ZEUS - Earnings call transcript Q2 2021

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Operator

Hello, and welcome to the Olympic Steel 2021 Second Quarter Financial Results Conference Call and Webcast. [Operator Instructions].

As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Rich Manson, Chief Financial Officer at Olympic Steel. Please go ahead, sir.

Richard Manson

Operator. you, Thank Steel's XXXX. Olympic for second the Welcome earnings of quarter to call

Our by joined be Officer, will Andrew call morning this hosted and Operating and will Greiff. President Rick we our also our be by Chief Officer, Marabito; Executive Chief

begin, reminders. Before I a have few we

changes factors results. Commission. Some statements Act differ Form releases the of actual be XX-Q such undertake not and Private Litigation could Reform in call today's cause assumptions XXXX Exchange the not are predictive to forward-looking filed or that and intended uncertainties reflect XX-K and with to provisions results are made safe in company as other on made materially statements. risks, harbor on of to may changes Important be statements, forward-looking reports press assumptions, and actual will does factors the and The set such Securities other within the the Securities update and forth affecting company's in

During may refer are net comparable night measures last turn the for call our be in and can archived At time, measures. I'll the replay website. share, most adjusted today's this non-GAAP that to discussion, diluted A was and the is adjusted which on financial live non-GAAP financial measures all directly over broadcast press release we Rick. of issued be on income available EBITDA these Today's EBITDA, GAAP per found reconciliation and provided website. will Olympic to Steel's to

Richard Marabito

record comments and performance strategy for outlook. the truly This to on I'll of us position and and we'll you our our our joining time results review our an results. profitability. for Andrew the discuss will Olympic Good quarterly performance your quarter with business begin a about to business questions. progress Olympic detailed XXXX. Steel. everyone, is Rich. second take that, Steel's to quarter morning, our thank be will review you, Rich happy with of more conclude some to long-term Thank market deliver second Then financial segment consistent our After for exceptional

to the From to volumes the record disciplines company's record our highs quarter. to perspective, key And quarter The history, a demand second investments consecutive our shipping sales ongoing profitable our execution, from and at are operational propelled and around good. reported market levels. and turnover escalate the pre-COVID for working strategic Metal second prices continues an capital quarter expenses have was we be continue and success. in most controlling perspective,

would the efforts possible performance be team. talents the not without and Steel of historic Our entire Olympic

We our are our operational efforts service in to culture has of to initiatives proud sustaining customers superior quarter. while record-setting Collectively, team of provide and resulted our together worked safety first. driving our these how

supply they navigate last labor component robust experienced metal, per range that disruptions of for dynamics the million than XXst $XXX marking second for sales were the To levels at The million we all year today, pricing continues delivering quarter the third customers during EBITDA per for brings second compares fiscal increased. and the of week $XX.X EBITDA Our hot-rolled adjusted Market adjusted by ton, $XX that second million. the however, alone to industry ton summer. quarter. index pricing challenges, than has the for is chain this up per of $X,XXX market second Index $XX.X carbon rose quarter, to ton per and steel more constraints. XXXX. This our $XXX for $X,XXX the serve to consecutive to the double quarter strong quarter. steel remain record-setting more Net from EBITDA first quarter. a million perspective, record and totaled shortages, continue was in we put $X,XXX ton $XXX our from and while the it as And income was into adjusted record

in expect continue challenges We these term. the to near

We and also continue profitability. business to execute our long-term further diversify strategy consistent to deliver our

business, of our successful Metals integration capital Specialty the efficiencies higher diversify We'll returns investments in expansion consistency the and in in on drive deploying recent to helped Southeast focus the our and EBITDA earnings. States region improve our United the of have to acquisitions investments continue our while portfolio returns. into Our us with our operational

acquisitions amended million additional low-cost in additional our flexibility growth. Looking and continued ahead, financial credit expenditures was The capital organic balance us pursue recently our strong $XXX capital facility. bolstered access the to already sheet borrowing and to and by extended gives capacity

a that opportunities We pursuing are actively future investment have strong pipeline we of for growth. high-return

the continue expect dynamics as economy. remains a strong industry positive in strengthening environment demand We

we're infrastructure come. long other we our year, in term, roads, be who really supplier to could demand the bridges be that U.S. this the in years the For extend nation's to will passed of are infrastructure a the projects critical hopeful position legislation rebuilding many role and higher play key customers excellent a an that metal and will for to

we're future anticipate third a optimistic and strong about For these reasons, similarly the quarter.

