ZEUS - Earnings call transcript Q2 2024

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Operator

Good morning, and welcome to the Olympic Steel 2024 Second Quarter Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. At this time, I would like to hand the conference call 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 second 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

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

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

Richard Marabito

results mix our Steel's to pricing are everyone. flat segments I'll challenging begin helping results. of XXXX all X capabilities a a diversified quarter, today rolled drive higher-margin richer environment. how Rich, that joining And despite discuss good by and and products fabrication end for Olympic results additional products, offerings about talk profitable profitability. us delivered how second I'll morning, our you, all for quarter you the of and Thank summarizing our Thank second to

as then facing And financial questions. the following that, time testament is is results steel will pricing Rich will the always, discuss open significant in to Steel's Olympic our call a solid your Andrew deliver review up success of segment then the performance. when we'll results a at industry diversification pressure our And true ability detail. strategy. more our for to

For and perspective, the EBITDA. beginning XX% the the $XXX Despite income and since of and of this sales of hot-rolled during net challenging the volume index $XX year. quarter million we environment, pricing second million fell pricing our with $XX million XX% shipping reported of increased alone

our across continue teams to business drive Our X all profitability of segments.

Our efforts capabilities carbon resilient to to strengthened additional expand grow fabrication coated market manufactured pricing have flat-rolled in higher-margin pressures. and make and us including business and and our more products, downturns products,

for especially lines additional position make identify We credit evaluate continue growth, that higher in availability to these product our proactively more return facility. with opportunities diversification $XXX our existing borrowing further under million excellent strategy. to than investments in financial We're and in an

and how Later in we're Rich in investing new the equipment call, highlight will CapEx.

well-run acquiring businesses continue are progresses. on this build as seen increasing M&A for these to Steel well we've acquisition. team year our Olympic the that opportunities post as impressive to of integrating success hope right has record companies an We the Additionally, as track fit as successfully

our we efficiencies. Looking focused and disciplines operating the working remain on XXXX, of half and profitability ahead on capital second around to delivering

shareholders. Olympic confident challenging to consistent we the about expect to in industry and results navigate near short-term the Steel to are market for remain future remain that of we domestic pressures positioned is conditions metals deliver optimistic the While term, our

we I'd found can call June, our corporate published on and like mention to be the Andrew, latest turn that I in our Before website. responsibility that over to report

built culture in I the XXth and commitments and a and marks and call progress stronger We're our dedication also team XXXX partners to to turn ever their of moment milestone. our Steel's to anniversary to Cleveland, team the want proud Olympic team and Ohio. than to I'm the organization, our and indeed environmental another and proud so to company celebrate such responsibility. business shareholders. incredible now safety, of our are because culture our We together. Formation areas take of our I'll Andrew. we've customers and as over in the

Andrew Greiff

morning, Rick, everyone. and good you, Thank

contributing As profitable to we all mentioned, our Rick results. a with quarter solid segments had X

see more continue stronger diversification Steel and our strategy a to has made company. that We resilient Olympic

markets. countercyclical pricing Our addition benefit of value-added end companies falling a during provides metals manufacturing product

I'll each segment's some Now results. detail provide on

well The Carbon pricing in in our business face continued have volumes OEM in X.X% quarter XXXX. larger of generating quarter demand. as and good some that news the pressure despite this profitability, in Carbon XXXX. second from we sequentially in is way because led also was noted year-over-year The $X.X we pricing as quarter Carbon first customers. the segment shipping on to the team able softer-than-anticipated First, the of the conditions improved segment, challenging the to from the million demand second EBITDA pressures grow X.X% and market of

pricing gross manufacturing XX% cost strong for of countercyclical expansion higher benefit of Our In declined, shipments profitability as has our manufacturing again, increased capabilities. end versus had a margins continued our companies quarter, product a increasing to their half of base steel. critical goods product fell our coated the first XXXX, industry. coated as to highlighting Also increase sold is of X% business, profile than margin EBITDA their carbon end metal which the the success a our hot-rolled the

