ZEUS - Earnings call transcript Q2 2022

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Operator

Greetings, and welcome to the Olympic Steel 2022 Second Quarter Financial Results. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Rich Manson, Chief Financial Officer at Olympic Steel. Thank you.

You may begin.

Rich 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

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

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

Rick Marabito

investments over will grow provide the review it Andrew, and turn we’re he comments of our of was for call highlights morning, making quarter, for business Steel’s I’ll to about some with us our some on of also you, business. segments. for that today’s and the XXXX. conference exceptional. joining which some begin outlook to results good overall thank comments And he’ll market you Olympic each Thank and I’ll the Rich, Well, second quarter Then to everyone. discuss on

would well. quarterly $XX.X EBITDA three strong of later run exceptionally sales then Rich grew we’ll EBITDA breaking navigating set their company, discuss your financial Metals just Steel. all-time Carbon to unprecedented pricing It quarter our for to business I And $XXX of the Pipe we’ll Tube It on questions. net $XX.X and as previous always, our We more detail. sales be Olympic ever quarter record second in record first to sales that, focus Following an surpassing for call. of performed take happened All million, which Steel. strong like helped in results, and deliver another will our while year. new headwinds, of This million. And team quarterly second million, quarter quarter for Olympic most which us quarter phenomenal results another earnings million of in the on delivered segments our the $XXX for profitable our Specialty record records. sales performance commend executing with to segment its was incredibly this of our was discuss and strong strategy. our continued

capital success and capital, combined processing, is higher Our the business our our disciplined expansion approach management rooted to to return, value-added with expense in of and products working deployment.

cycles. Our consistent more product strategic in strengthened increasing actions profitability have and Steel’s in Olympic resulting portfolio, the market all

segments serve our our to returns. make all three business capacity our to and expand investments organic to growing enhance customer base continue We focused in

in they enhance reduce our efficiencies, We continue in to minutes. to mean investments investing and few costs business are about talk the us of safety organization. our throughout these will automation a what also Andrew accelerate some in just to and

growth acquisitions. In seeking actively investments, we’re targeted these additional of addition to

of seamless good. successful targeting integrations, with We’ve record the by keep track the M&A like published and team’s pace deals higher note regarding Report past and conduct their in this and culture. performance. highlights that and one four share also & to the XX governance, accretive been safety, Responsibility And Olympic to really that to culture priority We value-added with it’s navigated completing our years. and excited responsibility, on by organization. May. our in the this Manufacturers while congratulate intend companies finally, divisions safety outstanding well-run strong of Olympic a stewardship, Fabricators Corporate always five targets that’s throughout has report were Our identified core We commitment divisions for return unrelenting in profitable, engagement, to ethical we for recognized Steel’s Steel, to our environmental align safety portfolio. commitment Association, at those first social every that to our FMA, strategy been I’d values, safety our the also Corporate build our a And align right I’m

provide details more Now, Andrew? our I’ll call he’ll over and segments. on to turn the Andrew

Andrew Greiff

to good Rick, Thank morning on and everybody call. you, this

business noted, Rick three levels exceptionally quarter. As in segments to perform continued second at the high all

of adjusting of volume comparable division last Detroit our second the second quarter to September. for the XXXX Our of disposition quarter sales the overall in was XXXX after

by adjusted Sales our Our year compared Specialty million of quarter of in records and of a quarter year $XXX million were first quarter of year. business with in quarter set to quarter up EBITDA this all was the compared and million increased last last $XX.X EBITDA XXXX sales and ago the $XX.X year. for second to Metals million new the sales XX% second to the million. in second from $XX.X as $XX improved EBITDA segments, in

generating XX% XX% quarter, Carbon EBITDA. the with fact, $X.X the base and for and segment segment, a million results from demand Pipe to continue ago, million was surpassed as segment’s EBITDA EBITDA million $XX.X Tube In million. of for to million $XXX remains nearly our $XX.X deliver quarter strong EBITDA. half sales of XXXX It year for Sales customer up another from excellent the of the Metals’ up full-year strong. $XXX Specialty first was

excellent hot-rolled done quarters. an waves through few of has team fluctuations managing job the pricing during last Our

as Importantly, when you deployment you result look is our segment mix a changing of our overall capital at our results, strategy. see

As a segment Carbon approximately to of XX% becoming the of our percentage is business. sales, close

