Insteel Industries, Inc. today announced financial results for its fiscal third quarter ended June 29, 2019. Net earnings decreased to $2.2 million from $12.9 million in the same period a year ago.
Net sales were essentially unchanged at $126.3 million compared to $126.7 million in the prior year quarter as a 3.7 percent increase in average selling prices was offset by a 3.9 percent decrease in shipments.
The company said shipments for the current year quarter were adversely impacted by increasing low-priced import competition spurred by the lower raw material costs available to offshore competitors following the March 2018 implementation of the Section 232 steel tariff together with unusually wet weather across many of Insteel's markets, which slowed the usual start of the construction season.
On a sequential basis, shipments increased 17.5 percent from the second quarter of fiscal 2019 while average selling prices decreased 4.0 percent. Gross margin narrowed to 6.5 percent from 19.1 percent in the prior year quarter due to narrower spreads between selling prices and raw material costs, higher manufacturing costs and the reduction in shipments.
As for an outlook, H.O. Woltz III, Insteel's president and CEO, said, “Looking ahead to the remainder of 2019, the infrastructure-related portion of our business should benefit from the recent acceleration in state and local spending supported by various funding initiatives and the federal funding provided for under the FAST Act and supplemental measures. The most recent industry forecasts for nonresidential construction, our other primary demand driver, indicate that growth rates are likely to moderate, but remain positive. We expect continued pricing pressure, however, in our PC strand and standard welded wire reinforcement markets driven by the surge in imports resulting from the Section 232 tariff program. The tariffs have enabled offshore competitors to further their penetration of the U.S. market by leveraging their access to lower cost raw materials and significantly underpricing domestic producers. We continue to have dialogue with the Administration regarding the detrimental impact of the tariffs and are hopeful a solution will be reached that addresses the deterioration in the competitive position of downstream producers of steel products.”