over additional comments. Now Andrew I'll for turn some the to call

Andrew Greiff

Rick, you, everybody. morning, and good Thank

team result Rick in our expenses our performance shipping the labor, noting It throughout maintaining an It's was quarter. and metals our operations and of worth again and efforts organization. to costs, operating was of the pipe keeping also testament while focusing products safe in for tube the in second material shipments strong our than XXXX rising specialty environment quarter As and that and collaborative more higher-margin outpaced metal on mentioned, of all market freight half just record first second a market the for customers, on controlling of everyone extraordinary the momentum. once

in Metals, quarter. Markowitz, X EBITDA results supported excellent our segments. all exceptional was Andy and pretax record by performances Our by Specialty had an of reporting led

sales a quarter was up and from more Second million. were ago XXX% $XX.X EBITDA year than

share. aluminum shipments market outpaced While still and constrained, grew stainless remained we and industry, our supply our the

throughout helped us in and trailer, manufacturers profitability Tight drove record appliance truck industrial the including price strong. which restaurant very this segment. remain Our quarter, equipment deliver OEMs, increases supply

We XXXX. XXXX, we remain Action of through the the expect has XXXX. in which in performed first December allocations stainless steel half well the extremely XXXX quarter of Stainless, and of into to fourth half first likely acquired

and adjusted EBITDA XX% Sales segment million, consistent and pipe this led segment, growth half Zielinski, record a million. a long-term profitability. the by to segment's year ago, well. $XX.X bringing from $X.X tube increased by pipe segment Bill deliver adjusted for for was our and outstanding team, the extremely continues strategy tube to perform first our support to Our an continues Led and EBITDA

as will create more a chain segment's for issues we As customer supply we our the will believe look differentiator ahead, be services. need value-added outsourced services key

million. models Our saw rightsizing Carbon of the and operating significant all XXX% from expenses create facilities, improvement. At to segment extraordinary have a year-over-year an had segment and inventory quarter. sustainable ago, generate was we focused controlling profitability. for consistent $XX year that EBITDA our Sales on can We increased

stamping Winder, in Southeast presence was Buford, strong and Our also both our Georgia performance which investments our of support facility, driven line by the in of in growing success region. Georgia automotive the our

automated be and quarter second XXXX. is packaging second for in to operational stamping Winder line Our of the being expected built automotive and

remained have As steady we quarter, volumes be strong. the third continue and started to margins

chain dealing are busy, but customers they supply Our industrial are continuing with also challenges. OEM

believe at of continue customers, While with particularly facilities we've number to we for as the automated supply to strong to equipment year. our in respect many products half We point into of head customers. expect value-added meet to conditions of continue supply us second invest this a help experienced Signals and from large same earnings. tight challenges healthy demand our for industrial the our will labor, demand chain to market these conducive the continued to we be as favorable

performing sustainable vigilant stay their I customers, what and our focusing members forward am we as can move that will impactful to of of leadership, staff made, comes for expenses and turnover, on to inventory on team We when and building these we we for proud our resiliency have forward. changes our look and successes all it support safety, control.

turn call over to I'll Rich. the Now

Richard Manson

and everyone. Andrew, you, morning, Thank good

in million mentioned LIFO of million income in up the million totaled strong markets income working prices, deal $X most $XXX second for quarter and compared Volumes with constraints a increases year in expenses, to first which expense As quarter contributed Rick a continued quarter include in and Sales the XXXX, operating of capital $XXX profitable on Net noted, history. Steel LIFO coupled focus with in of chain, were our the metal of compared our this pretax Olympic quarter period for earlier. XXXX year with of $XXX,XXX the in ago. results the the a quarter customers million pretax year last from was slightly $XXX,XXX with second and as same adjusted year. These EBITDA million loss $XX.X quarter quarter million net totaled the compared of for of ago. $XX.X supply compared the with $X.X with Andrew second the

volumes quarter quarter We second shipping expect to third shipping approximate volumes.

