Q4 2023 Insteel Industries Inc Earnings Call
Speaker 1: Hello everyone and welcome to Instill Industries 4th quarter 2023 earnings call. My name is Veeno and I will be operating your call today. During this presentation you can register to ask a question by pressing star followed by 1 on your telephone keypad. I will now hand over to your host and CEO , Edgwolz. Please go ahead.
Hello, everyone and welcome to into industries fourth quarter 2023 earnings call.
My name is and I'll be operating your call today.
During this presentation you can register to ask a question by pressing star followed by one on your telephone keypad.
I'll hand over to your host in C. O H Woltz. Please go ahead.
Speaker 2: Good morning. Thank you for your interest in Enspiel and welcome to our fourth quarter 2023 conference call, which will be conducted by Scott Jafruti, our vice president, CFO and treasurer and me.
Good morning. Thank you for your interest in steel and welcome to our fourth quarter 2023 conference call, which will be conducted by Scott <unk>, Our vice President CFO and Treasurer and me.
Speaker 2: Before we begin, let me remind you that some of the comments made in our presentation are considered to be forward-looking statements.
Before we begin let me remind you that some of the comments made in our presentation are considered to be forward looking statements that are subject to various risks and uncertainties, which could cause actual results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC.
Speaker 2: that are subject to various risks and uncertainties, which could cause actual results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC.
Speaker 2: 2023 was challenging for the company in view of inventory accumulations throughout the supply chain and a significant downward reset in steel prices that occurred following several quarters of extreme supply tightness and significant market price escalation.
2023 was challenging for the company in view of inventory accumulation throughout the supply chain and a significant downward reset in steel prices that occurred following several quarters of extreme supply tightness and significant market price escalations.
Speaker 2: We believe these headwinds have about run their course, and we continue to be optimistic about the underlying level of demand for our province.
These headwinds from about run their course, and we continue to be optimistic about the underlying level of demand for our products.
Speaker 2: I'm going to call turn the call over to Scott to comment on our financial results for the quarter and the macro environment. And then I'll pick it back up to discuss our business outlook.
On the call I'll turn the call over to Scott to comment on our financial results for the quarter and the macro environment is that I'll pick it back up to discuss our business outlook.
Speaker 3: Thank you, H, and good morning to everyone joining us on the call. As highlighted in our press release earlier today, our performance in the fourth quarter of fiscal 2023 reflects the continued pressure of narrow spreads between selling prices and raw material costs combined with elevated unit conversion costs. As a result, net earnings for the fourth quarter fell to $5.6 million, or $0.29 a share, or $24.3 million, or $1.24 per diluted share a year ago.
Thank you H and good.
Morning to everyone joining us on the call as highlighted in our press release earlier today, our performance in the fourth quarter of fiscal 2023 reflects the continued pressure of narrow spreads between selling prices and raw material costs. Following with elevated unit conversion costs as a result net earnings for the fourth quarter sale.
$5 6 million or 29 cents, a share a $24 3 million or $1 24 per diluted share a year ago.
Speaker 3: Our net sales for the quarter also faked headwinds, declining 24.3% from last year on a 27.8% decrease in average selling prices. Although this was partially offset by a 4.9% increase in shipping.
Our net sales for the quarter also face headwinds declining 24, 3% from last year on a 27, 8% decrease in average selling prices. Although this was partially offset by a four 9% increase in shipments.
Speaker 3: On a sequential basis, average selling price has declined 6.6%.
On a sequential basis average selling prices declined six 6%.
Speaker 3: while shipments were 1.8% higher. The ongoing challenges of the competitive pricing environment, the persistent downward trend in steel scrap prices, and the growing influence of low-price imported PC strand all contributed to decline in our average selling prices during the fourth quarter. As I've mentioned in previous calls, our products most exposed to the residential construction market have experienced the largest decline in average selling prices, a trend that continued throughout our fourth quarter.
While shipments of one 8% higher.
Ongoing challenges of the competitive pricing environment, the persistent downward trend in steel scrap prices and the growing influence of oil price imported PC strand, all contributed to a decline in our average selling prices during the fourth quarter.
As I've mentioned in previous calls our products most exposed to the residential construction market markets.
<unk> experienced the largest decline in average selling prices a trend that continued throughout our fourth quarter.
Speaker 3: Despite the weakening in our ASPs, our shipping volume exhibited modest improvements during the fourth quarter. Many customers are currently experiencing favorable or improving business conditions, and the majority have now normalized their inventory levels following Derby's stocking efforts that suppress demand for much of this for 2023.
Despite the weakening in our Asp's are shifting buying exhibited modest improvement during the fourth quarter. Many customers are currently experiencing favorable or improving business conditions and the majority are now normalized inventory levels. Following their destocking efforts to suppress demand for much of fiscal 2023. However, it is important to highlight.
Speaker 3: However, it is important to highlight that our shipments came in below our internal forecast, primarily due to project delays, weakness in the non-residential construction market, and the negative effect of adverse weather conditions in certain of our markets during the quarter.
Our shipments came in below our internal forecast, primarily due to project delays and weakness in the nonresidential construction market and the negative effect of adverse weather conditions in certain of our markets during the quarter.
Bruno: Hello, everyone, and welcome to Insteel Industries' fourth quarter 2023 earnings call. My name is Bruno, and I'll be operating your call today. During this presentation, you can register to ask a question by pressing star followed by one on your telephone keypad.
Speaker 3: Gross profit for the fourth quarter fell, 25.8 million from a year ago, and gross margin narrowed to 8.9% from 19.1% due to a combination of lower spreads and higher overall unit conversion costs, partially offset by year-over-year increase in shipping.
Gross profit for the fourth quarter fell $25 8 million from a year ago and gross margin narrowed to eight 9% from 19, 1% due to a combination of lower spreads and higher overall unit conversion costs, partially offset by year over year increase in shipments.
Howard Woltz: I will now hand over to your host and CEO, HVOLs, please go ahead. Good morning.
Scot Jafroodi: Thank you for your interest in Insteel, and welcome to our fourth quarter 2023 conference call, which will be conducted by Scot Jafroodi, our Vice President, CFO, and Treasurer, and me. Before we begin, let me remind you that some of the comments made in our presentation are considered to be forward-looking statements that are subject to various risks and uncertainties, which could cause actual results to differ materially from those projected. These risk factors are described in our periodic biolins with the SEC.
Speaker 3: On a sequential basis, gross profit decreased 6.4 million from the third quarter, and gross margin decreased 340 basis points. As a drop-off in average selling prices exceeded the reduction in our raw material costs. Throughout fiscal 2023, our spreads have been consistently pressured by the steady decline in average selling prices that have more than offset the benefit realized in the consumption of lower-priced raw materials.
On a sequential basis gross profit decreased $6 4 million from the third quarter and gross margin decreased 340 basis points as drop off in average selling prices exceeded the reduction in our raw material costs throughout fiscal 2023, our spreads have been consistently pressured by the steady decline in average selling prices.
More than offset the benefit realized from the consumption of lower price inventory.
Speaker 3: As we look ahead to the first quarter of fiscal 2024, margins are most likely to remain under pressure in the near term due to the current competitive landscape that continues to exert downward pressure on selling.
