Friedman Industries, Incorporated Announces Second Quarter Results and Provides Update on Strategic Growth Initiatives
- Net earnings of approximately $3.5 million for Q3 2023
- Sales of approximately $130.7 million and a 10% increase in sales volume
- Effective hedging offset physical margin compression due to declining steel prices
- Expectation of margin improvement and slightly lower sales volume in Q4 2024
- Strategic growth initiatives expanded steel processing capabilities, broadened geographical reach, and improved earnings
- None.
LONGVIEW, Texas, Nov. 14, 2023 (GLOBE NEWSWIRE) -- Friedman Industries, Incorporated (NYSE American: FRD) announced today its results of operations for the quarter ended September 30, 2023.
September 30, 2023 Quarter Highlights:
- Net earnings of approximately
$3.5 million - Sales of approximately
$130.7 million 10% increase in sales volume over prior year quarter volume- Working capital balance at quarter-end of approximately
$129.9 million
“Our second quarter results are a testament to our team’s ability to evaluate challenging market conditions and make the appropriate decisions to deliver increased sales volume and profitable results in periods of significant headwinds to profitability,” said Michael J. Taylor, President and Chief Executive Officer. “We experienced a significant decline in steel prices entering the second quarter with that trend continuing to the end of the quarter. These conditions resulted in compressed physical margins for the quarter, but the effective hedging of our price risk exposure allowed us to offset the physical margin compression and deliver improved results compared to the prior year quarter which had very similar steel pricing dynamics. Further, the
For the quarter ended September 30, 2023 (the “2023 quarter”), the Company recorded net earnings of approximately
Our operating results are significantly impacted by the market price of hot-rolled coil (“HRC”). The Company experienced similar HRC pricing dynamics entering and during both the 2023 and 2022 quarters. HRC price declined approximately
The table below provides our unaudited statements of operations for the three- and six-month periods ended September 30, 2023 and 2022:
| SUMMARY OF OPERATIONS (unaudited) | ||||||||||||||||
| (In thousands, except for per share data) | ||||||||||||||||
| Three Months Ended September 30, | Six Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net Sales | $ | 130,748 | $ | 149,692 | $ | 268,046 | $ | 311,495 | ||||||||
| Cost of products sold | 124,927 | 145,014 | 245,896 | 288,145 | ||||||||||||
| Selling, general and administrative expenses | 4,766 | 4,607 | 10,738 | 10,960 | ||||||||||||
| Earnings from operations | 1,055 | 71 | 11,412 | 12,390 | ||||||||||||
| Gain on economic hedges of risk | 4,402 | 3,749 | 4,832 | 6,504 | ||||||||||||
| Interest expense | (805 | ) | (621 | ) | (1,345 | ) | (1,051 | ) | ||||||||
| Other income | 10 | 7 | 16 | 20 | ||||||||||||
| Earnings before income taxes | 4,662 | 3,206 | 14,915 | 17,863 | ||||||||||||
| Income tax expense | 1,149 | 735 | 3,712 | 4,208 | ||||||||||||
| Net earnings | $ | 3,513 | $ | 2,471 | $ | 11,203 | $ | 13,655 | ||||||||
| Net earnings per share: | ||||||||||||||||
| Basic | $ | 0.48 | $ | 0.34 | $ | 1.52 | $ | 1.88 | ||||||||
| Diluted | $ | 0.48 | $ | 0.34 | $ | 1.52 | $ | 1.88 | ||||||||
The table below provides summarized unaudited balance sheets as of September 30, 2023 and March 31, 2023:
| SUMMARIZED BALANCE SHEETS (unaudited) | |||||||
| (In thousands) | |||||||
| September 30, 2023 | March 31, 2023 | ||||||
| ASSETS: | |||||||
| Current Assets | 165,162 | 143,656 | |||||
| Noncurrent Assets | 56,965 | 55,656 | |||||
| Total Assets | 222,127 | 199,312 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY: | |||||||
| Current Liabilities | 35,292 | 45,088 | |||||
| Noncurrent Liabilities | 60,026 | 38,792 | |||||
| Total Liabilities | 95,318 | 83,880 | |||||
| Total Stockholders' Equity | 126,809 | 115,432 | |||||
| Total Liabilities and Stockholders' Equity | 222,127 | 199,312 | |||||
FLAT-ROLL SEGMENT OPERATIONS (previously referred to as the “coil segment”)
Flat-roll product segment sales for the 2023 quarter totaled approximately
TUBULAR SEGMENT OPERATIONS
Tubular product segment sales for the 2023 quarter totaled approximately
OUTLOOK
From the end of the second quarter and through the date of this release, multiple domestic steel producers have announced price increases for hot-rolled coil (“HRC”). According to these announcements, the base price for HRC has increased approximately
PROGRESS ON STRATEGIC GROWTH INITIATIVES
Friedman Industries is a stronger company today than it was just a couple years ago. We have completed a series of strategic investments that have expanded our steel processing capabilities, broadened our geographical reach and improved our earnings. However, there is significant additional earnings potential to be recognized as we continue to expand the throughput on our existing assets. For perspective, the monthly sales volume for our flat-roll and manufactured pipe operations for fiscal years 2018 to 2022 averaged approximately 14,500 tons per month. Our average monthly volume for the first two quarters of fiscal 2024 is approximately 42,800 tons with the
At our Decatur facility, we continue to invest with the expansion of our storage yard for additional raw material storage, upgrading a component of our processing line for additional throughput and expanding our building for additional finished goods storage. In the first two quarters of fiscal 2024, our sales volume at Decatur averaged approximately 4,000 tons per month. The projects mentioned here will facilitate our goal to sell 8,000 tons per month from our Decatur facility within the next twelve months.
