Olympic Steel (ZEUS) 1 Nov 242024 Q3 Earnings call transcript

Good morning, and welcome to the Olympic Steel 2024 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 call over to Rich Manson, Chief Financial Officer at Olympic Steel. Please go ahead, sir.

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

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

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

over the I'll time, this call turn Rick. At to

for highlight in in are in as drive quarter, and for then then detail. Steel's on us third quarter begin in helping investing for open and call will our financial resulted XXXX discuss macroeconomic always, up our OEM flat-rolled how by strategies our a results overall results pricing diversification lower segments. you, demand the Andrew the I'll good Thank Thank in is the higher-margin CapEx and questions. Challenging pipe to which today quarter Rich, initiatives, growth for and opportunities our third affected Olympic discuss markets. our review performance review everyone. expanding carbon resulted results and third And end that, then demand, joining our segment I'll morning, for to our in results. will sector, Rich you summarizing Steel. particularly tube the and difficult following your market heavy Reduced in both we carbon overall and and more pressures will during Olympic equipment that focus trends significant

Metals surcharges the creating fell stainless segment. our Additionally, during quarter, Specialty steel pressure pricing in

demonstrated $XXX X generating market these in into of as positive continued has all million EBITDA Olympic quarter EBITDA the our resilience, million products reflect segments of of third strategy steel-intensive headwinds, as coated higher Steel end capabilities. sales. fabrication XXXX, margin Despite were the on for $XX products in flat-rolled to countercyclical invest success expansion and opportunities results our such the and The of diversify

that will diligently includes uncertainty growth. the efficiency, ongoing and political new processing business. investing future drive and working the and efficiencies safety, build in equipment, Given capabilities our into environment, team manage to is costs our This macroeconomic and automation productivity in

areas our managing in our Steel. customer aligning Olympic success more acquisitions and our the resilient We are operating closely organic We capital demand. expenses labor believe costs key with of growth stronger, created and investments a has

to positioned invest well in are continue We to initiatives. these

our our a meet acquisitions in moment pursuit investments active success that we equipment recent review in of criteria. and remain will Andrew

the million, $XXX of reduced quarter, approximately with During our credit we availability to million million approximately growth entered quarter the fourth initiatives. to fund and third $XX debt by we these $XXX

for the the optimistic Fed's to rate direction continue Olympic future expect election we long-term our we while We Steel the fourth of remain outcome and interest on cuts. to outlook the the Looking XXXX, presidential headwinds await quarter industry. and of for macroeconomic the

confident us in make and investing opportunities more organic strategy, are acquisitive create will resilient and our our We growth continue our with even shareholders. to combined flexibility additional financial that value for

Now on segment call comments for our turn to his Andrew performance. the I'll over

morning, Rick, you, good and everyone. Thank

discussed, positive during continue as the business EBITDA the Rick industry-wide we segments X third all were even As headwinds. significant experience quarter, to

of is strategies capabilities. sustained testament capacity enriched profitability Our mix a have in the and and efficiency, the product diversification, to place, we operational fabrication expansion our

seasonal Carbon Now decline segment's due equipment sector. lower our segment, results. in countercyclical OEM contractual our quarter In HVAC segment Carbon sales Even the with than I'll more quarter. some our detail fell hoppers. We of to Metal-Fab, the manufacturer strong demand for inventing products manufacturer our the especially on companies EBITDA saw with decline, Industries, each McCullough million generated for the from provide industrial end volumes of products heavy third customers, in third our and in normal in $X.X this strength quarters

demand first capacity growing We invest this continue improve manufacturing. of business more stages fabrication capabilities. operations, continue to their we see and efficiency OEMs serve gains our outsource to To continue our expanding processing our and of for as the and of in to fabrication

aligned Buford, Mount strong Georgia facilities background Kentucky has leadership the have fabrication Sterling, intensive also under and growth-oriented of who Max a We our in Pennsylvania, in metal Fitzgerald, Chambersburg, fabrication.

