ZEUS - Earnings call transcript Q1 2022

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Operator

Good morning and welcome to the Olympic Steel 2022 First Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the conference over to Rich Manson, Chief Financial Officer at Olympic Steel. sir. ahead, go Please

Rich Manson

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

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

Before begin, a few we reminders. have I

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

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

Rick Marabito

comments our then After as And, of business we'll achieved how first It EBITDA. segments was more our in begin the Olympic market quarter additional the of quarter, the and the to performance quarter record then insights exceptional another some quarter quarter Steel's current the provide review with and Andrew performance first thank million take for my we've in Rich. historic into you about you, for dynamics of history some will for course, In quarter discuss everyone I'll results. $XXX Thank the of with and XXXX. Rich these financial comments, us morning, questions. results first Good and of $XX.X reported Steel. company's second results of our always we detail. will discuss and strongest Olympic profitability your million joining for sales

cyclical a diversify quarter, these in in efforts to are the our detail business, will working. second tolling, and ability and The and cycles. We've record drive pipe saw metals Andrew profits. operational exposure with quarterly pricing risk shows our reduce our segments Steel to we first as this of while strong carbon segment along in the strategic sales a specialty position delivered we to results to earnings These to Our have its taken especially better strengthen sales challenging later in is all testament which both our highest tube our carbon And call. carbon hard actions segment succeed profitability Olympic near-record deliver market and environment efficiencies. to quarterly posted are us resiliency worked that and

including to excited our from our as other We've through well track Stainless, strong first with M&A as advance we're initiatives. forward Moving recent an quarter built our capital outstanding deployment our strategy. record acquisitions growth Action Metals business contributions and Berlin

potential we're well-positioned evaluate I and execute acquisition and targets XXXX. in believe We continue growth to to opportunities actively

diversify in our returns opportunities business. strategy to We have to further align strong plenty that of with capital our new deploy with

and details which of report, our you second Later with I'm balanced announced our $X.XX find this for to communicating ESG is also and approach to we And check of website for proud goals to and quarterly progress reward it report In responsibility $X.XX corporate also well. encourage to you'll our share. will shareholders that ESG priorities, per on deployment be per our the we quarter. program. PwC workplace. able to out. America for rate quarterly share more our capital committed previous that CEOs from Diversity to we to commitment us our is particular, month, and in that's initiative, We're have efforts. inclusion diversity share which publish regular joined if this remember our Inclusion you mobilize CEO in about was the Action first helping corporate our & we and advance the earnings increased our consecutive And as dividend Our release,

just success the our Before and and take strategy. that a I for impact we sustained has company thank our building to achieves Steel their Olympic to turn the outstanding are positive call Andrew? Andrew, a world. Together, I'd entire on moment efforts to like over to a dedication

Andrew Greiff

due a Rick, in All our pleasure very and of continues you, good to It is performance about the share quarter. exhibit three Thank to to company-wide businesses collective detail our market level, during steady morning. my historic demand. efforts are executing a additional high that at our

Rick its As quarter quarter our profitability delivered and ever along sales of and second sales the strong segments, strongest Tube and record Carbon profits. and our with each Metals Specialty noted, for Pipe segment posted

an model to results our carbon result to unprecedented is long-term the able early earnings this carbon was until for of Carbon XXXX. This face pricing the In our post to and headwind, segment it strong still at Looking business after sustainable a peaked market, in drop throughout a have in business direct our September the hot-rolled index of XXXX, changes we for company. the quarter. consistent March create our made strong began

of Following metal-based carbon scrap, the iron, -- pricing pig scrap and Ukraine, increased significantly. nickel, commodities, including aluminum Russian for most invasion unprovoked

the products pricing price carbon off based sheet While plate and futures, for see we hot-rolled on leveling now elevated. hot-rolled aluminum carbon stainless remain

want more intentional the mix sales become of the last reported to For to the sales several years. I note effort result our we a that and quarter, continues record diverse, segment very over

