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Friedman Industries announces Q3 results

Steel News - Published on Tue, 19 Feb 2019

Image Source: friedmanindustries.com
Friedman Industries announced its results of operations for the third quarter. For the quarter ended December 31, 2018, the Company recorded net earnings of USD 664,773 (USD 0.09 diluted earnings per share) on sales of USD 43,326,080 compared to net earnings of USD 161,271, as adjusted for the change in accounting principle discussed below, (USD 0.02 diluted earnings per share) on net sales of USD 28,033,521 for the quarter ended December 31, 2017. Effective April 1, 2018, the Company changed its method for valuing prime coil inventory of the coil segment from the last-in, first-out method to the average cost method. The effects of the change in accounting principle from LIFO to average cost have been retrospectively applied to the quarter ended December 31, 2017 results. The Company believes the average cost method is preferable as it more closely resembles the physical flow of our inventory, it better matches revenues with expenses and it aligns with how we internally manage our business. As a result of the retrospective application of the change in accounting principle, certain financial statement line items in the Company’s consolidated balance sheet as of March 31, 2018, consolidated statement of operations for the three month and nine month periods ended December 31, 2017 and consolidated statement of cash flows for the nine months ended December 31, 2017 were adjusted as disclosed in Note B – Change In Accounting Principle of our quarterly report on Form 10-Q filed with the US Securities and Exchange Commission on February 14, 2019.

COIL SEGMENT OPERATIONS
Coil segment sales for the 2018 quarter totaled approximately USD 28,731,000 compared to approximately USD 22,410,000 for the 2017 quarter. The increase in sales was driven by an increase in the average selling price associated with higher hot-rolled steel prices for the 2018 quarter compared to the 2017 quarter. Sales volume decreased slightly from approximately 33,500 tons in the 2017 quarter to approximately 31,500 tons in the 2018 quarter. Compared to the second quarter, third quarter margins contracted due to the price of hot-rolled steel declining significantly during the third quarter which resulted in downward pressure on selling prices. Additionally, higher cost inventory on hand flowed through cost of goods sold during the third quarter. Management expects continued margin pressure for the fourth quarter but expects the trend to reverse for the first quarter of fiscal 2020 if recent price increases from domestic steel mills gain traction. Management expects fourth quarter sales volume for the coil product segment to slightly exceed the third quarter volume.

TUBULAR SEGMENT OPERATIONS
Tubular segment sales for the 2018 quarter totaled approximately USD 14,595,000 compared to approximately USD 5,624,000 for the 2017 quarter. The increase in sales was primarily driven by an increase in sales volume with an increase in average selling prices being a secondary contributor to the increase. Sales volume increased from approximately 8,500 tons in the 2017 quarter to approximately 20,000 tons in the 2018 quarter. Compared to the second quarter, third quarter margins contracted due to the same circumstances mentioned for the coil segment above. Management expects continued margin compression into the fourth quarter associated with these factors and additional pressure on selling prices due to an increased presence of foreign material associated with import quotas resetting at the start of 2019.

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 using temper mills and cut-to-length lines. The tubular product segment consists of the operations in Lone Star where the Company manufactures electric resistance welded pipe, provides pipe finishing services and distributes pipe.

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Posted By : Rabi Wangkhem on Tue, 19 Feb 2019
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