AZZ Inc (AZZ) 2023 Q4 法說會逐字稿

Good morning, and welcome to the AZZ Inc. Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Sandy Martin, Three Part Advisors. Please go ahead.

Thank you, operator. Good morning, and thank you for joining us today to review AZZ's financial results for the fiscal 2023 fourth quarter and full year ended February 28, 2023. Joining the call today are Tom Ferguson, President and Chief Executive Officer; Philip Schlom, Chief Financial Officer; and David Nark, Senior Vice President, Marketing, Communications and Investor Relations.

After the conclusion of today's prepared remarks, we will open the call for questions. Please note, there is a webcast and slide presentation for today's call, which can be found on AZZ's Investor Relations page under the latest earnings presentation at azz.com.

Before we begin, I would like to remind everyone that our discussion today will include forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, by their nature, are uncertain and outside of the company's control. Except for actual results, our comments containing forward-looking statements may involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. Actual results could differ materially from these expectations.

In addition, today's call will include a discussion of non-GAAP financial measures. Non-GAAP financial measures should be considered as a supplement to and not a substitute for GAAP financial measures. We refer you to the reconciliation of non-GAAP to the nearest GAAP measure included in today's earnings press release and investor presentation for further detail. The earnings press release and Q4 presentation are posted on our website and have been included in the Form 8-K submitted to the SEC.

I would now like to turn the call over to Tom Ferguson, CEO. Tom?

Thank you, Sandy. Welcome to ADS' Fourth Quarter and Fiscal Year 2023 Full Year Earnings Call. Thank you for joining us this morning. Starting on Slide 3. I am pleased with our performance for fiscal 2023. We made tremendous progress towards our strategy to become a pure metal coatings company. I'm appreciative of the hard work of the entire AZZ team. I commend our AZZ Metal Coatings team for generating record results and our AZZ Precoat Metals team for coming into AZZ and performing well.

We are fully committed to building a stronger and more sustainable and focused company. On a continuing operations basis, we achieved record annual sales of $1.32 billion, up 46% versus reported fiscal 2022 sales of $903 million, while generating EBITDA and adjusted earnings per share within our previously stated guidance. We paid down debt, resulting in net leverage of 3.5x adjusted EBITDA at year-end and received $2.6 million equity income from our remaining interest in AIS.

As you can see here on Slide 4, we achieved good flow-through on higher sales, generating over $267 million of adjusted EBITDA or 20% of sales. These numbers reflect metal coatings for a full 12 months and Precoat metals for about 42 weeks in fiscal year 2023. Net income on an adjusted basis was $86.9 million, up 55%, resulting in an adjusted EPS of $3.48. Philip will talk more about our fourth quarter and full year financial results shortly.

Moving to Slide 5. AZZ Metal Coatings had another strong year with sales up 21% to $637 million, with over 16% coming from organic growth. The growth was a result of organic sales growth of $87 million and the earlier acquisitions of Dom and Steel Creek, which added another $25 million. Operating income was up 21% versus prior year with an operating margin of 24.5% despite inflationary pressures, particularly as zinc costs peaked in most of our kettles.

We continue to maintain our pricing discipline and focus on delivering value to our customers. Our investments in digitization continue to pay off in both productivity and customer service. Our investments in technology and innovation are focused on improving efficiencies, asset maintainability and supporting our energy efficiency and sustainability initiatives.

Turning to Slide 6. Precoat during his 42 weeks as part of AZZ, had solid sales growth to nearly $687 million and generated $120 million of EBITDA. Precoat sales grew by 20% on a comparable basis versus the prior year, mostly through unit volume growth and paint cost increases that were passed through. Precoat business performance was solid and within our expectations through its seasonally slower quarters where construction slows due to weather. As mentioned during our third quarter call, the management team at Precoat took action in the fourth quarter reduced the customer-owned inventory that had caused bottlenecks at many locations. Additionally, the team recently finished [Phoenix] expansion project at their MMC facility that had started prior to our acquisition. This was an important expansion as this facility focuses on heavier gauge material that supports our construction and infrastructure initiatives.