XX%. accounted of for and and XX% roll sales; Specialty carbon, Tube XX%; was quarter For flat Metals the was Pipe

year-over-year, Sales momentum enabled execution divested former that segment shipping deliver to our first operations previous year XX% the million segment its record we million. our shattering a flat and Detroit quarter. were contributed were from September $XX.X stellar excluding Specialty Our by us ago in a Jumping and XXXX. EBITDA roughly nearly Metals, to In of results. phenomenal EBITDA, levels market up $XX

continue We our an are also encouraged $XX.X all-time with are million. up sales user industrial Investments traditional of well supply equipment, in EBITDA -- markets in -- performing grow best continued Pipe well light of end end metals markets, to our business. XX% in see truck in high issues. facilities our another at food in record white and performing delivered chain trailer, tanks, appliance Tube quarter will our and to value-added by all

to see volume Our been traditional quarter. through steady and remarkably markets second end-user consistent expect the have

Turning business. carbon to now our

with of pricing, million over $X,XXX per all sales ton maintain into Our in pricing focus even descent been continued earning carbon quarter segment, the its paying $XX.X of divisions EBITDA, we by ever. Carbon a million to demonstrated commitment And as while We second decreasing to and strongest did March index has is carbon distribution that this profitable profitable. of performance $XXX our off. in be hot-rolled goal levels segment of toward our headwinds high sales, our Carbon XXXX, market all cycles. early weathered volume The this record

being turns. has carbon on and profitable for business our inventory expenses these in operating improving diligent reflected efforts us, that is And are results. on focused team Our duly

the due Our And able to very have we to industrial been issues. consistent. calls, ahead not have been on are OEMs get good chain have continued but as these discussing backlogs, supply

the to dynamics expect significant Looking first second on across and March markets Regardless ahead, we'll continued strong will external well pricing continue in did what and We'll impact to expenses prices believe it have safety, increased business inventory stay managing We do levels of can results success. while quarter demand at metal on due end and pressures, our not beginning our help our vigilant positioned for war the the for support Ukraine, for is current we of a control. sustained focus performance. quarter.

on call the the financials. turn I'll for Rich more over to details Now

Rich Manson

good and you, Thank everyone. Andrew morning,

Rick Andrew delivered to incredibly noted, start an our and have year. the As team strong

in consolidated addition of the for accomplishment the and first any best XXXX. record following $XX.X in in outstanding record our the our for for our all-time is to quarter as whole, second million a EBITDA a record $XXX was quarter million sales an company's performance This company EBITDA In the history.

incremental or quarter with sales XXXX As of that first million for first expenses first Stainless million. we for for operating $X.X and Those The $X.XX share expenses the XX.X% quarter compared up Detroit compared we X%. of the include After This a operating we decreased compared of experienced $XX to fourth since items get of for of into totaled included year's expense share, the quarter incentive on $XX.X year-end million year. which debt or per Adjusted to from ago. a of the totaled last have the Net Shaw the tied that million quarter to first the $X.XX and the quarter of X% remind year-over-year inflationary quarter comparisons. $X versus were ago. Shaw XX.X% $XX.X LIFO in inflation with quarter, the XXXX Total adjusting with you of our expenses million per want all XXXX, $X.X was year results, or XXXX. million expenses, $XX to in at $XX.X the XX.X% disposition pressure companies, we acquired of I profitability, million of in LIFO million of to by no $XX.X $XX the $XX.X Operating Consolidated quarter EBITDA of Like present last impact we adjustment first expense compared of not in supplies. sales quarter operations of quarter pre-tax estimate increase year. the transactions an $XXX third distribution, and year impact quarter XXXX. for our XXXX. were million income the current first results are first when labor Alloy & million during of million the completed our million

debt during We reduction the expect quarter. second additional

However, totaled majority projects expenditure $XXX line were utilization $X.X At projects cash. pricing our $X.X capital of availability as including debt of in was long but some Many slowing credit expenditures quarter million. of our approximately the metal occur second million of the half with quarter we times approved are end, XXXX. Capital expect elevated, remains million. automation our to compared in the the lead of first required depreciation reduction

effective quarter XX.X% compared was of for with the tax rate XX% first the quarter Our XXXX. for first

the tax range. to XXXX We XX% to XX% within expect our effective remain rate

future the dividend second that approval. cash in approved historically is $X.XX the per subject of quarter, to Board level a of share, to dividend consecutive For of a be the expected Directors Board high maintained

have We consecutive now dividends paid quarters. XX for

I'd early hot-rolled the our Before from congratulations to move their my We quarter. to decline we like efforts headwinds March. pricing Q&A, September weathered through in add this to of team the for

and over We let's to of the long value-added and second withstand remain we categories, expect these metal taken price our of higher confident call challenges Regardless positively are diversify Steel the deliver the we've expand quarter results product mindful continue term. Olympic Operator, dynamics, to up our but market declining of that actions profitability prices. business the to open for to into pricing questions. risks increases position influence consistent