Howard Woltz: 2023 was challenging for the company and view of inventory accumulations throughout the supply chain and a significant downward reset and steel prices that occurred following several quarters of extreme supply tightness and significant market price escalations.
As we look ahead to the first quarter of fiscal 2020 for margins are most likely to remain under pressure in the near term due to the current competitive landscape that continues to exert downward pressure on selling prices.
Speaker 3: During the fourth quarter, we experienced an increase in our unit conversion costs compared to both the previous year and the third quarter.
During the fourth quarter, we experienced an increase in our unit conversion costs compared to both the previous year in the third quarter.
Scot Jafroodi: We believe these headwinds are about to run their course, and we continue to be optimistic about the underlying level of demand for our problems. I'm going to turn the call over to Scott to comment on our financial results for the quarter and the macro-environment, and then I'll pick it back up to discuss our business outlook. Thank you, H, and good morning, everyone joining us on the call. As highlighted in our press release earlier today, our performance in the fourth quarter of fiscal 2023 reflects the continued pressure of narrow spreads between selling prices and raw material costs combined with elevated e-necroverting costs.
Speaker 3: This was due to reduced operating volumes at select plants as we implemented inventory reduction measures during the quarter. This resulted in weakened cost absorption and overall increase in unit conversion costs. As we move into our first quarter, we expect unit conversion costs to remain elevated based on anticipated operating levels, which will be impacted by the onset of the seasonal downturn in demand, as well as the continuation of the general inflationary trends that we've experienced throughout 2023.
This was due to reduced operating volumes at select plants, and we implemented inventory reduction measures during the quarter. This resulted in weekend cost absorption and the overall increase in unit conversion costs as we move into our first quarter. We expect gross cost to remain elevated based on anticipated operating levels, which will be impact.
Impacted by the onset of the seasonal downturn in demand as well as the continuation of the general inflationary trends that we experienced throughout 2023.
Speaker 3: SGA expense for the quarter decreased to $8.1 million, or 5.2% of net sales, from $8.3 million, or 4% of net sales last year. The dollar decrease primarily resulted from the relative year-over-year change in the cash rendered value of life insurance policies, along with lower depreciation expense partially offset by higher compensation costs.
SG&A expense for the quarter decreased to $8 1 million or five 2% of net sales from $8 3 million or 4% of net sales last year. The dollar decrease primarily resulted from the relative year over year change in the cash surrender value of life insurance policies.
Scot Jafroodi: As a result, net earnings for the fourth quarter fell to $5.6 million or $0.29 a share from $24.3 million or $1.24 per diluvia share a year ago. Our net sales for the quarter also baked headwinds declining 24.3% from last year on a 27.8% decrease in average selling prices, although this was partially offset by a 4.9% increase in shipments. On a sequential basis, average selling prices declined 6.6%, while shipments will 1.8% higher.
Along with lower depreciation expense, partially offset by higher compensation costs.
Speaker 3: Our effective tax rate for the quarter was largely unchanged at 22.5%, down slightly from 23% last year. Looking ahead to next year, we expect our effective rate will remain steady at around 22%, subject to the level of pretax earnings, both tax differences, and the other assumption and estimates that compose our tax provision calculation.
Our effective tax rate for the quarter was largely unchanged at 22, 5% down slightly from 23% last year looking ahead to next year, we expect our effective rate will remain steady at around 22% subject to the level of pre tax earnings book tax differences and the other assumptions and estimates that compose our tax provision calculation.
Scot Jafroodi: The ongoing challenge is of competitive pricing environment, the persistent downward trend and steel scrap prices, and the growing influence of low price imported TC strand all contributed to decline in our average selling prices during the fourth quarter. As I've mentioned in previous calls, our products most exposed to the residential construction market have experienced the largest decline in average selling prices, a trend that continued throughout our fourth quarter. Despite the weakening in our AFCs, our shipping volume exhibited modest improvement during the fourth quarter. Many customers are currently experiencing favorable or improving business conditions, and majority of now normalize their inventory levels following dirty stocking efforts that suppress the demand from much of this for 2023.
Speaker 3: Moving to the cash flow statement and balance sheet, we are pleased to report cash flow from operations generated $38.6 million of cash for the quarter and $142.2 million for the year, primarily due to a working capital reduction driven by plan decrease in inventory.
Moving to the cash flow statement and balance sheet. We are pleased to report cash flow from operations generated $38 $6 million of cash for the quarter and $142 2 million for the year, primarily due to a working capital reduction driven by a planned decrease in inventories.
Speaker 3: Our inventory position at the end of the quarter represented 3.3 months of shipments on a forward-looking basis, calculated off of our forecasted Q1 shipments, compared with 3.2 months at the end of the third quarter. Additionally, it's worth noting our inventory is at the end of the fourth quarter, for a value that an average unit cost that was lower than our fourth quarter cost of sale.
Our inventory position at the end of the quarter represented three three months of shipments on a forward looking basis calculated off of our forecasted Q1 shipments compared with $3 two months at the end of the third quarter. Additionally, it's worth noting our inventories at the end of the fourth quarter were valued at an average unit cost that was lower than our fourth quarter cost of <unk>.
Sales.
Speaker 3: We incurred 4.1 million capital expenditures in the fourth quarter for a total of 30.7 million for the year, and was primarily targeted at broadening our product offering, expanding capacity, and reducing operating costs. Looking ahead to fiscal 2024, we expect capital expenditures to total 30 million. H will provide more detail on this topic in his remarks.
We incurred $4 1 million in capital expenditures in the fourth quarter for a total of $30 7 million for the year. It was primarily targeted at broadening our product offering expanding capacity and reducing operating costs.
Scot Jafroodi: However, it is important to highlight that our shipments came in below our internal forecasts, primarily due to project delays, weakness in the non-residential construction market, and the negative effect of adverse weather conditions in certain of our markets during the Gross Profit for the four-quarter fell, 25.8 million from a year ago, and gross margin arrows to 8.9% from 19.1% due to a combination of lower spreads and higher overall unit conversion costs partially offset by a year-over-year increase in shipments. On a sequential basis, gross profit decreased 6.4 million from the third quarter, and gross margin decreased 340 basis points.
And ahead to fiscal 2024, we expect capital expenditures totaled $30 million eight will provide more detail on this topic in his remarks.
Speaker 3: From a liquidity perspective, we end this quarter with a record $125.7 million of cash on hand, and we're debt-free with no borrowing debt standing on our $100 million revolving credit facility, providing us with ample liquidity and financial flexibility.
From a liquidity perspective, we ended the quarter with a record $125 $7 million of cash on hand.
Debt free with no borrowings outstanding on our $100 million revolving credit facility, providing us with ample liquidity and financial flexibility.
Speaker 3: Along with our focus on making ongoing investments in the business, our financial strength has allowed us to continue to return capital to share hope.
Along with our focus on making ongoing investments in the business our financial strength has allowed us to continue to return capital to shareholders.
Scot Jafroodi: As a drop-off in every selling crisis, exceeded the reduction in our raw material cost. Throughout fiscal 2023, our spreads have been consistently pressured by the steady decline in every selling crisis that have more than offset the benefit realized from the consumption of lower price rod inventory.
Speaker 3: In fiscal year 2023, we returned $43.6 million to shareholders through a combination of dividends and shared buybacks.
