Q4 2023 Olympic Steel Inc Earnings Call

Operator: Greetings, good morning, and welcome to the Olympic Steel 2023 fourth quarter financial results conference call. At this time, all participants will be in a listen-only mode.

Greetings, good morning, and welcome to the Olympic Steel 2023 for fourth quarter financial results Conference call.

At this time, all participants will be in a listen only mode.

Operator: If anyone should require operator assistance during the conference today, please press star zero from your telephone keypad. Also, if you'd like to participate in our question and answer session today, please press star 1 from your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to withdraw your question from the queue.

If anyone should require operator assistance during the conference today. Please press star zero from your telephone keypad.

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Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Please note that this conference is being recorded. At this time, I'd like to hand the conference over to Rich Manson, Chief Financial Officer at Olympic Steel. Please go ahead.

For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys.

Please note that this conference is being recorded.

At this time I'd like to hand, the conference over to Rich Manson Chief Financial Officer at Olympic Steel.

Please go ahead Sir.

Richard A. Manson: Thank you, Operator. Welcome to Olympic Steel's earnings call for the fourth quarter of 2023. Our call this morning will be hosted by our Chief Executive Officer, Rick Marabito, and we will also be joined by our President and Chief Operating Officer, Andrew Greiff. Before we begin, I have a few reminders.

Thank you operator, welcome to Olympic Steel's earnings call for the fourth quarter of 2023, our call. This morning will be hosted by our Chief Executive Officer, Rick Mirabito and we will also be joined by our President and Chief operating Officer, Andrew Greiff.

Before we begin I have a few reminders. Some statements made on today's call will be predictive and are intended to be made as forward looking within the safe Harbor provisions of the private Securities Litigation Reform Act of 1095 and May not reflect actual results.

Richard A. Manson: Some statements made on today's call will be predictive and are intended to be made as forward-looking within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and may not reflect actual results. The company does not undertake to update such statements, changes in assumptions, or changes in other factors affecting such forward-looking statements. Important assumptions, risks, uncertainties, and other factors that could cause actual results to differ materially are set forth in the company's reports on Forms 10-K and 10-Q and in the press releases filed with the Securities and Exchange Commission. During today's discussion, we may refer to Adjusted Net Income for Diluted Share, EBITDA, and Adjusted EBITDA, which are all non-GAAP financial measures. A reconciliation of these non-gap measures to the most directly comparable gap financial measures is provided in the press release that was issued last night and can be found on our website. Today's live broadcast will be archived and available for replay on Olympic Steel's website.

The company does not undertake to update such statements changes in assumptions or changes in other factors affecting such forward looking statements.

Important assumptions risks uncertainties and other factors that could cause actual results to differ materially are set forth in the Companys reports on forms 10-K, and 10-Q and press releases filed with the Securities and Exchange Commission.

During today's discussion we may refer to adjusted net income per diluted share EBITDA and adjusted EBITDA, which are all non-GAAP financial measures.

A reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures is provided in the press release that was issued last night and can be found on our website.

Today's live broadcast will be archived and available for replay on Olympic steels website at.

Richard T. Marabito: At this time, I'll turn the call over to Rick. Thanks, Rich, and good morning, everyone. Thank you for joining us today to discuss Olympic Steel's 2023 fourth quarter and full year results. I'll begin by talking about our 2023 performance and the strategic progress we've made over the last five years. Then, Andrew will review our segment performance, and following that, Rich will discuss our financial results in more detail, and, of course, then, as always, we'll open up the call to your questions. It was another highly successful year for Olympic Steel. We believe our 2023 performance is a defining statement about our company's strength and resilience. For the second year in a row, we withstood a hot roll carbon steel index price decline of more than 45% during the year, as well as specialty metal surcharges that fell throughout the year.

At this time I'll turn the call over to Rick.

Thanks, Rich and good morning, everyone. Thank you for joining us today to discuss Olympic Steel's 2023 fourth quarter and full year results I'll begin by talking about our 2023 performance and the strategic progress we've made over the last five years, then Andrew will review our segment performance.

And following that rich will discuss our financial results in more detail and of course, then as always we'll open up the call for your questions.

It was another highly successful year for Olympic steel.

We believe our 2023 performance is a defining statements about our company's strength and resilience.

For the second year in a row, we withstood a hot rolled carbon steel index pricing decline of more than 45% during the year as well as specialty metals surcharges that fell throughout the year.

Richard T. Marabito: Yet, despite these significant pricing fluctuations, we delivered on our strategy and commitment to generate consistent, profitable results. We reported fourth-quarter sales of $489 million, with net income of $7.4 million and EBITDA of $20.9 million. All three of our business segments positively contributed to our results for both the fourth quarter and the full year. Our Pipe & Tube business delivered its second most profitable year ever.

Yet despite these significant pricing fluctuations, we delivered on our strategy and commitment to generate consistent profitable results.

We reported fourth quarter sales of $489 million with.

With net income up seven $4 million and EBITDA of $29 million.

All three of our business segments positively contributed to our results for both the fourth quarter and the full year, our pipe and tube business delivered its second most profitable year ever.