Operator

with be this proceed comes your Marco from Instructions] first we Rodriguez will conducting with Thank question session you. Our time a question. Stonegate Markets. Capital question-and-answer [Operator Please At

Marco Rodriguez

you for everybody. Good questions. Yeah. Thank my taking morning,

Rick Marabito

Good morning, Marco.

Marco Rodriguez

you reflect maybe I the you to in that about a behind a discussed talk QX your morning. dynamics maybe your is due more the if that the necessarily if little didn't though remarks could that? profitability in bit more a even that, benefit I correctly in here prepared QX. wondering, fact your had see talk Can bit increase necessarily – of little and war pricing in you didn't Good expectation Ukraine-Russian understood was you'll you you the

Andrew Greiff

Marco, is Well, this Andrew.

we immediate and September So probably after really shift did of ton. pricing four we through, we invasion see the the that to saw increased pricing And index February over of XXXX, end index saw really March. started week a first It to went drop. five-week about $XXX period pricing a continue in unprovoked a

and the pricing in quarter But bit January months, good good certainly increase included us the again, had little declining without very price. would March have So a still a for which the was very quarter. overall we better. were even February

Marco Rodriguez

Understood.

there I partially, at Is on side, decent as gross that And your movement so per off is well? year-over-year, I'm factored a looking ton it's Carbon mean, that the but that if bit sequential profits into a decline.

Andrew Greiff

is. It

Marco Rodriguez

Understood.

the specialty dynamics talk of about that, Okay. the bit market and there? in ASPs stainless sequentially. then little understand Got aluminum I business significantly you went And Can if your it. us obviously, an terms your of kind and the still are terms more of up pretty you are in thinking little tight. can give update ASP of what is the there bit for kind But a just expectations sequentially? of what a

Andrew Greiff

during What as year an Sure. quarter March. the But we you a of we we the highs had from leveled well. had saw that aluminum into in the been nickel increase metals since beginning certainly historic incredibly pricing through has little then. off run nice hit again, division and came or seen our period. bit doing up time And a It's Specialty Metals white

prices. those the And elevated a that, remain so lot prices prices, will LME the towards of and anticipation the really at that pegged is selling

little same thing been very aluminum, of decrease, a strong. consistent we a but very So nickel the bit see come with as we've may volume little a has bit off seen

Marco Rodriguez

Understood. able in of or are working the peel on the kind just due of of Bill way to And whether demand Infrastructure seeing you you it. layer the its you're back are Got here, country? curious kind any through or increase kind to not seeing

Rick Marabito

we've in question. Yeah, calls, a tell yet. terms prior infrastructure really we that It's company we're as who as you, seeing positioned spend the on well of not I'd a Marco, in. a it's sell great we're as lot kicks to Obviously, Rick. talked

the looking impact But answer a spending not as So yet we're we're seeing question, boost to more any specifically really really no, demand. that of XXXX, demand. little to on your towards

Marco Rodriguez

what kind lockdown Have the And sneak Shanghai sort the landscape you just I impact talking in of one about been landscape of the Ukraine-Russian could now? can that there's discuss also for terms in valuation seen Understood. right you're in of you here, maybe some kind you seeing negatively? increases more Obviously, M&A of opportunities And or macro if levels pipeline. of war. positively volatility in

Rick Marabito

Yeah.

of levels what years kind historical at got go three the yeah, cyclical the So would volatility. in given order. of dynamics I'll M&A, for be a terms targets certainly looking you've to lot of Valuation of in last two and reverse and earnings

pandemic the activity terms M&A we've that's last this strong think in lower be here that factors than most and really attention in of I earnings have cyclically a normal. earnings been a So, year get to through year, really of in for companies would of and of obviously thought going lot terms then one a environment coming be And the or so.

