Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the Olympic Steel 2023 Second Quarter Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. At this time, I would like to hand the conference 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 Forms release 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

night last will turn During may refer are for net the comparable our measures be can archived in At time, and I measures. share, most the adjusted replay today's non-GAAP to discussion, website. this 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 Olympic EBITDA these EBITDA, GAAP per reconciliation provided Rick. to Steel's over

Richard Marabito

with will and our to everyone. then conditions. quarter XXXX discuss for another on Rich, joining conference comments market good results. an call provide review us Andrew strong of Xnd morning, on Steel, you, quarter for Steel's performance you overview Olympic and segment some Thank I'll begin Thank Olympic today's

discuss call will in more Rich results your our open the questions. for And up then always, as financial we'll that, detail. Following

million diversification are the success from of strategy continue net ability our million strengthen EBITDA enhanced of in consistent with and as second of adjusted in even processing and Olympic $XX.X steady market of reported our the capabilities. which strategic $XXX our quarter benefit Steel of our delivered of challenges. to These actions, performance We investments results we income strong another sales profitability of face $XX to and million. deliver indicative quarter

the headwinds After as faced in benefiting prices hot-rolled the from pricing XX%. we rising fell of this at carbon year, steel quarter, index beginning

also continue in a steel We time, navigate at absorbing shipments, reduction to the stainless XX% in surcharges. XXX industry-wide same the reduction while Grade

adjusted the our $X.X first from EBITDA up Despite was million these quarter. challenges,

effect in synergies results second include we history. will full to the our Our second second was in the XXXX. our second largest earnings supply of benefit in the see quarter acquired Olympic's and strong a of acquisition the contributor begin to was of January quarter half earnings, Metal-Fab Metal-Fab, we which It XXXX.

In fabrication our addition, online move during the equipment in capital our facility projects to expansion Bartlett, Illinois. we and new into several continued came of quarter,

capital third of fully projects Andrew details provide in will Bartlett additional will operational our by expect remarks. be some the on end We his the quarter.

With further will a opportunities $XXX into our products. higher-return to of strategy borrowing expand investments sheet million, value-added additional availability than continue acquisition actively strong evaluate and seek that and more to balance we

for integrations our stakeholders. We profitable the right confident have track and growth to a deals proven additional and Olympic identify to we're foster and ability Steel our seamless M&A in record, execute

year. reductions We half rewarding in our are While debt the shareholders. the repayment of our we expect continue reduced commitment we business, $XX investments to these and invest million second during and we second by debt our with the in quarter, to balancing further

our consistent higher allows also directly financial We results. our shareholders to $X.XXX benefit and to our dividend share, per which quarterly continue from pay strong of rate performance

provide to rest moment a market take we to the for conditions of outlook on some the thinking like how and year. color I'd about our are Now

expect OEMs we domestic economic Longer While to out, from term, the demand near-term steel of optimistic subject our plays seasonal about to future we remain the environment remain market. normal the the trends. do third steady quarter, in

solid We bipartisan infrastructure centers. expect for metal for continue manufacturers, to that and benefit increased to domestic producers tariffs steel steel service the outlook as projects spending well other government will and as and support support quotas

fabrication In than as us outsource we have work. deliver that Steel in to more in Olympic results past. of the regardless look an position to strategically demand growing addition, on value-added excellent processing capitalizing this and I'm more we market capabilities positioned put confident our continue consistent to face, customers what returns environment for higher

We will to further to continue market reduce deliver on our execute profitable are strategy than our of stronger impact business on ever, growth. the and and cyclicality we

call Andrew I'll Now to turn the provide more detail. over to

Andrew Greiff

to you, continued second Steel year good start Thank Rick, the and on everyone. build in the Olympic morning, the to quarter. strong

The of Steel more $XX.X of we reduce are and us impact industry-wide taken can despite facing and demand reflects steps market to performance more resilient consistent EBITDA that earned carbon on deliver proving business. have the any market made our deliberate steel pricing we have headwinds cyclicality million on This stainless surcharge in pressure reductions. we environment. Olympic to strengthen great and As Rick achieved adjusted progress we performance noted, the

our turning to performance Now by segment.