Richard T. Marabito: Our carbon business showed its resilience in navigating the pricing pressures of 2023 with improvements in sales and gross margin. And although specialty models faced industry-wide stainless steel headwinds, this segment contributed consistent, positive EBITDA. We are now five years into our strategy to build a more diversified company that delivers results and creates shareholder value, even under challenging market conditions. During that time, we've successfully integrated six acquisitions, each of which has added a unique value-added offering to our portfolio.

Our carbon business showed its resiliency and navigating the pricing pressures of 2023 with improvements in sales and gross margins.

And although specialty metals faced industry wide stainless steel headwinds. This segment contributed consistent positive EBITDA we.

We are now five years into our strategy to build a more diversified company that delivers results and create shareholder value even under challenging market conditions.

During that time, we've successfully integrated six acquisition each of which has added a unique value added offering to our portfolio.

Richard T. Marabito: We were recently named Corporate Dealmaker of the Year by the Cleveland Association for Corporate Growth for a Metal Fab acquisition in January 2023. We have also strategically divested assets to further tighten our focus on higher return, higher value-add products. And throughout our transformation, we've stayed true to our operating discipline.

We were recently named corporate Dealmaker of the year by the Cleveland Association for corporate growth for our metal Fab acquisition in January 2023.

We are also strategically divested assets to further tighten our focus on higher return higher value add products and throughout our transformation. We've stayed true to our operating disciplines. Our success as a result of all of these actions.

Richard T. Marabito: Our success is a result of all these actions. Our inventory management and strong cash flow have fortified our balance sheet and position Olympic Steel for future growth. In 2023, we invested $170 million in the highly accretive Metal Fab and Central Tube & Barb acquisitions, and both investments have produced immediate, strong EBITDA returns. However, our total debt increased by only $25 million to $190 million at year-end, with availability of approximately $339 million

Our inventory management and strong cash flow have fortified our balance sheet and position Olympic steel for future growth.

In 2023, we invested $170 million and the highly accretive metal fab and central tube and Barb acquisitions and both investments have produced immediate strong EBITDA returns. However.

However, our total debt increased by only $25 million to $190 million at year end with availability of approximately $339 million as a.

Richard T. Marabito: As a result, we remain in an excellent position to continue to invest in higher return opportunities in the future. The recent decision by our Board of Directors to increase our quarterly dividend by 20% also reflects our company's strong financial position and the success of our strategy. Cumulatively, we've raised our quarterly dividend from $0.02 per share to $0.15 per share since 2022, reinforcing our commitment to deliver value to our shareholders. Our total shareholder return for 2023 was just over 100%, and for the three-year post-COVID period, our return was over 400%. I'm proud of the entire Olympic Steel team for their commitment to our strategy and the progress we've made in the past five years. And we continue to enhance our team with new hires and promotion.

We remain in excellent position to continue to invest in higher return opportunities in the future.

The recent decision by our board of directors to increase our quarterly dividend by 20% also reflects our company's strong financial position.

And the success of our strategy Q.

Cumulatively, we've raised our quarterly dividend from <unk> <unk> per share to <unk> 15 per share since 2022, reinforcing our commitment to deliver value to our shareholders.

Our total shareholder return for 2023 was just over 100% and for the three year post Covid period, our return was over 400%.

I am proud of the entire Olympic steel team for their commitment to our strategy and the progress we've made in the past five years and we continue to enhance our team with new hires and promotions.

Richard T. Marabito: In January 2024, we announced the promotion of Zach Siegal to the new role of president of Manufactured Metal Products. Zach has been with the company since 2007, and for the past six years, he's played an instrumental role in our acquisition strategy. In his new role, Zach will lead our newly created Manufactured Metals Products Group, one of the growth areas of our company, while he remains involved in the company's mergers and acquisition activities. As we head into 2024, Olympic Steel is stronger than ever.

In January 2024, we announced the promotion of Zachary siegal to the new role of President manufactured metal products Zach.

Zack has been with the company since 2007 and for the past six years. He has played an instrumental role in our acquisition strategy in his new role Zach will lead our newly created manufactured metals products group one of the growth areas of our company.

While he remains involved companies mergers and acquisition activity.

As we head into 2020 for Olympic steel is stronger than ever we remain committed to our disciplines of managing working capital operating expenses cash flow and debt. While we continue looking for opportunities to further expand our portfolio of higher return higher value add.

Richard T. Marabito: We remain committed to our disciplines of managing working capital, operating expenses, cash flow, and debt, while we continue looking for opportunities to further expand our portfolio of higher return, higher value-added products through both organic growth and acquisition. We're confident in our ability to build on our success in 2024, driving profitable growth and creating value for our shareholders. Now, I'll turn the call over to...

Products through both organic growth and acquisitions, we're confident in our ability to build on our success in 2020 for driving profitable growth and creating value for our shareholders.

So now I'll turn the call over to Andrew.

