OLYMPIC STEEL INC Q4 FY2023 earnings call

Strategic Progress - 5 years into strategy to build diversified company, integrated 6 acquisitions, divested assets to focus on higher-return products. - Named Corporate Dealmaker of the Year for Metal-Fab acquisition. ### 2023 Performance - Q4 sales $489M, net income $7.4M, EBITDA $20.9M. - All segments contributed positively; Pipe and tube second most profitable year, Carbon resilient through pricing pressures, Specialty Metals consistent despite headwinds. ### Acquisitions - Invested $170M in Metal-Fab and Central Tube & Bar, immediate strong EBITDA returns, debt at $190M with $339M availability. ### Dividend - Board increased quarterly dividend by 20%, total shareholder return 2023 over 100%. ### Segment Details - Pipe and tube margins to strengthen with CTB integration, Carbon saw growth in higher-margin products and fabrication, Specialty Metals had strong performance in food equipment and truck-trailer. ### End Markets - Strong demand in industrial OEM, fabrication (especially data centers), new fabrication facilities in Buford, GA and Bartlett, IL performing well.

Pipe and tube business delivered its second most profitable year ever. Carbon business showed resiliency with sales down less than 3% sequentially in Q4 2023 despite pricing challenges, adjusted EBITDA of $7.9 million in Q4 and shipments up 8% QoQ and 6% full year. Specialty Metals faced industry-wide stainless steel headwinds but contributed consistent positive EBITDA, recording its third most profitable full year. Pipe and tube adjusted EBITDA was $40.3 million for the full year, Carbon had adjusted EBITDA of $7.9 million in Q4, and Specialty Metals contributed consistent positive EBITDA.

Capital Expenditures - 2024 capital expenditures expected ~$35M for automation, fabrication, etc. ### Tax Rate - 2024 tax rate expected 27.5%-28.5%. ### Segment Growth - Pipe and tube expects margins to strengthen with CTB integration, Carbon and Specialty Metals to continue growth through market dynamics and operational efforts.

Market Pressures - Significant declines in hot-rolled carbon steel pricing (>45% decline) and specialty metal surcharges. ### Industry Headwinds - Stainless steel headwinds and falling nickel prices affecting Specialty Metals. ### Balance Sheet - Potential impact of inventory management and debt levels on future investments.

Q: Question on recent acquisition of Central Tube & Bar and its fit within pipe and tube franchise and future expansion.

A: Andrew Greiff said Central Tube fits under Chicago Tube and Iron segment, has similar equipment, and Rick Marabito mentioned big plans for value-add processing in data centers.

Q: Question on value-add component of business in terms of revenue or volume.

A: Rich Manson said pipe and tube segment aims for 50% of gross margin from value-added work, close to that with CTB acquisition, and Rick Marabito talked about growth in fabrication across segments.

Q: Question on overall demand environment in 2024.

A: Andrew Greiff said industrial OEM volumes down but anticipated, specialty metals have growth in food equipment, truck-trailer, and first quarter growth expected around 10%-12% sequentially.

Q: Question on industry-wide inventory levels at mills and impact on 2024 demand.

A: Andrew Greiff said lead times from carbon mills have come in a bit, hot-rolled and tandem products have shorter lead times.

Q: Question on specialty metals headwinds in 2024.

A: Andrew Greiff said nickel prices hover around 7.50, inventory appropriate, mill lead times good, expecting 2024 to be good growth year.

Q: Question on 2024 acquisitions or divestitures.

A: Rick Marabito said no divestitures planned, active on acquisition side, looking for good fits, M&A market picking up a bit.