handling up automation, throughput Cleveland, XX%. new expected is by in invest our temper to to continues segment which on stacking Ohio material installing equipment Carbon mill, improve to Our and

tube of Our posted pipe million EBITDA XXXX. $X.X of in the third adjusted segment and quarter

remained our augmented which stronger Central by of due to higher acquisition than value-added & has Bar. years margins previous Tube been Gross processing, year's last and

a market share the For segment, accomplished year solid segment surcharges September. this third in stainless by contributing Metals X.X quarter, EBITDA. a our Specialty million gaining fell We stainless to of low $X.X and aluminum. had in Nonetheless,

new facility packaging line to in Streetsboro, improve and a Ohio installed throughput efficiency. also automated our We

growing remain higher-margin organically to We in committed by opportunities. investing

our support products. growth of further cold-rolled coil Carbon XXXX we for in continued strategies. to our line Minneapolis and a that XXXX, which XXXX new ordered new coated ordered cut-to-length During will segment, equipment growth be In will in have pieces and significant enhance facility, delivered the we our

ordered capabilities Pennsylvania. X and X plasma have handling expand with along new an Chambersburg, new material machines automated in cutting lasers our system to We fabrication

a Metals growing we new ordered slitter Metals segment, ordered metals our facility high-speed of Berlin for Schaumburg, Illinois have Specialty support a for line also our white we the outside new operation In and Gary, distribution specialty our business, to cut-to-length Indiana.

grow As benefiting the I are reflect products the think on third processing to that to capabilities. expand and our fourth likely us higher-margin macroeconomic fabrication invest equipment into and we more us end look that time, safer, countercyclical metals strategy pricing helps the are in are efficient our quarter, and and makes same steel-intensive continue. quarter headwinds at At we that from to

what continue of be that will we on can and we things to focus We the control control. mindful to and responsive cannot

call over Rich the comments, concludes through That to go turn will and my financials. to the I

Thank you, Andrew.

from As Rick quarter. Andrew, the heard you all and X both during contributed profitability segments our to

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

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

million EBITDA $X quarter million of period. the with totaled $X.X third quarter, third was compared million XXXX For income. third year $XX LIFO the and with of Both pretax prior $XX.X in million compared the for income $XX.X in net results the the include of quarter quarter XXXX. million third XXXX

in third totaled $XX of quarter third million the compared the $XX for with expenses quarter operating XXXX. Consolidated million

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

Shaw Metal-Fab, As Industries, a reminder, pipe or we tube entire report tons not do EZ-Dumper, and Stainless for sold the McCullough segment.

due for the lower expenses expenses third expenses third XXXX. and for quarter credit the that did compared with third of the to the retention $X employee cost included million also operating CTB $X.X recur expenses million reflect of Consolidated XXXX. third operating million $X.X the when quarter quarter a not in of XXXX quarter incentive of of Operating benefit

We of the We to XXXX capital of a $XX flow from $XXX second working due cash in decrease increased debt lower the of million million, with ended the quarter fourth quarter quarter XXXX. anticipate requirements. total

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

quarters approximately compared depreciation capital our that $XX.X for XXXX with fabrication will of capabilities million. estimate our and the Our X processing $XX XXXX million million business. in of higher-return be other automation, we to as of expenditures capital totaled expenditures $XX.X We invest and first continue parts

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

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

December dividend quarterly which our December of Board addition, has record X, dividend quarterly is quarter, to third approved next regular XX, per paid on share and of a XXXX, we of shareholders of the on $X.XX XXXX. in per our In Directors share payable cash $X.XX

each The the quarterly XXXX, back of X the company years. last to dating regular in now has increasing paid dividends dividend

is remain to testament of to resilient in ability Our and success difficult our a strategic investments. markets profitable the

We will on long to while near-term working for control our continue strategy focus term execute expense diversification management. our continuing capital the and

deliver We for our weather and market are challenges sustained results to well positioned shareholders.

now we are Operator, questions. ready for

first Dave Stonegate. from comes Our Instructions] question [Operator with Storms

into the a mentioned you new that your in So prepared doing operations. lot remarks to bring obviously machinery you're