As result historically the of and inventories turn management, levels. focus on our at are high inventory to lean continue a

Our accordion million. existing and XX, year-to-date. flat the with through an X.Xx facility In we June, feature pipe tube that $XXX turned rolled up X.Xx extended we inventory revolving our to and asset-based turned inventory of credit June our XXXX, and of year-to-date amended announced $XXX maturity million

low-cost million to us operations, second it's well capital had have and facility fund the an end quarter, provides flexibility as ongoing needed. and which with also company the $XXX of organic unencumbered collateral, if the greater our of of million, acquisitions $XXX portfolio our sustain borrowing capacity include At base excellent updated We the source borrowing debt to funds estate growth. an real to provides of additional as discretion as base increase year-end. from The total

has shipping in in the fund higher $XX million been Included associated which by are processing last were As and approximately associated The of capital discussed increased an is expenses XX% with our as to quarter, as expenses pricing increase December our debt of expenses as higher $X.X year and to in compared increase year-over-year $XXX we of the $XX.X in result associated and of million expense into working with approximately higher will XXXX capital levels working million the fund need distribution capital incremental well million working second metal requirements. the the continue associated $XX.X shipping purchased to The caused increase. increase Stainless, an quarter funding prices third increase in with a which for Action operating profitability, higher million, the Consolidated incentive quarter approximate quarter need second was with prices ago. levels. continues metal volumes. in with levels higher metal our

operating expenses with depreciation compared dropped of of for Capital year. compared in As the last $X.X second totaled million. of to XX.X% $X.X expenditures percent XXXX XX% million a quarter with half sales, the first

last of Our XX.X% compared year. quarter second was XX.X% effective income quarter the tax rate for for the with second

effective the tax expect second year. to the first similar be of for the of We XXXX to income half rate the half

We payable also Directors share, of announced success expense shareholders control, that per ongoing focus long-term is been cash factors, strong has XX, XXXX including our XXXX. quarterly $X.XX our a our on September the approved of to Board In and on regular for our strategic result X, on and conclusion, record profitability, company of consistent September of dividend disciplined capital markets. of the working many positioning which

team proud are entire our XXXX, strong third far to and our in We forward looking accomplishments quarter. and thus a we're of

Now call Operator, the questions. open let's for

Operator

Instructions]. [Operator

coming Markets. Our Capital Marco from Stonegate first today from is question Rodriguez

Marco Rodriguez

as margin if about here QX. well there? gross had pricing, some nice increases you talk the carbon drivers wondering we was I Sequentially, you volumes flat little similar on but to Can maybe the bit a pretty in segment. was the pretty on start as can

Richard Marabito

Marco. Sure, Yes.

are focused I we focused gross on gross as not that think - things talked percentage X is per margin are always dollars we ton. of on as margin we've about we're the

similar first quarter. quarter the record the but we right? dramatically ton, saw dollars you commensurate increase what So percentage ton margin to more per what so relatively in the was a margin you that first be And to the generated selling saw second really gross the may the quarter be increased. in propelled And quarter. in quarter, gross the dollars a price far that's and per

Marco Rodriguez

wondering can of prepared times the you you Specialty the lead on update also you're that remarks And it. you of kind allocation then to sort 'XX. you're fiscal the in And sort us what if markets? on of update by Metals through expecting be Got the like. industry of there was look end mentioned if in I what on terms segment, the can might then maybe us seeing still

