Q3 2022 Encore Wire Corp Earnings Call
Welcome to the Encore wire reports third quarter results Conference call. My name is Vanessa and I will be your operator for today's call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you have a question. Please press zero then one on your Touchtone phone as a reminder, this call is being recorded.
I will now turn the call over to Bret Eckert, Sir you may begin.
<unk> Vanessa good morning, and welcome to the Encore Wire Corporation quarterly conference call.
Accurate Chief Financial Officer of Encore wire with me. This morning is Daniel Jones, President CEO and chairman of the board in a minute. We will review encores financial results for the third quarter ended September 32022. After the financial review, we will take any questions. You may have before we review the financials, let me indicate.
Throughout this conference call, we may be making certain statements that might be considered to be forward looking in order to comply with certain securities legislation and instead of attempting to identify each particular statement as forward looking we advise you that all such statements involve certain risks and uncertainties that could cause actual results to differ.
Materially from those discussed today.
For each of you to the Companys SEC reports and news releases for a more detailed discussion of these risks and uncertainties also reconciliations of non-GAAP financial measures discussed during this conference call to the most directly comparable financial measures presented in accordance with GAAP, including EBITDA, which we believe to be useful.
Couple mental information for investors are posted on our website.
I'll now turn the call over to Daniel for some opening remarks Daniel.
Good morning, everyone and thank you for joining us on the call and for your interest in Encore wire.
We appreciate your continued investment confidence and support.
Our ability.
To quickly convert raw materials into complete delivered orders continues to differentiate us in the market.
<unk>, an exceptional earnings in the third quarter of 2022.
Continued persistent tightness and the availability of certain raw materials and the general inability of the sector to meet demand for the timely delivery of finished goods kept spreads strong in the third quarter of 2022.
Our one location vertically integrated business model affords us the manufacturing scale and flexibility to enhance job site efficiency.
By continuing to execute on our core values of providing unbeatable customer service and order fill rates.
We were able to increase both copper and aluminum volumes shipped in the third quarter and year to date periods in 2022 over 2021 levels.
Copper volumes shipped were also up over second quarter 2022 levels.
This marks the third consecutive quarter of total volume growth driven by continued demand for data center healthcare and renewable product solutions among others.
I believe our operational agility and speed to market remained competitive advantages and serving our customers changing needs.
Copper unit volumes increased 12, 9% on a comparative quarter basis, and seven 9% on a year to date basis.
Comex copper prices decreased gradually throughout the third quarter, while other raw material costs and inputs generally continued to rise.
Copper spreads increased seven 3% on a year to date basis, but decreased 14, 7% on a comparative quarter basis.
Aluminum spreads and volumes increased for both the quarter and year to date periods in 2022 compared to 2021.
The gradual abatement of copper spreads in the quarter was more than offset by increased aluminum spreads and an overall increase in total volume shift.
We continue to believe encore wire remains well positioned to capture market share and incremental growth in the current economic environment.
As we address the near term challenges, we remain focused on the long term opportunities for our business, including improving our position as a sustainable and environmentally responsible company in our industry.
We believe that our superior order fill rates and deep vertical integration continued to enhance our competitive position.
As orders come in from electrical contractors, our distributors can continue to depend on us for quick deliveries coast to coast.
I'll now turn the call over to Brent to cover our financial results Brett. Thank you Daniel net sales for the third quarter ended September 32022 were $762 4 million compared to $716 3 million for the third quarter of 2021 copper unit volume.
Measured in the pounds of copper contained in the wire sold increased 12, 9% in the third quarter of 2022 versus the third quarter of 2021 gross profit percentage for the third quarter of 2022 was 39, 3% compared to 37, 8% in the third.
Third quarter of 2021.
The average selling price of wire per copper pound sold decreased 14, 4% in the third quarter of 2022 versus the third quarter of 2021, while the average cost of copper for pound purchased decreased 14, 1%.
As Daniel stated the gradual abatement of copper spreads in the quarter was more than offset by increased aluminum spreads and an overall increase in total volume shift, resulting in the increased gross profit margin in the third quarter of 2022 compared to the third quarter of 2021.
Net income for the third quarter of 2022 was $191 8 million versus $175 5 million in the third quarter of 2021 <unk>.