Our mix shifted us has We and this towards pricing will consistent value-added profitability us headwinds believe also help deliver all to cycles. allow within weather products. diversification carbon in market

As capital are profitable now right Rick mentioned, actively we growth. deploying to accelerate

the key last long our some quarter’s noted to of we have on projects. of has we several moving of Despite implementation ordered are subject these As projects. call, times the equipment much lead delayed along and delays, is successfully

XX,XXX annual capacity stamping support will of growing to Winder auto the second in week, operation transplant to be this our expect We press adding business our in online automotive next tons Southeast.

operational additional we and and XXK later at This for In two expect key the will automation. our will alleviate our our value-added expand lasers welders Buford, customers help in need new robotic fabrication facility for Georgia, addition, labor August. be new capabilities fully through two

foot this of operational segment. Iowa, facility moved be in location. leased to growing square Des expansion to We all metals Similar Pipe This we approach Schaumburg needs the new support is fabrication our fabrication fabrication serve our a Tube of Schaumburg we will Moines, distribution XX,XXX XXXX. and Illinois, early be in in Buford, to white fully our current have also a customers. Bartlett, opportunities to Winder expected the with in XX,XXX-square-foot center, facility facility in and begun And have near this to growth took successful

in expansion expect We the to early XXXX. be completed

we excited move to are progress We are updating and forward. making the these with about as to we you investments, forward look we continue

market to our now outlook. Turning

on downward we experiencing all pricing, metal demand. underlying the pressures products are While optimistic about remain

Several that several our a of continue customers any the sharing metal have not customer We concerns With OEM challenged impact to signs point of and to activity pricing. and as stabilization experienced chain and are about strong supply potential pullbacks significant backlogs by issues. have and trends customers the monitoring market, we macroeconomic in labor are of recession, be said, they closely.

Looking further funds should reset inflow XXXX. federal budgets match ahead, an activity up XXXX to and start expected states of late to in see their as pick infrastructure we early

of production, is the could of continue further market cyclicality, prices those on the half new will inventory successfully focus future turning capital, headwinds, expenses. are to deploy managing positioned what we in XXXX. reduce In addition, Despite cyclicality. where to impact our withstand driving and in and well In pricing expected bolster demand. and We’ll of effects strategy to navigate the the summary, energy we our which market pursue operating that we the headwinds how confident our also we second diversify and expect business to energy can we company near-term to and high control, investment continue are grow

the over to turn call I’ll Now, Rich.

Rich Manson

everyone. you, Thank and Andrew, morning, good

ago quarter our another delivered surpassing Andrew all set Rick results, quarter with across a just of and we segments. records record-breaking strong As we of have performance shared,

operations keep results of As in mind quarter-over-quarter Alloy an the completed our disposition impact in that year-over-year our acquired quarter please I we discuss those Detroit we on of fourth third the in XXXX, XXXX. during & and Shaw Stainless our of Both the transactions quarter had detail, more of and comparisons.

$XX current XXXX, of last debt expense in year $XX.X million income for ago. totaled decreased the million the $XX.X year. year-end, EBITDA We quarter with down quarter to quarter compared million $XXX no $XX.X million second was with Adjusted adjustment LIFO our the in of $X outstanding second net compared the to quarter For quarter debt of XXXX of million in LIFO XXXX. by bringing a of million second the since compared had second Total $XX.X million.

credit debt end We line our the second reduction quarter, At XXXX. expect million. approximately of throughout availability was additional $XXX the

deployment million ago. and of be $XX.X quarter, availability, strategy. well estate $XXX of receivable million an $XX another accounts can as a XX.X% discretion. operating our at stockpile our increase activated inventory the a line or to totaled sources support year provide capital ABL a for million million Those capital $X.X expenses million for additional have We real compared of as that $XX.X Consolidated with

of the Second a operating second quarter. $X consolidated operating include million XXXX to year expenses in compared ago of when and higher quarter million Shaw expenses $X.X incentive expenses

