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LONGVIEW, Texas, Aug. 14, 2019 (GLOBE NEWSWIRE) -- Friedman Industries, Incorporated, headquartered in Longview, Texas, is a manufacturer and processor of steel products with operating plants in Hickman, Arkansas; Decatur, Alabama and Lone Star, Texas. The Company has two reportable segments; coil products and tubular products. The coil product segment consists of the operations in Hickman and Decatur where the Company processes hot-rolled steel coils using temper mills and cut-to-length lines. The tubular product segment consists of the operations in Lone Star where the Company manufactures electric resistance welded pipe, provides pipe finishing services and distributes pipe.
The Company announced today its results of operations for the first quarter. For the quarter ended June 30, 2019 (the “2019 quarter”), the Company recorded net earnings of $194,772 ($0.03 diluted earnings per share) on sales of $40,975,320 compared to net earnings of $3,599,893 ($0.51 diluted earnings per share) on net sales of $48,193,318 for the quarter ended June 30, 2018 (the “2018 quarter”).
The Company’s operating results are significantly impacted by the market price of hot-rolled steel coil. Results for the 2019 quarter were negatively impacted by a declining steel price while the 2018 quarter was positively impacted by an increasing steel price. In March 2018, the Administration of the U.S. government announced trade actions under Section 232 of the Trade Expansion Act related to imports of steel and aluminum products. In November 2017, steel prices began to rise on speculation of potential trade actions. The rising prices gained momentum in January 2018 when the Commerce Department’s recommendations were provided to the Administration. From January 2018, steel prices continued to rise approximately 40% until reaching a peak in July 2018. Prices held near a 10 year high until September 2018 when prices started a significant decline through June 2019, dropping approximately 45%. In the 2018 quarter, the quarter immediately following the enactment of the Section 232 trade actions, our operations benefitted from strong margins primarily related to pricing power due to strong customer demand and the benefits of a lower cost inventory stock in a period of increasing prices. In the 2019 quarter, margins were challenged by the continued decline in steel prices and softer demand.
SUMMARY OF OPERATIONS (unaudited)
Three Months Ended June 30,
Total costs and
Weighted average shares outstanding:
Net earnings per share:
COIL SEGMENT OPERATIONS
Coil segment sales for the 2019 quarter totaled $28,181,468 compared to $31,129,200 for the 2018 quarter. Total coil segment sales declined due to reduced average selling prices associated with the significant and sustained decline in hot-rolled coil pricing. Inventory tons sold increased from approximately 36,000 tons in the 2018 quarter to approximately 38,000 tons in the 2019 quarter. While sales volume for the 2019 quarter increased slightly compared to the 2018 quarter, we believe the underlying demand was more challenging in the 2019 quarter compared to the 2018 quarter. Sales volume improved due primarily to aggressively pricing our material and growth in the number of customers sold. Coil segment operations recorded operating profits of approximately $345,000 and $3,179,000 for the 2019 and 2018 quarters, respectively. Margins for the 2019 quarter were negatively impacted by the continued decline in hot-rolled steel prices and the effect of inventory with higher average costs flowing through cost of goods sold. Margins for the 2018 quarter were positively impacted by increasing hot-rolled steel prices and the effect of inventory with lower average costs flowing through cost of goods sold.
TUBULAR SEGMENT OPERATIONS
Tubular product segment sales for the 2019 quarter totaled $12,793,852 compared to $17,064,118 for the 2018 quarter. Total tubular segment sales declined due primarily to a lower sales volume and lower steel prices. Tons sold decreased from approximately 24,500 tons in the 2018 quarter to approximately 15,500 tons in the 2019 quarter. The volume decline was primarily related to mill reject sales volumes which decreased from approximately 14,000 tons in the 2018 quarter to approximately 5,000 tons in the 2019 quarter. The higher shipping volume of mill reject pipe in the 2018 quarter was due primarily to a strategic effort to reduce the level of mill reject pipe inventory. At June 30, 2019, mill reject pipe inventory was at a desired level. Shipments of manufactured pipe for the quarters were comparable with approximately 10,000 tons in the 2018 quarter and 10,500 tons in the 2019 quarter. The tubular segment operations recorded operating profits of approximately $545,000 and $2,321,000 for the 2019 and 2018 quarters, respectively. Operating results for the 2019 quarter were negatively impacted by compressed margins associated with declining hot-rolled steel prices and softness in the U.S. energy industry. In contrast, the 2018 quarter was positively impacted by strong margins associated with increasing steel prices and a stronger U.S. energy market.
For the second quarter of fiscal 2020, management expects coil segment sales volumes to be comparable to the first quarter and tubular segment sales volume to decline slightly compared to the first quarter. The Company continues to see solid demand for its coil division products but more challenging demand for its tubular division products due primarily to softness in the U.S. energy industry and a hesitation of pipe distributors to hold inventory. Continued margin compression is anticipated for the second quarter. With domestic steel producers issuing price increases in June 2019 and July 2019, management sees an opportunity for margins to improve if the price increases hold and if customer demand will support the increases flowing through the supply chain.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and such statements involve risk and uncertainty. Forward-looking statements include those preceded by, followed by or including the words “will,” “expect,” “intended,” “anticipated,” “believe,” “project,” “forecast,” “propose,” “plan,” “estimate,” “enable,” and similar expressions, including, for example, statements about our business strategy, our industry, our future profitability, growth in the industry sectors we serve, our expectations, beliefs, plans, strategies, objectives, prospects and assumptions, future production capacity, product quality and estimates and projections of future activity and trends in the oil and natural gas industry. These forward-looking statements may include, but are not limited to, future changes in the Company’s financial condition or results of operations, future production capacity, product quality and proposed expansion plans. Forward-looking statements may be made by management orally or in writing including, but not limited to, this news release.
Forward-looking statements are not guarantees of future performance. These statements are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Although forward-looking statements reflect our current beliefs, reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements.
Actual results and trends in the future may differ materially depending on a variety of factors including, but not limited to, changes in the demand for and prices of the Company’s products, changes in government policy regarding steel, changes in the demand for steel and steel products in general and the Company’s success in executing its internal operating plans, changes in and availability of raw materials, our ability to satisfy our take or pay obligations under certain supply agreements, unplanned shutdowns of our production facilities due to equipment failures or other issues, increased competition from alternative materials and risks concerning innovation, new technologies, products and increasing customer requirements. Accordingly, undue reliance should not be placed on our forward-looking statements. Such risks and uncertainty are also addressed in our Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Company’s filings with the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including the Company’s Annual Report on Form 10-K and its other Quarterly Reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except to the extent law requires.
For further information, please refer to the Company's Form 10-Q as filed with the SEC on August 14, 2019 or contact Alex LaRue, Chief Financial Officer – Secretary and Treasurer, at (903)758-3431.