Andrew S. Greiff: Thank you, Rick, and good morning, everyone. Olympic Steel finished the year strong, capping off another year of solid performance despite challenging and dynamic market conditions. As Rick noted, this performance reflects the success of our strategy and our ongoing commitment to our operating disciplines. Our adjusted EBITDA was $16.7 million for the fourth quarter and $97.6 million for the year. Our pipe and tube segment had another exceptional quarter as this segment completed its second best full year in its 109-year history with adjusted EBITDA of $40.3 million. Our strategy to increase the amount of value-added mix and upgrades and additions to our laser fleet resulted in gross margins remaining above 30 percent throughout 2023, resulting from the team's focus on margin improvement through fabricated product growth. We expect margins will continue to strengthen with the addition of the central tube and bar.

Thank you Rick and good morning, everyone Olympic.

Olympic Steel finished the year strong capping off another year of solid performance, despite challenging and dynamic market conditions as Rick noted. This performance reflects the success of our strategy and our ongoing commitment to our operating disciplines, our adjusted EBITDA was $16.

$7 million for the fourth quarter and $97 $6 million for the year.

Pipe and tube segment had another exceptional quarter.

As this segment completed its second best full year, and it's 109 year history with adjusted EBITDA of $43 million.

Our strategy to increase the amount of value added mix and upgrades and additions to our laser fleet resulted in gross margins remaining above 30% throughout 2023, resulting from the team's focus on margin improvement through fabricated product growth, we expect mark.

<unk> will continue to strengthen with the addition of central tube and bar, we completed the acquisition of CTV in October 2023, and the integration has gone smoothly.

Andrew S. Greiff: We completed the acquisition of CTB in October of 2023, and the integration has gone smoothly. The business fits seamlessly into our growth plans, which will further enhance the performance of the pipe and tube segment. Turning to our carbon segment, along with the contributions from Metal Fab Acquisition, carbon delivered another solid performance while navigating some unusual market dynamics. In a typical year, fourth-quarter carbon pricing falls during the seasonally slowest quarter.

The business fits seamlessly into our growth plans, which will further enhance the performance of the pipe and tube segment.

Turning to our carbon segment, along with the contributions from metal Fab acquisition carbon delivered another solid performance, while navigating some unusual market dynamics in a typical year fourth quarter carbon pricing falls during the seasonally slowest quarter, but in 2023, we saw index pre.

Andrew S. Greiff: But in 2023, we saw index pricing fall 45% from April through September, and then it began rebounding in October in anticipation of the UAW strike settlement. During the fourth quarter, index prices increased 65 percent, which caused some customers to buy in advance of index pricing increases on contractual business for the first quarter of 2024, as well as the early settlement of many first quarter and first half 2024 contracts. As a result, fourth-quarter sales were down less than 3% sequentially from the third quarter, rather than the traditional 6-8% decline.

Icing fall, 45% from April through September and then it began rebounding in October in anticipation of the UAW strike settlement.

During the fourth quarter to be index pricing increased 65%, which caused some customers to buy in advance of index pricing increases on contractual business for the first quarter of 2024 as well as the early settlement of many first quarter and first half 2024 contracts.

As a result fourth quarter sales were down less than 3% sequentially from the third quarter, rather than the traditional 6% to 8% decline.

Andrew S. Greiff: Despite all those market challenges and unusual circumstances, the carbon segment earned adjusted EBITDA of $7.9 million in the fourth quarter. Carbon shipments were up 8% in the fourth quarter from a year earlier and up 6% for the full year. In particular, we saw growth in 2023 in higher-margin coal roll and coated products, as well as through increased fabrication business. Specialty Metals remained a meaningful contributor in the fourth quarter and recorded its third most profitable full year, even as this segment continued to face industry-wide stainless steel headwinds and falling nickel prices. We are very proud of the accomplishments of our Specialty Metals team and our performance under challenging market conditions. Turning to end markets, in early 2024, we are seeing our industrial OEMs buying as forecasted. The same is true for food equipment, truck-trailer, storage tank, HVAC, and appliance customers.

Despite all those market challenges and unusual circumstances. The carbon segment earned adjusted EBITDA up $7 9 million in the fourth quarter call.

Carbon shipments were up 8% in the fourth quarter from a year earlier and up 6% for the full year in particular, we saw growth in 2023, and higher margin cold roll and coated products as well as through increased fabrication business specialty metals has remained a meaningful contributor.

<unk> in the fourth quarter.

And recorded its third most profitable full year EBIT as this segment continue to face industry wide stainless steel headwinds and falling nickel prices.

We are very proud of the accomplishments of our specialty metals team and our performance under challenging market conditions.

Turning to end markets in early 2024, we are seeing our industrial Oems buying as forecasted the same is true for food equipment truck trailer storage tank HV AC and appliance customers. We are seeing very strong demand for industrial fabrication, especially for data centers.

Andrew S. Greiff: We are seeing very strong demand for industrial fabrication, especially for data centers. Our newest fabrication facilities in Buford, Georgia and Bartlett, Illinois are performing extremely well. We thank all of our employees for a successful 2023, and we expect 2024 to be another solid year. Now, I'll turn the call over to Rick.

Our newest fabrication facilities in Buford, Georgia, and Bartlett, Illinois are performing extremely well, we thank all of our employees for a successful 2023, and we expect 2024 to be another solid year now I'll turn the call over to rich.

