Ascent Industries (ACNT) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fourth quarter GAAP-based net income was $0.5 million or $0.06 diluted earnings per share, down from $1 million or $0.11 diluted earnings per share in Q4 2017 [6] - Fourth quarter non-GAAP adjusted net income was $2 million or $0.22 diluted earnings per share, compared to $1.2 million or $0.13 diluted earnings per share in Q4 2017 [6] - Fourth quarter non-GAAP adjusted EBITDA totaled $5.9 million or 8.1% of sales, up from $4.0 million or 7.5% of sales in the prior year [7] - Full-year adjusted EBITDA totaled $34.1 million, significantly up from $12.5 million in 2017 [7] Business Line Data and Key Metrics Changes - The metals segment finished the year with profits of almost $5 million, with all gains occurring in the first three quarters of the year [12] - The chemicals segment returned to organic sales growth in 2018, with expectations for continued growth in 2019 [14] Market Data and Key Metrics Changes - Nickel prices and associated surcharges were under pressure in Q4, resulting in metal losses, but have started to rebound in 2019 with a 26% increase since the end of 2018 [12] - The backlog as of March 1 indicated about five months' worth of work, consistent with historical levels [22] Company Strategy and Development Direction - The company completed the acquisition of Marcegaglia's galvanized tube business in July 2018 and ASTI's assets in January 2019, which are expected to enhance operational capabilities [9] - The company is targeting revenue of $340 million for 2019, a 21% increase from 2018, with adjusted EBITDA forecasted at $34 million [9] Management's Comments on Operating Environment and Future Outlook - Management noted that the level of business activity in the first two months of 2019 has exceeded plans in both metals and chemicals segments, indicating a solid year ahead [16] - Management expressed disappointment with the share price decline despite strong financial performance and authorized a share repurchase program [10] Other Important Information - The company experienced a mark-to-market valuation loss on investments in equity securities totaling $2.1 million in Q4 [11] - The integration of ASTI has gone smoothly, with raw material savings hitting assumptions and coordination of sales activities among stainless units underway [13] Q&A Session Summary Question: Concerns about chemical division margins - Management acknowledged that some expected product lines did not ramp up as planned in 2018, but they are seeing improvements in early 2019 [17] Question: Labor issues in the metals division - Management reported improved margins in the second half of the year and reduced turnover among welders, positively impacting throughput [20] Question: Demand levels in the Permian - Management confirmed that bookings typically pick up in the second and third quarters, with February bookings showing a nice increase [22] Question: Update on galvanizing and ornamental steel business - Management noted a significant reduction in inventory demand from customers in Q4 but has seen volume pick up in early 2019 [24] Question: Update on the IBC business - Management confirmed the signing of two long-term contracts with higher volume commitments than at the time of acquisition [28] Question: Brismet backlog status - Management indicated that the Brismet backlog is currently about $28 million [49]