Friedman Industries, Incorporated (NYSE American: FRD) announced
today its results of operations for the quarter ended June 30,
2023.
June 30, 2023 Quarter
Highlights:
- Net
earnings of approximately $7.7 million
- Sales of
approximately $137.3 million
- 23%
increase in sales volume over prior year quarter
volume
- Working
capital balance at quarter-end of approximately $113.1
million
“Our first quarter results are a great start to
fiscal year 2024 as we strive to deliver record earnings for a
third year in a row,” said Michael J. Taylor, President and Chief
Executive Officer. “Our team did a good job of evaluating and
responding to market conditions during the first quarter. As fiscal
2024 continues, we are focused on maximizing sales volume on our
existing assets while also evaluating additional growth
opportunities for the Company,” Taylor concluded.
For the quarter ended June 30, 2023 (the “2023
quarter”), the Company recorded net earnings of approximately $7.7
million ($1.04 diluted earnings per share) on net sales of
approximately $137.3 million compared to net earnings of
approximately $11.2 million ($1.55 diluted earnings per share) on
net sales of approximately $161.8 million for the quarter ended
June 30, 2022 (the “2022 quarter”). Sales volume increased from
approximately 105,000 tons in the 2022 quarter to approximately
129,000 tons in the 2023 quarter. The growth in sales volume was
primarily related to the Company’s Sinton, Texas facility which
commenced operations in October 2022 and the 2022 quarter
containing only two months of sales activity following the April
30, 2022 acquisition of facilities and inventory from Plateplus,
Inc.
The lower revenue for the 2023 quarter was
primarily the result of pricing dynamics of hot-rolled steel coil
(“HRC”) entering and during the 2023 and 2022 quarters. Our
operating results are significantly impacted by the market price of
HRC and the Company experienced volatility in this price during
both the 2023 quarter and the 2022 quarter. Entering the 2022
quarter, HRC prices experienced a sharp and abrupt increase in
reaction to the Russian invasion of Ukraine, increasing
approximately 60% from March 2022 to April 2022. HRC prices then
declined approximately 60% until the middle of December 2022. From
late November 2022 until April 2023, domestic steel producers
announced several rounds of price increases with HRC prices
increasing approximately 95% during this time. From the middle of
April 2023 and until the end of the 2023 quarter, HRC prices
declined approximately 27%. For both the 2023 and 2022 quarters,
the Company experienced significant increases in steel prices
entering the quarters with an inflection point in steel price
occurring during each quarter. As a result, both quarters
experienced stronger margins in the first half followed by margin
compression in the second half. Overall, both quarters are
characterized as periods of relatively strong margins.
The table below provides our unaudited
statements of operations for the quarters ended June 30, 2023 and
2022:
SUMMARY OF
OPERATIONS (unaudited) |
(In
thousands, except for per share data) |
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
2023 |
|
2022 |
|
|
|
|
|
|
|
Net Sales |
|
$ |
137,298 |
|
|
$ |
161,803 |
|
|
|
|
|
|
|
|
Cost of
products sold |
|
|
120,969 |
|
|
|
143,131 |
|
|
Selling, general and administrative expenses |
|
5,972 |
|
|
|
6,353 |
|
|
|
|
|
|
|
|
Earnings from operations |
|
10,357 |
|
|
|
12,319 |
|
|
|
|
|
|
|
|
Gain on economic hedges of risk |
|
430 |
|
|
|
2,754 |
|
|
Interest
expense |
|
|
(540 |
) |
|
|
(429 |
) |
|
Other
income |
|
|
6 |
|
|
|
13 |
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
10,253 |
|
|
|
14,657 |
|
|
|
|
|
|
|
|
Income tax
expense |
|
|
2,563 |
|
|
|
3,473 |
|
|
|
|
|
|
|
|
Net
earnings |
|
$ |
7,690 |
|
|
$ |
11,184 |
|
|
|
|
|
|
|
|
Net earnings
per share: |
|
|
|
|
|
Basic |
|
$ |
1.04 |
|
|
$ |
1.55 |
|
|
Diluted |
|
$ |
1.04 |
|
|
$ |
1.55 |
|
|
The table below provides summarized unaudited
balance sheets as of June 30, 2023 and March 31,
2023:
SUMMARIZED
BALANCE SHEETS (unaudited) |
(In
thousands) |
|
|
|
|
|
June 30, 2023 |
|
March 31, 2023 |
ASSETS: |
|
|
|
Current
Assets |
156,091 |
|
143,656 |
Noncurrent
Assets |
55,311 |
|
55,656 |
Total
Assets |
211,402 |
|
199,312 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY: |
|
|
Current
Liabilities |
43,017 |
|
45,088 |
Noncurrent
Liabilities |
45,016 |
|
38,792 |
Total
Liabilities |
88,033 |
|
83,880 |
|
|
|
|
Total
Stockholders' Equity |
123,369 |
|
115,432 |
|
|
|
|
Total
Liabilities and Stockholders' Equity |
211,402 |
|
199,312 |
|
|
|
|
FLAT-ROLL SEGMENT OPERATIONS (previously
referred to as the “coil segment”)
Flat-roll product segment sales for the 2023
quarter totaled approximately $125.2 million compared to
approximately $142.9 million for the 2022 quarter. The decrease in
sales was driven primarily by a decline in the average selling
price of inventory, although this was partially offset by an
increase in sales volume. The average per ton selling price of
flat-roll segment inventory decreased from approximately
$1,525 per ton in the 2022 quarter to approximately $1,038 per
ton in the 2023 quarter. Inventory tons sold increased from
approximately 94,000 tons in the 2022 quarter to approximately
120,000 tons in the 2023 quarter. The significant increase in sales
volume was primarily attributable to the additional facilities
acquired from Plateplus, Inc. on April 30, 2022 and the new Sinton,
Texas facility becoming operational in October 2022. Flat-roll
segment operations recorded operating profits of approximately
$11.8 million and $13.5 million for the 2023 and 2022
quarters, respectively.
