SYNL - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen and welcome to the Synalloy Second Quarter Earnings Conference Call. At this time all participants are in a listen-only, later we will conduct a question-and-answer session and instruction will follow at that time. [Operator Instructions]

I would now like to introduce your host for today’s presentation, Craig Bram, President and CEO.

You may begin.

Craig Bram

everyone. morning, Good Corporation’s Synalloy XXXX Call. Conference Welcome Second to Quarter provide of will the Dennis some Loughran financials, review will CFO segments. business I our QX a and on our comments provide then

to then will open call We questions. the Dennis.

Dennis Loughran

everyone. Hello,

As three methods. using be different usual, financial the will presented results

in a release. EPS; net non-GAAP defined the earnings defined measure GAAP-based release; and non-GAAP measure income, also First, earnings a third, second, as adjusted the adjusted EBITDA, in

diluted second $X.X Second as quarter $X.XX a was income or $X.X compared share GAAP-based XXXX. per of net loss with million per $X.XX of share quarter income million or in of the

in Second share second XXXX. was as quarter $X.X quarter of loss adjusted diluted with share per income net $X.XX $X.XX the non-GAAP compared or net $X.X of million adjusted million or diluted per

$X.X adjusted $XX.X total quarter million X.X% non-GAAP year’s the sales. of of to quarter EBITDA of sales prior XX.X% or compared Second second million or totaled

release, difference a in impacted the last losses an inventory $X.X year’s million in change out in quarter second two second gain the basis pointed pre-tax to quarters. of of XXXX $X.X million On that after-tax earnings represents As the basis, a price unfavorable an compared on between $X.X quarter. total results million

change primary combined the businesses factor The for quarter in the mentioned to as decline quarter differential of was compared above. XX.X%, the percent the in the sales EBITDA adjusted a operating X.X% second second price inventory the prior of being year’s

inclusion commodity not prior to brought tube press and guidance Galvanized second release in average the well update, XXth pricing in our were of quarter. in year that volumes The operations the described stainless more experienced our with welded as Galvanized declined in acquisition the June pipe as

related $X.X the basically second primarily from against our The million decreased XX.X At the down million our working ABL the decrease inventory. borrowings XX, is December facility to total. capital, totaled $ XXXX end outstanding of quarter,

$XX million. was of remaining The June available facility XX, as calculated approximately XXXX ABL

the January at addition, loan the balance drawn on ASTI In million million. stood $XX $XX.X support term to of Xst of the acquisition

I the back will to over now call turn Craig.

Craig Bram

what the The welded Thanks, in for quarter. experienced primarily release annual stainless in is forecast, on revision responsible business press XXth. we our be This in Company reported the temporary Dennis. in downward believe second we steel our which headwinds pipe our June to

are comment some sharing better other Sales to businesses. For than contribution and results. on and I or addition our has solid a book margins overall ornamental like on January of strong. The this to line, order tubing products would to details equal product original its in forecast ASTI made profit and our remained the

June, The Company-wide excellent In transition more has complement gone line implemented end product. our heavier carbon welded industrial stainless product pipe this served well. and seamless ERP and an very for been tube markets system for had markets by the and this to steel a unit consumer-oriented we the

produced Our for improved and exceeded Storage Revenue West year-to-date. forecast in and QX business original the in Tank margins both results Texas profit periods. much

on tanks has in reduced of activity been July customers slow several the orders. previous order have new and number However,

wells barrels day well pace day. The barrels XX,XXX Oil grow per XXX,XXX Permian day production from production Administration XXXX. per over in August, Energy per the barrels considerably production growth in in and will by the coming in of the slowed with has Permian at Information a that oil projects legacy decline XXX,XXX new of seeing

monitor the In coming this the in response and quarter decline to in in rig the we Permian slowing ever since. been have closely XXXX the has cost count started to The and we production weeks. activity, on oil rationalize the second and peaked of will

acreage that be announced significant involving in been have There recent several later indicated have released companies orders will QX. with customers Our mergers new the in Permian.

as long-term we the to the expect relationships have companies. in with excellent We controlling benefit

