Q4 2020 Olympic Steel Inc Earnings Call
Okay.
Good morning, and welcome to the Olympic Steel 2024th quarter Financial results Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded.
I would now like to hand, the conference over to Richard Manson, Chief Financial Officer, and Olympic Steel. Please go ahead Sir.
Thank you operator, welcome to Olympic Steel's earnings call for the fourth quarter and full year 2020, our call. This morning will be hosted by our Chief Executive Officer, Rick Mirabito and we will also be joined by our President and Chief operating Officer, Andrew Greiff.
Before we begin I have a few reminders. Some statements made on today's call will be predictive and are intended to be made as forward looking within the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and May not reflect actual results.
The company does not undertake to update such statements changes and assumptions or changes and other factors affecting such forward looking statements and.
Important assumptions risks uncertainties and other for other factors that could cause actual results to differ materially are set forth and the Companys reports on forms 10-K, and 10-Q and the press releases filed with the Securities and Exchange Commission.
During today's discussion we may refer to adjusted net income per diluted share EBITDA, our adjusted EBITDA, which are all non-GAAP financial measures.
A reconciliation of these non-GAAP measures for the most directly comparable GAAP financial measures is provided in the press release that was issued this morning and can be found on our website.
Today's live broadcast will be archived and available for replay on Olympic steels website.
At this time I'll turn the call over to Rick.
Thank you rich and good morning, everyone and thank you for joining us to discuss Olympic Steel's results for the fourth quarter and the full year 2020.
I'll begin with some comments about our quarterly performance and the tremendous progress our team made during really an incredible year.
Andrew will then review our business segment performance and will then share some thoughts about what I think we're almost interested in and that's the future and our outlook.
Richard will finish up with some additional details about our financial results and after that we'll be happy to take your questions.
So as we reflect on a truly unprecedented year, we're immensely proud of the Olympic steel team its resiliency and accomplishments together, we took decisive actions that resulted and sustainable advancements across the organization.
Today, we are a safer company with a permanently lower operating expense base.
Faster turning inventory, a stronger balance sheet, and cultural resolve which combined with improved market conditions enabled us to deliver our strongest quarter of the year and more importantly position us for success as we enter 2021.
Our fourth quarter net sales were $332 million compared with $320 million for the fourth quarter of last year.
Net income for the fourth quarter rose to $1 $8 million or <unk> 16 per diluted share compared with a net loss of $890000 or <unk> <unk> per diluted share a year ago.
Approach six times during the fourth quarter, we also reduced that to a four year low while increasing availability under our asset based loan to well above pre pandemic levels and that's after making and acquisition.
Strong counter cyclical cash flow generation and tougher markets is often not fully appreciated and of Covid red ravaged year, we actually reduced our debt by $32 million and we increased our ABL borrowing availability by $30 million all after spending almost 30 million dot.
And Capex and and acquisition.
We also remain committed to strategically growing company and reducing cyclicality and our returns and one of the highlights and the quarter was our acquisition of action stainless and alloys in December.
Action brings a strong and talented team a great culture, additional products and capabilities and and expanded distribution footprint to our specialty metals business.
We are actively seeking additional acquisitions that support our strategy to grow and niche high performing applications that offer higher return opportunities for our business.
Continued growth of our specialty metals business is also an important element of our strategy.
So as we start 2021, we're optimistic and have strong momentum and a recovering economy.
We are organizationally prepared for the opportunities from a growing economy and rapidly changing industry dynamics.
Is further evidenced by last week's energy distribution issues and Texas. We're also hopeful that the bite and administration will push Congress to pass a much needed comprehensive infrastructure bill to spur America's rebuild.
And summary, we're in and we believe we are and excellent position to drive significantly higher profitability and returned and the first quarter of 2021 with that I will now turn the call over to Andrew for some additional comments.
