Friedman Industries, Incorporated (NYSE – American; trading
symbol: FRD)
The Company announced today its results of operations for the
quarter and year ended March 31, 2021. For the quarter ended March
31, 2021 (the “2021 quarter”), the Company recorded net earnings of
$10,403,597 ($1.50 diluted earnings per share) on sales of
$49,214,204 compared to a net loss of $3,018,842 ($0.43 diluted
loss per share) on net sales of $32,980,607 for the quarter ended
March 31, 2020 (the “2020 quarter”). The 2021 quarter results make
it the most profitable quarter in Company history. Results for the
2021 quarter were positively impacted by strong margins primarily
associated with a historic rise in steel prices and a net
recognized gain of $5,502,620 related to hot-rolled coil derivative
instruments.
For the year ended March 31, 2021 (“fiscal 2021”), the Company
recorded net earnings of $11,424,475 ($1.63 diluted earnings per
share) on sales of $126,102,533. For the year ended March 31, 2020
(“fiscal 2020”), the Company recorded a net loss of $5,249,210
($0.75 diluted loss per share) on sales of $142,102,324. Fiscal
2021 results make it the second most profitable fiscal year in
Company history.
“I am proud of how our team responded to a uniquely challenging
year for our company, and our fourth quarter and fiscal year end
results demonstrate that resiliency,” said Michael J. Taylor,
President and Chief Executive Officer. “The pandemic created a lot
of uncertainty about how our employees, our operations, our
customer’s operations and the overall steel industry would be
affected. That coupled with volatility in steel prices created a
complex operating environment.”
Mr. Taylor continued, “We quickly updated our operational and
safety protocols to help ensure the safety and health of our
employees and continuity of operations throughout the crisis. And
in the face of a supply-demand imbalance, we expanded our supply
chain options with the support of newly implemented risk management
practices to drive improved operating results. We continued to
invest strategically in our business, namely in our Hickman,
Arkansas coil processing facility and Decatur, Alabama coil
processing facility, and see tremendous value in our plans for a
new facility in Sinton, Texas which will extend our competitive
footprint to better serve coil segment customers in the Southwest
United States and Mexico.”
Operating results have been favorably impacted by the market
price of hot-rolled steel coil. In August 2020, steel prices began
a historic run up, increasing approximately 200% by the end of
fiscal 2021. The Company believes the historic increase in
steel prices is primarily the result of a supply and demand
imbalance that was created by COVID-19's impact on the steel
industry and its customers. At the onset of the pandemic, some
steel mill production capacity was idled, and Friedman
Industries, and many other industry participants, scaled back
inventory purchases. The Company saw a significant but relatively
brief, dip in demand followed by a resurgence, and this
resurgence in demand was met by historically low inventory on hand
and on order levels in the supply chain and a lower level of
available steel mill capacity. Steel mill capacity was booked
up quickly and lead times extended well beyond normal levels and
due to supportive demand, capacity continued to book up quickly
throughout the remainder of fiscal 2021 and lead times
remained extended. This supply and demand dynamic resulted in
significant margin improvement for our products during the second
half of fiscal 2021.
SUMMARY OF
OPERATIONS |
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Three Months Ended March 31, |
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Year Ended March 31, |
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2021 |
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2020 |
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2021 |
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2020 |
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Net Sales |
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$ |
49,214,204 |
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$ |
32,980,607 |
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$ |
126,102,533 |
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$ |
142,102,324 |
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Total costs
and |
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other income |
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35,311,777 |
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36,910,398 |
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110,880,560 |
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148,940,526 |
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Earnings (loss)
before |
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income taxes |
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13,902,427 |
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(3,929,791 |
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15,221,973 |
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(6,838,202 |
) |
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Income taxes |
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3,498,830 |
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(910,949 |
) |
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3,797,498 |
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(1,588,992 |
) |
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Net earnings
(loss) |
$ |
10,403,597 |
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$ |
(3,018,842 |
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$ |
11,424,475 |
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$ |
(5,249,210 |
) |
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Weighted average
shares outstanding: |
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Basic |
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6,921,004 |
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7,000,403 |
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7,027,707 |
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7,000,403 |
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Diluted |
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6,921,004 |
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7,000,403 |
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7,027,707 |
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7,000,403 |
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Net earnings
(loss) per share: |
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Basic |
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$ |
1.50 |
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$ |
(0.43 |
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$ |
1.63 |
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$ |
(0.75 |
) |
Diluted |
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$ |
1.50 |
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$ |
(0.43 |
) |
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$ |
1.63 |
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$ |
(0.75 |
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COIL SEGMENT OPERATIONS
Coil segment sales for fiscal 2021 totaled $95,264,555 compared
to $99,762,892 for fiscal 2020. The decrease in sales was driven by
a decline in sales volume, partially offset by an increase in the
average selling price associated with higher hot-rolled steel
prices. Sales volume decreased from approximately 152,000 tons in
fiscal 2020 to approximately 130,500 tons in fiscal 2021. The
volume decline was related to both the impacts of COVID-19 and
removing the Decatur, Alabama coil processing facility’s equipment
in June 2020 for an equipment replacement project with the new
equipment being put into service in March 2021. Compared to
fiscal 2020's average monthly volume, April 2020 volume was
down 51% and May 2020 volume was down 33% but the rest of
fiscal 2021's monthly volume was only down an average of 9%.