-- in get in-house. to kind and lead we're them you times of sense laying the trying of I machines a Just appreciate those out getting

it trained How sense machines, trying of be should would in-house? they're them. step get be about X what get once between we those up will machines take maybe those to and implementing a thinking Just what to employees there getting on running

from I'll equipment Andrew. training. our facilities to can the take that tell that that place the I training cases could have coming answer have in that is They the some would some some in. that. you they prior will manufacturers, people the to do equipment this Dave, equipment available we send

new the automation ready will and in, But new almost have equipment almost that immediately. immediately, be people the we'll as comes

the in it be So performs way short we'll we get to that and very and to expected get time we a expect once into and operational period, equipment the in up the is would it place. right equipment assuming going, ready will

Understood. That's very helpful.

in seeing some hopefully we So could of XXXX. that start

beneficial know thinking for that the be acquisitive so maybe you for any Okay. as past. eye on? keeping Are targeting debt, in Maybe just Great your me. have there about one M&A give looks paid the been a companies Perfect. obviously are you to see type kind targets targets, been would sense then like of of you that some that M&A down recently? countercyclical what market And more you're I you're targeting more -- and you you've

It's acquisitions. question, at the Dave. Rick. for active, Absolutely. to continuing very Thanks We're look Yes.

You know do is that growth part our it's both. strategic of to actually

So internal But new growth we're don't equipment. sell acquisitions. Andrew a through a pursuing of short, outlined actively lot the

years, you the history if at over we've look last So made X our acquisitions. X

been more X little X year. So a a than we're year. averaging to around a It's about

strike our be in line is, find always if share you. I with so And and internally acquisition each that my year, we zone I'd is don't an disappointed,

So would yes, flow We've seen companies that of fit very our active. zone. good really in terms strike

terms are will team aside out believe we've You to add with we strike shown well-run right that countercyclical a the being category companies and strong and It's continues know where that zone. are, -- from companies in end market, synergy you of exactly management a, together and we the we're can seek that's continue in industry.

top and at sector did the So on the and acquisition service the higher that do the we fabrication, list, high centers, the the was last service B, of saw of center pipe We've that's right? return those group. tube margin, -- higher you and that's very very list; CTB much

are areas. those finding looking we're of So X And well-run, keys high-return, companies. really, accretive, all the good at

stay so more participating space. to come, that And we're in actively tuned,

Samuel The comes question McKinney next with Markets. Capital KeyBanc from

weakness demand continued from The OEMs. and equipment industrial machinery

on X you regarding Some hopefully thoughts and quarter it, election the past of have and spoken years? about a already third pent-up volumes. the talked to to next next release some after peers clarity gain we soft of week Any seasonally potential it demand for get your the

a Sam, there We the side Yes, do. of think great on We demand that is question. the do spot pent-up certainly some that's business.

a trail see second the going did I going With fourth to the think the much in not to that quarter. we're off big versus quarter. quarter like sure don't releases we any I'm the third of in see OEMs, industrial we're

noncontractual seen think customers But I quarter of they fourth do I active And still to there's be the had forecasting versus reductions next opportunity for at going we're year, a and equipment while phase, more we've don't in those than think they're certainly anticipate from spot I point. certainly their that been. the to heavy-duty that in number players see the sector greater going this than what into

And Yes. Rick. then it's Sam,

our other add The been thing we've really I'd is expanding business.

steadiness of -- as any I it of a off down the call So last I'd period kind Andrew quarter. of offsetting said, demand a think kind of kind in

We've of large you'll been OEMs. fabrication actually onboarding with Steel some business. see new side active very I the Olympic on think the

of going larger some equipment So the year, I into got even stable we OEMs opportunity is demand from view if our heavy in business. think kind increase our the have next sector, we've these of to

I but helpful. and XX% that. XX% tube in both sales and gross appreciate quarter. almost That's year, And next, third the Okay. best sequentially then the was the this margin pipe the quarter of fallen second number segment's have of

So a X-part how address question Can segment the during quarter? behaved you here. volumes third

the higher-margin that to quarter, of & Central Tube frame from of much then in that's way And $XX up third any sales the in million Bar? coming how

it's Sam, Rich.