Fiscal year 2023, we returned $43 $6 million to shareholders through a combination of dividends and share buybacks.
Speaker 3: This included a $2 per share special dividend as well as our four regular quarterly dividends, making the third consecutive year that we have paid a special dividend of at least $1.50 per share. Moreover, we repurchased approximately 80,000 shares of our common equity equivalent to $2.3 million through our share buyback program.
This included a $2 per share special dividend as well as our Reg for regular quarterly dividends, making a third consecutive year that we have paid a special dividend of at least $1 50 per share. Moreover, we've repurchased approximately 80000 shares of our common equity equivalent to $2 $3 million through our share buyback program.
Scot Jafroodi: As we look ahead to the first quarter of fiscal 2024, margins are most likely to remain under pressure in the near term due to the current competitive landscape that continues to exert downward pressure on selling prices. During our fourth quarter, we experienced an increase in our unit conversion costs compared to both the previous year and the third quarter. This was due to reduce operating volumes at select plants as we implemented inventory reduction measures during the quarter. This resulted in weakened cost absorption and overall increase in unit conversion costs.
Scot Jafroodi: As we move into our first quarter, we expect unit conversion costs to remain elevated based on anticipated operating levels, which will be impacted by the onset of the seasonal downturn in demand, as well as continuation of the general inflationary trends that we experienced throughout 2023.
Speaker 3: Turning to the macro indicators of our construction and markets, the most recent construction spending data continues to show strength.
Turning to the macro indicators of our construction end markets. The most recent construction spending data continues to show strength.
Speaker 3: For the 1st, 8 months of the calendar year total construction spending on a seasonally adjusted annual basis is up 7.4% from last.
For the first eight months of the calendar year total construction spending on a seasonally adjusted annual basis was up seven 4% from last year nonresidential construction spending was up almost 18% with public Highway and street construction one of the larger end uses for our products up over 12%. However, while construction spending remains elevated.
Speaker 3: Non-residential construction spending was up almost 18%, with public highway and street construction, one of the larger end uses for our products, up over 12%. However, while construction spending remains elevated, U.S. cement shipments, another measure that we track, can use the lag 2022 levels as shipments were down 1.8% for July and 2.2% for the first seven months of the calendar year.
Cement shipments another measure that we track continue to lag 2022 levels that shipments were down one 8% for July and two 2% for the first seven months of the calendar year.
Scot Jafroodi: SGNA expense for the quarter decreased to 8.1 million or 5.2 percent of net sales from 8.3 million or 4 percent of net sales last year. The dollar decreased primarily resulted from the relative year-over-year change in the cash rent value of life insurance policies, along with lower depreciation expense partially offset by higher compensation costs. Our effective tax rate for the quarter was largely unchanged at 22.5 percent down slightly from 23 percent last year.
Speaker 3: The most recent reports for architectural building and dive and minimum indexes, leading indicators for non-residential building.
The most recent reports for the architectural billings and Dodge momentum index as leading indicators for nonresidential building construction.
Speaker 3: Supply softening business conditions in the coming year as high interest rates and tighter lending standards appear to be having an impact on construction market.
July softening business conditions in the coming year as high interest rates and tighter lending standards appear to have an impact on construction markets in.
Speaker 3: September the ABI dropped to 44.8, the lowest score reported since December 2020.
In September the Abi dropped to 44 eight the lowest score reported since December 2020.
Speaker 3: The score is well below the growth threshold of 50 and would indicate a significant decline in buildings and marked a downturn in business conditions of architectural firms.
The score is well below the growth threshold of 50 and would indicate a significant decline in billings and marked a downturn in business conditions and architectural firms.
Scot Jafroodi: Looking ahead to next year, we expect our effective rate will remain steady at around 22 percent. Subject to the level of pre-tax earnings, both tax differences and the other assumption and estimates that compose our tax revision calculation.
Speaker 3: The Dodge Amendment Index which tracks non-residential building projects going into planning, rose 3% in September up to 182.5%. However, year over year, the index is 5% lower.
The Dodge momentum index, which tracks nonresidential building projects going into planning rose, 3% in September up to $182. Five however year over year. The index is 5% lower.
Scot Jafroodi: Moving to the cash flow statement about sheet, we're pleased to report cash flow from operations generated $38.6 million of cash for the quarter and 142.2 million for the year, primarily due to a working capital reduction driven by a planned decrease in inventory. Our inventory position at the end of the quarter represented 3.3 months of shittiness on a forward-looking basis calculated off of our forecast at Q1 shittiness compared with 3.2 months at the end of the third quarter, additionally in fourth noting or inventory at the end of the fourth quarter were valued in an average unit cost that was lower than our fourth quarter cost of sales. We occurred 4.1 million capital expenditures in fourth quarter for a total of 30.7 million for the year, and was primarily targeted at throttling our product offering, expanding capacity, and reducing operating costs.
Speaker 3: Dodge noted that the year-to-date trends would indicate an overall decline in commercial planning, and that going into 2024, planning levels will depend on improvement of financial conditions.
Dodge notice at the year to date trends would indicate an overall decline in commercial planning and that going into 2020 for planning levels will depend on improving our financial conditions.
And Dodge is August report it was noted that weaker market fundamentals continue to undermine play any growth is tightening lending standards and the higher interest rate environment are beginning to impact both the commercial and institutional segments.
This concludes my prepared remarks, I will now turn the call back over to H.
Thank you Scott.
We're pleased to have experienced an uptick in shipments year over year during the fourth quarter. Most of the improvement originated with shipments into our housing related markets, which was unexpected.
Speaker 2: Shipment into infrastructure and other commercial applications were weak in a continuation of the phenomenon we've experienced throughout the year where customers seem to be busier than their suppliers.
My sense of infrastructure and other commercial applications were weak and a continuation of the phenomenon we've experienced throughout the year, where customers seem to be busier than their suppliers'.
Scot Jafroodi: Looking ahead to fiscal 2024, we expect capital expenditures to total 30 million.
Speaker 2: Inventory liquidations by customers of both finished goods and reinforcing materials would explain market conditions although we lack objective data to support such a claim.
Inventory liquidations by customers of both finished goods and reinforcing materials would explain market conditions. Although we lack of objective data to support such a claim we believe however that consumption of reinforcing products is at an attractive level and that were maintaining market share.
Scot Jafroodi: H will provide more detail on this topic in his remarks. From a liquidity perspective, we ended the quarter with a record 125.7 million dollars of cash on hand, and we're debt-free with no borrowings outstanding on a 100 million dollar revolving credit facility, providing us with ample liquidity and financial Along with our focus on making ongoing investments in the business, our financial strains have allowed us continue to return capital to shareholders. In fiscal year 2023, we return $43.6 million to shareholders through a combination of dividends and share of buybacks.
Speaker 2: We believe, however, that consumption of reinforcing products is at an attractive level and that we're maintaining market share.
Speaker 2: Patience in the face of softer order entry rates is our best course of action.
Patients in the face of softer order entry rates as our best course of action.
Speaker 2: mining prices for metals has likely had a negative impact on the motivation by customers to rebuild inventory.
Declining prices for metals has likely had a negative impact on the motivation of our customers to rebuild inventories.
