Metallus(US:MTUS)2026-02-20 15:02Financial Data and Key Metrics Changes - In 2025, shipments improved by 14% year-over-year, indicating a commercial recovery after previous market headwinds [4] - Fourth quarter net sales totaled $267.3 million, a sequential decrease of $38.6 million primarily due to seasonality and slower ramp-up post-maintenance shutdown [13] - The fourth quarter GAAP net loss was $14.3 million, or a loss of $0.34 per diluted share, while adjusted net loss was $7.7 million, or a loss of $0.18 per diluted share [14] - Adjusted EBITDA for the fourth quarter was $2.4 million, below expectations due to lower volumes and increased manufacturing costs [8][14] Business Line Data and Key Metrics Changes - VAR sales totaled approximately $28 million in 2025, almost doubling from 2024, reflecting strong growth in aerospace and defense [4] - The company is increasing hourly staffing levels in areas with accelerated demand, such as seamless mechanical tube production [6][9] Market Data and Key Metrics Changes - The order book has increased by more than 50% year-over-year, indicating strong demand for domestic steel [9][20] - Industrial markets remain soft, but favorable trade conditions are creating new opportunities for reliable domestic suppliers [10] - Aerospace and defense outlook is robust, with strong growth expected through 2026, driven by existing program expansions and new platforms [11] Company Strategy and Development Direction - The company is focused on safety, operational enhancements, and strategic investments to support long-term growth [5][7] - A new four-year labor agreement was reached, emphasizing safety, innovation, and long-term competitiveness [6] - The company is investing in new manufacturing capabilities, including a new automated grinding line and other state-of-the-art assets scheduled for commissioning in 2026 [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a stronger operational foundation and improved execution for 2026, despite fourth quarter performance being below expectations [8][13] - The company anticipates a slight increase in first quarter shipments by approximately 10% compared to the fourth quarter, supported by a solid order book [20] - Management expects year-over-year adjusted EBITDA growth in each quarter of 2026, driven by strong demand and operational improvements [23] Other Important Information - The company generated $16 million of operating cash flow in 2025, with operational cash generation exceeding $80 million for the second consecutive year [15] - Planned capital expenditures for 2026 are expected to be approximately $70 million, including government-related expenditures [16] - The company repurchased approximately 71,000 shares of common stock for $1.2 million in the fourth quarter, reflecting confidence in cash flow generation [18] Q&A Session Summary Question: What were the costs incurred from labor negotiations in Q4 and Q1 2026? - Management indicated no additional costs were incurred in Q4 due to the labor agreement being settled in February, but a $2 million payment is due in Q1 [27][30] Question: How does the company expect melt utilization to improve? - Management stated that improvements are expected from both volume increases and third-party advisory programs, with a stronger order book entering 2026 [34] Question: What is the status of A&D sales expectations for 2026? - Management believes they are on target to hit a $250 million run rate in A&D sales, contingent on the ramp-up of munitions manufacturing capacity [48] Question: What is the status of key capital investments? - Management reported that the bloom reheat furnace is expected to be operational in the next month, with both the bloom and roller hearth furnaces ramping up by late Q2 or early Q3 [50][51] Question: What is the outlook for lead times and sales? - Management expects lead times to improve as new assets ramp up, which will also help maintain competitive lead times [63][66]