I of good wells number as doubled uncompleted future. (Ph) alone. in would the tank in potential The from Permian has that now indicator add of demand basin but serves there ago are and a [docks] the battery drilled, X,XXX just over also three years

product Wall, Turning year Heavy during have now proven contribution exceptionally pound to Seamless inventories case. levels. Carbon been down to Pipe our and and the was XXXX margins a line, decline very be low has that in XXXX, drawn shipped Tube to distributor as anticipated lower an good We

facility. has evident energy at been larger However, the Huston the focused year-over-year grade drilling. year sizes. performance almost side Order particularly the light particularly has decline activity higher on distribution is for all operations The our most and on OD been Houston market exclusively offshore alloys

other was Dubai shift the as begin we results for a stronger facilities general borders which steady the flat performance they this field, solar XXXX. has industrial to second tube higher revised serves for location Ohio post the maintained activity the We than revenue with On earlier mechanical look this market hand to forecast. year-to-date both for year. the July facility with which order on reported half

per stainless periods, the revenue. Let the greater In is before reflects lower associated turning provided steel revenue me welded the segment the a business. materials result raw which and were percentage by tolling does of the second pound include selling manufacturing, comment than chemical quarter pipe contract not to price business on customers, tolling and year-to-date

shift expect segment and absorption as for year, XX% profits. operating up continued the in were see last pound to However, overhead over increase year-to-date pounds improvement the chemical we

legal steady of last holding profits levels. year’s operating Excluding the receipt are XXXX with claim,

impact intermediate said, in to meet online That of are to we them. enough an that year that the growth expect our we our the for chemical forecast exceed year-over-year manufacture of have products the customers original second half marginal coming we chemical Many flat the reporting segment. our products for obvious to has which on

do of we believe welded but I pipe temporary fronts. our they challenging mentioned has difficult steel are to headwinds nature. year Turning The the business, several half stainless been been on in to first this overcome, that have

were half of distributor of first in imports pipe inventory last of domestic the the demand Let me the implemented first and XXXX stainless tariffs touch artificial surge enjoyed in buying steel during welded excess section half Both distorted resulting chain supply throughout on producers level. the XXX each of a patterns at year. which these, in the

Reports created the of the that the demand last first Institute six from showed American period the in Metal be market year, for single-digits the pipe growing tariffs. so have XX% pound down months Service decline end steel speaks shipped were North by this the excess inventory level should year-over-year Center stainless same in of shipments year. to low Shoe welded over

distribution international sales acquired global recent supply in chain. of chain been has year there the works segment the this two, beginning Supply the Number (Ph) a consolidation of the of of has [multiply] last for since stainless year. division fall flow been a master in and

were think Texas Pipe. recently I acquired

from the normal The has where created expect of historical tariffs to buys integration companies inventories of inventory Metals. the are above inventory well return in like these Consolidation the of and reduced over stock frequency multiple on XXX a coming situation levels distribution Section in inventory year. size Bristol do of their this has facilities balance levels. mills across heels We

now price from million gains to in in purchase price than incentive for half have and the no the final, surcharges, over the for big been the of following swing a same Surcharges in and prices last half Third well. basis. change XX% change down as surcharges with there were the associated has this $X rather inventory from visibility this period a year, first pre-tax to later. on losses first been combined first year inventory year nickel half of distributors XXXX in The of almost negative

have climbed pound. July XX% QX. at nickel Recently will above inventory and $X profits several per favorable. were Should returning prices prices nickel second prices hold have Nickel average turned levels, in in quarter over days last the current in we up see the

years, best five out that challenges electric steel believe for a next welded strong over there have increase demand for can. prices steel pipe believe demand stainless the that business is as the batteries. and nickel bias Looking increasing stainless we to these we vehicle through we do I three managed due to for to

share XX% last XXXX half half shipments, American in by this down over year, pound during the last basis than were year, of year, market down North considerably better Our of which increased shift the same points first XX% the overall the were over first XXX in period.

these aggressive well, As and more more you expect comes and low as pricing. sizes larger would often smaller under leaders for in directly pressure as are compete OD prices environment been sold with have however special buying imports. reasonably pipe sizes Pricing the up sizes activity lower with demand has severe held loss for alloys,

this smaller they solid. work demand second have several higher strong have project they We have projects OD as increased as well. share been had pricing we of not in of for buys bookings were year July While sizes relatively quarter. realized and been XXXX, included in the as peak than what the been

Another hurdle this for QX. latter in business was the part presented of unexpected