Richard T. Marabito: Thank you, Andrew. 2023 was an important year for Olympic Steel, as we demonstrated our ability to deliver consistent, profitable results in all markets. Before I discuss the results, I want to remind you that year-over-year comparisons will be more difficult due to the 2023 acquisitions of Metal Fab and Central Tube & Bar. For the quarter, net income totaled $7.4 million compared to $4 million in the fourth quarter of 2022, and adjusted EBITDA in the quarter was $16.7 million compared to $11.9 million in the prior year period. Fourth quarter 2023 results included $5.3 million of LIFO pre-tax income compared with $900,000 of LIFO pre-tax income in the same period a year ago.

Thank you Andrew 2023 was an important year for Olympic steel as we demonstrated our ability to deliver consistent profitable results in all markets.

Before I discuss the results I want to remind you that year over year comparisons will be more difficult due to the 2023 acquisitions of metal fab and central tube and bar.

For the quarter net income totaled $7 4 million compared to $4 million in the fourth quarter of 2022.

Adjusted EBITDA in the quarter was $16 7 million compared to $11 9 million in the prior year period.

Fourth quarter 2020 results include $5 $3 million of LIFO pretax income compared with $900000 of LIFO pretax income in the same period a year ago.

Richard T. Marabito: The fourth quarter 2023 results also include $1.1 million of acquisition-related charges. Consolidated operating expenses for the fourth quarter totaled $100.4 million compared to $81.6 million in the fourth quarter of 2022. Our fourth quarter operating expenses reflect the addition of metal fab and CTB, which do not report tons sold. Therefore, operating expenses per ton at the consolidated level and for the carbon segment will appear higher year over year. Consolidated operating expenses for the fourth quarter include $10.1 million of metal fab operating expenses, $5 million of CTB operating expenses, higher warehouse and distribution expenses associated with 5% higher year-over-year volume, and $600,000 of lower incentive expenses compared to the fourth quarter of 2022. Inflationary pressures during the fourth quarter and the second half of 2023 were negligible.

<unk> fourth quarter 2020 results also include $1 1 million of acquisition related charges.

Consolidated operating expenses for the fourth quarter totaled $104 million compared to $81 $6 million in the fourth quarter of 2022.

Our fourth quarter operating expenses reflect the addition of metal fab in CTV, which do not report tons sold.

Therefore operating expenses per ton at the consolidated level and for the carbon segment will appear higher year over year.

Consolidated operating expenses for the fourth quarter include $10 $1 million of metal fab operating expenses $5 million of CTV operating expenses.

Higher warehousing and distribution expense associated with 5% higher year over year volume.

And $600000 of lower incentive expenses compared to the fourth quarter of 2022.

Inflationary pressures during the fourth quarter and the second half of 2023 were negligible.

Richard T. Marabito: As a reminder, the CTB results for the fourth quarter included $1.1 million of deal cost and acquisition-related inventory fair market write-up amortization. As Rick mentioned earlier, our inventory management and strong cash flow have helped us to continue to fortify our balance sheet. We ended the year with debt of $190 million and availability of approximately $339 million, keeping us in an excellent position to continue investing in higher return opportunities. Our capital expenditures totaled $21.3 million through the fourth quarter of 2023, compared to depreciation of $21.5 million. Equipment lead times remain long, and we estimate that 2024 capital expenditures will be approximately $35 million as we continue to make investments in automation, fabrication, and investments that result in higher gross margin opportunities and more consistent results. Our fourth-quarter 2023 effective tax rate was 23.3% compared to 18.6% in the fourth quarter of 2022.

As a reminder, the CTV results for the fourth quarter included $1 $1 million of deal costs and acquisition related inventory fair market write up amortization.

As Rick mentioned earlier, our inventory management and strong cash flow all helped us to continue to fortify our balance sheet.

We ended the year with debt of $190 million and availability of approximately $339 million keeping us in an excellent position to continue investing in higher return opportunities.

Our capital expenditures totaled $21 $3 million through the fourth quarter of 2023 compared to depreciation of $21 5 million equip.

Equipment lead times remain long and we estimate that 2020 for capital expenditures will be approximately $35 million as we continue to make investments in automation and fabrication and investments that result in higher gross margin opportunities and more consistent results.

Our fourth quarter 2023 effective tax rate was 23, 3% compared to 18, 6% in the fourth quarter of 2022.

We expect our 2024 tax rate to approximate $27 five to 28, 5%.

Also during the fourth quarter, we paid our quarterly dividend of $12 five per share as outlined in yesterday's earnings release, our board of directors approved a <unk> 15 per share dividend, which is an increase of $2.05 per share from the company's previous quarterly dividend.

Richard T. Marabito: We expect our 2024 tax rate to approximate 27.5% to 28.5%. Also, during the fourth quarter, we paid our quarterly dividend of $0.125 per share. As outlined in yesterday's earnings release, our Board of Directors approved a $0.15 per share dividend, which is an increase of $0.25 per share from the company's previous quarterly dividend. The dividend is payable on March 15th, 2024 to shareholders as of March 4th, 2024.

