Service Centers

Friedman earnings slump but sees stronger quarter ahead

February 15, 2024

Friedman Industries Inc.

Third quarter ended Dec. 31	2023	2022	% Change
Net sales	$116.0	$111.9	4%
Net earnings (loss)	$1.2	$1.4	-14%
Per diluted share	$0.16	$0.19	-16%
Nine months ended Dec. 31
Net sales	$384.0	$423.4	-9%
Net earnings (loss)	$12.4	$15.0	-17%
Per diluted share	$1.69	$2.06	-18%

(in millions of dollars except per share)

Friedman Industries posted lower earnings in its fiscal third quarter but was upbeat on the current quarter due to the effect of increased hot-rolled coil prices.

“The market value of our inventory increased substantially during the third quarter and we expect to realize this value appreciation during our fourth quarter,” Michael J. Taylor, Friedman president and CEO, said in a statement on Thursday.

Taylor said higher HRC pricing during the company’s Q3’24 increased its physical margins, “particularly during the second half of the quarter.”

However, he noted that the HRC price bump “brought a corresponding increase in HRC futures pricing, which caused the improved physical margin to be partially offset by our downside hedging protection.”

The Longview, Texas-based service center posted net earnings of $1.2 million in its Q3’24 ended Dec. 31, down 14% from $1.4 million a year earlier, on sales that increased 3.7% to $116 million.

The company said its flat roll segment had sales volumes of ~110,000 short tons (st) from inventory and another 22,000 st of toll processing in its Q3, compared to ~106,000 tons from inventory and 13,000 st of toll processing a year earlier.

Friedman said the growth was “primarily related” to higher output at its Sinton, Texas, facility, which started operations in October 2022.

The company recorded sales in its flat roll segment of $106.4 million in fiscal Q3, up from $100.2 million in the same period the previous year.

For its tubular segment, Friedman recorded sales of $9.5 million in Q3, down from $11.6 million a year earlier.

“Sales decreased due to a decrease in the average selling price per ton, partially offset by an increase in the volume sold,” the company said.

Outlook

Looking ahead, Friedman expects “a strong fourth quarter characterized by solid margins associated with a substantial increase in HRC price entering the fourth quarter.”

Additionally, Friedman anticipates higher sales volumes in the current quarter vs. the same quarter last year.

Ethan Bernard

Ethan Bernard is managing editor for Steel Market Update. He previously worked for American Metal Market as a copy editor in the New York office for two years, starting in 2008. Later, he copy edited AMM’s monthly magazine on a freelance basis from 2015 until 2017. With experience in financial copywriting and textbook publishing, he holds a BA in Comparative Literature from UC Berkeley, and an MFA. in Creative Writing from New York University. He can be reached at ethan@steelmarketupdate.com or 724-759-7871.