Olympic Steel (ZEUS) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales were $526.3 million, down 7.6% year-over-year, with net income of $7.7 million, reflecting challenging pricing conditions and a 22% drop in hot-rolled steel prices during the quarter.

• Achieved profitability across all business segments, supported by diversification into higher-margin flat-rolled products, value-added fabrication, and end product manufacturing.

• Gross profit margin increased to 22.7% in Q2 2024 from 22.4% in Q2 2023, as inventory costs decreased more than selling prices.

• Maintained a strong balance sheet with over $340 million in borrowing availability and disciplined working capital management.

• Celebrated 70th anniversary and highlighted progress in corporate responsibility, safety, and environmental initiatives.

Financial highlights

• Q2 2024 sales reached $526 million, with net income of $7.7 million and EBITDA of $22 million; adjusted EBITDA was $21.3 million, down from $31.2 million in Q2 2023.

• Operating expenses for Q2 were $104.6 million, up from $101.6 million in Q2 2023, mainly due to the Central Tube and Bar acquisition.

• Total debt at quarter-end was $209 million, up from $190 million at year-end, with $344 million of additional availability.

• Net cash used for operating activities in H1 2024 was $(5.5) million, compared to $79.2 million generated in the prior year period.

• Paid a quarterly dividend of $0.15 per share, with the next dividend approved for September 2024.

Outlook and guidance

• Market conditions expected to remain challenging in the near term, but optimism remains for the domestic metals industry and continued growth in coated products and value-added fabrication.

• 2024 capital expenditures projected at approximately $30 million, focused on automation, fabrication, and equipment for higher-margin opportunities.

• Management expects available liquidity to be sufficient for working capital, capital expenditures, dividends, and potential acquisitions for at least the next 12 months.

• Effective tax rate for 2024 expected to be 28%-29%.