adjusted of ability management success expense The our segment team's million was critical the its carbon maintain inventory $XX.X focus Carbon to accounted EBITDA quarter. and this quarter. fundamentals the to on for discipline of for Our and

to been the entire successful performance work integration ongoing segment's quarter. this results. smooth. bolstered on and and integration our the Congratulations acquisition To Metal-Fab performing segment their is outstanding and carbon the Additionally, Gea Metal-Fab the date, well, David of has extremely

value-added results the by pipe our for improvement and with capabilities. led growing focusing quarter Zielinski, processing also delivered strongest by totaling million segment adjusted is strong fourth ever, tube very and Bill big tubes pipe and on of accomplishment This Our a on for profitability EBITDA $XX.X achieved capitalizing demand quarter. margin

handle which is in work, we this We particularly increasingly to capacity well to among demand fabrication expect this in we continue. our customers, and believe are positioned our outsourced to due trend segment

soft to conditions million quarter. specialty adjusted by experience As these Markowitz, specialty of $X.X the Andrew challenges, market expected, earned EBITDA. market metals metals, continued during led Despite

President, We on new and the technologies. and Bartlett, additional and organization's welcome facilitating presence, facility new strengthening Fabrication. our look Illinois, fabrication-related our Olympic as will growth newly of fabrication Max the will team this the focus carbon in strategy we Fitzgerald the In strong support created execution continue opportunity on to lead a we fabrication make commercial provide on in position capitalizing Max fabrication role, with area. to Vice continue capacity the the in progress implementing which both To to operational standardization white metals of demand this

Director fabrication of fabrication. Max Matt and who directly the business. Matt focus been promoted has Supporting grow to report Grussing, developing and on to Sales, Max company's to will implementing is strategies

execute capital We helping number and this that new growth and strategy came projects pleased quarter. forward are fabrication to succeed on to them of report their in excited look our a online our to roles. We're

new new Buford, automated At which Winder, fully which provides robotic laser, performing of our and press, X a new high-speed lasers, well our X precision thicker line, At fully facility, XXk well. installed Georgia extremely operational cutting second operation, XXk welders as packaging we as Georgia our stamping gauge includes material. now is automotive a

growing and investments increased automation and business. and our are instrumental prioritize These strategy well. very operating support driving in efficiencies are safety our We to

steady metals As Rick prospects and the we remain Thank market actions the work the our while for near-term confident you we industry. mentioned, of taken, we optimistic are our through future team dynamics, about the domestic performance. have entire of to in quarter and we another performance

I'll call Now over to turn Rich. the

Richard Manson

Thank to reflects you, ongoing meet Steel customer demands. and quarter was and investment one capacity Andrew. our the strong for in business our It another Olympic that

results our carbon XXXX comparisons results, roll the acquisition more that mind of second XXXX difficult review Metal-Fab we due quarter up As our through in January keep segment. be to will year-over-year whose

quarter, income $XX.X totaled prior second in million to in compared quarter net was the million $XX.X quarter the $XX.X Adjusted in compared $XX period. million million XXXX. year For the EBITDA of the to

to quarter to LIFO million the recorded in LIFO of Consolidated XXXX. $XXX.X pretax second income for compared million compared second totaled quarter quarter During we $XX.X second of XXXX. the in expenses operating adjustment of XXXX, quarter the of million no $X the

Our in the period totaled versus sales sales of XX.X% $XXX of per second the and year. for the for XX.X% ton XXXX same expenses ton prior quarter of and operating $XXX per

to operating XXXX. expenses $X.X and higher carbon second reflect at and operating of million quarter when Metal-Fab the tons does expenses lower per incentive level expenses quarter Our the for for will operating expenses report not segment the and of expenses $XX.X include Consolidated year-to-date second year-over-year. addition operating Metal-Fab, sold. the the consolidated which quarter variable of second million of compared ton Therefore, appear

