Insteel Industries, Inc. (NYSE:IIIN) Q2 2023 Earnings Conference Call April 20, 2023 10:00 AM ET

Company Participants

H. Woltz – Chairman, President and Chief Executive Officer

Scot Jafroodi – Vice President, Chief Financial Officer and Treasurer

Conference Call Participants

Tyson Bauer – KC Capital

Operator

Ladies and gentlemen, welcome to the Insteel Industries' Second Quarter 2023 Earnings Call. My name is Glenn, and I will be the moderator for today's call. [Operator Instructions]

I will now hand you over to the host H. Woltz, Chairman, President and Chief Executive Officer of Insteel Industries. Mr. Woltz, please go ahead.

H. Woltz

Thank you. Good morning and thank you for your interest in Insteel. Welcome to our second 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 filings with the SEC.

The first two quarters of fiscal 2023 have been challenging for the company in view of inventory accumulations throughout the supply chain and a significant downward reset Insteel prices that occurred following several quarters of extreme supply tightness and significant market price escalations. As stated in the release, we believe these headwinds have about run their course and we're optimistic about the underlying level of demand for our products and the margin environment.

I'm going to turn the call over to Scot to comment on our financial results for the quarter and the macro environment, and then I'll pick it back up to discuss our outlook.

Scot Jafroodi

Thank you, H., and good morning to everyone joining us on the call. As we reported in our release earlier today, going against difficult prior year comps, the second quarter of fiscal 2023 proved to be another challenging period for Insteel as we continue to contend with narrowing spreads between selling prices and raw material costs, lower shipments and higher unit conversion costs. Net earnings for the second quarter fell to $5.1 million from record earnings of $39 million a year ago and earnings per share dropped to $0.26 from $1.99 per diluted share in the prior year.

We reported net sales for the quarter of $159.1 million, a decrease of 25.4% from the prior year. Shipments rose 5.2% sequentially from Q1 due to the normal seasonal demand upturn that fell 12.8% year-over-year. Our shipping volume during the quarter was weaker than we anticipated due to a combination of winter weather conditions in several of our markets, reducing construction activity as well as the continuation of the inventory destocking activities pursued by our customers, which has now extended out over the first half of our fiscal year. However, as we move into our third quarter, we believe most customers have largely completed their inventory management programs and are returning to a more predictable ordering pattern.