Let me margin address first. the gross

million LIFO includes margin So remember, that of income. $X gross

So is the number. that XX% LIFO

seen to traditional of pretty address same basically question the much you're industrial we've when low falloff year. Andrew this think just of let talked we is about. I'll I the the that out, take in most customers that you back XXs that the terms

right, Well, that's exactly Rich.

and of So side. that the we the what see similar customers talk to about a pipe on tube we number on sheet very the flat side carbon the for roll fabrication and

the Tube, we've good pleased centers. part of very for on pleased see big There's we've with been a OEM, what focus business Regarding what is the does are Central Central there. A we seen. to Tube and been data so we've fabrication

continued And into expect and to we quarter that so in like business year. certainly and fourth really see next then progress

I XX% to terms segment and business. And of then, versus the Sam, in pipe tube value-added of added, our north distribution respect is the value with think

question business, lastly, as And margins. know, tube of north you yes, And part and then on margins the on strong CTB's existing was you Sam, very Yes. your I CTB commented and of think margins. which, pipe correct. are are our our

we and that see continuing. -- So

for If close Steel, have me, And specifically? you facilities one you me. now? with U.S. its any co-located Nippon right for acquisition changes the and what Olympic to on then do both And Okay. in remind think able last is of one marketplace Steel U.S. do

Yes, Sam, we do.

in Indiana, at Gary, We is U.S. are facility our Gary on-site -- Steel.

of We you mentioned. have vendors, all the with including great relationships X the

Nippon obviously, good really for future anticipate to a good or U.S. we the is, Steel a it think I continuing Olympic whether of goes, customer, to sorry. it way to deal -- -- whichever would be owner a So Steel, supplier continues be a customer this whoever be continues good

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

be that My change? lot a question expenses? these to can't flat of for expenses reduce Are carbon that operating you expenses. fixed is -- cannot done Or what operating can

Chris. Yes,

of couple things. a So

were to of $X XXXX million there that XXXX. operating about So there really the when not third increase, was credit, XXXX million but quarter there's in million that $X.X related of in at face the employee had XXXX. make that items occur quarter expenses operating looked in you operating didn't $X third of One expenses then up look the of the the we retention CTV And million. in in that expenses it being $X an almost entire reduction X year-over-year, a the like

So in kind in when are those flattish overall, essentially volume for flattish. we're expenses operating the adjust onetime you of items

bit. areas we taken where One in third second of the that or industrial noted, we've little slower shifts were have seen with some as little in in some those a quarter, here things a Andrew out reduced And sales bit of we're OEMs. down the some cases, the the

all the that the we severance Now of things headcount to that those -- in that was reduced. for was out quarter third fourth some most quarter, you of of take the the people where but once kind reflected in expect see do not reflected and

fixed other in We add, we incentives, versus I'd profitability. it lot. about it talk our do they're also our Chris, disclosed they and a on of variable, the But mirror And we our documents. terms Yes. SEC variable, have, thing the in highly

So the also those adjust side things tend down. up -- profitability compensation on and to the automatically with

. that So well. as I'd add

like understanding? -- to goal you're lot Is main Is a internal here a then profitability? of sounds that really increase main lot the And Okay. it investments. doing the

-- open obviously, moves. the productivity. in expand safety the investments Well, smart they terms increased quality, also those profitability, enhance in in They increased pieces addition of business. they product coated is new is equipment, yes. of But those so pieces on believe in we're capacity new return some our are the -- like of to of do We areas up growing the carbon. those business equipment to our that

side from us, on stickers of So the terms following it's justification. profitability in But really know you I also all think that. we're

to all it's that. areas. going those So returns lead of in that is yes, And obviously to improved

turn to I in remarks. the time. are over floor for would to further this closing There no like at questions Marabito queue Richard back

Thank forward call Steel. genuinely today. great much, you. operator. very look us you your We for appreciate with continued And all next day, joining we you Thank Olympic you speaking thank to again a on And everyone. in interest our quarter. Have

Thank you. conclude does teleconference. This today's

disconnect may lines. your You