Thank you Rick and good morning, as Rick mentioned, our ongoing commitment to safety operating improvements and executing on strategic initiatives benefited all of our segments specialty metals sales were up 9% pipe and tube sales increased by 5% and carbon flat sales improved one for.
<unk> compared to the prior year.
Each segment also positively contributed EBITDA for the second consecutive quarter, which is a testament to the decisive actions of our leadership group and outstanding execution by our teams.
Specialty metals under the leadership of our specialty models President Andy Markowitz posted the third strongest quarter and the segments history and was our most profitable segment for the year is the team navigated the turbulence of the market. The segment achieved all time highs for stainless and aluminum market share.
Share as measured by our industry Trade Association.
His fourth quarter came to a close we also completed the acquisition of action stainless which brings new complimentary products and additional processing capabilities, including plasma laser and water jet cutting and CNC machining, along with and expanded geographic footprint and Texas.
Jerry South Carolina, and Arkansas the.
The acquisition furthers, our strategy of enhancing the consistency and diversification of our company's earnings and our continued push to grow the stainless and aluminum product line at the aggressive pace and trajectory of the past decade.
Our recent expansion and Schaumburg, Illinois, where we added approximately 50000 square feet to house are dedicated white metals cut to length line has performed extremely well as has our additional white metals slitting line and streets Borough, Ohio.
We continue to actively seek strategic acquisitions and specialty metals and expect to further grow or white metal scope and the southern United States are pipe and tube segment under the leadership of bills. The landscape reported a 5% increase and fourth quarter of 2020 sales for.
As the prior year.
We are starting 2021 strong with the recent addition of a new LP free <unk> access robotic laser cutting system and our Chicago facility, which is capable of precision processing of bent tube. And addition in 2020, we've successfully completed our new ERP.
Installation in the midst of Covid.
We are excited about our growing white metals tubing products, and our geographic growth and the south east, which coupled with our continued improvement and inventory turnover and commercial integration opportunities with action stainless provide our optimism that the pipe and tubes segment is positioned to return to strong profitability.
Levels as we head into 2021.
Carbon segment produced the most EBITDA of our three segments and the fourth quarter of 2020 with a $3.8 million improvements sequentially versus the third quarter of 2020, we are thrilled with the rapid and profitable startup of our new fabricating operation and view for Georgia.
It was a great collaboration effort to open this 120000 square foot facility during the height of the Covid pandemic. This past summer are processed and capabilities their include laser and plasma cutting forming machining welding kidding and assembly. In addition to expanding fabricating <unk>.
Services, we provide to our customers and the south east the opening of the Buford facility freed up valuable space and resources and our existing winded, Georgia operation for our traditional distribution business and growing market for automotive supply and the region.
As part of the expansion, we added a new Mitsubishi fiber optic laser and Buford and a 600 ton automotive stamping press in Winder as we spoke to earlier the carbon segment was also and internal leader and making significant improvements and inventory turnover and expense reduction during 2000.
20 as.
Has returned to the current and rapidly changing market or industrial OEM customers are projecting higher metal usage for the year as we have already seen and are key and user markets, including agriculture heavy duty equipment truck trailer and construction.
Metal supply remains tight mill lead times for main extended and certainly as you all know metal prices are and a record high and this environment. We will remain focused on servicing our customers and maintaining our internal disciplines around safety operating expenses inventory management and.
Weekly growing our business and returns now I'll turn the call over to rich.
Thank you Andrew and good morning, everyone as Rick noted the fourth quarter was our most profitable quarter of the year with all three of our operating segments generating positive EBITDA for the quarter.
Net income for the quarter was $1.8 million, which included $400000 of LIFO pretax income.
This compares with a net loss of $890000, which included $2.4 million of LIFO pretax income and the fourth quarter of 2019 and.
Just did EBITDA for the fourth quarter of 2020 was nine $9 million and nearly 200% improvement compared with the prior year and a 130% improvement sequentially.
