ZEUS - Earnings call 3 2023 | Olympic Steel, Inc.

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Operator

Good morning, and welcome to the Olympic Steel 2003 Third 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

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

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

I begin, reminders. few a have we Before

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

today's release and adjusted last refer During comparable measures in EBITDA measures. are most non-GAAP all non-GAAP to diluted which and A found press issued the is to income our financial per be website. financial measures discussion, the on directly adjusted of EBITDA, that share, these net was GAAP may reconciliation night provided we can

time, turn call over the Today's live broadcast Steel's will be archived and I'll Olympic website. At to available for replay this on Rick.

Richard Marabito

performance you insight today Andrew and for Rich, then overview acquisition. I'll us our the discuss an Thank additional you, on our Steel's morning, review quarter joining of everyone. will provide conditions XXXX results. with Thank latest segment begin and good market Olympic to third and quarter,

always, led our quarter results our All And of up financial more tube the were detail. We quarter. consistent profitable, challenges volumes we'll our call during accelerating third business, benefits X which your rate challenging by macroeconomic our the pipe the strike from performance and interest several declines results with X in in back strong uncertainty, discuss by These results and were will for deliver demonstrates half carbon all ever, the our to more of the this most then, Rich while caused Steel's navigating segments pressures in industry. threat pricing that, of questions. Olympic open of actions Following added and recorded accomplished quarters segment. the on a continued, of softer-than-anticipated the hikes, quarter. the the in metal as Pressure leading to its environments. UAW profitable across significant further

reported income continues, year, the on was having $XXX quarter we these which and of with and about our integration is business, impact excited acquired we're of this headwinds, sales million, million addition Metal-Fab the net beginning results. of EBITDA at third $XX.X Despite of our of $XX.X million. The the

our debt, benefits to strong of the had year, supply beginning supply the to our into our which acquisition synergies in chain this full the and from start are reduce and Metal-Fab continue will we by flow later. XXXX. Since We completing chain expect of of cash have see integration January detail Metal-Fab Rich of operations

look forward seventh our XXXX, coverage is expand with the with Olympic we to capital the acquisition welcome excited years. CTB on capitalized and Central and team to and We're and Bar, X acquisition our organization, return past high growing pipe offerings well contract CTB X, to type their U.S. segment. in and South capabilities our delivering acquire. of cultural the and manufacturing is it's an balance Tube acquisitions. high-value attractive the to returns a that contributions complement sheet we who to CTB, run. to consistent and us additional marked We Our We exactly believe in It's higher as geographic CTB strong the company including opportunities, fit. excellent this performance, October their on Steel of and to provides Central the investment want pursue family, refer our tube reach.

addition focus the as strategic Steel we we Sales-Aluminum. element October, business bolster of to segment George growth Steel's team. a with products to of will this strategic of the aluminum and Olympic Director welcomed George our plan. our key continue In role, In investments, In metals Olympic National processing, Frost growth support specialty a on

responsibility, of instrumental continued growing Leah different Manager Iowa operations. facility. in Kiley of processing commercial Olympic our of of for she's roles We growth Minneapolis has since also announced to the Leah been been role in plate XXXX Steel's General the Minnesota and and Olympic promotion the with success and

our we business, we our in committed and invest to shareholders. rewarding remain As grow

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

to call like thoughts I Before a over Andrew, would on I turn the to our outlook. share few

remain market for we steel long-term about U.S. out outlook our optimistic As close business. and we the the solid year, another

to additional XXXX, growth and stronger of confidence dynamics, deliver regardless in higher-return the We in Andrew? consistently are pricing, us infrastructure outsourcing acquisitions. I our continued profitable full enable and including opportunities, backlogs, drive of challenges. that with Olympic will spending. is the of seeing Steel industrial with anticipated ongoing OEM together These to work to strategically efforts along fabrication profitability rebound improving pursuit a invest active have market's positioned in results

Andrew Greiff

Thank half quarter. you, Steel good and Rick, continued third year on Olympic the and of the first the to morning, strong build everyone.