driven had going COVID the didn't I'm and ready China terms to area certainly certainly multiples XXXX valuation be pent-up it them not sell and it's the potentially and attention an XXXX and We're the the So good that's war coming a valuation their M&A really on market. the about amount maybe some poised been the market. who activity think had in the of a M&A I been sellers companies gets and seeing think concerns. is of of years of just in exactly in that in through I to more off sure But probably happen. lot it's two of shutdown there's from thinking demand the and

that to from confident acquisitions us So sort back going execute do certainly Got we're story of a starting -- I of half and able to you've optimistic quarter first record is the the year. and and short would going on years be feel pace the and active We that it. this keep our that We several seen certainly like last to to looking. and towards strategically talked aggressively we're activity. see of about we're lot

Marco Rodriguez

I Great. appreciate you. it. Thank guys. you Got

Rich Manson

Marco. Thanks,

Rick Marabito

Thank you, Marco.

Operator

KeyBanc your Phil Please with question. Gibbs Capital with Markets. from proceed Our next question comes

Rich Manson

morning. Good

Rick Marabito

Phil. morning, Good

Phil Gibbs

us Can you And also plans on just spend? year with in terms CapEx targeting that you're of this size? update your then what

Rich Manson

dollar Yes kick it's about the more Phil to it to then the Rich. I'll expenditures. talk Andy I'll and talk about specific amount over

seen piece the had that I I will the something cash hasn't of put low-XXs POs believe equal think but predicted we I on call stuff. than lead we last that had think less lot that six time months of when that's honestly done in had terms we've of amount, that a in the a don't do equipment quite we out a flow.

And of opposed in be low flow as cash to XXXX some tend think so XXs pushed it probably more just the I will cash into to the XXs and a flow below standpoint. gets from

Andrew Greiff

business Well, certainly Rich of side that's the correct. the Phil. fabrication We'll XXX% invest continue to in

third behind. to mid-second that's little have We been quarter maybe had have that press our bit expected the stamping looking We're in sometime a even would now second probably beginning auto the operational. quarter quarter up of We happen. second for

Some had that cases equipment in we that had months we we're continuing we Same hasn't running that four behind. a running expected order. some more lasers other and start to automation of stopped high-speed and about expected we're now with in some two the optic have to the to fiber us that welders are bit of be to behind. robotic and But little

Phil Gibbs

and what Thank and was know times equipment or several for side you. for indicating? were as we big the telling there the hard was months in last guys others. your at periods some plan the in you you and of ups are to earthmoving downs coming it intermittent I out And customers of

they So indicating what to are you there? seeing you? are What

Andrew Greiff

certainly some backlogs issues a a China making And not now So the And it or has they're issues. very you're may maybe a that's second it's second a is issue XX steady. adding who's remarkably certainly A a to ahead through the is The that may or what really of units seven They quarter be really It making can't to great expectation is have the and steady steel of They're out they're problem. XX seven. question. going be supply through indicating issue. in for anymore. chip shifted ways right chain issue harness seem half. move to the for variety seeing customer

Phil Gibbs

gotten auto guys have your post still some has are And sale you What your exposure auto Detroit smaller of indicating? but of business your operations, some there.

Andrew Greiff

It's about the same Phil.

the business be We or the the So to going steadiness. nothing expectation over focused last And really is, dramatic. month really is location. now maybe but seen we've uptick southern which again And going it's through itself, slight same first certainly to steady two it's that the our And situation through and well. quarter. expect it's this don't probably the be the unless going expect year second second to fairly into resolves chip the as we half half we the again to

Rick Marabito

And you'll Rich. this but has have X% quarter our We'll to to X%. breakdown about out Phil, investor year that see next used the in it's updated deck auto; we where we're industry first by week be XX%

Phil Gibbs

And change? long Black unprovoked gone Thank have run Sea, conversation last with obviously, anything with term in perspective you or guys Okay. are will war I question you long you. but the short the up perspective your term planning prices the a in then from the seeing in mean customers? that feel the anything

Rick Marabito

Yes.