Andrew Greiff

Marco, this is Andrew.

we now, into that truck the stainless to have is strong expectation the continue food mills. - continue and with would go in it is that expect strong as right are year. also see mid mills, particular, We're are least the that sectors to we So the going already next year. really we allocation appliance strong. in through that, very trailer the discussions just go on domestic sector will the And at seeing The we equipment next and that's

existing so to enough from of before it able support to on our perspective, go making as metal for to year customers our them we take there's And looking they're next in business. for the additional growth sure is that what be look we to support into

Marco Rodriguez

any And the look times what update like? lead on

Andrew Greiff

Lead mean times range. are right fairly X- probably X-week in steady. I they're now, to the

the of than are gauges will that. much extend - out Some further lighter

Marco Rodriguez

here it. switching Tubular. Got Helpful. And to then

segment, of believe that a and up growth obviously. in kind if had pretty year-to-date large order And of substantial a year-over-year, expected wasn't that XX% quarter had revenue you customer the versus about look, You sort I quarter, so here annualize over revenues, And your 'XX last in the QX prepandemic you performance from repeat. if you're to in I will. a fiscal again

So sort revenue can the accelerated quarter side other events? you into any onetime what in may of perhaps on of sort area, anything talk the drivers if be tubular the you about or saw

Richard Marabito

No.

we're on to quarter, the business. traditional I segment the more back for really back That more to transactional and up. reverted of strong the side very traditional business. certainly think is business picked had And it the

the for that sectors to a balance second continue of stronger the going have the I And first. quarter in We than year. of the that number were that see expect we're

Marco Rodriguez

and talk the capital on working you in of the expecting for movement help receivables in payables. significant be Can what quarter, might the movements those bit year? inventory movements you usage fairly and little remainder some Then from Understood. a the about and

Richard Manson

escalating draw at Sure, obviously, of a Marco. in in there times is It's as capital. prices we Rich. - And at it, look prices, working

by increase increase our substantial little receivables, offset a seen a in the our it's you've a and So bit right, substantial inventory, in you're payables.

a we've spent we've markets. dollar EBITDA, The first availability. in is for see we've had at our of we while in about in types So works that of. is capital for $XXX news million the $X And every traditionally we here, - dollar spent good that work provides way continue to the is, every the end half these off At ABL capital. were that's it record us we've working what of plenty to quarter, of of second earned

and capital our the by working up were in even debt quarter, second So though substantially we availability grew another million. $XX

we've amend low-cost the June, that there access extend with sustain of capital so prices and will And we working continue. did through as this that draw plenty in us us capital it's to the got pricing. the my to expect And and I in allude little to comments, I quarter, third drain did prepared continue to think we do bit in that help to tied just a be going

will fund increase to that inventory accounts pricing in and during commensurate the index the through continues you'll as quarter, increase So see receivable a third line.

Richard Marabito

Rick. it's Marco, Yes.

comments, been on thing though capital and it really pool Rich we're pretty inventory working I'd reiterate prepared the other in his locked mentioned has turnover. even in just substantial, The

record about being the and talked So levels. flat pipe both tube turn the and at

we're going focused the didn't but our So as been And receivables on that. well. stay talk has thing on to we turnover rock-solid about,

continuing pricing feel And of we working said, capital. really how managing Rich it's pretty to the a function we're month. So each as good about the escalate

Marco Rodriguez

last higher And level kind it. question. question a Got me, for of

about industry's you potential as is maybe see Just this ability what relates to how of assuming sort meet to that now you sort that passed, of the expecting, constraints unfolding infrastructure can might coming it the demand? the you be you given bill and see and that talk

Richard Marabito

question. good Really Sure.

