Friedman Industries, Incorporated (NYSE American: FRD) announced
today its results of operations for the quarter ended June 30,
2024.
June 30, 2024 Quarter
Highlights:
- Net
earnings of approximately $2.6 million
- Sales of
approximately $114.6 million
- Working
capital balance at quarter-end of approximately $123.6
million
“We are pleased to report profitable results for
our first quarter in a period of challenging price dynamics,” said
Michael J. Taylor, President and Chief Executive Officer. “The
first quarter results further highlight our strategy as we captured
hedging gains of approximately $5.4 million that worked as intended
to help offset physical margin compression we experienced during
the quarter as HRC price continued a downward trend,” Taylor
concluded.
For the quarter ended June 30, 2024 (the “2024
quarter”), the Company recorded net earnings of approximately $2.6
million ($0.37 diluted earnings per share) on net sales of
approximately $114.6 million compared to net earnings of
approximately $7.7 million ($1.04 diluted earnings per share) on
net sales of approximately $137.3 million for the quarter ended
June 30, 2023 (the “2023 quarter”). Sales volume for the 2024
quarter consisted of approximately 119,000 tons of inventory sold
and another 24,000 tons of toll processing customer owned material
compared to 2023 quarter sales volume consisting of approximately
129,000 tons of inventory sold and another 24,000 tons of toll
processing. The decline in sales volume for the 2024 quarter was
related to a combination of challenging conditions for some of our
customers and extended planned downtime for equipment upgrades and
maintenance at the Company’s Sinton and Decatur facilities.
The table below provides our unaudited
statements of operations for the quarters ended June 30, 2024 and
2023:
SUMMARY OF OPERATIONS (unaudited) |
|
|
|
(In thousands, except for per share data) |
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30, |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
|
|
Net
Sales |
|
$ |
114,551 |
|
|
$ |
137,298 |
|
|
|
|
|
|
Cost of
materials sold |
|
|
96,414 |
|
|
|
108,203 |
|
Processing and warehousing expense |
|
8,178 |
|
|
|
6,606 |
|
Delivery
Expense |
|
|
6,051 |
|
|
|
5,446 |
|
Selling, general and administrative expenses |
|
4,511 |
|
|
|
5,937 |
|
Depreciation and amortization |
|
795 |
|
|
|
749 |
|
|
|
|
|
|
Earnings (loss) from operations |
|
(1,398 |
) |
|
|
10,357 |
|
|
|
|
|
|
Gain on economic hedges of risk |
|
5,375 |
|
|
|
430 |
|
Interest
expense |
|
|
(681 |
) |
|
|
(540 |
) |
Other
income |
|
|
3 |
|
|
|
6 |
|
|
|
|
|
|
Earnings before income taxes |
|
3,299 |
|
|
|
10,253 |
|
|
|
|
|
|
Income tax
expense |
|
|
732 |
|
|
|
2,563 |
|
|
|
|
|
|
Net
earnings |
|
$ |
2,567 |
|
|
$ |
7,690 |
|
|
|
|
|
|
Net earnings
per share: |
|
|
|
|
Basic |
|
$ |
0.37 |
|
|
$ |
1.04 |
|
Diluted |
|
$ |
0.37 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
The table below provides summarized unaudited
balance sheets as of June 30, 2024 and March 31, 2024:
SUMMARIZED BALANCE SHEETS (unaudited) |
|
|
(In thousands) |
|
|
|
|
|
|
|
|
June 30, 2024 |
|
March 31, 2024 |
ASSETS: |
|
|
|
Current
Assets |
162,416 |
|
170,064 |
Noncurrent
Assets |
60,374 |
|
59,955 |
Total
Assets |
222,790 |
|
230,019 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY: |
|
|
Current
Liabilities |
38,800 |
|
54,107 |
Noncurrent
Liabilities |
54,303 |
|
48,437 |
Total
Liabilities |
93,103 |
|
102,544 |
|
|
|
|
Total
Stockholders' Equity |
129,687 |
|
127,475 |
|
|
|
|
Total
Liabilities and Stockholders' Equity |
222,790 |
|
230,019 |
|
|
|
|
FLAT-ROLL SEGMENT
OPERATIONS
Flat-roll product segment sales for the 2024
quarter totaled approximately $103.4 million compared to
approximately $125.2 million for the 2023 quarter. The flat-roll
segment had sales volume of approximately 109,000 tons from
inventory and another 24,000 tons of toll processing for the 2024
quarter compared to approximately 120,000 tons from inventory and
24,000 tons of toll processing for the 2023 quarter. The average
per ton selling price of flat-roll segment inventory decreased from
approximately $1,038 per ton in the 2023 quarter to
approximately $932 per ton in the 2024 quarter. The flat-roll
segment recorded operating profits of approximately $2.7
million and $11.8 million for the 2024 quarter and
2023 quarter, respectively.
TUBULAR SEGMENT OPERATIONS
Tubular product segment sales for the 2024
quarter totaled approximately $11.2 million compared to
approximately $12.1 million for the 2023 quarter. Sales volume
increased from approximately 9,000 tons for the 2023
quarter to approximately 10,000 tons for the 2024 quarter. The
average per ton selling price of tubular segment inventory
decreased from approximately $1,358 per ton for the 2023
quarter to approximately $1,140 per ton for the 2024 quarter.
The tubular segment recorded an operating loss of approximately
$1.2 million for the 2024 quarter compared to an operating profit
of approximately $2.3 million for the 2023 quarter.
HEDGING ACTIVITIES
We utilize hot-rolled coil (“HRC”) futures to
manage price risk on unsold inventory and longer-term fixed price
sales agreements. We typically account for our hedging activities
under mark-to-market (“MTM”) accounting treatment and all hedging
decisions are intended to protect the value of our inventory and
produce more consistent financial results over price cycles. With
MTM accounting treatment it is possible that hedging related gains
or losses might be recognized in a different fiscal year or fiscal
quarter than the corresponding improvement or contraction in our
physical margins. For the 2024 quarter, we recognized a gain on
hedging activities of approximately $5.4 million.
OUTLOOK
“Friedman remains in strong financial position
and ready to capitalize on both short-term and long-term
opportunities,” Taylor said. “Despite the current macro-economic
headwinds, I see a favorable long-term demand outlook for the
industry and our products and believe we have a team uniquely
qualified to recognize Friedman’s fullest potential.”
The Company expects sales volume for its second
quarter of fiscal 2025 to be similar to the sales volume for the
first quarter. The second quarter started with further decline in
HRC price but as of the date of this release, HRC index prices have
started to increase and HRC futures are pricing in further
increases. The Company may experience a generally challenging
margin environment in the second quarter but, if sustained, the
increasing HRC price should result in improved physical margins
toward the end of the second quarter and entering the third
quarter.
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 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 and product
quality. These forward-looking statements may include, but
are not limited to, 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, 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 8, 2024 or
contact Alex LaRue, Chief Financial Officer – Secretary and
Treasurer, at (903) 758-3431.
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