represents now XX% product mix. overall products of Coated our

new win team during to of stability provides pricing. fabrication are fabrication by and falling new consistency of process margin our business, metals growth accelerating led that Fitzgerald, Max structure periods continuing are We

adjusted add with EBITDA XXXX Our volume results labor expanded million, and and of segment in fabrication tube economy. year-over-year. potential post-COVID $X.X growth an this The in in capabilities of increase quarter chain posted and outsourcing also shipping supply the including second dynamics market pipe the solid of X.X%

our Central continues Bar to margins our continue services forward. our to to Our The help and hot-rolled go margins us and and value-added well, profitability & will expand maintain declining increased going in Tube to has integration that drive pipe strategy business steel markets. allowed tube of

Our to legacy capabilities, business enhance and their bar central tube value-added facility the and services tube of production and business. continued the which pipe portion our

third add X-axis the CTI of in added in of new operation During half XXXX, new laser first CTB a is laser our tube slated a Romeoville, the and XXXX. Illinois quarter tube to

quality us best The the volume quarter to and The Shipping strategy. quarter both and contributed to experienced during enabled of year-over-year Our turnaround sequentially quick business, higher our since XXXX. metals XX.X% first segment ability of for quarter its furthering return parts the provide growth the quarter fabricated of this and more first X% profitability of during EBITDA has second quarter. million of increased XXXX. win volumes of the $X.X specialty segment from XXXX

Overall, we are with win ability a new profitable pleased environment. deliver to the business and in team's challenging results

market As service forefront. second navigate the we control. XXXX, focus an customer we of discipline, the to and with remain on will the half superior things uncertain along inventory will continue in at can Operating expense we

Now I'll Rich. turn to call the over

Richard Manson

Andrew. you, Thank

our to conditions. from Andrew, heard X you despite contributed Rick segments challenging the profitability and As all market

diversification of and reflect the our execution quarter our operating continued team's strategy of our impact second results Our disciplines.

impacted & of detail, year-over-year and comparisons whose more the want discuss in included the in our everyone segment. pipe results Tube to Central by that I tube remind are XXXX I Before October acquisition are Bar, results

year [ $XX.X quarter, second was million of XXXX. XXXX net $XX in (sic) million with the EBITDA in of quarter pretax quarter million totaled compared expenses million compared $XXX.X Both XXXX $XX.X million second $XX.X million compared prior $XXX.X the million second million second the quarter For the $X.X LIFO in income period. with ] second the quarter million of of include for operating Consolidated ] totaled (sic) the with income. quarter and in XXXX. $XX.X $X the [

second the expenses quarter appear operating Bar, reflect segment report ton Our level not per tube at and for operating year-over-year. the & consolidated higher Tube the and which addition of Central sold. expenses will tons Therefore, pipe does

Consolidated tons for expenses Shaw we million expenses incentive quarter the or when $X.X lower quarter not with included McCullough compared reminder, EZ-Dumper, a operating segment. $X second Industries, report and of expenses the second entire the do tube of operating million As Stainless pipe CTB and of sold EZ-Dumper, for XXXX.

Our effective due increase at higher increase of also of first XXXX levels by capital the rate hedge. quarter of driven was half is $XXX borrowing with the XXXX. the interest This million, rate working during $XXX the from higher ended total to fund our debt million of to quarter expiration year-end. our in second We an need of

investments borrowing in to more than access million have to to opportunities. continue availability return support higher in We additional $XXX

million compared $XX.X of Our million. for the half depreciation capital first XXXX $XX.X totaled expenditures of with

automation, capital approximately Equipment we to higher lead opportunities results and that and $XX million we've gross times investments in and be estimated remain results. XXXX in equipment margin will fabrication as that consistent long more continue expenditures make

will noted earnings metals The release specialty XXXX in cut-to-length As associated of expenditures high-speed coded early product recently occur X majority ordered our in and to further we efforts those flow expand night, our last the splitter lines our new X and in with XXXX. in cash lines.

additional capacity Cleveland the our XXXX, Romeoville location. laser in and first laser During leased half our leased added flat-rolled to we of in operation capacity

not leasing of during We our in reflected capacity will The operating CapEx but at included add is CTB additional leased of are value-added quarter tube in these lines laser expenses. the our laser third numbers, XXXX.