way at guess we the we're is look I timing, hopeful at we the of end we're looking this year, this place. by in as have that legislation First, some

a I to spot would put in see start metal projects. our flowing that think industry infrastructure to actually the in Olympic and XXXX probably to the

to world of great that the the without I be optimistic think sort bridge. infrastructure trends experiencing So you would of a and years that continue at, the 'XX boy, and look up steel on spend economic that strong steel and pretty economy. in of catches activity as And bridge beyond as and that with dynamic first maybe XXXX, we have then to a we're infrastructure get the pretty been to China we've kind XXXX, I the rest industry an U.S. here several supply. thing, of about

I nice think of terms we're demand. up here in for set really potentially a cycle

of say, And would I hopefully Olympics' lot chain the our that environment us. outlined, and fully think feel our I demand I industry North all. that the meet have of don't in supply side, long the needs behind we the timing of I and Certainly, on by I with comfortable infrastructure? think think, that problem certainly, we'll we've I given I really terms infrastructure be In from will our to, disruptions will an partners think spend. mill a built relationships the the perspective, American a at deep domestic ability participate the increasing

it. So optimistic we're about

would I be America. think it great for

think I need it. we

it Olympic think for be be Steel will our participator And entire economy. certainly, I a in will that. great great

Operator

is next from Leshock Our KeyBanc from Markets. question Michael coming Capital

Michael Leshock

costs increases of then inflationary do just the to we're I pressures quarter, seeing? whether incremental or that you it otherwise? be given some third freight further first, So expect primarily OpEx in ask, labor, just driving what the are wanted that, the And

Richard Manson

you Rich. the are pretty about on biggies. it's the X Yes, the freight talk I we and Mike, And much hit most. think things Labor

a do look QX on you we looks like think QX I at think QX. when of QX, it lot kind

$XX worst comparing you're ever a had quarter company you $XX so expense expense up kind year-over-year of which incremental so versus versus COVID there in weird of while the in 'XX quarter QX incentive there's QX And right? wasn't there at in million look in was of noted XXXX, as greatest we've that that And was which the history, op Action Stainless, you about at the we and our $X.X million million because wasn't of had time, as that XXXX. it's in comments, 'XX,

how you we at of look everything so handle And very to when tied we're expenses, keep volume. cognizant to trying

equal, the see QX expect you kind we of profitability kind would expect volumes over also higher up variable would well. in expenses kind be incentive maintain the to So be We as QX, things with operating of of all same that that ballpark. being would that if expense

things QX lot do QX. like all think looks being I So a said,

Richard Marabito

Yes. I - there bit there's be Mike, And inflationary pressure. think, may little a more

we continue are that think think I during the level. increase going same talked the the But at sort continue quarter-on-quarter due I to to are prices year-over-year you rate inflation the areas of see or certainly the for that really don't the increases to second about quarter.

the it to starting So quarter. second Rich third probably a chunk a little a right. there look inflationary in will be pressure of it, I reasons off quarter. like little but But he expenses lot it's level quarter seems third could for explained, think, The big like is more bit, the

Michael Leshock

Got seeing you are domestic in how incentivized given the tight to you of has these seeing what pivot players market import it. been? then some That's to helpful. And imports? Are capacity domestic

Richard Marabito

certainly shown much It's the a certainly that seeing imports more of for impactful. we're would it's we're country, the coming statistics on certainly Well, in. part amount which imports. I depending greater of us, - you have tell seeing month-over-month,

carbon X in as coming year, of more say, active need business, last, certainly there's imports as supply, certainly much in balance we'll more and the have for East the certainly side we on that. been active we're hot-rolled, has And the tell side see a on to a I Certainly think the Again, into business. stainless is stainless as I What we the in bit probably of import going it's Coast see that West. going South. in to carbon think now as into get the of more and Plate, well. the half great East the of of Coast, I'd I South years the less what bit the and the in a see X not the more will the the year, you we'll on second more little seen. little

Michael Leshock

And daily and what see the you then saw get feel terms exited July lastly just second the third whole? in a of you to that the quarter cadence as for began demand did for versus I'm the quarter you and a quarter? in trying then as me, momentum just

