Olympic Steel, Inc. Q4 FY2024 earnings call

• 2024 performance: Successfully navigated macroeconomic challenges, grew market share, maintained shipping volumes within 1% of 2023 levels, total sales were $1.9 billion, net income was $23.0 million, adjusted EBITDA was $72.5 million.
• Acquisition of Metalworks: Leading manufacturer of components for various products, strategic fit with service center business, eighth acquisition in seven years.
• Dividend increase: Board increased quarterly dividend by 7% to $0.16 per share.
• Investments: $29.5 million CapEx in 2024, expected $35 million in 2025 for automation and growth initiatives, including new cut-to-length lines, slitter, and fabrication automation.

In the carbon segment, despite lower demand from contractual OEM customers, it earned $7.2 million in EBITDA in Q4 2024, with growth in galvanized participation. The pipe and tube segment delivered adjusted EBITDA of $7.2 million, with focus on fabricated product growth. The Specialty Metals segment contributed $4 million in EBITDA in Q4 2024, having gained market share in stainless and aluminum in 2024. The recently acquired Metalworks had an immediate positive impact on results.

• 2025 CapEx expected to be approximately $35 million for automation and growth initiatives.
• 2025 tax rate expected to approximate 27% to 28%.
• Remain optimistic about long-term outlook for Olympic Steel and metals industry, confident in creating value for shareholders through investments in automation, product diversity, and quality solutions.

• Macroeconomic challenges including 40% decline in hot rolled carbon pricing, nickel hitting four-year low, manufacturing PMI below 50 for eleven months in 2024.
• Tariffs on steel, aluminum, and end products, new steel capacity, and investments in legacy integrated steel mills as potential risks to results.

Q: Starting in carbon flat, what drove the impressive gross profit per ton of $314?

A: Expansion of end-use metal products companies like Metalworks and metal fab, McCullough Industries, and growth in galvanized products which have better margins.

Q: For the pipe and tube segment, what pushed sales down in Q4 and recovery into Q1?

A: Traditional first quarter peaks, but new customers picked up at end of 2024, shift to greater fabrication with invested tube lasers.

Q: On specialty metals, contract vs spot exposure and impact of Midwest transaction price increase?

A: Most business is contractual, spot has jumped due to tariffs, overall aluminum business continues to grow with contractual opportunities.

Q: About Metalworks transaction, anticipated synergies?

A: Integration into supply chain, sourcing relationships, first stage processing, and integration into systems and accounting.

Q: How tariffs affect profitability and M&A valuations?

A: Prices have gone up, tariffs impact to be seen in late Q1/early Q2, M&A market saw pullback in 2024 but anticipate more activity in back half of 2025 as results improve.

Q: CapEx in 2025 and impact on margins?

A: $35 million CapEx expected, projects to be operational late 2025/early 2026, anticipate positive impact on 2026 margins.

Q: Decrease in selling and general expense?

A: $1.8 million less in variable incentive expenses year over year tied to profitability.