Our and hydraulic problems experiencing of heavy cracked. some two wall was that was determined was cylinders press one its,

cylinder the is $XXX,XXX. than less replace to cost The

will that equipment lead the machine out and commission mid-November. keep until have However, time to installed of

so We have a in hydraulic decided same backup we second the a available to have cylinder future. have the at the supplier time, produce

experienced have lose which pipe for final it Union A in month. steel of sight With improved with started new business easy contract, business, Company. comment to stainless reached welded this of this five we power agreement difficulties year the unit, on Bristol the is a the the earnings all

of Adjusted witnessed ASTI tank we include This year any year almost million would adjusted $XX that we this does the last in EBITDA have EBITDA over own XXXX our was improvement million. storage in been operation. had $XX not have

space, We less cash targeting in the chemical flow continue on the end reducing of are debt acquisitions remain than the by at $XX debt, will and transactions look our and imminent. no focused to million. year net be We metals potential but

a provide with As the that June on we Company. data mentioned XXXX in opened information room additional release, our press Privet

have adviser. from eight with weeks, not follow-up calls received Over the offers their At or comment had and further several time, we this have any Privet. we Privet past

the and they of to August XXth. business Company is decide close a evidence on funding offer of move asked Privet that by provide Should forward, formal

open call the will to We questions. now

Operator

Thank line Our you. [Michael Lucero] of [Operator the Investor. is comes Instructions] from question who first a Private (Ph)

is Your open. now line

Unidentified Analyst

press There what could release, question the second six was? more about the rate it and in has is bit months some why to good as explanation little tax My if the Yes, do it year. elaborate quarter I’m morning. you of wondering a high in this were first

Dennis Loughran

Yes. This Loughran. Dennis is

low, income With have relatively being been the if the so thousand on spread the hundred impact and would the a higher dollars overall figures only rate, significant discrete base. statutory fairly over - the effective which tax large were a at were income items low tax it few have rate a much

that So, it. is basically

Unidentified Analyst

Thank Okay. you.

Operator

the in line Private do at questions you. no follow-up of question Lucero, this Michael time. a queue from We Thank And the Instructions] [Operator we have have The Investor.

Your line now open. is

Unidentified Analyst

as elaborate increase. Another the steel wondering that tariffs I’m Xst. September are possible question you rapidly imports possible bit of little tariff with is in a upon beat imports new the early additional coming they Chinese starting impact if if as to could on

Craig Bram

Yes. would Michael, are products. the tariff steel increase to any impact not you speaking

Unidentified Analyst

Alright.

Thank Okay. you.

Operator

And you Thank further we at time. questions this no have

Craig Bram

there It is a Charles looks from like question Gold?

Operator

[indiscernible] line is now open.

Charles Gold

your… like looks it Craig, Hi

Craig Bram

Hi, Charles.

Charles Gold

It is like doing? you roughly right? half for is second are the million How EBITDA $XX forecast of your that in looks

Dennis Loughran

Yes.

Craig Bram

right. is That

Charles Gold

Alright.

of ready know So, had been not XX obviously you [San out like Is the for are. in I if and EBITDA, XX run put been to forecast, is in not to acquisition year. run have $XXX looks rate. XX million better is a it you would it we range the rate say it’s all said current to where million are XXXX it’s fair last (Ph), operating $XXX the run rate revenues sort of Jose] year are is we that to XX, the but there

Craig Bram

good and Charles, it exclude a you know If metal you losses is profits estimate.

Charles Gold

fixated too keeps holding you a year just nickel much down. and price look making on it at Yes. the and been high, London has inventory that here been number I on coming guess when have one the

like is it back bit. a little So Winchester

Craig Bram

some and QX. prices hold, to start the definitely up into some those will towards If profits but see end probably inventory of QX, definitely we pick

Charles Gold

much. so Thanks Alright.

Operator

you. call would to back Craig Thank I [Operator turn Okay now like Bram Instructions] for to any the remarks. closing

Craig Bram

Synalloy in to forward your you from and the look you future. Thank Thank hearing in we you. interest for

Operator

today's today's does for Ladies thank participating program. you This in conference. gentleman, conclude and

may day. great all have Everyone You a disconnect.

Ascent Industries (ACNT) 13 Aug 192019 Q2 Earnings call transcript