This improved level of profitability as a direct result of the outstanding work by our team to lower operating expenses, even as demand strengthened.
This focused and disciplined and will continue to position as well as we move forward.
Net sales were $332 million and the fourth quarter of 2020 up approximately 4% from $320 million a year ago, primarily due to a 3% increase and consolidated volumes.
Daily volumes returned to near pre pandemic levels as our and markets continue to recover and we successfully shipped more volume than we did and the fourth quarter of last year with approximately 17% less employees.
We also maintain tight control and or inventories turning flat-rolled inventory and access of five turns sometimes approaching six turns and.
We believe that our focus on inventory turns will be even more beneficial as we navigate unprecedented pricing levels and the beginning of 2021.
Our continued disciplines around accounts receivable and inventory allowed us to reduce our working capital needs and use the free cash flow to reduce debt.
We ended the year with $161 million of debt, which is a four year low and $121 million of availability, which is $30 million higher than pre pandemic levels and this is after paying for the action stainless acquisition and December.
We are and and excellent position to fund additional acquisitions and other organic growth opportunities that are lined with our strategic goals.
Capital expenditures for the year totaled nine $8 million versus $17 $7 million of depreciation as we navigated the uncertainties of the pandemic.
And anticipate 2021 capital expenditures to increase to the range of 75% to 100% of expected depreciation expense.
Are effective tax rate and and the fourth quarter of 2020 was 53% compared to 31% and the fourth quarter of 2019.
The higher tax rate was caused by an increase and pretax income during the fourth quarter, which are raised and expected net operating loss carry back refund that was booked and prior quarters.
For 2021, we expect our effective tax rate to be and the typical 27% to 30% range.
As a final note our board of directors has approved the regular quarterly dividend of two per share. We're proud that Olympic steel is now paid a dividend for 63 consecutive quarters.
And conclusion the decisive actions we took during the early days of the pandemic helped propel the fourth quarter to be our most profitable quarter of the year.
Now momentum has continued into this year and our actions have successfully positioned Olympics deal to drive significantly higher profitability and the first quarter of 2021, we.
We are optimistic about the market in the near term and hopeful that the economic recovery will continue to accelerate and to drive metal demand.
Now operator, let's open the call for questions.
And at this time and we will be conducting a question and answer session. If you would like to ask a question. Please for star one on your telephone keypad and confirmation tone will indicate your lines and the question and Q U may price star too if you'd like to remove your question from the queue for participants usually speak for equipment and may be necessary to pick up and your handset before pressing this darkies.
One moment, please while we pull for questions.
And our first question is from Michael I'm, Sorry, I'm, sorry, our first question and from Andrew <unk> with UBS. Please proceed with your question.
Well. Thank you very much. Thank you very much for the for the for the comments and a new set of results. Just a couple of quick question for me and.
Terms of downstream demand, where you're seeing particular strength at the moment and and where are you seeing demand a little bit more challenging and your view and and maybe if you have any comments about how much are you seeing his pent up demand and how much is a little bit more sustainable that'd be great and you'll get some clarity on that and number two.
Who obviously a lot and you know conversations about whether the white house or the current administration and it's going to pass your fully remove section 232, and and what that does come up for the industry and your and your thoughts on where you guys stand on that and and what you're saying is the optimal environment for you guys. Those are all my questions. Thank you very much.
So thank you for the question and various this is Andrew so we've actually seen across the board strength and all three of our segment. So.
Industrial equipment agriculture construction has has been very strong auto clearly has been strong even with the chip issue.
It has been widely discussed truck trailer the recreation vehicles were actually very strong during 2020 and just continuing into 21.
And construction.
Especially the utilization of coated products has has been strong and the white metals side of the business again automotive has been strong appliance really strong and we're just starting to see the.
The kitchen restaurant food equipment group starting to to come back.
Pipe into kind of.
Falls into into both categories and so there really is not at this moment and industry that is underperforming I think everybody.