The Company experienced growth in its coil segment customer
portfolio, increasing the number of customers sold from
approximately 185 customers in fiscal 2020 to approximately 200
customers in fiscal 2021. The average selling price of coil segment
shipments increased from approximately $651 per ton in fiscal 2020
to approximately $722 per ton in fiscal 2021.
TUBULAR SEGMENT OPERATIONS
Tubular segment sales for fiscal 2021 totaled
$30,837,978 compared to $42,339,432 for fiscal 2020. The decrease
in tubular segment sales was primarily driven by a decline in sales
volume which decreased from approximately 58,000 tons in
fiscal 2020 to approximately 42,000 tons in fiscal 2021. The volume
decline was related primarily to the impacts of COVID-19 and
challenging energy industry conditions. Compared to
fiscal 2020's average monthly volume, April 2020 volume was
only down 4% due to the fulfillment of pre-pandemic orders but May
2020 volume was down 36% and the remainder of fiscal 2021's
monthly volume was down an average of 27%. The tubular segment
volume did not recover in the same manner as the coil segment's
volume due primarily to energy industry conditions which remained
challenging throughout fiscal 2021. The number of tubular
segment customers sold remained steady at approximately 125
customers for both fiscal 2021 and fiscal 2020. The average selling
price for the tubular segment's products was consistent between
years at approximately $730 per ton for fiscal 2021 compared
to approximately $728 per ton for fiscal 2020.
STRATEGIC INITIATIVES
During fiscal 2021, the Company completed a 22,000 square foot
addition to its Hickman, Arkansas coil processing facility. This
project was completed at an actual cost of approximately $1,083,000
compared to an original estimated cost of $1,100,000. The expansion
provides additional finished goods storage space, removing that
constraint to growth, and also provides safety improvements.
During fiscal 2021, the Company removed its temper mill and
cut-to-length line at our Decatur, Alabama plant and replaced it
with a stretcher leveler cut-to-length line with significantly
enhanced processing capabilities that allow the facility to process
material that is thicker, wider and of higher strength compared to
the prior equipment’s capabilities. The Company began commissioning
the line during March 2021 and is pleased with the initial customer
response to the facility’s new processing capabilities. The
estimated cost of this project is $7,200,000 with approximately
$6,733,000 having been paid as of March 31, 2021.
On May 25, 2021, the Company announced plans for a new facility
in Sinton, Texas that will be part of the coil product segment. The
new facility will be on the campus of Steel Dynamics, Inc.'s
("SDI") new flat roll steel mill currently under construction in
Sinton, Texas. The Company's new location will consist of an
approximately 70,000 square foot building located on approximately
26.5 acres leased from SDI under a 99-year agreement. The Company
has selected Red Bud Industries to build one of the world’s largest
stretcher leveler cut-to-length lines, capable of handling material
up to 1” thick, widths up to 96” and yields exceeding 100,000 psi.
The Company expects the location to commence operations in April
2022 and estimates the total cost of the project to be $21 million.
We believe this is a great growth opportunity for the Company and
will allow us to expand our competitive footprint to the
Southwest United States and Mexico.
OUTLOOK
The Company continued to see margin strength throughout its
fiscal 2022 first quarter ended June 30, 2021 with hot-rolled steel
prices rising approximately 30%, and expects results for the first
quarter to be slightly better than its fourth quarter fiscal 2021
results. The Company expects margins to remain strong for its
second quarter ending September 30, 2021 and expects further
improvement in operating results.
ABOUT FRIEDMAN INDUSTRIES
Friedman Industries, Incorporated, headquartered in Longview,
Texas, is a manufacturer and processor of steel products with
operating plants in Hickman, Arkansas; Decatur, Alabama and Lone
Star, Texas. The Company has two reportable segments: coil products
and tubular products. The coil product segment consists of the
operations in Hickman and Decatur where the Company processes
hot-rolled steel coils. The Hickman facility operates a temper mill
and corrective leveling cut-to length line. The Decatur facility
operates a stretcher leveler cut to length line. The tubular
product segment consists of the operations in Lone Star where the
Company manufactures electric resistance welded pipe and
distributes pipe.
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, 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, including the timing of the completion
and successful commissioning of our new stretcher leveler line in
Decatur, the cost, timing and successful commissioning of our new
stretcher leveler line in Sinton, 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,
the continuing shifting of governmental policy relating to PPP
loans and forgiveness of such loans, 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-K
as filed with the SEC on July 7, 2021 or contact Alex LaRue, Chief
Financial Officer – Secretary and Treasurer, at (903)758-3431.
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