on disciplines in team higher we As challenges. the growth return made significant business was million diversify to as our Rick progress to the EBITDA investing by by of well earned opportunities. driven performance $XX.X have of This Olympic our the dedication as noted, despite we operating deliver market entire Steel

we EBITDA history. most tube profitable XXXX. team's and results, represents and on fabricated of delivered focus million this is driving and margin business included fifth as This $X close performance tube expect income. Our in $XX.X pipe to million, pipe of continue out the and we its The growth quarter positive improvement segment's which LIFO

acquired forward. quarter, the the pipe fourth at segment mentioned, our of start as will we CTB Additionally, included be which results in and tube Rick going

of business and is expected this context, our realizing has EBITDA to fully the immediately begin the and financial CTB benefits We to pipe yielded accretive drive consistently CTB's and additional our exceeded provide product returns, opportunities. are of tubular historical integrate highest expansion. To the to be has performance growth segments. margin additional excited margins sales which typically

as Our industry business pipe positioned leader. innovative and is tube an

acquisition, have grow the U.S. laser in We South and Arkansas believe equipment, largest us is high-end the which fabrication and in CTB breadth Oklahoma, includes tube and locations capacity to best capabilities, Central excellent including in industry. The South among allow processing the which will entire we and product

the stemming turning fall, during for carbon buying decline declines despite the Hot-rolled to $XX.X environment uncertainty facing further to more the Now pricing nearly disciplined and quarter the increased streamlining numerous April. million in bringing XX% market value-added Through has team. profitability. last the a continued shift, accelerated product to the management, these stronger segment. patterns to and profitability the fabrication and business, our hard volume than the delivered UAW since quarter of due is our of consistent to testament in the inventory offerings challenges. quarter pricing strike. business during These spot ultimately to carbon peak XX% work dedication challenges pricing declining led Carbon to This to year looming been total of market entire lower the of transaction carbon EBITDA from and sales. Navigating back customer deliver changes achieve same true the drove quarter expansion our especially able

quarter seamless, results as on Metal-Fab our in chain has impact of a metals face headwinds we pricing. EBITDA from and integration The realize The focus segment synergies falling continued as well. can the continues reduce levels. has to to control quarters. Specialty inventory to positive been on and had of what additional profitable industry-wide team the aluminum addition, business stainless quarter million coming hard with expect worked a In they performing to is business posted this supply $X.X and this this

a The the are market addition performance more reflected further Frost growth team ongoing actions face this the continues of in the results of our we in and our in to our bright segment, aluminum a company. was steady difference. The challenges taken across make deliver Our of resiliency efforts. have George spot to will consistent accelerate in

remain, and remain we optimistic the a headwinds seeing outlook steel pricing, we long-term U.S. the rebound market are Steel. for in about While Olympic and

Rich. Now I'll to over call the turn

Richard Manson

was company Andrew. our It reflects that Olympic Thank profitable and strong quarter in another Steel X you, disciplines. and ongoing investment for operational our

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

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

income of Third under million $X.X results and in expense expenses LIFO same totaled million quarter to from retention period third the million pretax in with the million $XX operating the pretax XXXX. $XX.X credit employee for compared compared $X ago. Consolidated include LIFO pretax third the XXXX income $X CARES year of of a million quarter Act, of the quarter

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

expenses included segment, consolidated for quarter of the which sold. Our level, expenses will per and tons addition not the of expenses operating year-to-date operating Therefore, third the third compared third higher on for million XXXX. the $XX.X quarter operating year-over-year. Consolidated expenses at $X appear were to million does report retention of carbon third operating reflect Metal-Fab, of expenses, XXXX Inflationary credit ton and $X.X negligible. and million employee of lower quarter quarter of when expense incentive operating Metal-Fab the variable during pressures the

of acquired which X a is As million, Rick earlier, trailing approximately $XX.X October XX-month we on Xx EBITDA. for CTB multiple mentioned

We write-up market XXXX, expense have our sales which in million, of and of included an previously approximately of quarter to margin tube XX.X%. CTB amortization. $XX inventory results disclosed the fourth will and deal of fair include sales represents costs will EBITDA segment approximately $XXX,XXX pipe for $XXX,XXX value of be trailing and approximately XX-month

million. total earnings acquisition to our reduced financial the October under see position Illinois, total to totaled facility $XX.X million revolving at expenditures we continue since an million to million. $XX that of compared reduced XXXX, million debt opportunities power our of XXXX flexibility $XXX to debt pursue in was in strengthen quarter acquisition our business Bartlett, of with and availability of with new the debt will the end during CTB Olympic had to quarter the the our invest by include acquisition, results. Prior lasers, approximately in through high-speed equipment. This product CTB align tube projects flat and bringing following us credit fabrication to the of approximately Steel. Capital acquisition of expansion, to depreciation quarter CTB strategic the $XXX capital million. expect strategy addition our in million. Immediately million million, $XX.X capital the puts of and on third expenditures additional automation the We XXXX $XXX we of the diversify estimate Large $XX approximately excellent first We X, our XXXX, quarter full by to January of XXXX addition Cumulatively, $XXX $XX pipe the and lasers be million. XXXX have third Metal-Fab welding $XXX debt the