We remain excited about the customer response to our new Sinton facility and the industry leading range of products we can produce. The equipment is performing up to expectations and we have experienced increased production monthly. In the first two quarters of fiscal 2024, our sales volume at Sinton averaged approximately 6,000 tons per month, with the goal of increasing to 10,000 tons per month within the next twelve months.
At our Granite City facility, there are two processing lines, one of which was non-operational when we acquired the facility. We recently completed a project to bring the second line operational. In the first two quarters of fiscal 2024, we operated one of the two lines and our sales volume averaged approximately 10,500 tons per month. With the second line now operational, the facility’s capacity has doubled and our goal is to capture sales opportunities to utilize the additional capacity.
In addition to maximizing throughput on our existing assets, we have an active growth strategy. Whether it be an acquisition, a new facility, or an expansion or upgrade to an existing facility, we are actively evaluating which opportunities can provide the most value to the Company and its shareholders. Our recent growth has been transformative for the Company and we look forward to recognizing the additional potential we have in place and executing additional strategic investments.
ABOUT FRIEDMAN INDUSTRIES
Friedman Industries, Incorporated (“Company”), headquartered in Longview, Texas, is a manufacturer and processor of steel products with operating plants in Hickman, Arkansas; Decatur, Alabama; East Chicago, Indiana; Granite City, Illinois; Sinton, Texas and Lone Star, Texas. The Company has two reportable segments: flat-roll products and tubular products. The flat-roll product segment consists of the operations in Hickman, Decatur, East Chicago, Granite City and Sinton where the Company processes hot-rolled steel coils. The Hickman, East Chicago and Granite City facilities operate temper mills and corrective leveling cut-to length lines. The Sinton and Decatur facilities operate stretcher leveler cut-to-length lines. The Sinton facility is a newly constructed facility with operations commencing in October 2022. The East Chicago and Granite City facilities were acquired from Plateplus, Inc. on April 30, 2022. The tubular product segment consists of the operations in Lone Star where the Company manufactures electric resistance welded pipe and distributes pipe through its Texas Tubular Products division.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and such statements involve risk and uncertainty. Forward-looking statements include those preceded by, followed by or including the words “will,” “expect,” “intended,” “anticipated,” “believe,” “project,” “forecast,” “propose,” “plan,” “estimate,” “enable,” and similar expressions, including, for example, statements about our business strategy, our industry, our future profitability, growth in the industry sectors we serve, our expectations, beliefs, plans, strategies, objectives, prospects and assumptions, future production capacity, product quality and estimates and projections of future activity and trends in the oil and natural gas industry. These forward-looking statements may include, but are not limited to, everything under the header “Outlook” above, including sales volumes, margins, hedging results, and potential price increases, expectations as to financial results during the Company’s upcoming fiscal quarters, future changes in the Company’s financial condition or results of operations, future production capacity, product quality and proposed expansion plans. Forward-looking statements may be made by management orally or in writing including, but not limited to, this news release.
Forward-looking statements are not guarantees of future performance. These statements are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Although forward-looking statements reflect our current beliefs, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements.
Actual results and trends in the future may differ materially depending on a variety of factors including, but not limited to, changes in the demand for and prices of the Company’s products, the continuing impact of the COVID-19 pandemic, changes in government policy regarding steel, changes in the demand for steel and steel products in general and the Company’s success in executing its internal operating plans, changes in and availability of raw materials, our ability to satisfy our take or pay obligations under certain supply agreements, unplanned shutdowns of our production facilities due to equipment failures or other issues, increased competition from alternative materials and risks concerning innovation, new technologies, products and increasing customer requirements. Accordingly, undue reliance should not be placed on our forward-looking statements. Such risks and uncertainty are also addressed in our Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including the Company’s Annual Report on Form 10-K and its other Quarterly Reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except to the extent law requires.
For further information, please refer to the Company's Form 10-Q as filed with the SEC on November 14, 2023 or contact Alex LaRue, Chief Financial Officer – Secretary and Treasurer, at (903)758-3431.
FAQ
What were Friedman Industries, Incorporated's Q3 2023 net earnings?
What was the sales volume increase in Q3 2023?
How did Friedman Industries, Incorporated offset physical margin compression?
What is the company's expectation for margin improvement in Q4 2024?
What strategic growth initiatives has Friedman Industries, Incorporated undertaken?
