Insteel Industries, Inc. today announced financial results for its first quarter ended December 29, 2018. Net earnings for the first quarter of fiscal 2019 decreased to $4.1 million, from $8.1 million in the same period a year ago. In a statement, the company said Insteel's first-quarter results for fiscal 2019 were unfavorably impacted by lower shipments and higher unit manufacturing costs on lower production volume relative to the prior year quarter.
Net sales increased 6.5 percent to $104.1 million from $97.7 million in the prior year quarter driven by a 28.7 percent increase in average selling prices that offset a 17.2 percent decrease in shipments. The company said shipments for the current year quarter were adversely impacted by the unusually wet weather in many regions of the country and construction project delays together with an increase in low-priced import competition.
On a sequential basis, shipments decreased 14.5 percent from the fourth quarter of fiscal 2018 while average selling prices increased 0.4 percent. Gross margin narrowed 140 basis points to 10.5 percent from 11.9 percent in the prior year quarter due to the reduction in shipments and higher manufacturing costs.
“Looking ahead to the remainder of fiscal 2019, we expect improved market conditions driven by continued growth in the construction sector and the weather-related deferral of business from the first quarter,” the company said in the statement. “The growth outlook for our engineered structural mesh (ESM) product line remains positive. We believe the continued tightness in the job market will spur increased interest in the use of ESM as a replacement for conventional rebar for many cast-in-place applications where it can allow contractors to realize a meaningful reduction in installation labor and compress project timelines.”
The company also commented on the effect Section 232 tariffs have had on their business. “We continue to be actively engaged with the Administration regarding the detrimental impact of the Section 232 tariff program on downstream consumers of steel,” the company said. “Domestic prices for hot-rolled steel wire rod, our primary raw material, remain substantially higher than global market levels, providing foreign producers of welded wire reinforcement and PC strand with a significant cost advantage as they aggressively seek to expand their presence in the US market. The resulting pricing pressure has compressed margins in those portions of our business that are susceptible to import competition, particularly for our PC strand product line. We remain hopeful that the Administration will be amenable to a solution that places domestic producers on equal footing with foreign competitors.”