Precoat team is now reporting normalized inventory levels at most of their plants. Finally, I believe Precoat has taken steps to bring its pricing curve in line with the cost curve that has experienced significant inflation. While the team still has more work to do on production efficiencies, we have realized over half of the expected synergies and still expect to identify sales synergies between Precoat and metal coatings. I am encouraged by the progress and expected efforts to show up in our run rates in fiscal year 2024.

And with that, I will turn it over to Philip to run through the financials.

Thanks, Tom. My financial commentary will focus on the results from continuing operations. Our continuing operations include the results of our AZZ Metal Coatings segment and our Precoat Metals segment from our acquisition date on May 13. Equity and earnings resulting from our noncontrolling interest in the avail infrastructure business and our corporate overhead supporting these businesses.

On Slide 7, AZZ generated fourth quarter sales from continuing operations of $336.5 million, significantly above the $130.1 million recognized in the same quarter of the prior year. The significant current year quarterly increase is a direct result of the addition of AZZ Precoat Metals of $187.1 million in our current quarter AZZ Metal Coatings sales of $149.4 million. The Metal Coatings segment sales were up 14.8% in the quarter versus prior year on stronger volumes and pricing.

On a comparable basis, pre-cut metal sales for Q4 increased by roughly 17%. Operating profits from continued operations for the fourth quarter were $36.2 million or 10.8% of sales. Prior year operating margins of 13.1% reflected only with the results of our Metal Coatings segment, while the current year reflects the inclusion of ACC Precoat Metals.

As we explained on our last earnings call, Precoat's fourth quarter margins were compressed primarily due to normal seasonally lower volumes, coupled with inflationary headwinds. We expect this to reverse in the first quarter due to improved volumes and the pricing curve is on noted catching up to the inflated cost curve. Adjusted EBITDA in the fourth quarter of $57.2 million was 11.6% higher than the prior year, again, as a result of the addition of Precoat Metals. Adjusted EBITDA -- as a percentage of sales, was 17% reflects a blended rate of -- sorry, blended with Precoat Metals and was 370 basis points lower than the prior year's fourth quarter, a period in which included only our Metal Coatings segment. The combined results of the 2 businesses for the fourth quarter was in line with our expectations. We anticipate higher EBITDA margins moving forward as contemplated in our full year guidance.

On Slide 8, our full year sales were $1.32 billion, reflecting the addition of Precoat Metals for roughly 42 weeks of the year. Our full year operating profit of $173.6 million was significantly above prior year when including Precoat Metals for the period under ownership. Operating margins from continuing operations of 13.1% or 200 basis points below the prior year, a period only including our Metal Coatings segments, who had strong performance during the period.

Adjusted EBITDA of $67.4 million or 20.2% reflects the strong performance of the newly combined businesses. Both our Metal Coatings and Precoat Metal segments have worked hard at managing the inflationary market pressures and generated results in line with our expectations. Adjusted EPS from continuing operations for fiscal year 2023 was $3.48 per diluted share compared with adjusted EPS of $2.24 per share in fiscal '22.

On Slide 9, cash flows from continuing operations for the fiscal year were $91.4 million compared with $60.6 million in the prior year. Our fiscal year 2023 capital expenditures from continuing operations were $57.1 million compared with $23.6 million in the prior year. This increase was expected as part of our strategic rationale for the Precoat acquisition. Our fiscal 2024 capital investment plan of nearly $80 million includes roughly $50 million in normal maintenance and growth capital spending and nearly $30 million allocated to the construction of our new Precoat greenfield facility in the St. Louis, Missouri area. We have continued to declare and pay quarterly common dividends. For the full year, we paid common dividends of $16.9 million and made payments of $5.8 million in preferred dividends.

On Slide 10, we purchased Precoat Metals on May 13, 2022 from Carlyle (inaudible) for $1.3 billion and then subsequently sold the controlling interest in our AZZ Infrastructure Solutions segment, excluding our small oilfield tubing business for $220 million in cash on September 30, 2022. During the year, we reduced our debt by $237.5 million through proceeds from the AIS sale and from operating cash flows, reducing our acquisition date leverage of 4.25 to 3.46% as of fiscal year-end.

