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Insteel Industries reports First Quarter 2019 results

Steel News - Published on Fri, 18 Jan 2019

Image Source: SteelGuru
Insteel Industries Inc announced financial results for its first quarter ended December 29, 2018. Net earnings for the first quarter of fiscal 2019 decreased to $4.1 million, or $0.21 per share, from $8.1 million, or $0.42 per diluted share, in the same period a year ago. Insteel's first-quarter results for fiscal 2019 were unfavorably impacted by lower shipments and higher unit manufacturing costs on lower production volume relative to the prior year quarter.

Net sales increased 6.5% to $104.1 million from $97.7 million in the prior year quarter driven by a 28.7% increase in average selling prices that offset a 17.2% decrease in shipments. Shipments for the current year quarter were adversely impacted by the unusually wet weather in many regions of the country and construction project delays together with an increase in low-priced import competition. On a sequential basis, shipments decreased 14.5% from the fourth quarter of fiscal 2018 while average selling prices increased 0.4%. Gross margin narrowed 140 basis points to 10.5% from 11.9% in the prior year quarter due to the reduction in shipments and higher manufacturing costs.

Outlook

"Looking ahead to the remainder of fiscal 2019, we expect improved market conditions driven by continued growth in the construction sector and the weather-related deferral of business from the first quarter. We should also benefit from lower manufacturing costs at our facilities through higher operating volumes and increasing contributions from our process improvement initiatives. Our second quarter results, however, will reflect the usual seasonal slowdown in construction activity.

"The growth outlook for our engineered structural mesh ("ESM") product line remains positive. We believe the continued tightness in the job market will spur increased interest in the use of ESM as a replacement for conventional rebar for many cast-in-place applications where it can allow contractors to realize a meaningful reduction in installation labor and compress project timelines.

"We continue to be actively engaged with the Administration regarding the detrimental impact of the Section 232 tariff program on downstream consumers of steel. Domestic prices for hot-rolled steel wire rod, our primary raw material, remain substantially higher than global market levels, providing foreign producers of welded wire reinforcement and PC strand with a significant cost advantage as they aggressively seek to expand their presence in the U.S. market. The resulting pricing pressure has compressed margins in those portions of our business that are susceptible to import competition, particularly for our PC strand product line. We remain hopeful that the Administration will be amenable to a solution that places domestic producers on equal footing with foreign competitors."

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Posted By : Joykumar Irom on Fri, 18 Jan 2019
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