November 19, 2021 17:19 ET | Source: Friedman Industries. Friedman Industries.

Longview, Texas, November 19, 2021 (Global News Service) - The company today announced its operating results for the second fiscal quarter. For the quarter ended September 30, 2021 ("Quarter 2021"), the company had sales of US$92,570,895, net income of US$13,177,614 (diluted earnings per share of US$1.91), and net sales loss of US$250,005 (diluted per share). Loss of US$0.04) for the quarter ended September 30, 2020 ("Quarter 2020") was US$24,861,680. The quarterly results for 2021 make it the most profitable quarter in the company's history. Results for the 2021 quarter were positively affected by strong profit margins mainly related to the historical increase in steel prices. The continuous increase of the new stretcher straightening machine fixed-length production line at the Decatur, Alabama plant also has a positive impact on the 2021 quarter.

"In the second quarter, we continued to position our business to take advantage of opportunities in an unprecedented industry environment," said President and CEO Michael J. Taylor (Michael J. Taylor). “Hot rolled steel prices in the 2021 quarter were approximately 280% higher than the 2020 quarter prices. Our coil sales volume was stable and exceeded pre-pandemic levels, while our tube sales volume was lower than pre-pandemic levels, but better than There has been an improvement in the same period last year. The real profit margins of all products have remained at historical levels."

Sales in the coil division for the quarter of 2021 totaled $78,323,927, while sales for the quarter of 2020 were $18,456,086. The increase in sales was due to the increase in the average selling price and the increase in sales due to the increase in the price of hot rolled steel. The average price per ton of coil stock has increased from approximately US$548 per ton in the 2020 quarter to approximately US$1,884 per ton in the 2021 quarter. The inventory tonnage sold has increased from approximately 33,000 tons in the 2020 quarter to approximately 43,000 tons in the 2021 quarter. Sales in the 2020 quarter were affected by the COVID-19 pandemic. Compared with sales before the pandemic, sales in the 2020 quarter were down by approximately 13%. The transaction volume in the 2021 quarter was approximately 13% higher than the transaction volume before the pandemic. Sales in the 2021 quarter benefited from the continuous increase in new equipment at the Decatur plant, which was put into use in March 2021. The previous equipment at the Decatur plant was dismantled in June 2020 due to an equipment replacement project. The operating profit of the coil business in the 2021 quarter is approximately US$24,273,000, while the operating profit for the 2020 quarter is approximately US$751,000. The operating results for the 2021 quarter benefited from the sharp increase in steel prices and the related improvement in our profit margins. The 2020 quarter was negatively affected by the low profit margins associated with the decline in hot rolled steel prices.

Tubular sales for the 2021 quarter totaled US$14,246,968, while sales for the 2020 quarter were US$6,405,594. Due to the increase in sales volume and average selling price per ton, sales increased. The average price per ton of pipe segment inventory increased from approximately US$634 per ton in the 2020 quarter to approximately US$1,223 per ton in the 2021 quarter. Sales tonnage increased from approximately 10,000 tons in the 2020 quarter to approximately 11,500 tons in the 2021 quarter. Sales in the 2020 quarter were significantly affected by the COVID-19 pandemic. Compared with sales before the pandemic, sales in the 2020 quarter were down by approximately 29%. The transaction volume in the 2021 quarter was approximately 15% lower than the transaction volume before the pandemic. The operating profit of the tubular segment business in the 2021 quarter was approximately US$1,997,000, and the operating loss in the 2020 quarter was approximately US$344,000. The operating results for the 2021 quarter benefited from the sharp increase in steel prices and the related improvement in our profit margins. The 2020 quarter was negatively affected by low profit margins related to falling hot rolled steel prices and weak energy industry conditions.

In August 2021, the company broke ground on a new coil processing facility in Sinton, Texas. The new facility will be located in the new flat rolling mill park currently under construction by Steel Dynamics, Inc. ("SDI") in Sinton, Texas. The company's new office location will include a building covering approximately 70,000 square feet, covering approximately 26.5 acres, leased from SDI under a 99-year agreement. The company has selected Red Bud Industries to build one of the world's largest stretcher straightening machine fixed-length production lines, capable of processing materials up to 1 inch thick, 96 inches wide, and capable of producing more than 100,000 psi. The company expects the site to begin operations in April 2022 and estimates the total cost of the project to be 21 million U.S. dollars. As of September 30, 2021, the balance of construction in progress was approximately US$6 million, including US$2.8 million in cash payments and US$3.2 million in accrued capital expenditures.

"We are excited about the future of our new Sinton plant and the growth opportunities it provides for the company," Mr. Taylor said. "Our customers and potential customers are as excited about the new facility as we are, and this continues to encourage us. After the initial acceleration period in the 2022 calendar year, we expect that by the 2023 calendar year, the facility may have annual shipments of 110,000 Between tons and 140,000 tons. Based on these volumes and historical average profit margins, we currently believe that the annual EBITDA of our Sinton facility may be between US$4.5 million and US$5.5 million."