While we have a good pipeline of M&A opportunities, particularly for Galvanizing, we are focused only on highly accretive, low-risk deals that exceed our targeted returns. Given our focus on growth and debt reduction, we did not buy back stock in fiscal 2023.

Slide 11. We reduced our Term Loan B debt since the Precoat acquisition date improved our leverage to 3.5x, a good step towards our long-term target of below 3x leverage. We continue to have more than 50% of our existing term loan debt covered by a swap agreement to reduce further interest rate exposure. We do not have any maturities under our current credit facility until 2027.

I'll turn it back to Tom now for his closing comments.

Thank you, Philip. Moving to Slide 13. The outlook in the first quarter for Metal Coatings is for a seasonally strong spring fabrication and construction season, with many of our customers citing good backlogs as they benefit from increased infrastructure spending. Fabrication activity remains solid with many of our customers noting good backlogs. Precoat continues to see solid customer demand, particularly in growing industries that directly relate to construction, container and data centers. As I mentioned earlier, customer inventories have normalized due to the actions we have taken. Our announced pricing actions to offset inflation are beginning to show positive impact on Precoat margins. We have entered the stronger quarters of the year and quite frankly, I'm glad to have the lower fourth quarter behind us. Our corporate team will continue to focus on cash flow generation to allow rapid debt reduction, customer credit metrics, risk mitigation, prudently allocating capital to the highest return on investment projects.

Before we move on to the guidance slide, I would like to comment on strong secular growth drivers impacting our end markets that we are excited about for fiscal 2024. Our financial outlook this year reflects our expectation to directly or indirectly benefit from U.S. spending bills totaling over $250 billion from the American Infrastructure Investment and Jobs Act. We hold strong market positions in metal coatings and Precoat Metals. And with these leadership positions, -- we are bullish about our prospective opportunities related to roads, bridges and important clean energy and power transmission projects as well as data centers, airports and other critical infrastructure.

Our long-term growth drivers include the shift to manufacturing reshoring with the Build America Buy America focus as well as benefiting from the migration to prepainted aluminum and steel. In addition, there are important sustainability projects that are supporting critical material conversions, for example, the conversion from plastics to aluminum in the beverage industry. All of these secular trends create incremental opportunities for AZZ. Finally, we are progressing with our greenfield plant construction that supports aluminum coatings with a valuable dedicated customer committed to filling a majority of our capacity in this new plant. That is an exciting project for us, and we will keep you updated on the progress.

As you can see here on Slide 14, we are maintaining our full fiscal 2024 sales guidance of $1.4 billion to $1.55 billion, adjusted EBITDA guidance of $300 million to $325 million and adjusted EPS guidance of $3.85 to $4.35. While we're expecting some equity income from our minority stake in avail, we are not ready to predict how much this will be while they are still working on their purchase price accounting. I will also note that the first quarter EPS is based on a more normalized tax rate than we experienced in the fourth quarter.

Finally, on Slide 15. As a reminder, why we believe AZZ is a great investment, AZZ is the leading independent hot dip galvanizing and coil coating company with an irreplaceable footprint serving a broad and diverse set of markets. As a high value-added tolling business, we are not directly exposed to metal commodities. Also, we have shown that we can protect margins with a long track record of profitability during all economic cycles. We produced great margins and solid financial returns as well as generate free cash flow by delivering outstanding value to our customers, emphasizing operational excellence and continuing to innovate and develop our people and technology.

We're driving sales expansion through both organic and acquisition growth and are committed to improving margins and cash flow generation to fund our growth strategy. We will continue to focus on driving performance and financial results as well as maximizing long-term shareholder value.

Again, I want to thank all our shareholders and the Board for their support and I especially want to thank our ACG team for their hard work and dedication during our transformational journey to become a focused metal coatings company. This is an exceptional accomplishment, and I'm proud of our entire team.

With that, we'll open it up for questions.

(Operator Instructions) And our first question will come from John Franzreb of Sidoti & Company.

I'd like to start with the 2 business segments, surprisingly good underlying growth, roughly 15% and 17% in the fourth quarter. Could you just talk about what your growth assumptions are in the 2 segments embedded in your revenue guide of 1.4 $1.55?