Speaker 2: While InSPIEL is not a price setter, we recognize the need to be competitive consistently.
While <unk> was not a price setter, we recognize the need to be competitive consistently.
Scot Jafroodi: This included a $2 per share special dividend as well as a four-red alert quarterly dividend, making a third consecutive year that we have paid a special dividend of a lease of $1.50 per share. Moreover, we refresh the approximately 8,000 shares of our common equity equivalent to $2.3 million through our share of buyback program. Turning to the macro indicators of our construction end markets, the most recent construction spending data continues to show strength.
Speaker 2: The fact remains, however, that lower prices do not stimulate demand so the tactic is questionable from a business perspective.
That remains however that lower prices do not stimulate demand. So the topic is questionable from a business perspective.
Speaker 2: We've mentioned before that declining steel prices create a headwind for in-steel earnings, which has clearly been the case over the last year during a period of significant reductions in steel scrap and hot roll prices.
We've mentioned before that declining steel prices create a headwind for in steel earnings, which has clearly been the case over the last year during a period of significant reductions in steel scrap and hot rolled pricing.
Speaker 2: We believe the downward slide has about run its course finally, and that steel prices are likely to rise in coming months.
We believe the downward slide has about run its course finally and that steel prices are likely to rise in coming months.
Scot Jafroodi: For the first eight months of the county year, total construction spending on a seasonally adjusted to annual basis is up 7.4% from last year. Non-residential construction spending was up almost 18% with public highway and street construction, one of the larger end uses for our products up over 12%. However, while construction spending remains elevated, U.S, cement shimmings another measure that we track can use July 2022 levels that shimmings are down 1.8% for July and 2.2% for the first seven months of the county year.
Speaker 2: Weaker than expected demand in Q4 caused us to continue reducing finished goods inventory levels, and we incurred the associated negative impact on operating costs.
Weaker than expected demand in Q4 caused us to continue reducing finished goods inventories inventory levels and we incurred the associated negative impact on operating costs, our plants experienced unfavorable impact of lower volume, while also feeling substantial emblaze.
Speaker 2: Our plants experienced unfavorable impact of lower volume while also feeling substantial inflationary pressures for all purchases, including energy, labor, spare parts, and operating supplies.
Eric pressures for all purchases, including energy labor spare parts and operating supplies.
Scot Jafroodi: The most recent reports were architectural billing and documentum indexes, leading indicators for non-residential building construction, implied softening business conditions in the coming year as high interest rates and tighter lending standards appear to be having an impact on construction markets. In September, the AVI dropped to $44.8, the lowest score reported since December 2020. The score is well below the growth threshold of $50, and would indicate its significant decline in billing and market downturn in business conditions and architectural firms.
Speaker 2: We believe that internal inventory corrections should be complete during the first quarter and that we should resume operations at a rate more in line with incoming orders. Nevertheless, Q1 will be another lackluster quarter as we complete inventory liquidations and as we contend with growing imports of low-priced PC Strand. Our expectations for the balance of fiscal 2024 are for much stronger performance.
We believe that internal inventory corrections should be complete during the first quarter and that we should resume operations at a rate more in line with incoming orders. Nevertheless, Q1 will be another lackluster quarter as we complete inventory liquidations and as we contend with growing imports of low priced P. C.
Strand or expectations for the balance of fiscal 2024 are for much stronger performance.
Scot Jafroodi: The documentum index was tracked non-residential building projects going into planning rose 3% in September up to 182.5. However, year-over-year the index is 5% lower. The AVI noted that the year-to-day trends would indicate an overall decline in commercial planning, and that going into 2024, planning levels will depend on improvement of financial conditions.
Speaker 2: We're optimistic about the impact on our markets of the Infrastructure Investment and Jobs Act, although it is difficult to point to specific projects that have affected demand.
We're optimistic about the impact on our market. So the infrastructure investment and jobs Act, although it is difficult to point to specific projects that have affected demand.
Speaker 2: There are indications that implementation of IIJA and traditional federal transportation spending may not focus so much on our infrastructure and mobility network as the administration's targets for funding its green priorities.
There are indications that implementation of J a.
And traditional federal transportation spending may not focus so much on our infrastructure and mobility network as the administrations targets for funding its green priorities.
Scot Jafroodi: In Dodge's August report, it was noted that weaker market fundamentals continue to undermine planning growth as tightening lending standards in the higher interest rate environment or beginning to impact both the commercial and institutional segments.
Speaker 2: According to DOT data, only 35% of traditional fiscal 2022 federal highway funding has been obligated, and just 11% has turned into outlay.
According to D O T data only 35% of traditional fiscal 2022 Federal Highway funding has been obligated and just 11% has turned into outlays.
Scot Jafroodi: This concludes my prepared remarks.
Howard Woltz: I will now turn the call back over to Abe. Thank you, Scott. We're pleased to have experienced an uptick and shipment year-over-year during the fourth quarter. Most of the improvement originated with shipments into our housing-related markets, which was unexpected. Shipments into infrastructure and other commercial applications will week in a continuation of the phenomenon we've experienced throughout the year where customers seem to be busier than their suppliers. Inventory liquidations by customers of both finished goods and reinforcing materials would explain market conditions, although we lack objective data to support such a claim.
Speaker 2: And with respect to IJA, the Secretary of Transportation has acknowledged, quote, delays of one, two, three, or more years between when funding is appropriated and authorized and when those dollars are assigned to a project, unquote.
And with respect to Iga as the Secretary of Transportation has acknowledged quote delays of 123 or more years between when funding is appropriated and authorized and putting those dollars are assigned to a project unquote.
Speaker 2: Meanwhile, of course, inflation is impacting project costs and higher costs are jeopardizing the viability of some projects.
Meanwhile of course inflation is impacting project costs and higher cost as jeopardizing the viability of some projects.
Speaker 2: Despite these obstacles, we believe that IIJA funds will ultimately be allocated to projects and spent, as intended, with a beneficial impact on our industry. The question is when, not if.
Despite these obstacles, we believe that I I J, a bonds will ultimately be allocated to projects and spinner as intended with a beneficial impact on our industry.
Howard Woltz: We believe, however, that consumption of reinforcing products is at an attractive level and that we're maintaining market share. Patients in the face of softer order entry rates is our best course of action. Declining prices for metals has likely had a negative impact on the motivation by customers to rebuild inventory. While Insteel is not a price setter, we recognize the need to be competitive consistently. The fact remains, however, that lower prices do not stimulate demand so the tactic is questionable from a business perspective.
Question is when not if.
Speaker 2: Turning to CapEx, we indicated in prior calls and press releases that our CapEx would step up in 2023, reflecting investments in three new production lines, as well as recurring expenditures to maintain our facilities and information.
Turning to Capex, we indicated in prior calls and press releases that our Capex would step up in 2023, reflecting investments in three new production lines as well as recurring expenditures to maintain our facilities and information systems.
Speaker 2: We ended fiscal 2023 with 30.7 million of capex invested in 3 new production lines as well as upgrades to our information systems and maintenance of our facility.
We ended fiscal 2023 with $37 million of Capex invested in three new production lines as well as upgrades to our information systems and maintenance of our facilities.
