INSTEEL INDUSTRIES INC Q4 FY2024 earnings call

• Sluggish market conditions persisted in Q4 2024, with weak order backlogs and inefficiencies at plants.
• Impacted by tighter spreads between selling prices and raw material costs.
• Ongoing competitive pricing pressures in welded wire reinforcing markets and influence of low-priced PC strand imports.
• Expect gradual improvement in construction markets due to potential interest rate cuts.
• Invested $19.1 million in CapEx in fiscal 2024, with a forecast of $22 million for fiscal 2025.
• Returned $52.8 million to shareholders in fiscal 2024 via dividends and share buybacks.

In the fourth quarter of 2024, Insteel Industries' net earnings dropped to $4.7 million ($0.24 per share) compared to $5.6 million ($0.29 per share) in the prior year. Net sales fell 14.7% to $134.3 million, primarily due to a 12.9% decline in average selling prices. Gross profit for the quarter was $12.3 million, a decrease of $1.7 million from the prior year, but gross margin increased 20 basis points to 9.1%. Shipments fell 2.1% year-over-year, impacted by weak market conditions, low-priced PC strand imports, and adverse weather.

• Anticipate profit margin pressure in Q1 2025 due to competitive landscape and seasonal slowdown.
• Expect gradual improvement in construction markets based on potential interest rate cuts by the Federal Reserve.
• Capital expenditures expected to total $22 million in fiscal 2025.

• Weak market conditions affecting operating rates and margins.
• Impact of low-priced imported PC strand circumventing Section 232 tariffs.
• Macro-economic uncertainties including mixed indicators for construction markets.
• Adverse weather conditions impacting shipments and production.

Q: Julio Romero asked about month-to-month shipment cadence in July, August, September and ranking of impacts on volumes.

A: H.O. Woltz III said the first part of the quarter was lower, finished September year-over-year even, cited weather, core demand, and low-priced PC strand as factors but couldn't quantify.

Q: Tyson Bauer inquired about levers outside trade restrictions to lessen impact of import prices and experience with interest rate environments.

A: H.O. Woltz III discussed ongoing trade efforts, united front in steel industry, and view that interest rate cuts may loosen capital for projects but timelines are uncertain.

Q: Tyson Bauer asked about concrete poles and their acceleration due to storms.

A: H.O. Woltz III said storms stimulate demand for concrete poles and related products, but first cleanup is needed before new demand arises.