Friedman Industries Q1 Earnings and Revenues Decline Y/Y

Friedman Industries, Incorporated FRD reported earnings per share of 37 cents in the first quarter of fiscal 2025, which decreased 64.4% from the year-ago figure of $1.04.

Revenues in Detail

Friedman Industries registered revenues of $114.6 million in the fiscal first quarter, down 16.6% year over year.

The decrease in sales resulted from declines in sales volume and average selling price per ton.

Sales volume in the reported quarter consisted of approximately 119,000 tons from inventory (down 7.8% year over year) and another 24,000 tons of toll-processing customer-owned material (flat year over year).

The decline in sales volume in the fiscal first quarter resulted from a combination of challenging conditions for some of Friedman Industries' customers and extended planned downtime for equipment upgrades and maintenance at its Sinton and Decatur facilities.

Segment Details

Friedman Industries derives revenues from two segments — Flat-Roll and Tubular.

For the quarter under review, Flat-Roll revenues were $103.4 million, down 17.4% from the year-ago quarter. The segment had a sales volume of 109,000 tons from inventory and another 24,000 tons of toll processing for the reported quarter, down 9.2% and flat from the year-ago period's 120,000 tons from inventory and 24,000 tons of toll processing.

The average per ton selling price of flat-roll segment inventory decreased 10.2% to $932 per ton in the reported quarter from $1,038 per ton in the year-ago quarter.

Revenues in the Tubular segment totaled $11.2 million, down 7.7% year over year. The sales volume increased 11.1% to 10,000 tons in the fiscal first quarter from 9,000 tons in the year-ago period.

The average per ton selling price of tubular segment inventory decreased 16.1% to $1,140 per ton in the reported quarter from $1,358 per ton in the year-ago period.

Friedman Industries Gross Margin

In the quarter under review, Friedman Industries' gross profit declined 37.7% to $18.1 million year over year. The gross margin contracted 536 basis points to 15.8%.

Adjusted Operating Expenses Analysis

Selling, general and administrative expenses declined 24% year over year to $4.5 million, primarily resulting from lower incentive compensation expenses due to the lower earnings in the reported quarter.

Profitability

The operating loss totaled $1.4 million in the fiscal first quarter against the operating profit of $10.4 million in the year-ago quarter.

In the fiscal first quarter, Friedman Industries' net income was $2.6 million, down 66.6% from the year-ago quarter.

Liquidity & Debt Management

Friedman Industries exited first-quarter fiscal 2025 with cash of $4.1 million compared with $2.9 million at the fiscal 2024-end.

Net cash used in operating activities at the end of first-quarter fiscal 2025 was $6.1 million compared with $4.6 million a year ago.

Guidance

Friedman Industries has shared its fiscal second-quarter guidance.

For the quarter, management expects sales volume to be similar to the sales volume reported in the fiscal first quarter.

Management also stated that the second quarter started with a further decline in hot-rolled coil prices. However, as of Aug 8, 2024, HRC index prices have started to increase and HRC futures are pricing in further increases. The company may experience a generally challenging margin environment in the fiscal second quarter, but if sustained, the increasing HRC price should result in improved physical margins toward the end of the fiscal second quarter and entering the third quarter.

Our Take

Friedman Industries exited the first quarter of fiscal 2025 with dismal top-line and bottom-line results. Lower revenues from both segments and lower sales volumes were also discouraging. The decline in average per ton selling prices across both segments was also disappointing. During the reported quarter, the gross margin contracted, which did not bode well. 

On a positive note, an uptick in sales volumes in the Tubular segment during the reported quarter was impressive.

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