Howard Woltz: We've mentioned before that declining steel prices create a headwind for instile earnings, which has clearly been the case over the last year during a period of significant reductions in steel scrap and popular pricing. We believe the downward slide has about run its course, finally, and that steel prices are likely to rise in coming months. Weaker than expected demand in Q4 causes to continue reducing finished goods inventories, inventory levels, and we incurred the associated negative impact on operating costs.
Speaker 2: Because of component shortages related to supply chain problems, only one of the three production lines was in operation at the end of the fourth quarter. We expect the other two to come online during Q1 and Q2 of 2024. The investments we are making in state-of-the-art technology will expand our product capabilities and favorably impact our cash cost of production.
Cause of component shortages related to supply chain problems only one of the three production lines was in operation at the end of the fourth quarter. We expect the other two to come online during Q1 and Q2 of 2020 for.
The investments, we're making in state of the art technology will expand our product capabilities and favorably impact our cash cost of production.
Speaker 2: We expect CAFEX for 2024 to come in at approximately $30 million as we continue to modernize our facilities and information systems, invest for growth, and invest to lower our cash cost of production.
We expect Capex for 2020 or to come in at approximately 30 million as we continue to modernize our facilities and information systems invest for growth and invest to lower our cash cost of production.
Howard Woltz: Our plants experienced unfavorable impact of lower volume while also feeling substantial inflationary pressures for all purchases, including energy, labor, spare parts, and operating supplies. We believe that internal inventory corrections should be complete during the first quarter and that we should resume operations at a rate more in line with incoming orders. Nevertheless, Q1 will be another lackluster quarter as we complete inventory liquidations and as we contend with growing imports of low-priced PT strand.
Speaker 2: As pointed out in the release, the company completed fiscal 2023 debt free with more than $125 million cash on hand.
As pointed out in the release the company completed fiscal 2023 debt free with more than $125 million of cash on hand.
Speaker 2: Consistent with actions taken by the board of directors in recent years, we will evaluate the capital needs of the company and will have information about any return of capital to our shareholders following our November board meeting.
With the actions taken by the board of directors in recent years, we will evaluate the capital needs of the company and we will have information about any return of capital to shareholders. Following our November Board meeting.
Speaker 2: Looking ahead, we're aware of rising risk related to the future performance of the U.S. economy and we're monitoring the environment.
Looking ahead, we're aware of rising risk related to the future performance of the U S economy, and we're monitoring the environment.
Howard Woltz: Our expectations for the balance of fiscal 2024 are for much stronger performance. We're optimistic about the impact on our markets of the Infrastructure Investment and Jobs Act, although it is difficult to point to specific projects that have affected demand. There are indications that implementation of IJA and traditional federal transportation spending may not focus so much on our infrastructure and mobility network as the administration targets for funding its green priorities. According to DOT data, only 35% of traditional fiscal 2022 federal highway funding has been obligated and just 11% has turned into outlays.
Speaker 2: We believe that in addition to elevated interest rates, heightened conservatism among customers that are concerned about the macro environment could be contributing to the slow market recovery.
We believe that in addition to elevated interest rates heightened conservatism among customers that are concerned about the macro environment could be contributing to the slow market recovery in any event, we're well positioned to aggressively pursue actions to maximize shipments and optimize our costs and to.
Howard Woltz: And with respect to IJA, the Secretary of Transportation has acknowledged, quote, delays of 1, 2, 3, or more years between when funding is appropriated and authorized and when those dollars are assigned to a project, unquote. Meanwhile, of course, inflation is impacting project costs and higher cost is jeopardizing the viability of some projects. Despite these obstacles, we believe that IJA funds will ultimately be allocated to projects and spent as intended with a beneficial impact on our industry.
Speaker 2: In any event, we're well positioned to aggressively pursue actions to maximize shipments and optimize our faults and to pursue attractive growth opportunities both organic and through acquisition.
Pursue attractive growth opportunities, both organic and through acquisition.
Speaker 2: This concludes our prepared remarks and we'll now take your questions. Bruno, would you please explain the procedure for asking questions?
This concludes our prepared remarks, and we will now take your questions Vornado would you. Please explain the procedure for asking questions.
Speaker 1: Sure, thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 1 on your telephone keypad. That's star 1.
Sure. Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone keypad.
Thats Star one on your telephone keypad.
Speaker 1: To withdraw your question, press star followed by two and please do also remember to unmute a microphone when it's your turn to speak. We'll now give you a couple of seconds.
To withdraw your question Press Star followed by two I'm pleased to also remember to anemia to microphone when it's your turn to speak.
We will now give you a couple of seconds together with some questions.
Speaker 1: OK, we have our first question coming through. It comes from Giulio Romero from C.DOT Company. Giulio, your line is now open. Please proceed.
Okay. We have our first question coming through he comes from Julio Romero from Sidoti <unk> Company. Your line is now open. Please proceed.
Okay.
Speaker 4: Thanks hey, good morning. Good morning. Scott. Maybe just start the.
Thanks, Hey, good morning, H good morning, Scott.
Maybe to start.
B.
Speaker 4: Hey, good morning. So to start on maybe selling prices, you mentioned a number of factors that affected pricing during the quarter, competitive pressures, scrap pricing trending downward and the import pressure on the PC strand side. Could you maybe rank order those factors for us in terms of what was most impactful during the quarter?
The.
Hey, good morning, so to start on maybe selling prices you mentioned a number of factors that affected pricing during the quarter.
Howard Woltz: The question is when, not if. Turning to CAPEX, we indicated in prior calls and press releases that our CAPEX would step up in 2023, reflecting investments in three new production lines, as well as recurring expenditures to maintain our facilities and information systems. We ended fiscal 2023 with 30.7 million of CAPEX, invested in three new production lines, as well as upgrades to our information systems and maintenance of our facilities, because of component shortage is related to supply chain problems only one of the three production lines was in operation at the end of the fourth quarter.
<unk> pressures scrap pricing trending downward in the.
The import pressure on the PC strand side could you maybe rank order those factors for us in terms of what was most impactful during the quarter.
Speaker 2: I would tell you it's just mainly competitive pricing pressures pretty much across the board. If you were to take a snapshot of contemporaneous purchases and sales, we don't have a margin collapse on our hands. What we have is a significant reset in...
Well I would tell you, it's just mainly competitive pricing pressures are pretty much across the board.
And you.
If you were to take a snapshot of.
Contemporaneous purchases.
Sales.
We don't we don't.
Have a margin collapse on our hands, what we have is a significant reset and.
Howard Woltz: We expect the other two to come online during Q1 and Q2 of 2024. The investments we're making in state-of-the-art technology will expand our product capabilities and favorably impact our cash cost of production. We expect CAPEX for 2024 to come in at approximately 30 million as we continue to modernize our facilities and information systems, invest for growth, and invest to lower our cash cost of production. As pointed out in the release, the company completed fiscal 2023 debt-free with more than 125 million cash on hand.
And.
Speaker 2: pricing throughout the supply chain and the inventory impact and flows of inventory through cost of sales has been something we've been unable to get ahead of.
Pricing throughout the supply chain and the inventory impact flows of inventory through cost of sales. So that's been something we just we've been unable to get ahead of.
Speaker 4: Understood and the competitive pressure would that be both on the domestic and the imported side? Yeah, I would tell you it's pretty much across the board.