XXXX the since second of we another of We been the has debt January estimate additional reduced expenses operating have debt year. XXXX and quarters Metal-Fab the to under $XXX we $XXX end at $XX inflation Cumulatively, the X X%. total just in reduction of $XX impact by million on XXXX, over our the pressure quarter million. second the expect by debt We past debt bringing at quarter the acquisition Inflationary quarter, the declining sequentially. second in reduced million in half million, of

expenditures to as totaled end, $XXX growth We position At investing our further acquisition our to quarter excellent million. record in near of availability credit continue to $XX.X million quarter Olympic organic well for Steel. second was $XX.X XXXX as strengthen of remain depreciation an opportunities compared Capital a million. efforts the in

expenditures to in continue the range. estimate million XXXX We capital $XX

our income increase is in to Mexican to XX.X% carry operations. our XXXX. and effective of second quarter higher the increased in Additionally, than compared tax transactional tax and tax quarter effective our second profits rate a which was This primarily XXXX attributable effective rate sales XX.X% U.S. rate

expect XX%. of the per for dividend share. quarter, quarterly balance during approximate We to the Also, of tax XXXX to we XX% paid our $X.XXX our effective rate

XX Directors per September Our dividend payable of to on holders September X. share a as Board of approved $X.XXX

shareholders our We have XX to dividends now quarters. consecutive for paid

strong quarter, helped the even in the market Our to diversify offerings and performance of and second drive opportunities our capital invest in challenging conditions. uncertain our in some face higher-return product

and we seek forward, our further will we continue strengthen to optimistic, opportunities to diversify and business. remain Looking

Now open call questions. up the for please operator,

Operator

Instructions]. [Operator

first question Your with comes Markets. McKinney KeyBanc Samuel Capital from

Samuel McKinney

quarter, margins even tube. rebate all in see typically that first the in quarter, the quarter, to strength are First, you was quarter though XX% the how and firm work? in great held attribute does? second margin lasers those margins And that your typically sticky and first quarter outsourced pipe to strong the but margin value-added second the forward? those doesn't I moving Gross start strongest Do income wanted

Andrew Greiff

So We those question. Sam, it's margins do see continuing. Great Andrew.

been It's probably value-added going CTI As in approaching represents the We to think sales. of we XX%. the XX% that end really to of somewhere look to year, objective at take get get number today, closer XX% a XX%. that's by the that the of to

So that's we've money equipment elongating good value-added the that, spent grow going to in to expect really do and margin. continue

Samuel McKinney

the towards helpful. quarter pricing flat can But volume continued in weighted I And especially contract segment declined you Okay, recent given second overall then carbon into Andrew. That's sharply effects you're third quarter, through spot. the to know HRC expecting? and seasonal fall thinking talk your books about you're order during weeks. versus has more how pricing us the

Andrew Greiff

Yes.

think seeing unless challenged, will question. I'd is stream. expect see running we see going I we to we we'll steady, But still the be it on still And moment, do be think, we're great today. lead consistency prices get seeing being whatever there We relatively greater well. take to market the little X the today, then say mills running think that weeks. we're coming -- Another seasonality times to weeks, than there very capacity as I lead is more to we're think X a so seeing at it are will quarter. see hot-roll as steady, time a the I we're but as but X on gets really fourth where would And today. into X look

Samuel McKinney

couple of levels falling continuing metals, talk they lowest any Okay. to level those at And the are me, inventory to inventory specialty you're years. service of feeling levels fall, impact Can turning are centers you if at for about pressure? the import last specifically in lastly and then their

Andrew Greiff

Yes.

we I a We're big is probably we the pressure. we certainly were a the seeing probably like So flat. than have to think I last is year, month. tons inventory we where Import factor. to seen high this X around inventories service XX,XXX what Demand to feeling come We're saw bit be. in months would to start would there But that bit imports centers stainless say time, seeing certainly higher comfortable. X like is not right still now. it for us, similar seeing last down relatively to a a last the our And to over it is year as not little little for XX,XXX need