XX.X% XXXX Our XX.X% period rate last income to effective in was tax compared year. same second quarter the

XXXX XX% our tax expect rate XX%. to approximate We to

paid we quarter. the addition, share $X.XX of in In quarterly a dividend per second

company X X, approved September paid of which cash to back Directors quarterly of on dividends is next of The XXXX, Board the years. September per increasing dividend on dating Our quarterly XXXX, now to as shareholders XXXX. record payable in of $X.XX last the our regular each regular share, XX, has dividend

profitable be ahead, our ability enterprise we deliver results and the look we at As segment to levels. continue consistent optimistic to about

higher into margin, have opportunities. higher expanded We value-added

win as to able customers And new the we've a existing with grow customers. and business result, been

operational future. continue in and financial remain invest our a position also to to We strong in

what our focused value controlling on team and our are Operator, for are We ready proud now questions. we and of control customers is delivering shareholders. can we our for that

Operator

[Operator Instructions] comes with McKinney Our Samuel question first KeyBanc. from

Samuel McKinney

drove for margins customer despite They've despite margins in continue as margins uptick XX%, a row. and lower around lower fabrication, now automation quarter to pipe and What gross Starting tube benefits great gross this think XX% the second XX%, quarter XX% more can quarters the from And glean do that in sales? been hang in those in above range outsourcing? X sales. you you

Andrew Greiff

Sam, Andrew. this is

to the fabrication been So the continue answer a grow is CTI business. yes. part our strategy Group the for It's in to of

strategy downstream We added. to do more those and and will expect equipment. do really We of in fabrication grow that there margins probably are our value it's more investing part be

We are and the the still tube, but side. it part very of distribution in is certainly, the growth coming the on pipe interested of fabrication

Richard Marabito

the acquisition Yes. a And profile. got the year. think last certainly other CTB of They've is I strong piece margin

So that would of it, other right? the be piece

Samuel McKinney

sheet moving pricing steep then out the despite release. on to value declines And the you quarter during Okay. balance the stayed in that pretty called similar sheet, second the inventory balance the

Assuming levels that, inventory current sequential times function that do the more your into of a of volume, is half year? headed steadiness against of how the lead back you view

Richard Manson

first. Sam, I'll value the it's Rich. take

And was, on flip not an in I up What quarter, in it's the saw the surcharges think so XX% it really stainless between quantity. during really, what second you a quarter. was increase

down. question. inventory of other I'll while for So a inventory carbon you went turn stainless of it Andrew values the the over saw part value to higher

Andrew Greiff

Sam. Yes,

think I is appropriate at an the level So level. inventory

that the quarter, through we fourth get third but do think we can quarter the the think little inventory a certainly there's I more work level appropriate. is that as I bit into

Operator

from next Stonegate. Dave question The comes Storms with

David Joseph Storms

nicely, volumes it are up like. Just real looks

shoots hoping momentum Just kind around maybe Is any have you're industry-wide see spot to market, wonder in outlook. anything any any like green starting you there that if that. inventory in bid I the environment, levels in thoughts pricing -- of any change stock

Richard Manson

it's Rich. Dave,

from XX%. hot-rolled little quarter into is you pricing a year-over-year. pointed the performing side further we And out declined But is what tell about demand seen that that we're we've continued our here in That's see that decline what side. We've in really comments, that we release pricing would July. second to on a better so the as

up as the the what second we you first well in I were half year-over-year. as that think quarter is about X% saw

that's But that on continue to QX to expect -- what quarter. a into we trend and that nice up continue We jump saw third QX the seeing we're versus the volume, sequentially.