Understood.
Competitive pressure would that be both on the on the domestic Andy imported side.
Yeah, I would tell you it's pretty much across the board.
Okay. That's helpful.
Speaker 4: Maybe just on the import competition on the PC-SARAN side, can you maybe just talk about that a little bit and how much more of the recent growing influence of those imports have been to freight costs coming down versus other factors?
Maybe just on the import competition on the PC strand side can you, maybe just talk about that a little bit and how much more of a recent growing influence of those imports have been to freight costs coming down versus other factors.
Howard Woltz: Consistent with actions taken by the board of directors in recent years, we will evaluate the capital needs of the company and will have information about any return of capital of a shareholder following our November board meeting. Looking ahead, we're aware of rising risk related to the future performance of the U.S, economy and we're monitoring the environment. We believe that in addition to elevated interest rates, heightened conservatism among customers that are concerned about the micro-environment could be contributing to the slow market recovery. In any event, we're well positioned to aggressively pursue actions to maximize shipments and optimize our costs and to pursue attractive growth opportunities both organic and through acquisition.
Speaker 2: Yeah, I don't know that we can actually quantify it for you. And we've seen this coming.
Yeah, I don't know that I don't know that we can actually quantify it for you and you know it.
We've seen this coming.
And.
Speaker 2: Now it's here. There were a few factors that insulated our market from lower priced imports, including freight rates that skyrocketed during the 21, 22 period. All of that is normalized and we're now seeing.
And now it's here.
There were a few factors that insulated our market from from lower priced imports, including freight rates skyrocketed.
'twenty one 'twenty two period of all of that is normalized.
Our analyses were seeing significant import action and keep in mind that we do get a forward look at this because.
Speaker 2: we're seeing significant import action. And keep in mind that we do get a forward look at this because customers who are purchasing import materials generally do so two, three, four months ahead of taking receipts. So we know what's going on in that market.
Howard Woltz: This concludes our prepared remarks and will now take your questions.
Bernardo: Bernardo, would you please explain the procedure for asking questions? Sure. Thank you.
Customers, who are purchasing import materials generally do so two to three four months ahead of taken receipt. So we know what what's going on in that market.
Bernardo: Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star followed by two and please do also remember to unmute a microphone when it's your turn to speak. We'll now give you a couple of seconds to gather some questions. Okay, we have our first question coming through.
Speaker 2: ahead of the imports actually hitting the U.S. market. So that's what we're seeing. It certainly began in earnest toward the end of Q4. We'll see it in Q1, we'll see it in Q3.
I stay out of.
The imports actually hitting the U S market. So that's what we're seeing it it certainly began in earnest.
Towards the end of Q4, we will see it in Q1, but we'll see.
Speaker 2: pursue additional trade cases sometime in 2020.
So pursue additional trade cases sometime in 2024.
Julia Romero: It comes from Julia Romero from C.C, company. Julia, your line is now open. Please proceed. Thanks. Hey, good morning. Good morning, Scott. Maybe to start the day. Good morning. So to start on, maybe selling prices. You mentioned a number of factors that affected pricing during the quarter. Competitive pressures, scrap pricing, trending downward and the import pressure on the PC's translate. Could you maybe rank order those factors for us in terms of what was most impactful during the quarter?
Speaker 4: Very helpful and then just I'll squeeze one in on demand if I could just speak to. You know what you're hearing or seeing from your customers in terms of.
Very helpful. And then just I'll squeeze one in on demand if I could.
Just speak to.
What youre hearing or seeing from your customers in terms of.
Speaker 4: Maybe what they're seeing on the private non residential. Demand side.
Maybe what they're seeing.
On the private nonresidential demand side.
Speaker 2: Well, we don't necessarily know whether it's private non-residential or whether it's public non-residential. But if you wrap those two families together in, let's just say, non-risk construction, our customers are busy, that they're...
Well, we don't necessarily know, whether it's private nonresidential or whether it's public nonresidential, but.
But if you wrap those two those two families together and let's just say non risk construction our customers are busy.
Julia Romero: Well, I would tell you it's just mainly competitive price and pressures pretty much across the board. And you know, if you were to take a snapshot of contemporaneous purchases and sales, we don't have a margin collapse on our hands.
That there they're regionally there are always some winners and losers, but it's remarkable that the level of quotations and the level of shipments and backlog at our customers have is generally positive regionally there are definite.
Speaker 2: Regionally, there are always some winners and losers, but it's remarkable that the level of quotations and the level of shipments and backlog that our customers have is generally positive. Regionally, there are definitely...
Scot Jafroodi: And what we have is a significant reset, and pricing throughout the supply chain and the inventory impact and flows of inventory through cost of sales has been something we just we've been unable to get a head off. Understood and the competitive pressure would that be both on the domestic and the imported side? Yeah, I would tell you it's pretty much across the board. Okay, that's helpful. Maybe just on the import competition on the PC's to the inside, can you maybe just talk about that a little bit and how much more of the recent growing influence of those imports have been to freight costs coming down versus other factors?
At least some differences, but but as a general statement I think consumption of our products is better than the market indicators would have you believe at this point.
Speaker 2: But as a general statement, I think consumption of our products is better than the market indicators would have you believe at this point.
Speaker 4: Okay, very helpful. I'll pass it along. Thanks very much. Thank you.
Okay very helpful. I'll pass it along thanks very much thank you.
Speaker 1: As a reminder ladies and gentlemen, if you like to ask a question, please press star 1 on your telephone keypad. That's star 1 on your telephone keypad.
As a reminder, ladies and gentlemen, I would like to ask a question. Please press star one on your telephone keypad.
Thats Star one on your telephone keypad.
Speaker 1: Our next question comes from Tyson Bauer from KC Capital. Tyson, your line's not open. Please go ahead.
Our next question comes from Tyson Bauer from KC capital.
Please send your line is now open. Please go ahead.
Yeah.
Good morning, gentlemen.
Good morning Tyson.
Speaker 5: And congratulations on doing your part to fight against inflation and pricing. So the Fed appreciates that. Hopefully the shareholders stay with us and they'll work our way through this as we get toward the end of it. When we have price pressures on imports.
And congratulations on doing your part to fight against inflation in pricing so the fed appreciates that.
Scot Jafroodi: Yeah, I don't know that we can actually quantify it for you and you know we've seen this coming and now it's here, you know that there were a few factors that insulated our market from lower priced imports, including freight rates that skyrocketed during the 21-22 period of all of that is normalized and we're now seeing significant import action and keep in mind that we do get a forward look at this because customers who are purchasing import materials generally do so two, three, four months ahead of taken receipt so we know what's going on in that market ahead of the imports actually hitting the U.S, market so that's what we're seeing it certainly began in earnest toward the end of Q4 we'll see Q1 and we'll see it in person additional trade cases sometime in 2024.
Hopefully the shareholders.
Stay with us and work our way through this as we get towards the end of it.
When we have price pressures on imports.
Speaker 5: Sometimes that can also lead to advantages for you in purchasing supply of wire rod from foreign sources. Has that not presented itself as an opportunity this go around or are you seeing opportunities in that regard?
Sometimes that can also lead to advantages for you in purchasing supply of wire rod.
From foreign sources.
Has that not presented itself as an opportunity. This go around or are you seeing opportunities in that regard.