The dividend is payable on March 15th 2024 to shareholders as of March four 2024.

We have now paid dividends for our shareholders for 75 consecutive quarters.

Although we face significant pricing headwinds and other market challenges throughout 2023, the success of our strategy and the strength of our company enabled us to deliver consistent results and reward our shareholders.

We're excited about the future and look forward to what we can achieve in 2024 and beyond.

Now operator, please open up the call for questions.

Operator: We have now paid dividends to our shareholders for 75 consecutive quarters. Although we faced significant pricing headwinds and other market challenges throughout 2023, the success of our strategy and the strength of our company enabled us to deliver consistent results and reward our shareholders. We are excited about the future and look forward to what we can achieve in 2024 and beyond. Now, operator, please open up the call for questions. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question at this time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Okay.

Thank you at this time, we'll be conducting a question and answer session.

If you'd like to ask a question at this time. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

You May press star two if he would like to remove your question from the queue for.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

One moment, please when we poll for questions once again Thats star one thank you.

Thank you and our first question. This morning is from the line of Gibbs with Keybanc capital markets. Please proceed with your questions.

Hey, gentlemen, good morning.

Good morning, Phil.

A question on your recent acquisition of Central and I know you talked about it a little bit, but maybe just opine on on highway.

Just within the existing bandwidth.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions, and once again, that's star one. Thank you. Thank you. And our first question this morning is from the line of Gibbs with KeyBank Capital Markets. Hey, gentlemen, good morning. Good morning, Phil.

<unk> <unk> franchise.

And then how you may may look at that as a.

Because the future platform to to maybe expand your offerings elsewhere.

So Phil this is Andrew so.

Central tube fits beautifully under our Chicago tube and Iron segment.

The bulk as you know of the business that they're doing is fabricated tubes.

Gibbs: Phil, a question on your recent acquisition of Central. I know you've talked about it a little bit, but maybe just comment on how it fits within the existing bandwidth of the pipe and tube franchise and then how you may look at that as a future platform to maybe expand your offerings elsewhere. So Phil, this is Andrew.

A growth part of what we're looking for under.

Chicago tube and.

It also allowed us to get into two areas that we were not down in little rock as well as in Tulsa and so the facilities. There when you go into our fabrication facilities. They are very similar equipment to with Chicago tube has.

Andrew S. Greiff: So the Central tube fits beautifully under our Chicago tube and iron segment. The bulk, as you know, of the business that they're doing is fabricated tubes. It's a growth part of what we're looking for under Chicago Tube, and it also allowed us to get into two areas that we were not, down in Little Rock, as well as in Tulsa. And so the facilities there, when you go into our fabrication facilities, they have very similar equipment to what Chicago Tube has, and so it was a very natural fit to tuck them under that sector.

So it was a very natural fit to talk them under that segment.

And I would say.

Duston Ward, who was the previous owner of CTV is a fantastic leader, who stayed on with us and we.

We've got really big plans to continue to use that CPI slash CTV platform to.

And to do more value added processing and a big chunk of the CET business CTV business is data centers. So we're excited about the growth there.

Andrew S. Greiff: And I'd say, and Dustin Ward, who was the previous owner of CTB, is a fantastic leader. He stayed on with us, and we've got really big plans to continue to use that CTI slack to do more value-add projects and a big chunk of, Yeah, so we're excited about that. How are you guys looking at just the value add component of the business overall, either as a percentage of revenue or as a percentage of volume? I know from a volume standpoint, it's probably not massive, but... You know, from a revenue standpoint, it certainly can move the dial. Do you have a percentage of revenue maybe where you are, where you were, and where you want to go? Well, Phil, it's Rich.

Okay.

How are you guys looking at.

Just the value add component of the business overall in there as a percentage of revenue or as a percentage of volume from a volume standpoint, it's probably not massive but.

From a revenue standpoint, it certainly can can move can move the dial.

Have a percentage of revenue may be were where you are where you were and where you want to go.

Well, Phil it's rich I think what we've talked about is the focus is not generally on revenue that focuses on gross margin and I think what we've said in our pipe and tube segment is that they want 50% of their gross margin being generated by value added work and they're well on their way to that and I think they are pretty close right now with the acquisition of CTV.

Richard A. Manson: I think what we've talked about is the focus is not generally on revenue; the focus is on gross margin. And I think what we've said in our pipe and tube segment is that they want 50% of their gross margin being generated by value-added work. And they're well on their way to that.

And then overall, maybe Andrew you can talk about all yes, fabrication and really the growth we're seeing especially.

Not only in the pipe and tube, but also in the stainless and really in the carbon side, well, that's right and so Phil as you know we dedicated two facilities one down in Buford, Georgia.

Richard A. Manson: And I think they're pretty close right now with the acquisition of CTB. And then overall, maybe, Andrew, you could talk about, yeah, fabrication and really the growth we're seeing, especially not only in the pipe and tube but also in the stainless and really on the carbon side. Well, that's right.

Other in Bartlett, Illinois they are.

Strictly fabrication facilities, but if you go through a number of our other large facilities you will also see.

