Insteel Industries Q1 Revenue Declines 7% Due To Supply Chain Headwinds; Notes Margin Pressure

Insteel Industries, Inc IIIN reported a first-quarter FY23 net sales decline of 6.5% year-on-year to $166.9 million, missing the consensus of $177.4 million.
Lower shipments and the narrowing of spreads between selling prices and raw material costs unfavorably impacted Insteel's first-quarter results. The spread compression was due to the consumption of higher-cost inventory purchased primarily in fiscal 2022.
During the first quarter, shipments into nonresidential construction markets were adversely affected by customer destocking, which reflects easing supply chain constraints and the ongoing weakness in the residential construction market.
Gross margin contracted by 1,300 bps to 10.7% due to the reduction in spreads and shipments.
EPS of $0.57 missed the consensus of $0.85.
Insteel generated $33.0 million in operating cash flow and held $42.6 million in cash and equivalents.
"Following a year of record financial results, the first quarter of fiscal 2023 was a period of transition as our supply chain recovers from unprecedented constraints of the prior year," commented H.O. Woltz III, Insteel's President, and CEO. "As we move into the second quarter, we expect our results will continue to be affected by the consumption of higher cost inventories along with the usual weather-related slowdown in construction activity."
Price Action: IIIN shares closed lower by 0.35% at $31.03 on Wednesday.
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