David Joseph Storms

optimal back then just What's like And end there take through coded of Understood. call you this XXXX. would this for XXXX. an by the the Is forward on up Carbon. of to percent going half that the for of outlook carbon

any helpful. you Just have there would be outlook

Andrew Greiff

Yes.

we've great I would XX% seen David, would is our last growth. growth Mike for say, Tookey what coated job. been a he's about So I year. that terrific has doing over Olympic, runs say

continue We expect HVAC to see year get that that make the the continue through as into markets. 'XX actually into we see roads and accelerate the to in balance as of to construction we head

Operator

The Research. with Chris Sakai Singular next from question comes

Joichi Sakai

to about, wanted talk guess, is M&A is headwinds, I facing pricing I valuations? then? Is affecting the how decreasing that it some

Richard Marabito

Chris, it's Rick. question. Really good

valuations think steady I remain industry. our pretty in

cycle. real how to trying a That's and at at to that look in pricing over the company's performance we looking trick is ups the to tend it. and over think valuations I look value a cycle, downs

the is industry term, pricing as earnings But been that have what the to really short look part companies the companies but is a really high where market in you've in at little The in steel and well-run I'd how you quarters. our consistently M&A, of they considering seen at with important is, cycle. least of approach some bit the we're on So the certainly, certainly tell for pricing profitable perform good, compressed. looking pressure valuation, at couple last looking that the in models are more those and it's over have return consistently

So on I we're think M&A, active.

mentioned active quarter comments, part, seen growth in in part strategy. years. flow continue know You we certainly activity to the our have pick the certainly our been we've X consider be that last in We've the as to M&A up second of and the

Joichi Sakai

performing And then focusing what others? type there than you're is specific Okay. better any be And environment, this in business why? that's the that of should more the of that part or on and

Andrew Greiff

a What for say become is so Well, big has us. is would growth this strategy I fabrication Chris, Andrew.

for up significant segments, X but in from that are We as there product picking right -- of are the into industrial that acceleration post-COVID go can we've business. they the opportunities that to are have a only seen explode really also some seen the OEMs, of opportunities of looking would pockets all be supply particular, you to our opportunities able And assembly. finished I to not there fairly tell business is in starting improve. But an

the industrials some appliance improvement pipe On seeing in the food with data bit. carbon the inroads where truck our from equipment making little business. the centers. of trailer perspective, tube, the specialty nice that's or we've And the we're and business, our again, seen nice and of side, fabrication some then a back a other a side And been pretty we're big, coming of

segments pleased for what we're seeing. all we're So X with

Richard Manson

second down their in margins the seeing add Rich. and where was the it's nice time compress of balance pricing quarter. come may products us expand I Chris, distribution would And in a sold that margins, you're the that of on goods periods. periods our And in as manufactured these cost

Richard Marabito

Yes, exactly.

-- the the nice fabrication. think, it business taken cyclicality bit, about is and that fruition of end and a products there, all initiatives little balance we talked the we've the really about years. Andrew Rich that's just of about the very X was counter And strategic talked and has really talked that. of evidence the the offset over our I Chris, seen a segments. what and in you've

mix coated moving division within products. the about of talked just we more of to the Certainly, our Carbon

So the we a and pipe talked about we acquisitions like the and tube, acquisition. CTB question the margins in had about

we we keeping with and and in on expenses controlling So every that's say can line our the what we've that really inventory. our really control turning together things been laser-focused quarter

to and we're going that's So on focus to continue that. and what that's focused we're on, it,

Operator

this floor Rick to you. would time, I At Thank turn back for over the to Mr. comments. like Marabito closing

Richard Marabito

not call so you, again And quarter, everybody, your look Olympic Thank the Steel. joining Have you. thank with if Thank sooner. continued much, day. next you morning. to appreciate interest you for and a on us great we in forward We this speaking

Operator

teleconference. does This today's conclude you. Thank

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

Olympic Steel (ZEUS) 2 Aug 242024 Q2 Earnings call transcript