Value added equipment.

Andrew S. Greiff: And so, Phil, as you know, we've dedicated two facilities, one down in Beaufort, Georgia, and the other in Bartlett, Illinois. They are strictly fabrication facilities, but if you go through a number of our other large facilities, you will also see value-added equipment in conjunction with maybe some of our more traditional equipment as well. It is a part of our business, Phil, that we see growing very rapidly. We brought in this year and hired a new vice president for fabrication, so Max Fitzgerald had an industrial OEM background to join us and help us accelerate these processes. And the demand coming today, in particular from the industrial OEM, has really put us in a terrific position to convert what were originally rectangles going to the customer into now value-added parts, in a lot of cases welded, finished goods that go directly into the assemblies of these industrial OEMs. On the specialty metal side, we're seeing that equally in food and food equipment and in truck-trailer, in particular, has been a really growing area. Thank you.

In conjunction with maybe some of our more traditional equipment as well.

It is a part of our business Phil that we see growing very rapidly we brought on this year and hired a new vice president of our fabrication So Max Fitzgerald.

Industrial OEM background too to join us and help us accelerate.

This.

These processes and it is the demand coming today in particular from the industrial OEM.

Has really put us in a terrific position to convert what was originally rectangles going to the customer to know.

Value added parts and a lot of cases welded finished goods that go directly into.

Into the assemblies of these industrial Oems on the specialty metal side, we're seeing that.

<unk> and food and the food equipment and in truck trailer in particular has been a has been a really growth area for that.

Thank you and then just on the overall <unk>.

Andrew S. Greiff: And then just on the overall demand environment. What are your customers telling you to expect in the new year here? Yes, I'd say the industrial OEMs, when we, towards the end of last year, the forecasts were that they would have seen a down year, and their forecasts are accurate. We've seen certainly at the beginning of this year that the volumes are down, not horribly, but they're certainly down, but they had anticipated that they were going to be down.

<unk> environment.

What are your customers telling you to expect then in the new year here.

Yes, so I would say the the industrial Oems when we towards the end of last year, the forecast where that they would have seen.

<unk> year.

In their forecast.

Our accurate we've seen certainly at the beginning of the year that the volumes are down not horribly.

But there are certainly down but they had anticipated that they were going to be down.

Richard T. Marabito: On the specialty metal side, truck trailer, again, that's down a little bit, but not significantly. The sales equipment is actually starting to come back, so we're seeing some resurgence for some of our traditional customers. The appliance business has been pretty steady. As we think about growth, we think that first quarter growth is going to be pretty good compared to the fourth quarter, probably up, tonnage-wise, in the 10% to 12% range versus a pretty strong fourth quarter, relatively speaking, from what has been traditional. We're seeing the start of the year be pretty good, and this is how we see the year.

<unk>.

The specialty metal side truck trailer again, thats down a little bit, but not off significantly food equipment is actually starting to come back.

So we're seeing we're seeing some some a resurgence.

Our traditional customers.

Appliance business has been pretty steady so.

As we think about growth, we think that first quarter growth.

Is going to be pretty good compared to fourth quarter probably up.

Tonnage wise in the 10% to 12% range versus a pretty strong fourth quarter relatively speaking from what has been traditional so we're seeing we're seeing the start of the year would be pretty good and this is how we kind of see the year, yeah and I think.

Richard T. Marabito: The item to really note, as Andrew talked about, a couple of the end industries where our customers have forecast slightly softer volume; we're more than offsetting that with new business, and a lot of that new business is what Andrew talked about a few minutes ago on the fabrication side. So, you know, that's how we get to the 10 to 10, 11, 12 percent growth in the first quarter sequentially. We were onboarding a lot, a new product. I mean, our galvanized business really has taken off. So we've, we've, we've done a. We're going to focus on our tandem products, so coal-rolled and galvanized certainly will accelerate. Thanks, guys. And the last question for me, so just thinking about the puts and takes, the call it the carbon sheet contract business, seems like it should be lagging behind. The spot piece feels like it's obviously been moving down, so you've got some pluses and minuses there. The LIFO, I would imagine, kind of neutralizes in Q1.

The.

The item to really note as Andrew talked about a couple of the end industries, where our customers have forecasted slightly softer volume were more than offsetting that with the new business and a lot of that new business is what Andrew talked about a few minutes ago on the fabrication side. So.

That's how we get to the around the tender, 10%, 11%, 12% growth in the first quarter sequentially.

We're onboarding a lot of new business.

New product I mean, our galvanized business really as has taken off and so we've done a.

Our focus on our tandem product, so cold rolled and galvanized certainly have.

We will accelerate this year.

Thanks, guys and then last question for me so.

So just thinking about the puts and takes.

The.

We call it the carbon sheet contract business seems like it should be lagging.

The spot is feels like obviously, it's been moving down so you've got some pluses and minuses there the LIFO I would imagine kind of neutralizes in Q1.

Phil: Stainless feels like it's sort of stabilizing from a pricing standpoint. You have the volume growth. I don't think inflation at the margin is accelerating too much, you know, from here.