Speaker 2: Keep in mind that all of our raw material purchases are subject to the Section 232 tariff of 25%, which has had the impact of certainly making offshore purchases less attractive.
Well keep in mind that says all of our raw material purchases are subject to the section 232 tariff of 25%.
Which has had an impact of <unk>.
Certainly make an offshore purchases less attractive.
Speaker 2: The other reality of offshore purchases is extraordinarily long lead times, which create risk for us that is not particularly attractive at the present time. I would say that our offshore material purchases are probably a low-ev at this point.
Other the other reality of <unk>.
Offshore purchases is extraordinarily long lead times, which create risk for us.
It is not particularly attractive at the present time so.
So I would say that our offshore material purchases are probably at a low ebb at this point.
Okay.
Speaker 5: You talked about the competitive pricing. The supply seems to be obviously very adequate within the domestic marketplace. Yet, we're spending $60 million over a two-year period to expand capacity through three more production lines and other... I'm sure there's maintenance included in that and other things.
Your you talked about the competitive pricing the supply seems to be obviously very adequate within the domestic marketplace, yet we're spending $60 million over a two year period to expand capacity through three more production lines and other im sure there is maintenance.
Julia Romero: Very helpful and then just I'll squeeze one in on demand if I could just speak to what you're hearing or seeing from your customers in terms of maybe what they're seeing on the private non-residential demand side.
Scot Jafroodi: Well, we don't necessarily know whether it's private non-residential or whether it's public non-residential but if you wrap those two families together and let's just say non-risk instruction our customers are busy that they're there regionally they're always some winners and losers but it's remarkable that the level of quotations and the level of shipments and backlog that our customers have is generally positive regionally there are definitely some differences but as a general statement I think consumption of our products is better than the market indicators would have you believe at this point. Okay.
<unk> in that and other things.
Speaker 5: kind of break down what your return expectations are for that $60 million in regards to increase opportunities of revenue Versus maybe just getting the better handle on your costs and the cost per unit as you production going forward
Kind of break down what your return expectations are for that $60 million in regards to increase opportunities of revenue versus maybe just getting a better handle on your cost and the cost per unit as production going forward.
Speaker 2: Well, I can't quantify those components, but you have identified correctly that the investments that we are making have both.
Well.
I can't quantify those components, but you have identified correctly that the investments that we're making have both.
Speaker 2: potential for increasing revenue and significantly reducing the cash cost of production on products that we're currently producing. So as a general return expectation, I can tell you that we would expect these investments to return in excess of our cost of capital.
<unk> four for increasing revenue and significantly reducing the cash cost of production of products that we're currently producing.
So so as a general return expectation I can tell you that that we would expect these investments to return in excess of our cost of capital.
Speaker 2: We don't try to push it further than that.
We don't we don't try to push it further than that.
Scot Jafroodi: Very helpful. I'll pass it along. Thanks very much. Thank you. As a reminder, ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. That's star one on your telephone keypad.
Speaker 2: And I hope also to mention that just to repeat what was said in our last conference call, you know,
And the NFL playoffs.
Just just to repeat what we've said in our last conference call.
Speaker 2: You don't get to pick your time for starting these investments off. There's a year and a half to two year lead time to get these things done.
You don't get to pick your time for starting these these investments up there there is a year and a half to two year lead time to get these things done. They are the projects that we've undertaken are critical to the future of the company and I would argue deserve these investments.
Tyson Bauer: Our next question comes from Tyson Bauer from KC Capital. Tyson, your line's not open. Please go ahead.
Scot Jafroodi: Good morning, gentlemen. Good morning, Tyson. And congratulations. I'm doing your part to fight against inflation and pricing. So the Fed appreciates that. Hopefully the shareholders stay with us and work our way through this, as we get toward the end of it. When we have price pressures on imports, sometimes that can also lead to advantages for you in purchasing supply of wire rod from foreign sources. Has that not presented itself as an opportunity this go around, or are you seeing opportunities in that regard?
Speaker 2: The projects that we've undertaken are critical to the future of the company, and I would argue these investments deserve to be made regardless of the market outlook because they're critical going forward.
Serve to be made regardless of the market outlook because there they are critical going forward.
Speaker 5: Right, especially given the equipment timeline and such forth.
Right, especially given the equipment timeline.
Speaker 5: Your balance sheet obviously easily supports a $2 special dividend what we've seen here recently. The question is, does your general outlook?
Sure.
Your balance sheet, obviously easily supports a.
$2 special dividend, what we've seen here recently.
Question is does your general outlook or Azure exhibited a year ago, even though the cash used for working capital drain some of that balance you are able to look at a three four year horizon to justify that special dividend.
Speaker 5: or as you exhibited a year ago even though the cash used for working capital drained some of that balance.
Speaker 5: you are able to look on a three, four year horizon to justify that special dividend. Same parameters, this go round, you have the cash.
Scot Jafroodi: Well, keep in mind that all of our raw material purchases are subject to the Section 232 tariff of 25%, which has had the impact of certainly making offshore purchases less attractive. The other reality of offshore purchases is extraordinarily long lead times, which create risk for us that is not particularly attractive at the present time. So I would say that our offshore material purchases are probably a low end at this point. Okay.
Same parameters, let's go around you have the cash the outlook, maybe a little weaker for Q1, but overall, you're generally positive in the outlook that would be supportive.
Speaker 5: The outlook may be a little weaker for Q1, but overall, you're generally positive in the outlook. That would be...
Speaker 2: You well know, because you're familiar with the company, that we've never claimed to have great insight to what happens two, three, four quarters out. But we don't see a train wreck coming our way in 2024 or 2025. We think that while there may be a downturn, there are a lot of countervailing factors that would...
Yeah.
You will know because you're familiar with the company that we've never we've never claimed to have great insight to what happens 234 quarters out, but but we don't see a train wreck coming our way in 2024 or 2025, what do you think that.
While there may be a downturn there are a lot of countervailing factors that would that would support the nonresidential construction market.
Speaker 2: that would support the non-residential construction market. We don't feel like the sky is falling.
Scot Jafroodi: You talked about the competitive pricing, the supply seems to be obviously very adequate within the domestic marketplace. Yet we're spending $60 million over a two-year period to expand capacity through three more production lines, and I'm sure there's maintenance included in that and other things. Kind of break down what your return expectations are for that $60 million in regards to increase opportunities and revenue versus maybe just getting a better handle on your costs and the cost per unit as you production going forward.
And so so we're not.
We don't feel like the Sky is falling.
Okay.
Speaker 5: Have you come to a point where reviewing operational adjustments?
Have you come to a point, where reviewing operational adjustments.
Speaker 5: and where you look at whether we should be really protecting market share versus margin protection or you looking at the margin will kind of settle itself out with the inventory adjustments. Thus, it's more important to protect your market share.
Yeah.
You look at whether we should be really protecting market share versus margin protection or are you looking at the margin will kind of subtle itself out.
With the inventory adjustments the us it's more important to protect your market share.
Speaker 2: No, I mean, I mean, as I stated in my prepared comments that that
No I mean, I mean, it is as I stated in my prepared comments that that we'd expect to be competitive in the market on a consistent basis and and we will be our customers expect that of us, we expect of ourselves and and we.