Diluted earnings per common share were $9 97 in the third quarter of 2022 versus $8 51.
In the third quarter of 2021.
Net sales for the nine months ended September 32022, with 232 4 billion compared to 190 5 billion for the nine months ended September 32021.
Copper unit volume increased seven 9% in the nine months ended September 32022 versus the nine months ended September 32021.
Gross profit percentage for the nine months ended September 32022 was 37, 2% compared to 33, 2% from nine months ended September 32021.
The average selling price of wire per copper pound sold increased four 3% in the nine months ended September 32022 versus the nine months ended September 32021, while the average cost of copper per pound purchased increased one 5% for the same periods.
The increase in copper spreads on a year to date basis, along with increased aluminum spreads over the same period, coupled with an overall increase in total volume shift drove the gross profit margin higher in the nine months ended September 32022, compared to the commensurate period in 2021.
Net income for the nine months ended September 32022 was $563 8 million versus $399 8 million in the nine months ended September 32021.
Fully diluted earnings per common share or $28 57.
In the nine months ended September 32022 versus $19 31.
And nine months ended September 32021.
Aluminum wire represented 17, 4% and 14, 7% respectively of our net sales in the quarter and nine months ended September 32022.
Aluminum wire volumes and spreads have increased for both the quarter and nine months ended September 32022, compared to the commensurate period in the prior year results.
Our results through the third quarter ended September 32022 were driven by stable demand for our products and as Daniel said, the general inability of the sector to meet demand for the timely delivery of finished goods persistent tightness and the availability of certain raw materials ongoing global uncertainties and suppressed availability.
A skilled labor kept overall spreads strong through the third quarter of 2022. This marks the sixth consecutive quarter of elevated margins and spreads our balance sheet remains very strong we have no long term debt our revolving credit line remains untapped.
$573 6 million in cash at the end of the quarter during the third quarter, we repurchased 785747 shares of our common stock.
On a year to date basis, we've repurchased $1 million 893769 shares of our common stock for a total cash outlay of $225 2 million.
Since the first quarter of 2020.
We repurchased over two 8 million shares of our common stock at an average price of $102 90.
We've also declared a <unk> cash dividend during the quarter.
The repurposing of our vacated distribution center to expand manufacturing capacity and extend our market reach was substantially completed in the second quarter of 2002 was previously reported.
The increase in 2022, the incremental investments announced in July of 2021 continue in earnest focus on broadening our position as a low cost sustainable manufacturer in the sector and increasing manufacture manufacturing capacity to drive growth capital spending in 2022.
Through 2024 will expand vertical integration in our manufacturing processes to reduce costs as well as modernize select wire manufacturing facilities to increase capacity and efficiency and improve our position as a sustainable and environmentally responsible company in our industry.
Total capital expenditures were $106 million in the first nine months of 2022 and $118 million for the full year 2021, we expect total capital expenditures to range from $140 million to $150 million in 2020 to 150 to 170.
Million in 2023, and $80 million to $100 million in 2024.
We expect to continue to fund these investments with existing cash reserves and operating cash flows I will now turn the floor over to Daniel for a few final remarks. Thank you Bret will down Buddy our consistent performance through the first nine months of 2022 further attests to the strength of our one campus vertically integrated.
Low cost business model, which continues to thrive under current market conditions. I believe this business model remains a competitive advantage, giving us unmatched operational agility and speed to market and serving our customers evolving needs.
Despite persistent tightness and the availability of certain raw materials, our supplier partners continued to deliver on their commitments to encore.
We wouldn't have this level of success without the consistent exceptional performance of our long term suppliers.
Labor market also remains tight and the limiting constraint for many companies.
All of these factors have contributed to the general inability of the sector to meet the demand for the timely delivery of finished goods.
Which positions us favorably to expand volume shift for both the quarter and year to date periods.
Looking ahead, we remain solely committed to execute upon the core values of our company unbeatable customer service nimble operations and quick deliveries coast to coast.
I want to close by recognizing our employees for their continued hard work and commitment to safety and excellence.
Our performance over the past six quarters could not have happened without their extraordinary efforts.
Our success in the market continues to allow us the opportunity to incrementally invest in our team as we position encore as an employer of choice in this sector.
