Steel products maker posts record second-quarter profits

Shares of steel wire maker Insteel Industries Inc. traded up 10.5% after the company released Q2/22 financial results that showed a 53% increase in year-on-year revenue year and a 65.4% increase in average selling prices.

Manufacturer of steel wire reinforcement products Insteel Industries Inc. (IIIN:NYSE), which today manufactures prestressed concrete strand (PC strand) and welded wire reinforcement (WWR) used to reinforce building products concrete announcement financial results for its second quarter of 2022 ended April 2, 2022.

The company reported that Q2/22 net sales increased 53% to $213.2 million from $139.0 million in Q2/21. The company pointed out that the revenue gain was attributed to a 65.4% increase in average selling prices and a 7.2% decrease in shipments.

The company reported that during Q2/22, gross margin improved by 510 basis points to 26.8% from 21.7% in Q2/21. Thanks to the combination of higher margins and revenues, the company was able to increase its gross margin in Q2/22 to $57.1 million from $30.2 million in Q2/21. Insteel noted that the gains were mainly due to higher spreads between selling prices and raw material costs. The company added that “it has benefited from strong demand for its strengthening products and additional price increases to offset continued cost escalation.”

The company said for Q2/22 it posted record quarterly net income of $39.0 million, or $1.99 per diluted share, compared to $14.9 million, or $0.76 per share. diluted share in Q1/21.

For H1/22, Insteel recorded net sales of $391.7 million, representing a 51.5% increase from the $258.6 million recorded in H1/21. The company reported that for H1/22, it recorded net income of $62.1 million, or $3.17 per diluted share, compared to $23.1 million, or $1.18 per diluted share. during H1/21.

The company said that at the end of Q2/22, it held $69.7 million in cash on its balance sheet and had no outstanding balances on its $100.0 million revolving line of credit.

Insteel President and CEO, HO Woltz III, commented on the company’s business outlook for the remainder of fiscal 2022, saying, “Momentum across our businesses remains positive, driven by robust demand from our customer base and price increase initiatives to recoup rapidly rising raw materials, labor, utility and transportation costs… For the remainder of our fiscal year, we expect a strong and continued performance due to underlying strength in all of our non-residential construction markets, as well as the usual seasonal upturn in demand that occurs in our third and fourth quarters.

“While concerns over insufficient supply of domestically produced wire rod persist, we have supplemented our requirements with offshore equipment to fill the gaps we have previously identified and do not expect any raw material related disruptions in our operations during the fourth fiscal quarter. We have concerns about the impact of record steel prices on the demand for reinforcement products, but so far the momentum in our markets remains strong and there is no no signs of weakening,” added Woltz.

Insteel is headquartered in Mount Airy, North Carolina, and operates ten manufacturing facilities in the United States. The company claims that “it is the nation’s largest manufacturer of steel wire reinforcement products for concrete construction applications.” Insteel produces and sells drawn and formed wire, PC strands to add structural support to precast concrete used in the construction of bridges, parking lots, buildings and other concrete structures and WWR products such as structural mesh for engineering, concrete pipe reinforcement and standard welded wire reinforcement. The company markets its products primarily to concrete product manufacturers and concrete contractors for use in commercial construction projects. Non-residential construction accounts for approximately 85% of Insteel’s total revenue, with residential sales accounting for the remaining 15%.

Insteel started the day with a market cap of around $778.3 million with around 19.4 million shares outstanding and a short stake of around 2.6%. IIIN shares opened 6% higher today at $42.58 (+$2.49, +6.21%) from yesterday’s closing price of $40.09. The stock traded today between $42.52 and $46.15 per share and is currently trading at $44.36 (+$4.27, +10.65%).

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