TUBULAR SEGMENT OPERATIONS
Tubular product segment sales for the 2023
quarter totaled approximately $12.1 million compared to
approximately $18.9 million for the 2022 quarter. Sales
decreased due to a decline in the average selling price
per ton and a decrease in tons sold. The average per ton selling
price of tubular segment inventory decreased from approximately
$1,779 per ton in the 2022 quarter to approximately
$1,358 per ton in the 2023 quarter. Tons sold decreased from
approximately 10,500 tons in the 2022 quarter to approximately
9,000 tons in the 2023 quarter. The tubular segment
recorded operating profits of approximately $2.3 million and $2.1
million for the 2023 and 2022 quarters, respectively.
OUTLOOK
The Company expects steady demand for its second
quarter of fiscal 2024 with sales volume expected to be
approximately the same as the first quarter. HRC price has
continued to see downward pressure during the second quarter. The
Company expects lower physical margins for the second quarter
compared to the first quarter due to the HRC price trend with
hedging related gains partially offsetting the impact of lower
margins.
ABOUT FRIEDMAN INDUSTRIES
Friedman Industries, Incorporated (“Company”),
headquartered in Longview, Texas, is a manufacturer and processor
of steel products with operating plants in Hickman, Arkansas;
Decatur, Alabama; East Chicago, Indiana; Granite City, Illinois;
Sinton, Texas and Lone Star, Texas. The Company has two reportable
segments: flat-roll products and tubular products. The flat-roll
product segment consists of the operations in Hickman, Decatur,
East Chicago, Granite City and Sinton where the Company processes
hot-rolled steel coils. The Hickman, East Chicago and Granite City
facilities operate temper mills and corrective leveling cut-to
length lines. The Sinton and Decatur facilities operate stretcher
leveler cut-to-length lines. The Sinton facility is a newly
constructed facility with operations commencing in October 2022.
The East Chicago and Granite City facilities were acquired from
Plateplus, Inc. on April 30, 2022. The tubular product segment
consists of the operations in Lone Star where the Company
manufactures electric resistance welded pipe and distributes pipe
through its Texas Tubular Products division.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking
statements within the meaning of Section 27A of the Securities Act
and Section 21E of the Exchange Act, and such statements involve
risk and uncertainty. Forward-looking statements include those
preceded by, followed by or including the words “will,” “expect,”
“intended,” “anticipated,” “believe,” “project,” “forecast,”
“propose,” “plan,” “estimate,” “enable,” and similar expressions,
including, for example, statements about our business strategy, our
industry, our future profitability, growth in the industry sectors
we serve, our expectations, beliefs, plans, strategies, objectives,
prospects and assumptions, future production capacity, product
quality and estimates and projections of future activity and trends
in the oil and natural gas industry. These forward-looking
statements may include, but are not limited to, expected financial
results for the quarter ended September 30, 2023, everything under
the header “Outlook” above, including sales volumes, margins,
hedging results, and potential price increases, expectations as to
financial results during the Company’s upcoming fiscal quarters,
future changes in the Company’s financial condition or results of
operations, future production capacity, product quality and
proposed expansion plans. Forward-looking statements may be made by
management orally or in writing including, but not limited to, this
news release.
Forward-looking statements are not guarantees of
future performance. These statements are based on management’s
expectations that involve a number of business risks and
uncertainties, any of which could cause actual results to differ
materially from those expressed in or implied by the
forward-looking statements. Although forward-looking statements
reflect our current beliefs, reliance should not be placed on
forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which may cause our actual
results, performance or achievements to differ materially from
anticipated future results, performance or achievements expressed
or implied by such forward-looking statements.
Actual results and trends in the future may
differ materially depending on a variety of factors including, but
not limited to, changes in the demand for and prices of the
Company’s products, the continuing impact of the COVID-19 pandemic,
changes in government policy regarding steel, changes in the demand
for steel and steel products in general and the Company’s success
in executing its internal operating plans, changes in and
availability of raw materials, our ability to satisfy our take or
pay obligations under certain supply agreements, unplanned
shutdowns of our production facilities due to equipment failures or
other issues, increased competition from alternative materials and
risks concerning innovation, new technologies, products and
increasing customer requirements. Accordingly, undue reliance
should not be placed on our forward-looking statements. Such risks
and uncertainty are also addressed in our Management’s Discussion
and Analysis of Financial Condition and Results of Operations and
other sections of the Company’s filings with the U.S. Securities
and Exchange Commission (the “SEC”) under the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), including the Company’s Annual Report
on Form 10-K and its other Quarterly Reports on Form 10-Q. We
undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events, changed circumstances or otherwise, except to the
extent law requires.
For further information, please refer to the
Company's Form 10-Q as filed with the SEC on August 14, 2023 or
contact Alex LaRue, Chief Financial Officer – Secretary and
Treasurer, at (903)758-3431.
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