OLYMPIC STEEL INC Q3 FY2023 earnings call

Rick Marabito began by providing an overview of the quarter, noting all segments were profitable with pipe and tube having one of its most profitable quarters. Mentioned integration of Metal-Fab, acquisition of CTB, and team additions like George Frost and Leah Kiley. Andrew Greiff detailed segment performances: pipe and tube's strong EBITDA, carbon's challenges and efforts to navigate pricing declines, and specialty metals' headwinds and inventory focus. Rich Manson discussed financial results, debt reduction, CTB acquisition details, capital expenditures, tax rate, and dividend payment.

Pipe and tube: Delivered EBITDA of $11.8 million, including $2 million of LIFO income, representing the segment's fifth most profitable quarter. CTB acquisition in October 2023 will be included in this segment and is expected to be immediately accretive. Carbon: Achieved EBITDA of $13.5 million despite market challenges; hot-rolled pricing fell 24% during the quarter. Specialty metals: Posted EBITDA of $5.5 million, faced headwinds from falling stainless and aluminum pricing, but focused on inventory reduction with aluminum growth as a bright spot.

Optimistic about the long-term US steel market outlook. Seeing pricing rebound, industrial backlogs, OEM outsourcing of fabrication work, and anticipated infrastructure spending. Intend to pursue acquisitions in 2024, focusing on geographic expansion in midsouth and southwest US, and companies with high returns and synergies with Olympic Steel.

Market challenges such as metal pricing declines, macroeconomic uncertainty, the UAW strike, and the threat of further interest rate hikes leading to softer-than-anticipated volumes.

Q: How did the $4 million CARES Act adjustment flow through on a segment level basis?

A: On a rough basis, about $0.5 million on ZEUS cost center, $0.5 million on specialty, and $3 million on carbon, not impacting the pipe and tube segment.

Q: Regarding the pipe and tube segment's margin profile and runway for fabrication outsourcing with CTB's acquisition?

A: Pipe and tube division is focused on growing value-added business, and CTB acquisition will continue to drive margin growth.

Q: Thoughts on carbon flat segment pricing as we head through the end of the year?

A: Pricing is expected to start coming up, with customers on transactional side jumping in and contract business seeing a slight increase, likely rising into first quarter.

Q: What's desired in a potential next M&A opportunity?

A: Focus on geographic expansion in midsouth and southwest US, and well-run companies with high returns and synergies with Olympic Steel.

Q: Synergies from CTB acquisition?

A: Equipment and tube lasers areas, geographic presence in Oklahoma and Arkansas, and complementary customers.

Q: Specialty metals pricing outlook and inventory plans?

A: Inventory levels expected to rise as contract season moves up, and pricing for specialty metals is a mixed bag with focus on inventory control.

Q: CTB integration timeline and inventory/debt plans?

A: CTB integration to be quick, with purchase accounting costs highlighted in fourth quarter; inventory levels expected to rise, and debt to be affected by working capital changes but negligible.