The company expects that in the third fiscal quarter ending December 31, 2021, the actual profit margin will decline slightly, but it will remain at a level much higher than the historical average profit margin. Due to the typical seasonal demand around the holidays, customer indecision, and the decline in steel prices in the third quarter, sales are expected to decline slightly. The company also expects to reclassify losses of approximately $14.7 million in the third quarter as gains related to derivatives designated for hedge accounting.

"The COVID-19 pandemic and related supply chain disruptions have had a profound impact on the steel industry and our operations," commented Mr. Taylor. “We mitigated downside risks by hedging and seized the upside by securing additional supply and expanding production capacity. At the beginning of the pandemic, steel prices fell, but then they increased by approximately 350% at a historical rate. At the peak of the rise, steel The price is about 80% higher than the previous historical level. In these cases, we see that the physical profit margin is higher than our expectations, and therefore also experienced hedging-related losses. We don’t think we expect to confirm in the third quarter The scale and timing of hedging-related losses will become indicators of our future operations. I firmly believe that our company is implementing a long-term strategy, which will create growth for the company and its shareholders under a series of market conditions, despite short-term price fluctuations And value. Through the successful execution of our investments in Decatur, Alabama and Hinton, Texas, the company is laying the foundation for doubling the sales of its coil division. We are actively evaluating additional growth opportunities and expecting The fiscal year ending March 31, 2022 will be the most profitable fiscal year in the company's history. I look forward to future opportunities for Friedman Industries."

Friedman Industries, headquartered in Longview, Texas, is a steel product manufacturer and processor with operating plants in Hickman, Arkansas; Decatur, Alabama and Texas Lone Star. The company has two reporting divisions: coil products and pipe products. The Coil Products Division includes operations in Hickman and Decatur, where the company processes hot-rolled steel coils. The Hickman factory operates a leveling machine and a straightening and sizing production line. Decatur factory uses a stretcher straightening machine to cut into fixed-length lines. The company has a third coil branch under construction in Sinton, Texas, and is expected to start operations in April 2022. The pipe products segment includes the company's business in Lone Star, where the company manufactures resistance welded pipes and distributes pipes.

Note on forward-looking statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements involve risks and uncertainties. Forward-looking statements include preceding, following, or including "will", "expects", "intends", "anticipates", "believes", "projects", "forecasts", "proposals", "plans", "estimates", "Enable" and similar expressions, including, for example, statements about our business strategy, our industry, our future profitability, the growth of the industry sectors we serve, our expectations, beliefs, plans, strategies, goals, prospects and assumptions , Future production capacity, product quality, and estimates and forecasts of future activities and trends in the oil and gas industry. These forward-looking statements may include, but are not limited to, the company’s financial status or operating results, future production capacity, product quality, and the future of the proposed expansion plan Changes. Management may make forward-looking statements, whether orally or in writing, including but not limited to this press release.  

Forward-looking statements do not guarantee future performance. These statements are based on management's expectations and involve many business risks and uncertainties, any of which may cause actual results to differ materially from the results expressed or implied in the forward-looking statements. Although forward-looking statements reflect our current beliefs, forward-looking statements should not be relied on because they involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be in line with the expected future The results are materially different, performance or achievements expressed or implied by such forward-looking statements.

Actual results and future trends may vary greatly due to various factors, including but not limited to changes in the demand and price of the company’s products, the continued impact of the COVID-19 pandemic, and changes in government policies on steel, steel and steel products Changes in overall demand and the company’s successful execution of its internal operating plans, including the completion and successful commissioning of our new stretcher straightener production line in Decatur, cost, time and successful commissioning of our new stretcher straightener production line in Sinton, Changes and availability of raw materials, our ability to fulfill our acceptance or payment obligations under certain supply agreements, unplanned shutdowns of our production facilities due to equipment failures or other problems, increased competition from alternative materials, and competition with innovation, new technologies, and products Risks associated with increasing customer requirements. Therefore, we should not place undue reliance on our forward-looking statements. Our management’s discussion and analysis of financial conditions and operating results and other parts of the company’s filings with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933 (as amended) also address such risks and uncertainties And the revised Securities Exchange Act of 1934 (the "Exchange Act"), including the company’s annual report on Form 10-K and other quarterly reports on Form 10-Q. We assume no obligation to publicly update or revise any forward-looking statements, whether due to new information, future events, changes in circumstances, or other reasons, unless required by law.

For more information, please refer to the company's Form 10-Q filed with the U.S. Securities and Exchange Commission on November 19, 2021, or call (903) 758-3431 to contact Alex LaRue, Chief Financial Officer, Secretary and Treasurer.