Also want to thank our shareholders for their continued support.
Vanessa will now take questions from our listeners.
Thank you Sir we will now begin our question and answer session. If you have a question. Please dial zero then one on your Touchtone phone if you wish to be removed from the queue. You can press zero, then too and if youre using a speakerphone. Please pick up the handset first before pressing the numbers once again with you.
Please enter the queue by pressing zero than one we have our first question from Julio Romero with Sidoti.
Thanks, Hey, good morning, Daniel and Brett.
Good morning Julio.
Yes.
Wanted to start on a residential.
Can you just talk about what percent of sales came from residential in the quarter and could you speak to maybe what you're seeing in regards to demand on the residential portion of the product portfolio.
$28 seven so.
It's pretty comparable as we talked up before with regard to really what drives our business and it's not the housing start numbers, but I'll, let Daniel comment on the residential market what <unk> seen yes, I mean, there is clearly.
A slight slowdown in that segment for sure but year over year numbers still.
Consistently show to be strong.
There still seems to be somewhat of a backlog on some of the other materials building materials. It takes to finish some of the.
Houses, creating a little bit of a backlog there maybe in the supply chain side, but.
Overall, we are still receiving.
Pretty consistent demand and request for quotes for the residential piece.
Got it I appreciate that color and you guys touched on this last call in July .
The flex your manufacturing capacity for residential products towards other product categories if need be.
I guess you have not started to see that not started to do that at all in the third quarter yet.
Yes, we had some of that for sure.
It changes based on the complexion of the orders coming in.
The majority of the demand that comes in from distribution or the request for quotes.
Our custom list of materials, just not like to repeat list that you.
Pull off the shelf and ship so there's clearly.
For us.
That opportunity to flex within the.
The product categories, and then also share from one plant to the other.
On the input side for the raw materials as long as we.
We're meeting that service level that we can we will continue to do it on the finished goods side.
Got it and then just turning to the aluminum portion of the portfolio.
Just could you compare the trend line, you're seeing in aluminum spreads versus copper spreads in.
You've talked about a gradual abatement in copper spreads going forward do you see aluminum spreads following a different trajectory sequentially.
Great question, Julio as we've talked about.
I've said for six quarters now I thought the copper spreads peaked in the second quarter of 2021 I stand by that.
We didnt comment on aluminum spreads you saw what happened with aluminum in the second quarter.
We've seen consistent growth in aluminum volumes in spreads throughout this period.
And.
The challenges from aluminum standpoint that we saw when copper hit $5 and there was a few more projects heading that way.
Continued tightness.
On that side of the market.
The utility has taken up a lot of the domestic capacity.
<unk> seen imports.
Increase come out of China of aluminum, but youre not seeing them fall domestically and so they're really not coming into this market yet.
So all in we've been able to leverage our capacity and footprint here to to continue to expand volumes and serve the market I mean, it goes back to what we've talked about before is the single site manufacturing really positions us very well to adjust to these changing market conditions, we've got a very diverse product portfolio.
We've got manufacturing nimbleness and that affords us the ability to move with the market and I think this quarter really showed that you had some tightening in the copper spreads, which we've been talking about.
And that tightening was more than offset by an overall increase of total volume shift as well as a continued growth in aluminum spreads and that resulted in improved gross margin. So that would be my takeaway from the quarter.
Helpful.
Thanks for taking the questions I'll hop back in the queue.
Thanks Julio.
Yes.
As a reminder, if you have a question you can enter the queue by pressing zero then one on your Touchtone phone and we will take our next question from Brent Thielman with D. A Davidson.
Hey, Brad Thanks, Congrats congrats on a great quarter again.
Yes.
Yes.
I guess a question.
Look pricing spreads and margins still really strong here even as generic.
Our spreads are coming off pretty high level is it seems like the supply dynamics, particularly for metals are still pretty tight.
Today, Daniel I'm, just wondering if you can comment on what what are the underlying drivers.
This sort of gradual abatement in spreads even with kind of metal so tight you've got other disruptions, obviously out there pretty strong demand environment.
And then just also wondering.
If you are seeing that across all.
Copper product lines or is it isolated just a select few.
