The Company announced today its results of operations for the
fiscal first quarter. For the quarter ended June 30, 2021 (the
“2021 quarter”), the Company recorded net earnings of $11,311,797
($1.64 diluted earnings per share) on net sales of $65,916,439
compared to a net loss of $858,862 ($0.12 diluted loss per share)
on net sales of $23,524,600 for the quarter ended June 30, 2020
(the “2020 quarter”). The 2021 quarter results make it the most
profitable quarter in Company history. Results for the 2021 quarter
were positively impacted by strong margins primarily associated
with a historic rise in steel prices. The 2021 quarter was also
positively impacted by the Decatur, Alabama facility starting to
operate its new stretcher leveler cut-to-length line.
“We continued to operate in an unprecedented
industry environment during the 2021 quarter,” said Michael J.
Taylor, President and Chief Executive Officer. “Hot-rolled steel
prices for the 2021 quarter were approximately 200% higher than
prices for the 2020 quarter and securing steel to support our
customers remained a critical focus. Prior efforts to expand our
supply chain options, combined with our team’s excellent work in
the quarter to source steel in a supply tight market, have allowed
us to be the consistent supplier our customers expect and to
capture new customer opportunities. We are excited about the
initial customer response to our Decatur facility’s new processing
capabilities. We are also pleased to announce we have broken ground
on the construction of our new facility in Sinton, Texas. We
believe successful execution of these projects in Decatur and
Sinton provide a path for us to double our coil segment sales
volume.”
SUMMARY OF OPERATIONS (unaudited) |
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Three
Months Ended June 30, |
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2021 |
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2020 |
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Net
Sales |
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$ |
65,916,439 |
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$ |
23,524,600 |
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Total costs and |
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other income |
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51,647,762 |
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24,661,230 |
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Earnings (loss) before |
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income taxes |
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14,268,677 |
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(1,136,630 |
) |
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Income taxes |
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2,956,880 |
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(277,768 |
) |
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Net earnings (loss) |
$ |
11,311,797 |
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$ |
(858,862 |
) |
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Weighted average shares outstanding: |
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Basic |
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6,899,537 |
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7,080,444 |
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Diluted |
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6,899,537 |
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7,080,444 |
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Net earnings (loss) per share: |
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Basic |
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$ |
1.64 |
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$ |
(0.12 |
) |
Diluted |
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$ |
1.64 |
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$ |
(0.12 |
) |
COIL SEGMENT OPERATIONS
Coil segment sales for the 2021 quarter totaled
$52,694,730 compared to $15,432,784 for the 2020 quarter.
The increase in sales was driven by an increase in the average
selling price associated with higher hot-rolled steel prices and an
increase in sales volume. The average per ton selling price of coil
segment inventory increased from approximately $566 per ton in
the 2020 quarter to approximately $1,462 per ton in the 2021
quarter. Inventory tons sold increased from approximately
27,000 tons in the 2020 quarter to approximately 39,000 tons in the
2021 quarter. Sales volume for the 2020 quarter was significantly
impacted by the onset of the COVID-19 pandemic with volume for the
2020 quarter being down approximately 30% compared to pre-pandemic
volumes. Volume for the 2021 quarter was approximately 3% higher
than pre-pandemic volumes. Volume for the 2021 quarter benefitted
from the new equipment at the Decatur facility being placed into
service in March 2021. The prior equipment at the Decatur facility
was removed during the 2020 quarter for the equipment replacement
project. Coil segment operations recorded an operating
profit of approximately $13,256,000 for the
2021 quarter compared to an operating loss of approximately
$459,000 for the 2020 quarter. Operating results for the
2021 quarter benefitted from a significant increase in steel prices
and associated improvement in our margins. The 2020 quarter was
negatively impacted by low margins associated with declines in
hot-rolled steel prices.
TUBULAR SEGMENT OPERATIONS
Tubular product segment sales for the 2021
quarter totaled $13,221,709 compared to $8,091,816 for
the 2020 quarter. Sales increased due to both an increase
in the volume sold and an increase in the average selling
price per ton. The average per ton selling price of tubular segment
inventory increased from approximately $723 per ton in the
2020 quarter to approximately $930 per ton in the 2021
quarter. Tons sold increased from approximately 11,000 tons in
the 2020 quarter to approximately 14,500 in the 2021
quarter. Sales volume for the 2020 quarter was significantly
impacted by the onset of the COVID-19 pandemic with volume for the
2020 quarter being down approximately 23% compared to pre-pandemic
volumes. Volume for the 2021 quarter was approximately 6% higher
than pre-pandemic volumes. The tubular segment operations
recorded operating profits of approximately $2,600,000 and
$59,000 for the 2021 and 2020 quarters,
respectively. Operating results for the 2021 quarter
benefitted from a significant increase in steel prices and
associated improvement in our margins. The 2020 quarter was
negatively impacted by low margins associated with declines in
hot-rolled steel prices and weak energy industry
conditions.
STRATEGIC INITIATIVES
During March 2021, the Company began
commissioning a stretcher leveler line at our Decatur, Alabama coil
processing facility. This new equipment replaces the equipment
previously operated at Decatur, which was removed in June 2020 at
the commencement of the equipment replacement project. The new
equipment expands the processing capabilities of our Decatur
facility and our overall coil product segment.
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. The Company broke ground on construction
of the facility during August 2021. This facility is expected to be
a great growth opportunity for the Company and will allow the
Company to expand its competitive footprint to the Southwest
United States and Mexico.
OUTLOOK
The Company expects margins to remain strong for
its second quarter ending September 30, 2021 and expects
improvement in operating results compared to the first quarter. As
of this press release, hot-rolled steel prices have risen
approximately 10% since June 30, 2021 and the Company expects
prices will continue to rise through September 30, 2021.
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-Q as filed with the SEC on August 23, 2021 or
contact Alex LaRue, Chief Financial Officer – Secretary and
Treasurer, at (903)758-3431.
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