Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Olympic Steel Inc (ZEUS, Financial) achieved EBITDA positive results across all three segments despite challenging market conditions.
- The company reduced its debt by approximately $12 million, bringing it down to $197 million.
- Olympic Steel Inc (ZEUS) has $304 million of credit availability to support growth initiatives.
- The company is actively investing in new equipment and automation to enhance safety, efficiency, and productivity.
- Olympic Steel Inc (ZEUS) continues to pursue acquisitions, with a focus on countercyclical and higher-margin opportunities.
Negative Points
- The company faced reduced demand from OEM customers, particularly in the heavy equipment sector, leading to lower volumes in the Carbon segment.
- Stainless steel surcharges fell to a 3.5-year low, creating pricing pressure in the Specialty Metals segment.
- Net income for the third quarter was $2.7 million, a significant decrease from $12.2 million in the same period last year.
- Operating expenses increased to $99 million from $91 million in the third quarter of 2023, partly due to the acquisition of Central Tube & Bar.
- Macroeconomic headwinds are expected to continue, with uncertainty surrounding the presidential election and future interest rate cuts.
Q & A Highlights
Q: Can you explain the process and timeline for implementing new machinery and training employees?
A: Andrew Greiff, President and COO, explained that training will occur both before and immediately after the equipment arrives. The company expects the new machinery to be operational shortly after installation, assuming it performs as expected.
Q: Are there any M&A targets you are considering, and are you focusing on countercyclical companies?
A: CEO Richard Marabito confirmed that Olympic Steel is actively pursuing acquisitions, particularly in countercyclical sectors and higher-margin fabrication. The company aims to continue its history of successful acquisitions, averaging more than one per year.
Q: What is your outlook on demand from industrial machinery and equipment OEMs post-election?
A: Andrew Greiff noted that while a significant release of pent-up demand is not expected immediately, there is potential for increased activity from non-contractual customers. CEO Richard Marabito added that Olympic Steel is expanding its business with large OEMs, which could offset any stable demand levels.
Q: Can you discuss the performance and contribution of Central Tube & Bar to the pipe and tube segment?
A: CFO Richard Manson highlighted that the segment's gross margin includes LIFO income, and Central Tube & Bar's margins are higher than the existing pipe and tube business. Andrew Greiff added that Central Tube & Bar has been performing well, particularly in fabrication for OEMs.
Q: How would the potential acquisition of US Steel by Nippon impact Olympic Steel?
A: CEO Richard Marabito stated that Olympic Steel has a facility co-located with US Steel and maintains strong relationships with all vendors. The company expects to continue being a key supplier regardless of the acquisition outcome.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
