Aldo Mazzaferro Instructions] next question Research. ahead. [Operator from Please

Aldo Mazzaferro

Hey, good morning, everyone.

Michael Siegal

Aldo. Hi,

Aldo Mazzaferro

question was quarter, that the of a Thanks. Difficulty] out to be stands ability capacity you of just in out carbon. one little out tonnage? a whether more the what in a the and to at [Technical the had it's that's say volume thing I'm was a of function the noticed, down Difficulty] you strong might terms [Technical slightly a is on flat, volume Congratulations [Technical tell trends on about quarter that The whether utilization I utilization be Difficulty] can in wondering, I'm least. the where are your you us I could being carbon Difficulty] [Technical I function strong or wondering, in in put of capacity trying year. terms

Richard Marabito

Good Rick. it's morning. Aldo,

Aldo Mazzaferro

morning. Good

Richard Marabito

highlighted - tonnage. [Technical We let's talk total, about, the flat carbon in so Difficulty]

at we've down statement close look you all, was and year the that, operation and predominantly, business a size business that [Technical that and carbon. [Technical face While Difficulty] did well the brokerage if Difficulty] all that quite not see year. second, is of of then international really tonnage North we Difficulty] [Technical last [Technical last Difficulty] had as Carolina the volume that was And and bit

industry. you store, [Technical outpacing back you at the up, our we're actually Difficulty] rate actually same if growth you same when and operational and we're So year-over-year, tonnage that will, in look the

Michael Siegal

has running Aldo, because mill - the for replacing has quarter. we're we of backed replacements, [Technical mill temper the facility, off also Difficulty] we'll as And up share and [Technical temper tonnage this the have in have that quarter late Difficulty] Hopefully, our down Iowa been so shut.

Richard Marabito

[Technical carbon to up. our you takeaway what want I is in Difficulty] is But business

asset of with business. And continue to we existing flat second in more. the to do carbon Difficulty] have base then our shipping your We're part answer Our ability [Technical grow customers to busy. the core are the

some we're Difficulty] we because Difficulty] the marketplace that, have see customers all strong way additional indicating a pretty some backlog strong and do do we today. [Technical excited [Technical So our pretty XXXX. And about are into

Aldo Mazzaferro

yourselves some slightly this in little and really able. merchant or open availability ways I'm Great. service topic, a the customers bit there to you for On steel, Is general their of or less might that installing anywhere centers? get you pick U.S. just seeing that for of that that? willing some opportunities might service issues or up if [ph] or I saying market that are slabs wondering, slabs, importing - a about were mills in of by ready, does morning contracting that you to anything slab slabs? previously work additional be how different call have the you maybe merchant starting this could maybe just out for they're wonder imports the the centers business like difficult on [Zero from Slabs] and

Michael Siegal

of steel is Aldo, in much steel hasn't continue not is [Technical are a looked Difficulty] our at really Steel. we we little to XXXXs. that bit supply as market and for back get preponderance as What [Technical the suppliers [Technical I is of the not get we might to business. that, our the periodically which strong, we Olympic while with - It performance to significantly our - Difficulty] our Difficulty] enough that did domestic shares. We really beneficial grow want, get you we

We have participating and nimble. a there. we're little to But be large, well bit by

Aldo Mazzaferro

Yeah.

turns into the season, you tighter, are you as back-to-school general of than September, would and market the terms, we of being In now come the Dave, summer say? do right are supply-demand October, out where So we kind see

David Wolfort

third seen. one no I customer quarters very there. that base tell our is we've third is of that stronger you strong. the Aldo, There's abatement That quarter will

busy well are deep have for again, goes And XXXX] them. we OEMs orders Our order are filling book large [ph]. [in a - that

very [Technical way all strong third and we the So quarter. demand fourth through Difficulty] cycle

Aldo Mazzaferro

acquisitions congratulations and recent contribution. Okay. the great Difficulty] tubing Well, in to of [Technical [Technical terms in coming really see the Difficulty] in, earnings

Michael Siegal

Thank you, Aldo.

Richard Marabito

Thanks.

Operator

closing Siegal to for I'd to conference time, this any the additional At remarks. or like back Mr. turn

Michael Siegal

you, operator. Thank Yes.

[Technical this there. [Technical August many will on for morning attending Rick the Conference hope Tuesday, Industrial you will Difficulty] you Again, Next your York. We and thank New and of I X, Difficulty] see be in for us joining Marabito Steel. we

Operator

today. does our for for This you conference conclude your Thank participation.

disconnect. may You

Olympic Steel (ZEUS) 5 Aug 182018 Q2 Earnings call transcript