Slipping domestc demand and foreign competition could impact Insteel’s 2020 earnings estimates, the construction steel manufacturer noted while reporting its Q2 2020 earnings on Friday.
The company has continued operations without interruptions so far despite the COVID-19 pandemic because of its critical infrastructure designation. However, overseas competition remains a concern as foreign competitors are being incentivized to increase production of downstream products for export into the US to circumvent tariffs.
The subsequent surge in prestressed concrete (PC) strand and welded wire reinforcement (WWR) imports has increased pricing pressure in Insteel’s markets that are susceptible to import competition. Insteel said it is pursuing extension of tariffs with Administration to include PC strand and WWR to address this issue.
Insteel Industries increased its net sales by 2.6pc to $114.9mn in Q2 2020 from $111.9mn in the same quarter a year ago.
The company’s cost of sales declined from 93.7pc of net sales in Q2 2019 to 86.7pc in Q2 2020. Costs included 74pc for raw materials, 21pc manufacturing costs, and 5pc freight.
Insteel’s net earnings increased by 316pc to $4.36mn in Q2 2020 compared to $1.05mn in the prior year period. Gross margin widened to 13.3pc during the quarter from 6.3pc in Q2 2019, primarily due to higher spreads between selling prices and raw material costs, and the increase in shipments.
Steel shipments increased by 19.2pc from Q1 2020 while the average selling prices decreased by 1.2pc. The strong shipping performance for the quarter was driven by increased construction activity in most markets supported by more favorable mild weather conditions compared to the same quarter a year ago, the company noted.
Insteel is the nation’s largest manufacturer of steel wire reinforcing products for concrete construction applications in nonresidential construction.
Headquartered in North Carolina, Insteel operates 10 manufacturing facilities in the US, including seven WWR plants and three PC strand plants. In March 2020, Insteel acquired Strand-Tech Manufacturing, the US’ fourth largest US producer of PC strand, for $22.5mn.