Especially our contract customers are very optimistic going into this year and we've already started to see increases over their forecasts from even what they had talked about fourth quarter into the first quarter the issue.
That we will have we think for a little bit is just metal supply.
Mills are still behind and so getting caught up probably will take another couple of months until we're back to where where we want to be.
232, I know Rick if you want to talk about yeah, I think 232.
Obviously with the new administration, and I think they're pretty large agenda. It seems like 232 is probably not at the top of the agenda here and the first few months and the new administration.
Certainly.
With the record high pricing, we've had him and.
And I'm quite certain there's a lot of petitioning going on and Washington to to consider the elimination of the 232.
ER view is that.
And we're entering a pretty good.
Period of time, we think for and demand and growth and demand and we're big fans of.
That demand really providing a much more stable marketplace, regardless of whether you've got tariffs and place or.
Or not but so we do see a significantly growing demand environment. I think you had asked Andrew about the sustainability of that demand and we do think and sustainable so.
We'll see.
I think though and the near term it looks like the terrorists are going to remain and place.
Okay, that's very clear and maybe once follow up if I may just on demand I'm in terms of kind of further upside from here, how you kind of gauging where demand as two day versus where we kind of work for Ya Covid. I mean are we still catching up to kind of a pre COVID-19 levels and and step further upside and for your upcoming quarters. All we already passed pre COVID-19.
And and we're exceeding those levels.
Have any thoughts there yeah and this is this is Andrew again I would tell you we're not there yet we are approaching those levels.
Certainly this we've seen the strength coming through the first quarter and.
And as as we get into March and certainly and to the second quarter. We believe that will be there and probably in a relatively short time.
Hit those numbers and then probably exceed them.
As demand continues to show the strength that customers are forecasting right now.
And I think really what's holding the demand back a little bit right. Now is just the long lead times on supply and the the spot market places where.
We haven't seen the full recovery too I'd call. It pre pandemic levels and I think the the OEM base looks strong and I'd characterize the OEM business as as App or in some cases, maybe even looking to exceed pre pandemic levels. It's the is that transactional marketplaces still a little lagging well that's right and so we'll see.
Certainly see and the carbon side, we still see cole role and coded is going to be tight probably through the first half as.
As you know and and stainless steel mills. The domestic meals are have for the most part put customers on allocation we're seeing come.
Commodity availability on aluminum very tightened so and so Rick is 100% correct. The coverage for the for our contract business, which is which was strong part of our business.
And we're certainly very focused on and and it does leave.
A little bit less for for some of the spot today.
But that's that's very clear I appreciate that and so obviously sorry, one more if I may you mentioned, Lisa supply and tightened is there did you see impulse kind of coming in and helping kind of alleviate that current titanism and I know that and pulled the time for a long stretching into the summer at the moment, but.
Well, we should just expect from here on and you just get a little bit more important to the mortgage kind of hung up to balance and and maybe maybe you have on price is all we're not there yet it's a really good question I would tell you that lead times are for the most part into the summer June July the.
The pricing is is it and elevated level from our perspective that.
It's not.
It's not worth the risk as we look at it today, we certainly are.
We had been in the past a much bigger importer in particular to our east coast facility, and Connecticut, and where we could down and our joy.
Georgia facility, but the numbers today, certainly and hot roll or not particularly attractive as far as we see it and maybe some some opportunities and and pull role and and coded just because of the tightness and the market here, but but the prices are really not and.
Not particularly attractive at the moment.
That's that's very clear I appreciate you answering my questions and you and I'm not gentleman and thank.
Thank you and.
And our next question is from Michael Rodriguez Wood Stone and getting capital markets. Please proceed with your question.
Good morning, and thank you for taking my questions.
I was wondering.
It sounds like you've got some some pretty decent.
Tailwind from on demand perspective, just listening to their your responses here and I was wondering if maybe you could also kind of take us through your expectations asthma volume sword and start to come back to you towards.