<unk> feels like it's sort of stabilizing from a pricing standpoint, you've got the volume growth.

I don't think inflation at the margin is accelerating too much.

From here.

Richard A. Manson: So how do we think about just the, just the growth, I guess, FIFO? or ex-LIFO gross margins in the first quarter versus the fourth quarter? Yeah, Phil. It's Rich.

Do we think about the just the just the growth I guess FIFO.

Sure.

<unk> LIFO gross margins in the first quarter versus the fourth quarter.

Yes, Phil it's rich and I think you kind of hit it spot on you've kind of got things going in different directions, with the contract and spot business I think.

Richard A. Manson: And I think you kind of hit it spot on. You've kind of got things going in different directions with the contract and the spot business. I think, you know, what you'll see is with the reset of index pricing higher on January 1, you typically come out of the gates a little stronger with gross margin, and you kind of see it fade as you go through the rest of the quarter. I would add on the LIFO, keep in mind that LIFO is only on our pipe and tube segment.

What youll see is with the reset of index pricing higher on January one do you typically come out of the gates, a little stronger with gross margin and you kind of see it fade as you go through rest of the quarter.

I would add on the LIFO keep in mind that LIFO was only on our pipe and tube segment, and we had a pretty substantial amount of LIFO income in the fourth quarter they tend to lag.

Richard T. Marabito: And we had a pretty substantial amount of LIFO income in the fourth quarter. However, they tend to lag index pricing by three to six months. And so we probably will see higher-priced inventory coming in for pipe and tube in the first half of the year, which could actually lead to a little bit of LIFO expense over the first half. Thank you. Our next question is from the line of Dave Storms with Stonegate. Please proceed with your question. Good morning, Dave, follow-up, and your M&A outlook: the Olympics continue. Are there any segments? that you would like to see, or any thoughts addressing that. Yeah, Dave, this is Rick.

Index pricing by three to six months and so we probably will see higher priced inventory coming in for pipe and tube in the first half of the year, which could actually lead to a little bit of LIFO expense over the first half.

Thank you.

Our next question is from the line of Dave storms with Stonegate. Please proceed with your questions.

Good morning.

Good morning, Dave.

Just to kind of.

Follow up on lifestyles earlier questions now.

And your M&A outlook.

Olympics, continuing to try to build a diversified business are there any segments of your business that you would like to see more diversified and are there any thoughts.

Addressing that in the M&A market.

Yes, Dave this is Rick.

Richard T. Marabito: So first, generally, our overall strategy through M&A, as well as CAF. We like all three of them. So, you know, our intent is to grow all three of them. You know, we've had... probably until CTB, we had a little bit of a greater success rate in terms of specialty metals and carbon on the acquisition side. That's why we were thrilled, really, to add CTB to the mix. But strategically, we're looking to grow all three of them through a balanced approach to CapEx and acquisitions. I think on the acquisition front, obviously, if you look at some of the recent acquisitions we've done, we really are gravitating towards those types of companies that really have a consistent return, high return companies that we can add a good amount of synergy to through our existing operations.

So first generally our overall strategy.

Through M&A as wireless Capex, we like all three of our business segments. So.

Our intent is to grow all three of them.

We've had.

Probably until CTV, we had a little bit of a greater.

Focused success rate in terms of specialty metals and carbon on the acquisition side Thats why we were thrilled really.

To add <unk> to the mix.

But strategically we're looking to grow all three of them through a balanced approach on <unk>.

Capex and acquisitions.

I think on the acquisition front, obviously, if you look at some of the recent <unk>.

Acquisitions, we've done we really are gravitating towards those types of companies that really have a consistent.

Return high return.

Companies that we can add a good amount of synergy to through our existing operation. So.

Richard T. Marabito: So I'd say we're taking a really balanced approach, and we'd like to grow all three segments through acquisition. And while we're doing that, we're going to continue to do what you saw us do, which is add stand-alone fabricating facilities adjacent to some of our metal fabricating facilities. So we like that model as well, and then just more on an industry-wide... What do you think about inventory levels at the mills and how you back demand? This is Andrew.

I'd say, we're taking a really balanced approach.

And we'd like to grow all three segments through.

Through acquisition and while we're doing that we're going to continue to do what you saw us do.

Which is.

Add fab Standalone fabricating facilities adjacent to some of our metal fabricating facilities. So we like that model as well.

Very helpful. Thank you.

And then just more of an industry wide level.

Are you seeing in terms of inventory levels at the mills and how do you.

Factored this in when considering demand going into 2024.

This is Andrew.

Andrew S. Greiff: We've seen the lead times from the males, the carbon mills in particular, have come in a little bit. Hot roll today is, call it, in the four to six week time period. That's down. If you go back about four to six weeks ago, it was probably more in the six week period. Same thing for tandem products.

We've seen lead times from the mills.

<unk>.

From the carbon mills in particular, we've seen lead times come in a little bit hot rolled today is call. It <unk>.

Four to six week time period.

Thats down if you go back about four to six weeks ago was probably more in the six six week period same thing for tandem products stainless and aluminum has been very steady so.