Yes.
Without getting into names or anything but.
There is clearly a healthy demand for the entire product line.
It moves up and down slightly.
And then when you think it's.
Little slower picks up in <unk>.
Got you.
Strong industrial.
Segment, the commercial segment.
Has been strong.
Brett mentioned the aluminum demand has been strong.
And not to take anything away from the copper side.
Theres pockets that we have.
Some pricing challenges from competitors on the larger size copper cables.
The basic stuff, that's pretty easy to run through the equipment.
Which really does it.
Surprise me.
The response in the market.
For them to I guess move.
Move some type of pounds or volume or something and what I can.
Pretend to know what they are trying to do or not do it makes no sense, but.
Demand is still there.
There is there is more emphasis still.
Through Q3 on the delivery side and the service side.
<unk> significant pricing pressures from.
The competition.
There is there's good competitors and there are some that are not as good.
And doing those things.
But again, we're doing our thing.
Our model.
As a.
Very resilient for this type of market that we're in.
We have a lot of flexibility in our production capacity as we were talking about earlier.
We can we can flex from.
One plant to the other.
They have a primary purpose but.
We.
Set them all up to be able to support one another and flex with that demand and so.
There is still on a couple of things that sell building large it's price and delivery.
We spend the majority of our time focused on the delivery side than.
We're able to charge for that service, we are able to create relationships.
<unk> moved with.
Some of the demand that is.
Maybe it doesn't go out into the market for bid.
We're able to have that repeat business.
And sharing those successes with those end users and our distributor customers and.
As we mentioned in the prepared statement.
We certainly couldn't do that without the fantastic vendors that we have in.
It's not that there.
The challenges aren't there on the raw materials there is certainly there.
But we've got relationships that go way back with these.
With our suppliers and vendors.
We're able to execute really really extremely well.
In this market.
Reward you for services, which is what we're after.
Yes.
I appreciate that Danielle.
I saw some news out there that some rod mill capacity is getting shuddered in Texas, obviously not years, but another I mean any thoughts on the implications in this type of environment.
Already pretty tight.
Yes, I mean, there is.
There is eight or nine rod mills in the U S.
Four five.
Canada and Mexico combined so.
The shape of copper obviously is incredibly important.
It's not just a comex story.
Historically.
Over the years, you have folks watching comex and they try to make up.
Business decision on a significant purchases building wire potentially based on what they think comex is during or is going to do that.
It's less influential today.
It really has.
Moved over toward the shape of the copper and the availability of that shape.
Driving a lot of the service opportunities that are there for some of those larger jobs.
The day to day business is affected by it.
The shape that every wire manufacturer needs to start with being rod.
It is significantly tied.
Building wire the biggest consumer.
But it's not the only consumer of those shapes and so.
Again.
The service levels.
That we're able to provide in the market.
We've been able to get materials.
We've been able to get the right shape at the right time and.
Our speed to market once we receive those.
Raw materials I believe is pretty much unmatched in the industry and we're able to benefit from that.
Okay.
I guess my next question just would be.
I'll now and they are all trying to figure out where.
Margin find themselves from these extraordinary levels and continue to surpass expectations there but.
Daniel Brett I guess I'm just wondering if you can comment at least on the capital investment initiatives. I know you are not disclosing exactly what those are just yet but anything you can share at this point in terms of.
What does do for Ya structurally in terms of contribution to encores sort of core margins in other words in that.
Steady market environment can we can we think about these investments elevating your.
Longer term.
Normalized profit margin.
Yes, I mean, it's a great question Brent we've always said these capex investments are focused on two things they have to either improve our service model and take costs out of the system and Thats, how displaces drawn from day one right. The Great example was the Repurposing of the distribution center.
Right, we really needed incremental capacity, but you had to build a new service center to be able to handle that incremental load and as we talked about as we get closer to the finalization of that debt repurposing that it was going to add 15% to 20% capacity as we get closer to these investments, we're making really are a combination.
Of deeper vertical integration is derisking some aspects of the supply chain that that we didn't maybe like the profile of as much as others as you navigate to the pandemic and this past 18 to 24 months.
And then it modernization, it's utilizing some of our land that we have here too.
To continue to expand that capacity.