Scot Jafroodi: Well, I can't quantify those components, but you have identified correctly that the investments that we are making have both the potential for increasing revenue and significantly reducing the cash cost of production on products that we're currently producing. So as a general return expectation, I can tell you that we would expect these investments to return in excess of our cost of capital. We don't try to push it further than that, and I also tell a nation that just to repeat what was said in our last conference call, you know, you don't get to pick your time for starting these investments up.
Speaker 2: We expect to be competitive in the market on a consistent basis.
Speaker 2: and we will be. Our customers expect that of us. We expect it of ourselves. We're not going to hold an umbrella over the market. I think we have the cost structure to compete with anyone. As I said, we don't want to be price setters. We think the tactic of lowering prices is naive to say that we're going to be price setters.
We're not going to hold an umbrella over the market I think we have the cost structure to compete with anyone as I said, we don't want to be priced centers. We think the tactic of lowering prices is is naive to say the least.
Speaker 2: But nevertheless, there's a market out there and we're going to compete and we'll let the results fall out where they are. But we're not going to hold an umbrella over the market.
But but nevertheless, there's a market out there and we're going to compete and and we'll we'll let the well let the results fall out where they are but but we're not going to hold an umbrella over the market.
Speaker 5: Last question for me, probably directed to Scott. The monthly trends in the last two quarters, we've had the front end month show a good recovery from the previous quarter, and then the rest of the quarter falls below expectations. We had a good April , we had a good July , and then all of a sudden we have this rapid decline for various reasons that you've explained. When you look at this list, you can see we've done some quick projections of the milk changeout in the last 3 quarters and we have Franklin Mandela in the last quarter.
Okay and last question for me.
Probably directed there Scott.
The monthly trends in the last two quarters, we've had their front end month show a good recovery from the previous quarter.
Scot Jafroodi: There's a year and a half to two year lead time to get these things done. The projects that we've undertaken are critical to the future of the company and I would argue deserve these investments deserve to be made regardless of the market outlook because they're critical going forward. Right, especially given the equipment timeline and such work, your balance sheet obviously easily supports a $2 special dividend, what we've seen here recently. The question is, does your general outlook or as you exhibited a year ago, even though the cash used for working capital drains some of that balance, you were able to look on a three, four year horizon to justify that special dividend.
Rest of the quarter kind of falls below expectations.
We had a good April we had a good July and then all of a sudden we have this rapid decline for various reasons that you've explained.
Speaker 5: Anything unique that you can see that would have created that impact, or is that just how the numbers worked out?
Did anything unique that you can see that would've created that impact or is that just how the numbers worked out.
Speaker 3: There's something unique there that's how it worked out for the corner.
There is nothing unique there.
Just how it worked out for the quarter.
Speaker 5: Okay, but that anticipation is for the rest of this year. We're going to start out kind of as we end it and probably just kind of stay tight or stable until we get into the next year's seasonally stronger quarter.
Okay, but that in anticipation is for the rest of this year, we're gonna start out kind of as we ended and probably just kind of stay tight or stable until we get into the next year seasonally stronger quarters.
Speaker 2: I think the influence is that we're dealing with right now types of related to reducing inventory and the impact on our plants. And certainly, I mean, the level of volume that's out there isn't particularly impressive anyway, but we have exacerbated that impact with our inventory reduction effort.
But I think the influences that we're dealing with right now price on a related to reducing inventory and the impact on our plants.
Scot Jafroodi: Same parameters, let's go around. You have the cash. The outlook may be a little weaker for Q1, but overall, you're generally positive in the outlook that would be supportive. Yeah, I mean, you well know because you're familiar with the company that we've never, we've never claimed to have great insight to what happens to 34 quarters out. But we don't see how there may be a downturn. There are a lot of camera-vailing factors that would support the non-residential construction market. And so we're not, we don't feel like skies falling. Okay.
And certainly certainly I mean.
The level of volume that's out there isn't a particularly impressive anyway, but but we have exacerbated that impact with our inventory reduction.
Efforts, which are are clearly called for but nevertheless, they're painful. So I think I think that that that's a big driver of what you're seeing.
Speaker 2: clearly called for, but nevertheless they're painful. So I think that's a big driver of what you're seeing. What you're seeing.
Okay. Thank you gentlemen.
Okay. Thank you.
Yeah.
Speaker 1: We currently have no further questions so I would like to hand the call back to H. Volts to closing remarks.
We currently have no further questions. So I would like to hand, the call back to May 12, two closing remarks.
Speaker 2: We appreciate your interest in the company. We look forward to talking to you next quarter and we encourage you to follow up with us if you have continuing questions. Thank you.
Okay. Thank you. We appreciate your interest in the company, we look forward to talking to you next quarter and we encourage you to follow up with US if you have continuing questions. Thank you.
Scot Jafroodi: Do you have you come to a point where reviewing operational adjustments and where you look at whether we should be really protecting market share versus margin protection, or are you looking at the margin will kind of settle itself out with the inventory adjustments, thus it's more important to protect your market share? No, I mean, as I stated in my prepared comments that we expect to be competitive in the market on a consistent basis.
Speaker 1: Well, ladies and gentlemen, this concludes today's call. Thank you for joining. You may not disconnect your lines. Thank you.
Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines. Thank you.
You may now disconnect your lines. Thank you.
Scot Jafroodi: And we, and we will be. Our customers expect that of us. We expect to them ourselves. And we're not going to hold an umbrella over the market. I think we have the cost structure to compete with anyone. As I said, we don't want to be price-setters. We think the tactic of lowering prices is naive to say the least. But nevertheless, there's a market out there and we're going to compete. And we'll let the results fall out where they are. But we're not going to hold an umbrella over the market. Okay.
Scot Jafroodi: And last question for me, probably directed to Scott. The monthly trends in the last two quarters. We've had the front-end month show a good recovery from the previous quarter. And then the rest of the quarter kind of falls below expectations. We had a good April. We had a good July. And then all of a sudden, we have this rapid decline for various reasons that you've explained. Do anything unique that you can see that would have created that impact or that's just how the numbers worked out?
Scot Jafroodi: There's nothing unique there, that's just how it worked out through the quarter. Okay, but that anticipation is for the rest of this year, we're going to start out kind of as we ended and probably just kind of stay tight or stable until we get into the next year seasonally stronger quarters. Well, I think the influence is that we're dealing with right now, Tyson, are related to reducing inventory and the impact on our plants.
Scot Jafroodi: And certainly, certainly, I mean, the level of volume that's out there isn't particularly impressive anyway, but we have exacerbated that impact with our inventory reduction efforts, which are clearly called for. But nevertheless, they're painful, so I think that that's a big driver of what you're seeing.
Tyson Bauer: Okay, thank you, gentlemen.
Howard Woltz: Okay, thank you.
Howard Woltz: We currently have no further questions, so I would like to hand the call back to H.
Howard Woltz: Woltz to closing remarks. Okay, thank you. We appreciate your interest in the company. We look forward to talking to you next quarter and we encourage you to follow up with us on if you have continuing questions. Thank you.
Howard Woltz: Well, ladies and gentlemen, this concludes today's call. Thank you for joining. You may not disconnect your lines. Thank you. I know disconnect your lines.
Thank you.