Our quarter tax XX.X%, of rate XX% third third XXXX. effective XXXX quarter in to income compared was the

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

to is which XX of December $X.XXX dividend, Board share approved Our payable on as X. December Directors a shareholders per of

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

the acquisition. quarter, business, our and in headwinds, third we we're even consistent to and economic organic face and market results in when demonstrated growth both deliver we through invest As able

continue we rewarding our to are shareholders. growing business forward, Looking committed our and

for please open questions. the operator, Now, call

Operator

[Operator McKinney Instructions] comes question with Capital And Markets. our from KeyBanc Samuel first

Samuel McKinney

that start money. quick I'll segment in on a a on million question Act did that adjustment flow CARES just $X level through basis? with housekeeping How

Richard Manson

It's Rich. Sam. Sure,

segment. put million specialty on carbon. So impact $X cost on tube the on on basis, the can and a and not $X.X about million rough did pipe [ It it's center, -- million you then ] $X.X ZEUS

Samuel McKinney

Great. tube XX%. segment, margin another gross moving the pipe and above quarter with to I And then mean,

capabilities used from of now strong guys runway you the And at are that quarter CTB? with continue the to first is How margin laser fabrication rebates, The more much to do quarter profile with work attributed for you just be add posting business to added the XX% customers? how see that but quarter. outsourcing you much the additional every you've

Andrew Greiff

Andrew. This So thanks, Sam. is

going value-added to doing continue part rise, CTB, continue to see the That's job. of that continue focus division. -- to rise it's and certainly the see with pipe with and business. continue. to objective. We the the tube has an their They're grow incredible see to been And Their to you'll going you're

margin a quarter-over-quarter going expect And that's for so foreseeable you're see, to the to to that going of to I that. grow on basis, a because percentage future, continue continue

Samuel McKinney

hot-rolled since the the then fell course pretty the start some It's steadily And of recovered it October. third Okay. pricing, over quarter. of

versus through year, seasonal You're segment thinking the business the contract more the to head carbon you spot, experience? are the but the weighted flat probably we given will pricing volume as of about effect end how

Andrew Greiff

great question. Well,

So change from this last tell that little I we year a you bit year. that a would to kind go saw of of

there. same, the We around This quite that we off saw saw based So drop started drop about but April second October the XX% XX%, index price. of in through right half a last April. in year not year, really equaling

though who as lower, we'll on are bit on a to more we to even announcements domestic thought fourth down now see versus market. QX now pricing They opposite, starting to start right. that see seasonally the the see And come market up. our we'll you're As you It's transactional mills, come number while the number our side, had customers, X last in. was volume the We we the going especially still adjusted a that of into is little -- the jump increase business, to weeks. saw a think basis, fixed stay contract of a through over to of an mills quarter. that continue going are or And QX

And think to going pricing QX. quarter the and I rise, probably into first going going into would is continue to certainly into that

Samuel McKinney

focused you Okay. you'd what next million It Southern opportunity? the to more talk United maybe can really And like to sounds then than still the with looking lastly Still for in through me, that. a $XXX like you're just revolver, left see States? M&A on on target potential

Richard Marabito

and Sam, Yes, approach balanced of excited We're investments it's through a continue internal to Rick. to grow acquisitions.

a our I of types think purchased, at it's that look companies indicator what terms of to good going if we've the record, in track you going do think of we're forward. I

where like some the density. So the of into expansion geographic our don't higher we have we yes, areas

I some we that southwest to where, Olympic areas think to the continuing Those growth. companies right benefits are So well-run high from midsouth, returns, certainly, entities. hopefully, Olympic importantly, it's we with for find for strategy. And most those have synergistic are add those Steel companies can

Metal-Fab, whether think I are the companies those they're -- examples. it's So CTB And or is great like pipeline good, it's strong.