Andrew S. Greiff: Stainless and aluminum has been very steady. So we're seeing the mills pretty consistent today with deliveries, probably on the shorter side. Thanks for your help.

We're seeing the mills pretty consistent today with with deliveries.

Probably on the on the on the shorter side.

Operator: Thank you. As a reminder, to ask a question today, you may press star 1. The next question is from the line of Chris Sakai with Singular Research. Please proceed with your question. Hi, good morning. Good morning. I just had a question on specialty metals and stainless steel headwinds.

That's very helpful. Thank you.

Thank you as a reminder to ask a question you May press Star one.

The next question is from the line of Chris Sakai with singular research. Please proceed with your question.

Hi, good morning.

Thanks Rod.

Just another question on specialty metals.

The stainless steel headwinds are.

Andrew S. Greiff: Are we expecting to see those in 2024, or are they going to be reduced? Well, I think, Chris, what you've seen is nickel prices have hovered right in that $7.50 range. And so historically, at least what we've seen in the last two, three years, are a little bit lower. But again, our inventory is appropriate. Our mill lead times are pretty good.

<unk>.

Expecting to see those in 2024 or are they going to.

Reduced.

Well I think Chris would you have seen as nickel prices have hovered right in that $7 50 range.

And so.

Historically at least what we've seen in the last.

Two three years.

<unk> are a little bit lower.

But again, our inventory is appropriate our mill lead times are a pretty a pretty good.

Andrew S. Greiff: The imports are certainly going to continue. And so I would say that $24 is going to be a really good year, will be a good growth year for specialty metals. Can you comment on tube and pipe?

<unk>.

Imports are certainly going to continue.

And so I would say that we expect that 'twenty four is going to be a really good will be a good growth year for specialty metals.

Okay. Thanks, and then can you comment on.

<unk> tube and pipe what were the main driver for the good quarter and is that sustainable going forward.

Richard A. Manson: What were the main drivers for the good quarter and is that sustainable going forward? Sure Chris, it's Rich, and I think, as we've talked throughout the year, Pipe & Tube's continued focus on value-added work and the continued willingness of OEMs to outsource more work to us has been a huge factor in driving their gross margins about 30% consistently for the year. Additionally, the fourth quarter, you see an additional bump up from having CTB included in those results. You know, we're really excited about it. Keep in mind, as Rich said, and you saw in the earnings release, we acquired CTB in the fourth quarter, so our results actually had some acquisition-related costs. So, we're excited for 24 to have the full year impact of CTB in the pipeline. That's certainly a part of it. Okay, sounds good. Last one for me. For 2024, what can we generally expect as far as acquisitions are concerned or divestitures are concerned? Will it be a mix of those? Yeah, Chris, this is Rick.

Sure, Chris It's rich and I think as we've talked throughout the year that pipe and tubes continued focus on value added work into continuing of Oems to outsource more work to us has been a huge factor in driving their gross margins above 30% consistently for the year.

Additionally, the fourth quarter, you see an additional bump up from having CTV included in those results.

And we're really excited about keep in mind as rich said.

You saw on the earnings release, we acquired <unk> in the fourth quarter. So our results actually had some acquisition related costs. So we're excited for 24 to have the full year impact of CTV in the pipe and tube segment. So that's certainly a positive.

Okay sounds good.

Last one for me for.

For 2024, what sort of what can we generally expect as far as acquisitions are concerned or divestiture.

Will it be a blend of that.

Yes, Chris this is Rick.

Richard T. Marabito: You know, right now, we really have nothing on the divestiture side. Certainly, on the acquisition side, as we've commented, we've made six acquisitions in the last five years. That is definitely a piece of our strategy going forward. We're active in terms of the marketplace. The entire M&A marketplace for metals, really broadly, due to the economic environment, the interest rate environment, the back half of last year seemed to slow down a little.

Right now we have really nothing that we're looking at on the divestiture side certainly on the acquisition side.

As we've commented we've made six acquisitions in the last five years that is definitely a piece of our strategy going forward.

We're active in terms of marketplace.

The entire M&A marketplace for models really broadly.

Due to the economic environment, the interest rate environment, the back half of last year seemed to slow a little.

Richard T. Marabito: Seems like it's picking up a little bit, but that is a key piece of our strategy going forward, and we'll remain active, looking for the good fits that we've outlined. Okay, thanks for that. Thank you. At this time, we've reached the end of our question and answer session, and I'll turn the floor back to Rick Marabito for closing remarks. Thank you, operator, and thank you all for joining us on our call this morning. We appreciate your continued interest in Olympic Steel, and we look forward to speaking with you again next quarter. Thanks. Have a great day, everybody! Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

Like it's picking up a little bit but.

That is a.

A key piece of our strategy going forward.

And we will remain we will remain active looking for the good fits that we've outlined.

Okay.

Okay. Thanks for that.

Thank you.

At this time, we've reached the end of our question and answer session I will turn the floor back to Rick <unk> for closing remarks.

Thank you operator, and thank you all for joining us on our call. This morning. We appreciate your continued interest in Olympic Steel and we look forward to speaking with you again next quarter. Thanks have a great day everybody.

Thank you. This will conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation.