NEW YORK Insteel Industries Inc.s earnings soared in its fiscal third quarter compared with a year earlier, riding the coattails of slowly but steadily improving investment in construction that has boosted the companys shipments.
"Activity levels in our markets improved marginally during the (fiscal) third quarter, continuing a plodding recovery characterized by sluggish construction spending and employment," president and chief executive officer H.O. Woltz III said during a conference call with investors. "Were continuing to see a recovery thats unimpressive, although business is certainly better than at any time since the downturn we saw in 2008.
Insteel posted net income of more than $3.27 million for the three months ended June 29 vs. $894,000 in the same period last year, in large part thanks to a more favorable spread between raw material costs and selling prices. Sales increased 3.6 percent to nearly $96.95 million in the same comparison on a 9.3-percent increase in shipments.
"While we continue to see signs of recovery in our market, the trajectory is reasonably flat," Woltz said.
The company saw tighter competition on selling prices as competing diversified steel wire drawers focused increasingly on concrete reinforcing products to feed improving construction markets, Woltz said. Fiscal third-quarter selling prices decreased 5.3 percent compared with a year earlier and were down 3.9 percent vs. the fiscal second quarter ended March 30.
"I think that part of what were seeing is that business conditions in other markets for wire products have been very disappointing thus far, and some of our competitors that participate in a wider range of products have focused more on concrete reinforcing" to compensate for losses in other products, Woltz said. "I think its going to remain highly competitive."
Mount Airy, N.C.-based Insteel has invested in several new operating lines in the current fiscal year, including an engineered structural mesh line in Texas, and Woltz said that a new line in North Carolina that will mechanically produce specialty shaped reinforcing mesh the company currently fabricates by hand is set to start production in coming weeks.
Poor weather conditions have hampered shipments, tempering the companys improvement. "Weve continued to be affected by abnormal amounts of rain in many parts of the country," Woltz said.
"The weather continues to have a significant impact on the quarter, which has made it more difficult to get a real clear view of the underlying trends," chief financial officer Michael Gazmarian said during the earnings conference call, but the company anticipates continued modest growth in its fiscal fourth quarter.
"We expect gradually improving conditions in the absence of a catalyst for a more robust recovery," Woltz said.