Friedman Industries Reports Q3 Loss Amid Revenue Declines, But Sees Future Improvement
Shares of Friedman Industries, Incorporated (FRD) dipped by 1.1% following their earnings announcement for the quarter ending December 31, 2024. This contrasts with a slight decline of 0.4% in the S&P 500 Index during the same period. Over the past month, FRD shares climbed by 15.9%, surpassing the S&P 500’s 3.8% increase.
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Earnings Snapshot
For the third quarter of fiscal 2025, which concluded on December 31, 2024, Friedman Industries reported net sales of $94.1 million. This reflects a significant drop of 18.9% from $115.9 million in the same quarter last year. Additionally, the company incurred a net loss of $1.2 million, or $0.17 per diluted share, compared to net earnings of $1.2 million, or $0.16 per diluted share, from the prior year.
Meanwhile, the cost of materials sold decreased by 14.6% to $78.5 million, down from $91.9 million year-over-year. Processing and warehousing expenses rose slightly by 1.4% to $7.5 million, while selling, general, and administrative costs fell by 8.2% to $3.9 million.
Friedman Industries Inc.: Price, Consensus, and EPS Surprise
Friedman Industries Inc. price-consensus-eps-surprise-chart | Friedman Industries Inc. Quote
Segment Performance Analysis
The flat-roll segment generated sales of $86.1 million, a 19.1% decrease from $106.4 million last year. Sales volume fell to 105,000 tons for inventory and 18,000 tons of toll processing, down from 110,000 tons and 22,000 tons, respectively, in the prior year. The average selling price per ton for flat-roll inventory decreased by 15.3%, contributing to an operating profit reduction of 85.1% to $1.3 million.
Conversely, the tubular segment reported sales of $7.9 million, down 16.9% from $9.5 million the year before. Despite stable sales volumes at 8,000 tons, the average selling price per ton dropped by 12.9% from $1,164 to $1,013, leading to a slight operating loss of $0.2 million compared to a loss of $0.1 million in the same quarter last year.
Key Business Metrics
At the close of the quarter, Friedman Industries had a working capital balance of approximately $107 million, compared to $116 million on March 31, 2024. The company generated $2.7 million in operating cash flow and successfully reduced its debt by 9% during the quarter. Additionally, the sales backlog volume at quarter-end was noted to be 11% higher than in the previous year.
Management Insights and Market Trends
President and CEO Michael Taylor remarked on the broader industry pricing pressures and decreased sales volume stemming from political uncertainties and holiday-related slowdowns. Notably, he indicated an increase in sales order activity after the U.S. presidential election, as well as new commercial initiatives underway. Taylor expressed optimism regarding the long-term prospects for Friedman Industries and its strategic position in the market.
Performance Influencers
Lower steel prices significantly impacted the company’s earnings and led to reduced gross margins. The price decline in the flat-roll segment was particularly detrimental. Although sales volume in the tubular segment remained steady, revenue suffered due to lower prices.
In terms of hedging, Friedman Industries reported a small gain of $0.3 million, an improvement from a loss of $4.1 million in the previous year due to reduced market volatility affecting hedging activities.
Future Outlook
Looking ahead, Friedman Industries anticipates improved sales volume for the fourth quarter of fiscal 2025, buoyed by an uptick in order activity and the absence of holiday slowdowns. Additionally, rising prices for hot-rolled coils observed at the beginning of the fiscal fourth quarter may enhance sales margins in the latter half of the period.
Recent Strategic Focus
In the latest quarter, FRD has focused on optimizing operations across its six manufacturing facilities. There were no reports of acquisitions, divestitures, or restructuring during this time.
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