Yes, John, I think on the 2 segments, when you look at the Metal Coatings segment to start with, they have continued to run a really solid business through COVID over the last 8 or 12 quarters and the back -- well, we don't have a lot of backlog, but the opportunities for some of those secular drivers that Tom was speaking to are there. When you look at the Precoat side of the business, same thing. They've got good opportunities in a lot of their markets are seeing a slight slowdown in some of the construction, but overall, a very solid business.

Yes, John, let me just add. I think we don't have significant growth -- top line growth embedded in our guidance. Most of the uptick is going to come from having precoat for the full year. And our focus on -- is going to be more on value and cash flow management and generation. So we don't have to have significant growth to hit that guidance.

Okay. Fair enough. And last quarter, you talked about roughly 3 to 4 plants at Precoat that was taking lower-margin business, and this was a roughly 3- to 4-quarter solution in your view back then probably fiscal '25 to get resolved. Update us on the status of that? And maybe talk about what kind of business they're taking that's lower margin.

Yes. I think some of it was more focused on just more our internal efficiency misses, if you will. So we've made some management changes at some of the -- at those plants. We've also made some organizational changes to help support the focus on improving efficiencies and productivity. And we have made some pricing adjustments for some lower margin customers that have just kind of been consistently -- it's not really a category of customers. It's just things that have gone on for a while in the type of business. So it's not anything specific, more just a focus on -- a general focus on we want to deliver value. We want to perform well and the vast majority of Precoat plants do exactly that.

Got it. And just one last question, I'll get back in the queue. The new aluminum coal plant, $80 million in CapEx this year, how does that look 2 years from now on the CapEx? And maybe kind of any updated the status of the build?

Yes. We had the groundbreaking ceremony with the Governor of Missouri. That was a fun event on a cold dreary day. And quite frankly, the groundbreaking was more of -- they were already doing quite a bit of excavation work on headsite. So official groundbreaking but things have been going on. We've got the equipment on order and delivery secured. We've got the long lead items under control. We've it's a really good schedule with enough float in it that we're going to hit the targets. So I feel real good about it at this point. We are going to spend about $30 million this year on that facility, which is both construction, down payments on equipment, things like that to make sure we get critical items in. That drifts off especially as we get into, I want to say, calendar '25, that drops pretty significantly. We get the facility open.

I'd also say that we're still having some somewhat slightly higher than normal CapEx spend in both Metal Coatings and Precoat that I think that normalizes back in nicely under the $50 million range. So we're doing things both for -- to drive some operational improvements. I mentioned in my remarks is MMC facility expansion. We had some other CapEx that's being deployed to improve controls and continue to drive digitization. And those things just play out is helping us improve efficiencies and productivities, but the investments start to go away.

Next question comes from Adam Thalhimer from Thompson, Davis.

Congrats on the solid Q4. You had a -- I wanted to get your thoughts on -- and you commented on sequential revenue growth at Metal Coatings. What are the expectations just because we don't have a lot of history for sequential revenue growth at Precoat Q4 to Q1?

It's pretty -- it's significant because Q4 is by far the slowest quarter for Precoat. It's winter months. So construction just slows up and the construction they're doing is inside when they can. We're now into spring, which better weather, more construction. Quite frankly, I'd have to check the percentage, but I'm going to say at least 10%, 15% quarter-over-quarter. Philip, do you have anything better.

No, that's about right. It's -- their fourth quarter is, I think, 12 of the 13 slowest weeks of the year. So we'll see a nice uptick in Q1.

Okay. And then you had a comment in the press release about a seasonally higher first quarter. Was that a sequential comment? Or is Q1 the highest EPS for the year?

Q1 and Q2 are both strong quarters. They -- I think if you look historically, particularly for metal coatings, sometimes it's Q1, sometimes it's Q2. But mainly, we're just -- we're talking about the seasonality coming out of winter going into spring as a general seasonality thing. And signaling, of course, now we enter 2 really good strong quarters for both construction and infrastructure.