We will get closer to what those are but when we look at them. Those first two things improving the service model and taking cost out are really top of top of our list and so more to come on that from a cash perspective, we saw the growth in the cash balance of $574 million.
As the cash at the end of September .
Year to date, we spent $225 million on share repurchases and $106 million on Capex and <unk>.
Still grew cash of $135 million to $140 million and so youre sitting on $565 million of receivables as of the end of September and those balances are all correct and so.
It's more of the same as we generate through this but from a capex standpoint, we tightened the range a little bit for 2022 and left through the rest of them unchanged that's going to be the primary primary focus we do have about one 2 million shares remaining under our under our share repurchase operation.
Authorization I'm, sorry through March of 2023, and so we'll continue.
To look to opportunities in the market for that.
Okay, maybe just last one I mean, the volumes really healthy this quarter I imagine plant seven isn't contributing a whole lot yet as that ramps that correct me if im wrong, but in.
Yeah.
Where are you seeing the biggest drivers in terms of underlying demand right now Paul for your products.
I think it's the ones Daniel mentioned right.
And it goes back to the web page in the slide that we have out there.
Data centers renewables healthcare and then some of the incremental investments youre seeing outside of just traditional commercial industrial and residential.
We've definitely seen.
Some accelerated growth in the industrial segment, which which leans in well to to the repurposed distribution center and so we're taking advantage of that we didn't just turn all the lines on.
All at one time it late in the second quarter as we commission lines.
We started making wire and and it turned from initially a construction site, which was making wire to wire plant that had a little bit of construction left and so we continue to lean in as we as we ramp up the capacity in that facility and we will take advantage of the opportunities we see in the market.
Okay, great. Thank you guys I appreciate you taking the questions great questions. Thanks, Brent.
We have our next question from William Louis Feldman with Baldwin Anthony Securities.
Good morning.
I think you probably addressed.
The question I have at least to degree Youre willing to talk about it but I'll go ahead and ask it anyway I was going to.
See what kind of color you could offer.
On the nature of your vertical integration Capex programs.
What.
What areas what products those type of things if you are able to offer any any color there.
Yes.
It's it's along the same lines as what we've done in the past.
As Brent mentioned Brent mentioned.
Specifically after.
Savings and cost opportunities.
Increasing our service model in each.
Each one of those projects that we have going.
We're heading in that direction and we also and.
So a huge consideration here.
For our sustainability.
No.
We're moving in those directions and trying to stay ahead of.
What is there and take advantage of.
Opportunities come up in those categories as well, but.
<unk>.
We're.
We only have five basic raw materials.
We're addressing all of those in any way shape or form that we can.
Increase our service or.
Cut into cost or some manner and at the same time be very aware of and take advantage of.
Opportunities to improve.
From a sustainability standpoint.
On the on the product offering side.
It's similar products to what we've been offering over the years Theres a few tweaks we can make.
To be.
Maybe more important in one market or the other but.
We're just posturing ourselves bill as we have in the past too.
Offer fantastic service and from our low cost perspective, and be ready to take on whichever market presents itself.
We've got the cash to do it.
Got the right guy or the right girl with backups identified in key positions and others too.
To take advantage of it so it's really just more of a say theres some upgrades involved there.
And the year of 33 here.
We're constantly trying to.
<unk> become more efficient and better.
Through processes that we can find and developed through those experiences that we've built over the years.
And we're acting on them, we've got the cash to do it and we've got the right folks and the timing is good.
It fits raw materials, it's finished goods.
It's distribution, it's truly all of the above.
This industry.
We've talked in the past.
We fight for pennies in this industry.
And then just Fortunately right now Theres nickels out there that we can pick up so we're accurate and accurate.
Yes.
There's no question and then I mean in your strategic and operational execution is there.
But unbelievable over the years.
It's just wonderful to see you get.
Yet recognized now and you're getting a heck of a return on it so.
I congratulate you and your team for all the hard work over a long period of time.
Yes, Sir.
Yes.
Yeah.
It's been very exciting to watch.
Sure.
Thank you very much.
Just to confirm sorry, do you have any further questions before I release you.
No no that's fine.
Jeremy Thank you.
Thank you. Our next question is from Eric Marshall Hodges Capital management.