Richard Marabito

pretty increases. say steady. would have not any huge seen we I I Yes, mean, really

had with who side, issues certainly issues automotive think chips I about But growth. customers in on everything from as chain talked that are the certainly also supply freight they as the I Rich the labor well were engines. disruptions, with forecasted industrials to and the having expecting and greater we're seeing the think chips

was were through And to on expectation that's we but going been steady, their so and to relatively some it's growth there QX. I see we think based think continue a going forecasts, great that

Richard Manson

would effective right just back holiday, I of steady as there said, of But add, month. right a to couple holiday, And Yes. the X Mike, lost the state. the that the beginning Andy up picked the timing of with it in after shipping you July days

Richard Marabito

day that, was Other business back And right after and Andrew day - said at at The is for I Based than what consistent Mike, - good. business for characterize and seasonally July we know, well. saw on the think the Yes. as say levels it of the as in good. slower months, the before it, Rich pretty X QX. said, day July, Really you historically, really July like with I it Fourth. - normally I'd

a book. good July in that's my So

Operator

[Operator Instructions].

next Our Singular from is Sakai Research. coming from question Chris

Chris Sakai

guess, you I off down? that. do will it steel? are had you how of feel a do yes, come I decline? I or had price - a about I you I just guys the I Do you couldn't - about guys hear you - And how second. level for just think for preparing question, Sorry mean a

Richard Marabito

are see where would they that I carbon today. great think we're index a you at it's surprised Chris. to tell question, Well, numbers I

I answer There's eventually, to is they're momentum. there's So the great do mills. the down? going they But that certainly at will. come think mean discipline we

the it's focusing going, sure inventory turns. inventory It's bringing For we're that mean we us, on do We focusing It's inventory. in have inventory. really right with staying I on our where those how disciplines. control. focusing and on can out making the prices on can't control but things certainly focus moving and we that control can our we're we what are we

Chris Sakai

Great. much I Okay. in actually price say metals would would of right. as that decline? wouldn't And a decline, a see All mean - you specialty

Richard Marabito

I And Yes. through right again, going look, levels tell of I'd year. the the half the Well, you, over nickel with particular, I ton. really going including think next on least spot, into allocation, Chris, at of I just $XXX is mean, consistency, side a strong, Midwest in you at year, take you're you're is to see of the Aluminum strong now. record this stainless because think, first a

Chris Sakai

Okay. a And general then I question, general question. guess on economy of kind

your on any For and on variant Delta of far? so demand the you effects seeing - business are

Richard Marabito

the tell growth. Chris, certainly I'll Well, you, been the area has

growth customer just about concerns has And that of Delta chain but of from variant, as think as think, you not as so been well about kind the disruption. our the supply thwarted, I

this of variant honestly, forecasted. think to certainly certainly of environments more who the less time are ability what cases mask-wearing and year. people prevented we in from as work they're certainly that growth forecasted where certainly they're half safe spending of Certainly, not our terms of at workforces to we're don't going changing to of able certainly, vigilance they to grow ensure are the combination has larger It's X that had less back levels safe see And go about There's to concern working. Delta on. quite focused much for into the continue are that with time the and the the I a that customers crowds and the I in second disappointed - a increasing.

that And supply is not can to in conjunction forward disruptions. going going so - chain be certainly helpful that certainly with

steady twist. second certainly, of seeing of could we're as half talked you're pretty more going think little the the I about, But through add we've year. expecting, a with So a what Delta

Operator

reached or to to floor our closing further have comments. We like over end question-and-answer session. back for of I'd the turn any the management

Richard Marabito

much, have Thank if continued morning. joining Steel a this our and and of with speaking good your interest day. for not again next look appreciate in you Olympic us you sooner. We so thank call Thank quarter, and forward you to on you all

Operator

Thank teleconference webcast. conclude and does today's you. That

may a disconnect wonderful your and participation this at for You We today. have thank time, you line day. your

Olympic Steel (ZEUS) 8 Aug 212021 Q2 Earnings call transcript