look to grow acquisition. in continue we so to And XXXX through

Operator

Dave Storms Our next from question with Stonegate. comes

David Joseph Storms

internally? with Just hoping could out we could us? any you of that your see acquisition. CTB run operations acquisition boost what rate, can Any that their aspects lay you sense of that for synergies start maybe Just could complementary boost of the kind

Andrew Greiff

to There's synergies. lasers, grow. tube definite equipment we continue that there's Well, Yes. like and want areas to

some be. to new love We area and be sophisticated There for And feel doing pretty greater to offerings places is certainly us customers that Oklahoma now, and we're and good business so we'll terrific right Arkansas, already customers. layer able with have equipment. customers to in existing some the in of

terrific think, to So going the I combination, us. for is be

David Joseph Storms

Understood. around market a pricing Very in here? on pricing And sense wind of any demand helpful. how metal, of thoughts goes specialty from that standpoint? Any kind then where or finger just changes the from

Andrew Greiff

the was we heavy year, half there to as first think have and line with a question. down, It's came come industry-wide want that I'd see. inventory did into I to more levels the we an great issue it's you a what the started inventory job, tell Yes. a in lot think better of so I of

really and there's year. at it's kind aluminum, prognosticators inventory us. we're going on next really bag prices, mixed indication important of coming aluminum a Nickel that's obviously, into look bit, to relative to for nickel start what some going little the is it's And up I As focused control. a But steady.

overhang reducing -- today. And much and more of situation so some job done in balanced great the in a a now much we've balanced

David Joseph Storms

could. very then from more X me, That's helpful. And if Understood. just I

Olympic Just force effects of, that's are impacts, labor with seeing going the around on UAW? you obviously, the all outside the into Steel ripple any UAW everything

Richard Marabito

No, presence have in think did know I a you up that mean, I large not Detroit until September of really. we XXXX. pretty

that we operation. So Detroit sold

force intersection of terms labor of the really in with in we're auto kind not our that and market. So the unions,

So we really haven't seen any on impact that.

Operator

question next Our Research. with comes from Singular Chris Sakai

Joichi Sakai

wanted a do to Just on be question you CTB. When integrated? expect fully it

Richard Marabito

Yes.

one. really of is CTB easy really it's tube integration, Chris, the Typically, Rick. operation. tremendous terms is a an pipe our X in fit So CTI for and this

the accounting standpoint, goes normally have the we very of in acquisition From quarter. accounting quickly. we'll a that have purchase integration costs think So some fourth we really the and costs pure

an if hit they're off first really to of rate run looking operating from our quarter. fourth great start reconciliation, to what allocations we'll earnings, our in first us highlight think, accounting everybody you're a So and with are. in for CTB always, EBITDA purchase that's true the in costs we'll as their say standpoint. But And quarter I'd I for the the month likely

Joichi Sakai

And Okay. the you about reduce I inventory -- And you Do previously plan same the levels. them know mentioned talk even debt? more? you with can to

Richard Manson

Rich. So Chris, it's

a bottoming what up that month so September, happening kind here contract normal. in of October, earlier than season kind with pricing was October the seeing And -- of for of we're us moved about

as or quarter sales. is in And fourth so inventory think what during -- quarter actually second to first bring and quarter inventories you'll support actually the rise first I see you'll we quarter see

other that's the it's inventory, pretty certainly a quarter. levels X a you standpoint, accounts drain And I year, going be for what of the amount the working and to fourth that tends so receivable. debt my anticipation true negligible is capital in think that toward I inventory you'll think But see debt is see the way up. From think the or to for in with increase I end

Joichi Sakai

other looks is then intangible there X What It like in that? And question. an assets. increase was

Richard Marabito

sure -- you're probably not period I But would I'm what assume Rich, Metal-Fab... was It looking it's for at. the

Richard Manson

Yes. in Metal-Fab was the have quarter, the acquisition. yes, The that was increase, seen you first should and Chris, last

So the you had in and goodwill a substantial the of on books first quarter. amount intangibles brought

Operator

[Operator Instructions]

Richard Marabito

Okay.

we've the cleared think all I questions.

for good to We on quarter. Olympic And this again we your our forward you. want with appreciate certainly interest in continued next you, joining everybody and speaking Steel, operator. Have look thank Thank a call morning. thank So you I to day, everybody. us

Operator

conference concludes This call. today's

at may your Thank day. and participation, great this your you have You disconnect time. a for lines

Olympic Steel (ZEUS) 3 Nov 232023 Q3 Earnings call transcript