And then third quarter in the fall somewhat more dependent on weather, but it tends to be a reasonably good quarter. And then the fourth quarter, you just get -- as Phil just said, 12 of the 13 weeks tend to be heavy winter, particularly in some of the areas that we serve as you get up North. Our Metal Coatings business tends to do -- they tend to be a little stronger in third quarter because most of our facilities are in the South and Midwest, other than the things we have up in Canada.

Okay. And then Philip, within the EPS guide, what are you assuming for share count and preferred dividends? I'm trying to get to the right EPS -- and within your range for revenue and EBITDA, but something is off on EPS, and I'm just wondering if it might be share count and the preferred dividends.

Yes. On the preferred dividends, there's 4.1 million shares associated with the Blackstone preferred equity. It's $240 million and the conversion price is $58.30. And the preferred will be dilutive for the year. So you need to take that into consideration.

Okay. And then last one, high-level thoughts on cash flow from operations in fiscal '24.

When you look at our guidance, I think it's in line with the EBITDA less CapEx is a good barometer for our ability to generate cash flow.

And indeed (inaudible). As we've noted, we're targeting 75 to hopefully $100 million of debt pay down. Just to help us as we move on. Q1 is more of a -- we consume some cash or so not likely to be paying down a lot of debt in Q1 just because it's 2 things. We're ramping up some inventory for the big season. And this is also when we do have bonus payouts and things like that. So then we get into the quarters where you can expect to see more significant debt paydown.

The next question comes from Jon Braatz of Kansas City Capital.

Tom, it seems like your -- let's say, this year, the focus at Precoat will be on improving productivity, margins and so on and so forth. And I guess my question is, as you complete or complete some of those projects and so on and improve the efficiency, what kind of improvement could we see in terms of the incremental margins once volume gets better at Precoat? How much better might those incremental margins be versus maybe where they were before? Any thoughts on that?

I think there's a variety of things that particularly impacted. I mean I think we -- well, I know we had done this presentation to try to explain how our fiscal year at AZZ kind of hits Precoat pretty badly in terms of -- and they used to have a better spread of profit margins across their quarters. So this is inflicted by our fiscal year. But we're still committed to getting them to the 20% EBITDA margins and which means we need to get improvements pretty quickly. I think Curt and the team, they've taken some good structural actions organizationally in terms of some of the plants that we're struggling.

This -- I can't understate the impact of that customer inventory on Precoat. So most of that's gone. We've gotten rid of a lot -- almost all of the outside warehouses that had to be leased to accommodate that. And if you just think about the impact on their efficiencies when you're having to go several miles down the road to an outside warehouse move material, that creates time cost and some quality issues, that's pretty much gone. So returning to their -- the 20% margins we've talked about. Obviously, there's a lot of work that goes into that. But the vast majority of the actions to do it have been taken. So we're going to see that pretty quickly as we get into this year.

Okay. Okay. And then secondly, the St. Louis facility, how quickly does that get up and going and begin to contribute to the bottom line?

It gets up and going, and it's -- but it's -- the construction is coinciding with the customers' demand for it as well. And I believe that's -- we're not going to see any measurable impact until 2025.

The next question is a follow-up from John Franzreb of Sidoti & Company.

Yes, I think it seems like everyone's got a kind of a good feel in the Middle cons business. But as far as Precoat, if we kind of separate it into a tale of 2 halves for you guys on your calendar year, how much of revenue Precoat will fall into the first half of the fiscal year versus the second half?

It's about 56%. I think if you look at the seasonality charts, if you look over the 5-year history, they tend to be in our fiscal year, more heavily weighted in our Q1 and Q2, then fewer working days in Q3. And then as Tom explained earlier, the slower fourth quarter seasonally.

Yes, I think you are right. 56%, 44%, 57%, 43%. And there's enough sensitivity in particularly in these days where it's harder to get skilled labor. So the tendency is to hold on to the capacity and drive through this. So you get that kind of movement in absorption levels, you get a lot of flow through pretty quickly when we get that kind of volume shift.

Got it. And in the fourth quarter, the margins that Precoat registered, how much was that normal seasonality impact versus the inventory rebalancing impact in the quarter? Do you have a sense of that?