They are over the down think report, think going you're the a down metals month see or You're but right. bit next activity I to little to you'll more. according come them I X, see

Operator

Next question, Storms with Stonegate Dave Markets. Capital

David Storms

could the our It work like acquisition? Or lot Is products Hoping diversify looks there bit about is offerings. of you that touch story? just revenues. your more taking the changed more to -- to done of from have up it a carbon on last quarter Metal-Fab with just flat might a XX% that or little you've

Richard Manson

story Metal-Fab because X has mean, bigger I think it's I yes, I on side. the been points. stainless the of Dave, bit up general, in there think I it's little a -- think

it's well as that we're average of slower down. been has and stainless immune as price come industry-wide, So sales, the stainless to not

So about used be popped it -- yes, about I to -- I think flat. XX think we on was carbon it XX%

I think was quarter. this it for XX%

David Storms

And or on anything just typical expect then seasonal into factors? looking that, that unusual have helpful. should downtime of half very there is like 'XX, the any we just planned we second Or should the radar. That's

Richard Manson

Yes.

a think, very we shipping just X% because to holidays year. I Dave, XXXX to steel that And of sequentially see after would typical July. then X% is QX, typically effective in been has what historically seasonal I less down days of you due QX of tell kind the is what

So kind expect I trends would those continue. to of

David Storms

And one perfect. me. That's for more

right any impact get is to X.X%. around unemployment your on and maintain still that the Just Is having ability labor it?

Richard Marabito

going I ago. we demographics at, real manufacturing labor bit it's of the pressure to is This compared of new little we've a are is years where the at just in levels we're from on of kind think side, relief to the But States. mean, of a relief -- terms But -- United looking certainly a that the the this X the and Rick. We've bit year is low reality kind seen from be that. unemployment seen last in little hire impacts, easier COVID so little it I to and

Operator

Next question, Singular Chris Sakai with Research.

Joichi Sakai

also Just are you for had sold the specialty to flat. on get of of sense I the materials question there metals rest cost specialty your wanted at flat. seeing a the demand year? metals What of and the guys

Andrew Greiff

that going you, Chris, you nickel tell think as XX important that stainless. steady. would come little range. Nickel know, it's Aluminum, an is I pretty in Well, plays, up role has XX, to probably bit. a been prognosticators in again,

maybe talking the analysts, see about the little just is to the of year bit. they you're may think where to up be So it now this going a balance

seen is mills months. real is. a stay would tell are I well, is the these we've pretty X if stay what running they way mean imports the nickel where pricing past the And in surcharge domestic you that on it going I around are who right to falloff

a are to steadiness year, little going then the but come about it's steady, steady. And see which mean predicting going bit we of relatively into really to for stay balance to of we're will stay as say to going our the that are September. prices think hard the I it's most

Joichi Sakai

Okay.

what you talk your there? opportunities good Sounds can And more and about are that. fabrication for

Andrew Greiff

question. great a it's Yes,

really we're of a it's -- what a it's looking So driving at. part

key has since look manufacturer for taken The grown. at industrial marketing looking that welded and the about R&D, that seen assembly really areas, has need today that's parts we their parts and as for is and we -- think X it's So fabricated and a take fabricated real really they're grown, what the and COVID. Chris, value-add we in OEMs, have need off

brought guy participate We a be for growth to have number to area in Vice downstream been there. Fabrication promoted We're big Fitzgerald fortunate downstream heavily Grussing new invest Matt going his of It's value-added and to us, in we President be to equipment. that. equipment big invest continuing to in in this. be why one we'll It's our in and Max

Operator

over Rick for remarks. the turn I would to Marabito to closing like floor

Richard Marabito

Thank Steel. day. and look We again continued forward And interest call of for next you, thank on your you, operator, we have and quarter. speaking to Thank joining us all certainly Olympic a you appreciate with today. you our in great

Operator

This teleconference. concludes today's

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

Olympic Steel (ZEUS) 4 Aug 232023 Q2 Earnings call transcript