When totaled in Detroit XXXX. quarter the million quarter during up per the of for prices compared quarter as expenditures $X $XX.X saw outbound division, experienced million of pressure This depreciation freight of in quarter $X.X our for the Additionally, we gallon of inflationary significant second second costs year-over-year. million. Ukraine the per with adjusted of we of $X.X distribution sale former XXXX from Capital the invasion and were under second diesel $X the expense second results approaching XXXX gallon compared XXXX. to

our discussed, are slowing fund growth organic Andrew utilization of As projects. cash to long the lead times

long approved XXXX. into projects push will the first but During of $XX half growth organic fund the XXXX, million capital these to of times lead we deployment, need

of XXXX, full-year cash $XX we expenditures. anticipate capital For of utilization million

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

our has $X.XX team XXXX cash the expect remain for per another higher closing, rate We to a paid rate like quarter historic at to share. quarter, third for the XX% Steel I Board quarters. of XX% company And of now XX Directors the to range. The dividends the within quarterly effective tax at consecutive for approved performance. delivering In Olympic congratulate our entire would consecutive dividend

As consistently Despite the fears. recessionary we we grow of second and year, that cyclicality and confident facing we the half market pressures to move are to and Steel more endure remain these is into macroeconomic positioned challenges, profitability. Olympic pricing headwinds

for open the call questions. operator, let’s up Now,

Operator

comes [Operator Marco the Stonegate line Instructions] question Capital Markets. of Rodriguez Our with first from

Marco Rodriguez

maybe we was could carbon I on wondering the side. start

you’re there, and through And looking parts divestiture, supply quarter. so, the some or with or here expectations thinking obviously of the X about the there volume last tons acquisition. Just be tons so mentioned past I shipping looking in sold, quarters you’ve selling there’s also headwinds at from XXX,XXX might moving the I about Detroit the per about know Shaw or some that constraints. But kind that know your

second being half and because So can us is bit, you thinking supply carbon? what of of of your terms a sort kind kind the dissect for of of Or not that in at volumes a constraints all, through little maybe what ship sense, if pressured? give you like is the can what

Andrew Greiff

Yes.

you this for question. Marco, Thank the Andrew. is So

expect traditional is quarter. going would that we us So, third to be quarter for a

therefore, maybe we specifically think been expect we and saw we not as The over industrial backlog to in our July. be relatively just OEMs. relatively shipments -- the have into bit in steady. what steady, July industrial forecasts of than the They’ve get carbon while even been they steady. to show certainly not trying So, been sales issues, chain don’t XX August backlog -- And we going the of very been next Their And the July. to have great off to the supply better think they’ve that movement to were September OEMs, from from eat on have to traditionally able and XX days. are larger and because the been a able little customers into some days

to so And anticipate is shipped being should be we steady. that -- going be the relatively tonnage

Marco Rodriguez

helpful. that while. of Very And maybe as you for guys there there you Can Specialty you update us Metals allocation I know just well. discuss it. volume? thoughts what your Got a the can regarding kind also if side and are run

Andrew Greiff

Yes. Sure.

allocation or pricing. So, X on picked X and months, the It’s added Imports of pressure you’re so up seeing the But domestic months domestic have put still availability some marketplace. that mills. on pressure certainly into last the mills, the certainly

us, say, the our will side. down pretty challenged. food opposed even are has it Customers a but very to loads the market customers side maybe from volume additional equipment may buying that spot steady, have we see trailer come more and with more would on before margin pricing particular customers, they been full buying some and are It’s for I contract would bought we’ll truckloads. the the customers pressure frequently half They’re some So busy, tell quarter expect But pricing again, where and the as loads still that be it. you of the imports on I perspective. contract certainly in truck from as

Marco Rodriguez

on as might that kind have there you There’s, recessions, thoughts comment cases discussed guess, to having any conversations be could to recession. of far would expand potential some the concern macroeconomic you in your be terms of just maybe recession? I discuss the base you’re customers. growing Got whether Just it. If end sense shallow due helpful. And what with as in of deeper picture and obviously maybe remarks, prepared their you some any

Andrew Greiff

so I their What of lot conjecture Yes. tell as not you, it’s changed. a is not have and really forecasts Marco, would I think specifics much

hearing, they’re to forecast I hey, into Fed of reading cutbacks you general think it’s a look and really consideration to seasonality. say where fourth of take the hey, still really we’re remain we’re quarter where pretty a, third haven’t and opposed customers rates are at, concerns, as optimistic at seeing think getting are seen are forecasts. levels going see And But I the the going see to, they’re are increase talking inflationary you concerned, recessionary would you that I going our a more their what the should just taking and that to be. at this, about concern their we relative do when concerns. the moment, where

Marco Rodriguez

you And what look Maybe Got the last on on for it. little us update pricing can Helpful. bit, opportunities, might talk M&A me. quick seeing you’re what landscape a question like?