I in. think chime and Andy certainly

our monumental realignments some about terms we've my likely some and demand and that us things things through impacts several our we're And forward talked partnerships think have a not impacts from of for effects in into supply readjusting in that in on certainly to we're permanent are this think on have the those supply global haven't of pandemic supply dynamics going for of economic going and we of, of think lasting I Europe. move economics of shift metal. From I through been be as perspective chains, may chains, all supply war I terms terms area however, the customers the really that and world dependent years.

home. and near-term But short creates any that's supply good for of Olympic chains that manufacturing. the resolved the on like And if which but war other were that? and thoughts get are a quickly, does thing Andy, to closer the think Steel think even think this it US going to doesn't I it to be it very for I just is look I impact hopefully

Andrew Greiff

Rick, add it. I Well you thing I would the nailed think and only

long do, the in see buying keeping the for see I think out the mills will the steady talked pig it you'll that certainly that scrap what and iron have Russia. And think steadiness hot-rolled pig think US from coming term. a is region. of well that least only reduction thing of pricing is, in you'll I I bodes at of in iron The the stopping about coming

Phil Gibbs

you, Thank Happy guys. weekend.

Rick Marabito

Thank you, Phil.

Andrew Greiff

Thank you, Phil

Operator

Instructions] Our Sakai comes with next [Operator from Chris question Singular Research.

Chris Sakai

morning. Good

Rick Marabito

Good morning, Chris

Chris Sakai

can were but up through cost it you drivers explained higher carbon of main sold the have the materials flat? the might for for me walk You what

Rich Manson

it's Phil, Sure Rich.

of of steadily to the talked we've rolled about the And things then decrease especially started through side and pricing is after increased so the we how one XXXX on carbon September had fall index flat that. see

of compare quarter -- that's the flat it comparing first XXXX the XXXX a for going if and you're versus started trending difference it's quarter So down while to price versus fourth first see rolled level substantial there's it's quarter you're cost ago to down XXXX, the dramatic in of in sold. difference of months to trying to where carbon XX higher goods a the when you're XXXX

Rick Marabito

were year-over-year sold Yes sequentially. more We the in goods speaking were speaking than cost sequentially about of of pricing we terms earlier. impacts more

exactly, right. So that's

Chris Sakai

average price for carbon flat selling your year? thoughts where ton see the the Okay. you the for you per on Can share of remainder

Rich Manson

We we've ton. carbon Well, in $XXX a pricing here by had talked carbon. a lot volatility think about recently, elevating about I of

they If today. at bit futures on where you from the little a are look they're down metals, pointing carbon

see we flattening coming really here it the as out bit in little and of for a then year. decline months Specifically a the starts

going relatively we're be we're in to hopefully -- good So pricing a be a in I think going relatively environment. to

elevated. remain going prices going I think it's are -- to to

are people predicted be last rolled fall. the higher going year hot think had than for prices I to

centers for in domestically. That's thing that's good thing. the certainly as think I a industry steel a a whole good service

what that's So say. I'd

a it's stabilizes. little peak then we're just period where lower and saw to up think they hopefully recently than we a find I in and trying settle it its where footing

Chris Sakai

about inventory And you are? them? your how feel they great. you do levels? you comfortable Can Are Okay, about where talk

Rick Marabito

in level a done good of our reducing I we've overall think job Chris. terms inventory

could -- next some the work relatively in down we have I a shape to to bit. think But good do balance out we then I I bring think steady the expect little will -- we're but we'll it And bit. I just of we in today, come through year. a it's the down think think can quarter, it little

Chris Sakai

Okay, great. answers. the Thanks for

Rich Manson

You're welcome.

Rick Marabito

Thanks Chris.

Operator

the turn end session. to would call the reached back to Rick We've of question-and-answer Marabito. I like over now the

Rick Marabito

and you appreciate joining quarter. Thank much day. today continued you Steel thank all Bye-bye. your Olympic us forward you speaking for and good we very next on again interest you look the really to call. We a of support and with Thank have and

Operator

conference. This concludes today's

we may at and disconnect participation. thank for time, your You your you lines this

Olympic Steel (ZEUS) 6 May 222022 Q1 Earnings call transcript