Mark regulations on the quarter congratulations on the quarter guys.
I appreciate the Covid.
Some of the color that you guys gave on what you see going on in the housing market, but can you give us an idea of.
An estimate of how much of your business. This last quarter was residential compared to maybe a year ago.
Sure Eric So, let's look at a couple of periods third quarter to third quarter. So third quarter of 2022 residential 28, 3%.
Third quarter 2021, residential 28, 7% so almost almost.
Almost flat if you look at it from a nine month comparison.
You kind of pick up the meteoric second quarter of last year went from Edr to just kind of hot since then but you were $31 seven residential nine months.
'twenty, one compared to 20 969 months 2022.
It's pretty flights that changed the last one that I'll kind of give you give you a little better perspective.
Let's look at it third quarter from second quarter of this year right what is it trending in the most recent period.
You talked about 2008 three for third quarter 2022, if you look at second quarter of 2022, just to remind you. It was 29 nine so.
It's pretty fragile the shift.
But you can see from a bottom line standpoint, we continue to just evolve and adapt and take what the market gives us.
Okay, and then when we think about the possibility of the housing market slowing down much more than.
Commercial industrial side of your business.
Does the mix.
The type of more highly engineered wire and conduit that goes into.
The industrial side of your business does it carry higher margins than residential.
Ken the way that you asked the question the answer would be yes.
If it's highly engineered products.
There are standard products on the industrial commercial.
List offering as well but.
Again, as we've tried to communicate and highlight even in the press release and on our website.
We're not.
Not tied to.
The residential starts number as folks tried to portray us.
In the recent past.
That <unk>.
Production capacity, that's in that residential plant, which is the original plant.
Going back to day one.
It will be used.
And other products that go out of here that are considered to be commercial and industrial related.
Okay.
And then.
Any comment that you can you make on the what you guys are seeing out there as far as the.
Physical market for supply and demand for copper are there any pockets.
With copper being so volatile on pulling back here or there are any excesses out there that you see that could.
Further disrupt things.
No.
Copper is up 10 since the volatility is really where the.
The story is when you get swings of $10 $15 20 during one particular day and as I mentioned earlier the shape today has a huge influence on the cost itself. The adders above comex that are not published are significantly higher today than they have been in <unk>.
Here's an so when folks are just watching pullbacks, it's certainly part of the story, but it's less important part of the story.
The shape and availability of all shapes to run these wire plants. So the fact that.
There's been a.
Unbelievably.
<unk> market.
On the shape of Rod.
That feeds wire plants.
I mean, the last time. It was this time was probably not.
90, 596 timeframe when.
When there was this type of.
Lack of availability of rod to feed these wire plants, we've seen letters from competitors go out.
Clearing that they couldnt get Raj so they were going to back out of the market for a specified timeframe. So there's just a lot around that copper piece to unpack.
When you look at.
What projects are out there to help if that's the right term with that tightness or alleviate some of the tightness in the market.
They're just not there.
It's a.
Pretty long drawn out process too.
Get ready to do your own.
So.
Again, the copper vendor specifically to the raw material.
If youre speaking of that availability.
Look at it.
Any any report.
Can support either conclusion, I guess, but.
Theres just no copper out there thats extra.
You know what happens.
With these electric vehicles on copper consumption and you know what happens with companies that are going green with copper consumption.
You can read what happens to.
Copper when Theres onshoring and re shoring of manufacturing.
There's.
Got a few things.
The <unk>.
Consumption demand side for copper and you're just not any <unk>.
Significant.
<unk> supply side projects that are out there.
With the Texas Rod Mill that was shuttered and the dollar being so strong have we seen any imports of.
Rod come in at all.
No not the nominal growth.
I mean, other than Canada and Mexico.
Okay.
Alright, Thats all I have thanks, guys.
You bet, Thanks, a lot Eric.
The next question is from Brian Gibson with Raymond James.
Good morning, Daniel and Brad.
Hey.
Okay Sir.
This is mainly a complementary.
Call, but.
I do have one question actually two questions but.
Dan you have said for years, we're not going to get bigger in poor.
Youre, certainly getting bigger, but youre, not and youre not getting bored. So congratulations on on how you guys run the business.
