Insteel Industries Inc. (NYSE: IIIN) announced this week its first quarter earnings were down more than 50% from the same period a year ago.
Net earnings for the first quarter of fiscal 2023 decreased to $11.1 million, 57 cents per share, from record earnings of $23.1 million, or $1.18 per diluted share, in the same period a year ago. Earnings for the current year quarter benefited from a $3.3 million, or 13 cents per share gain on the sale of property, plant and equipment. Insteel’s first quarter results were unfavorably impacted by lower shipments and the narrowing of spreads between selling prices and raw material costs, the firm said.
Net sales decreased 6.5% to $166.9 million from $178.5 million in the prior year quarter primarily from a 10% decrease in shipments partially offset by a 3.9% increase in average selling prices. “Shipments into nonresidential construction markets during the first quarter were adversely affected by customer destocking that reflects easing supply chain constraints together with the ongoing weakness in the residential construction market,” the company said in reporting the results. “On a sequential basis, shipments decreased 12% from the fourth quarter of fiscal 2022, reflecting the usual seasonal slowdown in construction activity, while average selling prices fell 8.8%.”
On Dec. 23, Insteel paid a special cash dividend totaling $38.9 million, or $2 per share, in addition to its regular quarterly cash dividend of 3 cent per share and ended the quarter with $42.6 million of cash and no borrowings outstanding on its $100 million revolving credit facility.
“Following a year of record financial results, the first quarter of fiscal 2023 was a period of transition as our supply chain recovers from unprecedented constraints of the prior year,” said H.O. Woltz III, Insteel’s president and CEO. “As we move into the second quarter, we expect our results will continue to be affected by the consumption of higher cost inventories along with the usual weather-related slowdown in construction activity.”
Woltz continued, “Throughout fiscal 2022, we mentioned the favorable impact on gross margin of steadily increasing steel prices matched against lower cost inventories under our first-in, first-out (“FIFO”) accounting methodology. When steel prices decline, we experience the flipside of the FIFO impact. Our accounting methodology does not diminish the favorable outlook for nonresidential construction markets or our financial performance once the inventory pipeline has normalized. Customer sentiment remains positive, and we expect to benefit from incremental demand from projects funded by the Infrastructure Investment and Jobs Act during the second half of fiscal 2023. Additionally, we should be positively impacted by the completion of several capital projects that will allow us to expand our capacity and reduce the cash cost of production.”
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