And the pre pandemic and and beyond levels and.
And you had made a comment earlier about having less employees and delivering still pretty I think it was plus 3% volume growth year over year, how should we kind of be thinking about and the operating structure as those volume start to surpass please COVID-19 levels, how 'bout sort of selections with that volume increase.
Sure. Thanks, Mark for for the question, it's rich and and so you are correct. When we look at the fourth quarter of 20 versus the fourth quarter of 19, we were up about 3% and volume, but we were able to take out about 3% of operating expenses, including about 11% decline and warehouse and processing year over year and so we are.
Down about 17% total and head count.
Compared to pre Covid times, and we really have been pretty stable at that number here.
Pretty much since the second quarter, we've been addressing the increase.
And demand through overtime, but you're right. We do and is Andrew did say, we do expect at some point here is we may begin to the second quarter that we can get back above pre COVID-19 levels and so we will have to add a little bit of head count, but our focus is really on keeping that expense based variable with the increase and volume that we see and I think we've done a.
Really good job of that here in the back half of 2020, and and those disciplines remain well into 2021, and and we're very committed to keeping that headcount at the right level for the volume of business we're doing.
And it and then I'm just wondering if you could perhaps talk a bit about.
Your expectations major drivers for your growth maybe it's throughout the whole fiscal year, obviously, the the kitchen becomes a little bit clowder and the second half versus the for the first half day. If you can just kind of give us for some sort of ranking of buckets as far as where you see the biggest grow strawberries from its fiscal year will be will be helpful.
Sure Great question.
And we're going to continue to be actively seeking acquisition. So.
Strategically if you look at our last three or four acquisitions they've been in.
I call them more niche high return areas for the business. So that's certainly a growth strategy for us.
We I mentioned earlier specialty metals, we're really excited about and think we have a lot of potential to really continue the growth and.
And the specialty models on both the stainless and the aluminum side. We're excited about some of the aluminum growth that we're seeing.
We continue to add to our product team and aluminum.
And then we're really excited about growth and the southeast.
Certainly Andrew touched on some of the investments that we made this past year down in Georgia, we see that as a Ah.
Really nice growth engine for Olympic steel.
Andrew touched on it we've really migrated and and started to build a nice automotive supply business and the southeast and we expect that to continue to grow and I think the the.
The diversification into the two locations and Georgia, one focusing on the fabrication and then one on the traditional service centre business has been an enormous wind for us and so we're expecting continued growth.
There.
Andrew any any other items I kind of missed on the hit list. There I think but those those are those are the big drivers yeah. No I think I think your carpet Rick I think we're just going to continue to see most of the customers as they as we are coming into 2021 and a particular on the the industrial equipment guys had all talked about.
Not so much comparing from a growth rate over 25th but almost going back to where 19 was and and talking about what the original goal was from 19 going into 20 and and that really is what we're seeing so in some cases, we're going to be seeing growth over 20 of.
30% to 40% and a couple of really key areas whether it's.
On the on the agriculture side the construction side.
And we're excited to see truck trailer coming back and there was a little bit of a law, but certainly that's starting to pick up but automotive and appliance have just been have been booming and we continued to to see that certainly we think that's going to continue through this year.
Got it and then just a quick follow up and regard to part of the strategy of obviously I didn't acquisitions and that you also mentioned as a potential growth shopping for for this fiscal year could you maybe talk a little bit about what that pipeline looks like maybe in comparison to where it was last year. At this time and then you can also you can maybe talk a little bit about what valuations come and look like.
Sure I would tell you the pipeline looks good I think the pipeline has been refilled post COVID-19. So.
Obviously.
For a period of time, there and the middle part of last year.
Everyone was being cautious on the Bisulfide from acquisitions, obviously, we got one done however.
Thrilled.
And the year of Covid to have one done, but I tell you the the pipeline the opportunities we're looking at the pipelines pretty good we're.
We're excited about some of the opportunities we're looking at in terms of valuations.
I think the valuations have remained pretty pretty steady and we have and I haven't really seen much of a significant shift there obviously with the COVID-19 year that always adds in last year. Some some debate.
Debate in terms of evaluation for companies.
In terms of what were the the one time impacts from.
From from the virus, but beyond that I'd say valuations have been pretty consistent.
And you said thanks for like that is it really appreciate your time thank.
<unk>.
And our next question is from Chris Sky with Cingular Research. Please for see what's your question.
Hi, Good morning, I, just had a question and I know you guys mentioned that.
And then and Automotives and appliances of the.
Been really strong I wanted to know do you believe that this is.
Sort of.
A sign of and a song economic rebounds, that's occurring.
Well.
I think it's a combination of a strong economic rebound I think there was some pent up demand.
And I think you have to remember if you go back automotive from basically the middle of March through June.
There were no there was really nothing produced on the auto side and so inventory at the at the dealership got down to historic lows.
And.
People have the opportunity to because travel and entertainment was was basically nonexistent there was.
Some demand for for autos and people have the availability of money to be able to go out and buy and so I think we've started to see a lot of dealerships now getting backfield and so inventory levels did get very low and and what I would tell you. Chris is is we see.
Automotive going strong through this year, there is nothing for us to indicate and.
And talking to our customers and the sub contractors.
It's going to be strong there's already discussion about what may or may not take place. This summer relative to tradition automotive shutdowns during July and appliances.
If you just go into any of the lows for the home depots.
There's a there's a back order and it's going to take your time to to get what you're looking for and so I think I think we can see certainly through the first half and and I think we're going to have.
Pretty strong demand going into the second half.
Okay, great. Thanks, and then.
I just wanted to know I guess from an overall perspective.
What for this last quarter, what <unk> what are you most pleased about and what were as an area where you soon and you could have the most improvement.
So great Great question Chris.
What I'm always most pleased about is our safety record and.
And.
We didn't talk a lot about it but we had.
Really huge improvements and and our safety environment and that's.
Really kudos to our entire team. So that's what I'm really most proud of the second thing is really navigating a very challenging year.
And the team at Olympic coming together.
All the things that we highlighted earlier in terms of the operational.
Disciplines, but at the same time.
Executing on a couple of really key and strategic growth initiatives and and a really tough year. So.
The growth initiative down and the southeast.
And and completing and acquisition and the year overnight. So.
Those have all been great and and really just proud of the Olympic team, especially our production workers who.
As you know as an essential business well most of the country was shut down.
Olympic and others and the steel business.
Click and along and they came to work every day and did a phenomenal job. So.
So those are the things in terms of looking forward and and not necessarily what we can do better but just really pleased with the momentum that we have.
I tell you where.
We're excited rigged.
Regardless of where the market conditions go I think the some of the fundamental principles that we have and place.
We're excited about the returns if those are going to yield for Olympic and our shareholders.
Okay, great. Thanks.
Thanks for us thank you.
And our next question is from Aldo Mazzaferro is Mazzo for a research. Please proceed with your question.
Hey, good morning, Rick.
And and moving out of it.
Good morning, how are you it's been a while I was.
I had a few questions I think you touched on on on both of them already but I wanted to talk with a little bit about the very recent trends and deliveries and and lead times, especially since the disruptions and from the storms and Texas.
And would you say that those are even having even more trouble now catching up with the delivery so and they were.
And the fourth quarter.
Yes, I would say that azo, because there's a couple things that and you certainly understand.
And the mills and just trying to catch up from a production perspective, but even once they do and they have metal that's ready to ship trucking has been incredibly challenging.
Uhm.
There's been product at a couple of our suppliers that's been sitting for the last couple of weeks that they just can't find trucks and so I think with the storms and and some of.
Whether it's natural gas nitrogen and we just got some ladders yesterday that there are some issues.
And Ah nitrogen and so I think it's going to it's going to just continue to to exacerbate itself certainly for the next at least 30 to 60 days, but I don't see trucking.
Relieving itself anytime soon and if you can find the trucks out, though you are paying significantly higher great.
Alright, I know with the dollar getting weaker and tariffs.
<unk> still and place I don't think imports can can can offer a release on the supply side.
At this point and it seems now.
I think I think I think you're right and and is used shortly now and if you've been following the cost of containers has also skyrocketed. So.
This this.
What where and at the moment this pricing cycled does not appear that it's going to.
Really relieve itself anytime in the near future.
Alright.
Well that's great. So my my other question was going to focus on the southeast strategy that you're pursuing is your growing there and and and I heard you mentioned and automotive as a focus for sure I'm wondering are there any other markets that you're seeing expand strongly there and and.
A key question I have is like what are your competitors doing and that region as well.
Well I can't speak so much to the competitors' sales, though is I just will our strategy and so we added 125000 square foot facility and Buford.
We pulled out or.
Our fabrication equipment from our wind and facility that really opened space in R Y and facility today, we have.
Or stretch line cutting length and Sledder, but we put in the first of what we think will be a number of automotive stamping presses, we liked the business down south.
We have excellent relationships with some of the direct automotive companies as well as some of the sub tears and have.
Right optimism that that's going to be a big part of what we're doing or Alabama facility has performed extremely well, we open that over a year ago as a as a plate distribution facility and we like more and more and business continues to migrate into the southeast we think we're prepared and and very good shape too.
Be able to service that we have facilities, now and North Carolina, South Carolina, as well as in Alabama and Georgia.
And we're very excited kind of as we now have a footprint and Texas.
It's exciting for us and it really allows us if you kind of think of from Alabama to Texas and allows us to be able to service customers.
And Louisiana, and Mississippi, and a way that we really have not been able to before and.
And we think it's just.
We've looked to to really grow and this region. We're excited about it.
And and we got nice and opportunities Additionally, and the pipe and two business that CPI down and the southeast.
Although that's been another strategic growth area for us and as we look at.
Growing our pipe and two business, you're going to see us continuing to grow down and the southeast as well and then and then we talked about it the stainless and aluminum opportunities there.
Also we are really excited about.
Great and just.
Just one final question and I heard on strategy is.
This is probably a time you'd you'd go up to have.
25, or $50 million more inventory on here and if you could but is there are you trying to build inventory at this point and being unable to does that way turns is so high or would you say and you still have a strategy and keep your inventory.
Yeah. So our strategy is not to keep our inventories low so much as the word low it's really to turn it at what we think is optimal for Olympic steel.
And five inventory turns and sort of what we've always talked about so the first part of the answer is.
Over the last two years, we've really.
Put a very intense effort and making sure that we're a better turning inventory company and we've achieved that and that's that's really has nothing to do with you know.
Covid and the current situation the.
The second piece of your question is yes, our inventory.
Stories turned and a little bit faster and right now just because of the supply dynamics.
And so the longer lead times and the shortage of inventory out there for the spot marketplace certainly.
I think if we had additional inventory for the spot marketplace we'd be.
We'd be utilizing that so that's where the pinpoint really is it's on that and transactional business.
Oh, well. Thanks, so much I just wanted to congratulate you guys aren't taken a very tough year and coming up with <unk> and much stronger.
Thank you well, thank you out and I appreciate that.
Take care.
Thank you.
And we have reached the end of the question and answer session and I'll now turn the call over to Richard T. Margarito for closing remarks.
Thank you operator, and I want to thank all of you for joining us on our conference call. This morning, we certainly appreciate your continued interest and Olympic steel and we look forward to speaking with you again net.
Quarter, if not sooner thank you and have a great day.
And this concludes our conference you may disconnect you lie and at this time, Thank you and have a good day.
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And.