Love the buybacks love investing in your infrastructure investing in new buildings.
That's why.
It's a good business people to be doing that.
About five quarters ago, you said, hey business is kind of normalize we don't know if it's going to be quick, but it's going to be gradual.
You said that for a couple of three quarters and then a couple of quarters ago. You said, Hey, we can see signs now where business will normalize gradually.
Do you still think that.
It's Brett so as you look at this I think you really take that out if you looked at the last two quarters right in last two quarters gross margin has actually gone up right and so yes as I said earlier in the call. We saw copper spreads peak in June of 'twenty, one and we saw gradual abatement as you.
Went through there.
And Thats the million dollar question, how long does happen does it work.
As youre going to drive off a cliff and as you look at this it looks at the resiliency of that business now over the last 15 months right margins are higher and get your gross margins higher today than it was at that point in time and it just shows I think it shows a lot above that resiliency. What you saw this quarter, we saw copper spread.
<unk> in the quarter, alright, still up on a year to date basis, but you saw some abatement occur in this quarter and the quarter in which gross margin went up and so total volume shift to continue to increase that was a contributing factor to the overall increase as well as continued strength in the aluminum spreads and so I. Thank you.
You take from that what you will.
Copper remains very very tight as Daniel talked about the metal is the tightest, it's ever been even through the pandemic and the shape is never been tighter.
Still got to figure out some things with regard to Russian metal is it going to <unk> next year and not probably half to 60% of the inventory at <unk> today is Russian and so they're going through a poll right now to decide what to do for next year, but if.
That doesn't go in and Thats going to cause some disruption, it's not a big percentage of mainly goes to China, but that'll stand China.
South America, which goes domestic and so and which pulls on ocean freight and ocean barge and port congestion and you can kind of play it out. So it remains very very tight Brian as you go through this.
Okay.
Yes.
Wondering if nothing stays the same forever in a year.
Five quarters ago, you had this explosive earnings and it's gone.
Gone up it's gone up so.
But it would be.
No.
Buying back the shares and.
Putting money into infrastructure should certainly help in the future.
I think I heard you say Daniel that we have.
How do I say that.
You said.
People are not we're not putting we're not even some jobs were not even better.
Call them and say stop is that pretty much. What you said there that youre not even some some jobs already been betting youre just filling orders.
No no no they don't go out to the traditional.
Sure.
Path of putting it out to two or three vendors to bid on it.
We certainly have too.
Be attentive to demand and customer request for quotes no question, but we do have repeat business that doesn't go out to four or five competitors to be.
Take shots at or cut prices.
Okay, Yes.
You still got a bit of it but it's not going out there just saying we're going to.
Give us your price.
Yeah.
And then.
Is that normal two or is it just because you guys have the product to supply.
The job.
We've always had.
A pretty decent track record.
Attempting to peak.
Things from being bid by competitors, where they can have a chance to cut the price.
It's a.
It's a testament to <unk>.
Our employees here ourselves office doing a great job in.
The operations did a great job shifting doing a great job you do the things youre supposed to do.
Folks fairly.
They are less inclined to go out to shop, it around if youre, taking care of business and so.
Ill, just say that it's normal or abnormal.
I consider it to be somewhat normal.
Okay.
Well hey, thanks for your time guys.
You bet. Thank you Brian .
Once again, if you have a question you can queue up by pressing zero than what our next question is a fall.
Follow up question from Julio Romero with Sidoti.
Hey, Thanks for taking the follow up.
One more on Capex, just given the expansion you've undertaken given the all the reinvestment just a quick refresher on what annual maintenance Capex. It looks like these days.
Yes, great question, Julio it's still around $40 million to $60 million in that $40 million to $60 million in maintenance Capex is typically incremental machinery and equipment.
But thats kind of your annual run rate those numbers are embedded within our Capex estimates, but I still think it's in that range as you get back to a normal investment level at some point.
Yes.
Great I appreciate it thanks very much.
For the support.
Thank you I have no further questions in queue at this time.
Perfect. Thank you so much everyone. Appreciate your attendance today and enjoy your day. Thank you.
Thank you ladies and gentlemen, this concludes our conference. We thank you for your participation you may now disconnect.
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