Rick Marabito

question, Good Rick. is This Yes. Marco.

comments, prepared are. desires said I what can in we about first As our Olympic and speak

via see growth So, we’re acquisition. continuing to actively

feel one I quarters, we’re year. acquisitions. to prior make to hope in yet confident continue this We would make said I’ve As going to

tell time. the I’d of probably in than seen for quarter, terms landscape the a you, In activity long, last seen we’ve more long M&A,

buyers shift value in more I meeting and in of of the maybe we’re some in forward of on terms think difficult pricing pricing minds marketplace are from what the seeing the and from even terms on leading indicators of some assertations a to the sellers.

at downturn rise X X performance, here as So at in the we COVID, the you valuation least years unique challenging steel you cycle, we’ve at over over really typically, recovery. with and some years with rapid and and look price way the a to the had last the do look markets

that’s buyers. really that EBITDA or is consistent what it’s profitability returns, and focused think what fit ascertaining that if our an I of minds the probably lot I several sticking right more really of is, a in on new the I’d to we’ve years. than offers of well-run a But some a books there’ll of and of do more the you, from able probably meeting execute value to inflow bankers, kind Olympic is And in So, in get buy the geographies be more tell to that, seen we’re want desire But in going terms be and we’re We type and we’ve terms earnings, multiple. with to to sellers strategies. trick companies the activity, on. of believe now our higher seen

Operator

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

Chris Sakai

are and quarter? your similar they on shipping third you somewhat How in Are the to Can second comment costs the quarter? they? transportation

Rich Manson

the expense distribution is, lot that the was what distribution prepared Rich. see comments a quarter shipping Sure, said to look I think going think Chris. adjusted quarter seasonal It’s I like per quarter with And invasion, will $X I in back second And first for What invasion yes, saw rates. I fuel prices third diesel after you’re in Xs. expense the first the looked $X second prior were second low we than essentially, less quarter the to quarter Ukraine in compared gallon Ukraine and XXXX. the diesel in quarter, at the even went the of

think see diesel I can this almost you per doubling so And of gallon. price

distribution is terms yes, lot a So like to in QX look of going the expense. QX

Chris Sakai

that investments top increase Okay. when? will to line see revenue when for magnitude we made, and And then it you’ve these what --

Rick Marabito

Yes.

think in I section. Andrew’s So, commented we

phasing So the in these half of the year. first thing be is we’ll in this back

starting get So, type ready aren’t Winder. we terms in $XX equipment building looking we’re the power expansions million a XXXX. we’re in be any up see these going at EBITDA in Moines, to there to and But excited to of down probably boost in XXXX. be The expansion Des running to to in of plus

Rich Manson

boost the down as the automotive expansions impact get XXXX. Rick the have think Yes. add to most I Obviously, phased stuff the the what comes would South, XXXX will in. stuff full I in said, in just

the and ramped comes think but into XXXX, well I Des Bartlett up Moines in as XXXX fully XXXX. as

Rick Marabito

the Andrew volume spoke of is I Yes. And once comments, mean adding. that’s the his And big piece XX,XXX we’re annual I that think of capacity. tons that’s ramped press in equipment up,

Rich Manson

the that’s we have Well, full. Chris, automotive right. right. first press That’s so And stamping is

The second is week. one Everything in. should be operational next starting

that’s benefits for We’re about automotive coming being is South. on that the behind, side, that. down full, start we an presses, But the from X really delivery But actually we’re year. months see and as with increase to the for next -- customers that parts on behind X into those of we’ll months the close seeing

So, we’re excited that. by pretty

Operator

Thank our you. I’ll back Ladies any and comments. to gentlemen, that the floor final session. concludes for question-and-answer Mr. turn Marabito

Rick Marabito

Thank you, today. interest of Olympic you again a if in operator, We joining greatly thank our all speaking Steel certainly quarter, and look you continued appreciate sooner. Have us and for next great day. to your forward not on with call

Operator

This Thank you. conference. today’s concludes

disconnect may at You for participation. lines time. this your you Thank your

Olympic Steel (ZEUS) 5 Aug 222022 Q2 Earnings call transcript