Insteel(US:IIIN)2021-04-22 20:09Financial Data and Key Metrics Changes - Net earnings for Q2 2021 increased to $14.9 million or $0.76 per diluted share, up from $4.4 million or $0.23 per share a year ago, representing more than a tripling of earnings [4] - Shipments increased by 5% year-over-year and 3.1% sequentially from Q1 [4] - Average selling prices rose by 15% compared to last year and 12.7% sequentially from Q1 [5] - Gross profit increased by $15 million year-over-year, with gross margin expanding to 21.7% [6] Business Line Data and Key Metrics Changes - The demand for concrete reinforcing products remained robust, contributing to strong financial results [4] - The company successfully passed rising costs through the supply chain, maintaining gross margins above 20% throughout the quarter [6][7] Market Data and Key Metrics Changes - The supply of wire rod in the U.S. market became constrained, leading to substantial price increases [5] - Steel scrap prices increased by over 60% in the last six months, impacting production costs [6] - Recent market indicators like ABI and Dodge have rebounded, suggesting growth in private nonresidential construction markets in the next 9 to 12 months [12] Company Strategy and Development Direction - The company expects continued market strength driven by improved public finances and elevated activity in the distribution and e-commerce segments [15] - There is a focus on expanding engineered structural mesh products and cast-in-place applications [16] - The company plans to invest approximately $20 million in capital expenditures for 2021 to support growth initiatives [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about steady demand and strong order books, despite uncertainties related to COVID-19 [12][13] - The company is actively managing the tight supply environment for raw materials and expects to pass costs through the supply chain [17] - Management acknowledged risks associated with elevated steel prices and supply constraints but believes that existing tariffs and dumping orders will mitigate sudden market changes [33] Other Important Information - The effective tax rate for the quarter increased to 22.5% from 21.2% year-over-year [9] - Cash flow from operations generated $15.3 million, with no borrowings on the revolving credit facility, providing financial flexibility [11] Q&A Session Summary Question: Demand trends in the horizontal market - Management noted that distribution, including e-commerce, has been extremely robust and has a long run ahead [25] Question: Availability of trucking and cost pass-through - Management confirmed that trucking availability is extremely tight, which has driven costs up significantly [28] Question: Progress on the Strand-Tech acquisition - Management reported that major equipment refurbishment is complete, and commissioning is expected to occur soon [30] Question: Risks associated with elevated steel prices - Management highlighted that while risks are high, they are managing quantities of steel purchased to fulfill customer commitments [32] Question: Trade action rulings - Management expressed satisfaction with the trade rulings, which aligned with their expectations [35] Question: Seasonal impact and government spending - Management anticipates that government stimulus may not have an immediate impact but could extend the pipeline for future projects [41]