Ascent Industries (ACNT) - 2020 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q4 2020 were $55.9 million, a decline attributed to the curtailment of Palmer operations and lower pipe and tube shipments [9] - Gross margin increased by 80 basis points to 11% due to operational efficiencies and successful passthrough of raw material price increases [10] - Adjusted EBITDA for Q4 increased by 19% to $3 million, with an adjusted EBITDA margin improvement of 170 basis points to 5.4% compared to the prior year [11] - The company reported a net loss of $8.6 million or $0.94 per share for Q4 2020, compared to a net loss of $9 million or $0.10 per share for Q4 2019 [10] Business Line Data and Key Metrics Changes - The Palmer Texas business was curtailed in April 2020 as it no longer met internal return thresholds, impacting overall sales [9] - The metal segment includes three businesses: welded pipe and tube, specialty pipe and tube, and American stainless tubing, which are expected to rebound as industries recover from the pandemic [17] - The chemical segment, while a minor portion of revenue, has a better margin profile and is expected to leverage its capabilities for additional products and services [18] Market Data and Key Metrics Changes - The company noted that the pandemic has created uncertainty affecting customer demand, but operational improvements have been made to enhance efficiency [6] - There is a significant improvement in backlog from Q3 to Q4 2020, indicating a positive trend in demand [45] Company Strategy and Development Direction - The management team is focused on improving operational efficiency and effectiveness, with plans to invest in employees and foster a culture of accountability [14] - The company aims to maximize shareholder value through strategic planning, operational improvements, and potential acquisitions [20] - There is a commitment to growth without solely relying on cost-cutting measures, emphasizing the importance of setting up for profitable growth [19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for improved performance in 2021 due to favorable economic conditions and commodity pricing [28] - The company is focused on leveraging its diverse experiences and relationships to better service customers and improve overall efficiency [15] - Management acknowledged challenges in attracting and retaining talent but does not foresee significant wage inflation impacting operations [51] Other Important Information - Total debt as of December 31, 2020, was $61.4 million, representing a nearly 20% reduction compared to the previous year [12] - The company entered into a new revolving credit facility with BMO Harris Bank, providing up to $150 million in borrowing capacity [12] Q&A Session Summary Question: Interest savings from the new credit facility - Management indicated that the new interest rate is lower, resulting in significant savings, approximately $100,000 per month [22][42] Question: Plans for acquisitions - Management confirmed that the new credit facility allows for acquisitions up to $25 million, not exceeding $100 million over four years, indicating a strategy for potential inorganic growth [24] Question: Consolidation of corporate infrastructure - Management acknowledged the efficiency of the current corporate structure in Richmond and indicated no immediate plans for consolidation [26] Question: Future EBITDA expectations - Management expressed confidence in significantly improving EBITDA through operational efficiencies but did not provide specific numbers [43] Question: Capacity utilization at CRI Tolling - Management noted opportunities to optimize asset efficiency and throughput at CRI, indicating a focus on increasing capacity utilization [30] Question: Impact of nickel price fluctuations - Management explained that while nickel is a component in stainless products, it is not a significant driver of inventory profits, and they have strategies to manage inventory effectively [40] Question: Demand outlook for the chemical segment - Management reported robust demand in the chemical segment, with opportunities arising from increased customer capacity needs [59]