Insteel Industries Inc. (NYSE: IIIN) (“Insteel” or the “Company”), the largest manufacturer of steel wire reinforcing products for concrete construction applications in the United States, today announced financial results for its first quarter of fiscal 2024 ended December 30, 2023.
First Quarter 2024 Highlights
- Net sales of $121.7 million
- Gross profit of $6.3 million, or 5.2% of net sales
- Net income of $1.1 million, or $0.06 per share
- Operating cash flow of $21.8 million
- Payment of special cash dividend totaling $48.6 million, or $2.50 per share
- Net cash balance of $85.6 million and no debt outstanding as of December 30, 2023
- Favorable demand profile with improving market fundamentals and macroeconomic outlook
First Quarter 2024 Results
Net earnings for the first quarter of fiscal 2024 decreased to $1.1 million, or $0.06 per share, from earnings of $11.1 million, or $0.57 per share, in the same period a year ago. Net earnings for the prior-year quarter included a $3.3 million, or $0.13 per share gain on the sale of property, plant, and equipment. Insteel’s first quarter results were unfavorably impacted by the narrowing of spreads between selling prices and raw material costs, together with elevated unit manufacturing costs on lower production levels.
Net sales decreased 27.1% to $121.7 million from $166.9 million in the prior year quarter, driven entirely by a decrease in average selling prices. Shipment volume during the period was essentially unchanged from the prior year and benefited from recovering demand from our residential construction markets, offsetting weakness in infrastructure and commercial construction markets. On a sequential basis, shipments declined 16.1% from the fourth quarter of fiscal 2023, reflecting the typical seasonal slowdown in construction activity, while average selling prices fell 7.9%. Gross margin narrowed to 5.2% from 10.7% in the prior year quarter due to the reduction in spreads between selling prices and raw material costs together with higher operating costs that reflect lower production volumes.
Operating activities generated $21.8 million of cash during the quarter compared to $33.0 million in the prior year as both periods benefited from the relative changes in working capital. Working capital provided $16.3 million in the current quarter, driven by the reduction in receivables and inventories, while providing $17.8 million in the prior year quarter.
Capital Allocation and Liquidity
Capital expenditures for the first quarter of fiscal 2024 increased to $12.3 million from $8.2 million in the prior year quarter. Capital outlays for fiscal 2024 are expected to total up to approximately $30.0 million, primarily focused on expenditures to modernize our facilities and information systems, advance the growth of the engineered structural mesh business, and to support cost and productivity improvement initiatives in addition to recurring maintenance needs.
On December 22, 2023, Insteel paid a special cash dividend totaling $48.6 million, or $2.50 per share, in addition to its regular quarterly cash dividend of $0.03 per share and ended the quarter with $85.6 million of cash and no borrowings outstanding on its $100.0 million revolving credit facility.
Outlook
“We stated during the Q4 2023 earnings call that our first quarter would be difficult in view of higher inventory carrying values, competitive pricing pressure, the need to reduce finished goods inventories, and the normal seasonal downturn in construction activity. While all of these factors affected our first quarter results, we are glad to report that we have reached the point where the carrying value of raw materials approximates replacement cost and finished goods inventories are more appropriately aligned with our business level. With pricing turning upward and inventory liquidations substantially complete, we believe that we are past some of the headwinds that adversely affected results during 2023 and the first quarter of 2024. As we look toward the remainder of fiscal 2024, we anticipate stronger market fundamentals and look forward to increasing contributions from the capital investments we have made,” commented H.O. Woltz III, Insteel’s President and CEO.
Mr. Woltz further commented, “Customer sentiment remains mostly positive, and the macroeconomic outlook is improving with the apparent end of the recent rising interest rate cycle. Additionally, we are optimistic about increased demand from spending associated with the Infrastructure Investment and Jobs Act as we progress through the fiscal year. Regardless of the circumstances, we will remain focused on navigating market conditions, strengthening our leadership positions across our product lines, and optimizing our operations to position Insteel for long-term success.
