Olympic Steel, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights:

• Strong first quarter sales of $493 million with net income of $2.5 million; all segments delivered positive EBITDA.
• Flat-rolled shipping volumes up 24% sequentially and 6% year-over-year, driven by increased demand mid-quarter due to steel and aluminum tariffs.
• Continued execution of strategy to grow profitably by diversifying into metal-intensive end markets, expanding fabrication capabilities, and focusing on higher-margin products.
• Recent acquisition MetalWorks completed in late 2024 is accretive to results.
• Committed to M&A as a growth source, with 8 acquisitions in past 7 years.
• Strong working capital management led to $37 million debt reduction; $625 million asset-based revolving credit facility extended for 5 years.
• Recognized as a partner-level supplier for 2024 in John Deere Achieving Excellence program.

Segment Performance:

• Carbon Segment: Delivered EBITDA of $10.9 million. Flat-rolled shipping volumes were up 24% sequentially and 6% year-over-year, reaching highest levels since Q3 2021.
• Pipe and Tube Segment: EBITDA of $6.4 million. Lagged carbon performance by 3-6 months but still positive, with focus on sales growth, margin improvement, and fabricated product expansion.
• Specialty Metals Segment: EBITDA of $3.6 million. Despite falling nickel surcharges, had a solid quarter. In March, opened a new 105,000 square foot facility in Houston to expand distribution and fabrication capabilities.

Guidance:

• 2025 capital expenditures expected to be approximately $35 million for automation and growth initiatives.
• 2025 effective tax rate expected to approximate 28%.
• Quarterly dividend of $0.16 per share declared, payable on June 16, 2025, to shareholders of record on June 2, 2025.

Risks:

• Macroeconomic headwinds and changing market inputs could impact performance.
• Tariffs and potential reciprocal tariffs may affect the business, though the company is well-positioned domestically.
• Uncertainties in the M&A pipeline at the start of the year due to capital market trepidation.

Q: About pull-forward demand in carbon flat A: Andrew Greiff states a lot of the volume boost was from stronger spot business, with sales being more spot-heavy this quarter compared to traditional contract vs spot ratios.

Q: Pipe and Tube outlook A: Andrew Greiff mentions onshoring opportunities as a key area, with investments in fabrication capabilities across various facilities and expecting growth through 2025 and beyond.

Q: Appetite for M&A A: Rick Marabito says M&A continues to be a key growth strategy, with potential sellers returning and expecting to continue at the pace of past years, aiming for at least one deal per year.

Q: Working capital and inventory management A: Richard Manson talks about working capital management leading to $37 million debt reduction, and Andrew Greiff notes inventories are at appropriate levels with majority of metal supply domestic, supporting growth.

Q: Operating expenses jump A: Richard Manson explains the jump is due to MetalWorks acquisition expenses and volume growth, but monitors expenses on a same-store basis with inflation in low single digits after accounting for raises.

Q: Tariffs and M&A A: Rick Marabito says tariffs impact the core business more than M&A, but could increase competition for acquisitions if manufacturing growth in the US plays out as planned