Yes, I'd say it's about 50-50 on seasonality because when you look at it, the revenue drop, but not materially greater than normal in terms of the season. And the rest was, as I've toured the plants, the constraints created by that phenomenon and this moving between outside warehouses was just dramatic. I can't understate it. So the fact we're talking about that mostly being gone. That's why sequentially, it's -- you're going to see a big pop quarter-over-quarter.

Great. And one last question. It looks like zinc turning at a 1-year low. So can you just talk about your thoughts about that and maybe why you didn't reassess your guidance in light of that?

Well, we've talked about this before. We've pretty much separated as much as we can the -- our pricing from the cost of zinc. So we're focused on delivering the value that sustains the price levels. For us, it will take another 6 months before this lower-cost ink starts to hit our kettles. And so we're well into this year before we see any of the benefit of this lower cost than an hitting our kettles. So we'll take a look at that again as we get deeper into the year. But it's just that cycle of, call it, 6 months on average that in terms of the inventory in our kettles that we've got to move first before we see the lower cost of that. And then 2, we've got to make sure we can hold our prices and continue to offer the value services to sustain that.

Right. And who knows what the set looks like in 6 months, right?

We moved quite a bit just over -- just within a quarter.

The next question comes from Bill Baldwin of Anthony Baldwin Securities.

Quick oversight on this new plant as far as looking at it from 10,000 feet. When that gets up and running, should that be accretive in the first full 12 months of operation as far as accretive to contribute to operating income?

Yes, it will be in the first full 12 months of operation. Yes, because the volumes are committed. There's a lot of testing that goes on to get it into full operation. But once that process is completed, then the volumes ramp up fairly quickly.

And remind me, Tom, what's the scheduled date for beginning of testing and this type of thing as far as the plant beginning to operate?

It's -- we I'm going to say it's early next year, as I'm thinking about. I should have brought the schedule in with me, so I apologize, but -- early in fiscal early fiscal '25.

Yes, early fiscal '25, I believe, is the current schedule for that, and it ramps up because it will require some FDA approval. That's what Tom was talking about, the testing. So we'll ramp up if we get those approvals, we'll then ramp up to full year rate, which is accretive.

And would it be reasonable to assume that you'd be operating at close to the capacity that your demand allows you to by the second half of fiscal say give you 6 months to ramp up, is that sufficient, do you think?

I'd say it's going to be a little bit longer than that. There is -- because part of this is also depending on how the customer demand ramps up with it. But I'd say more towards the latter part of the year.

The next question comes from Brett Kearney of Gabelli Funds.

Tom, you mentioned some of the fiscal support we've seen from the U.S. government, the tailwinds that provides for your businesses. I guess, pretty familiar, and it feels like particularly on the galvanizing side, the funding sources behind that utility CapEx budgets, we have good visibility to that, some new municipal highway and bridge activity. It feels pretty good. How about, I guess, fiscal support, how that plays into the Precoat Metal side and how you were thinking about any dislocations that could happen from financing and the banking channel on that side of the portfolio?

That's a great question. I think on the Precoat side, they have been impacted by some of the slower residential activity. But some of these underlying trends to convert to prepainted aluminum and steel, I think, offset some of that. On the noncommercial investments, we're still seeing good activity there. And part of this is the -- I guess, I'll technically, we'll call it reshoring of manufacturing of things like chips and stuff. That's all-good stuff. We're seeing several factories being constructed here in Texas, particularly. All of those use a ton of prepainted (inaudible).

So that kind of activity is continuing. I wish I had a better crystal ball how long that's going to continue with capital cost remain high. Right now, the outlook is fine. And hopefully, we're also continuing to find new opportunities, which we talked about some of those like the heavy gauge, expanding that facility that's a fairly big deal for us because that focuses more on infrastructure support, culverts and things like that. So we've been taking those steps, making those investments. And unless something dramatic happens, hopefully, we continue to benefit from it at Precoat.

Excellent. And then we've talked about the favorable move in zinc prices, how those have probably peaked in your kettles. How are you thinking about, I guess, 2 pieces. One, asset, energy, labor, the other portions of your cost base? And then I guess second question, kind of how is labor availability trending in a lot of the markets you're active in?

Yes. Just kind of the -- generally, labor is still tight. So -- but we're down. I think at the peak, we probably had 400 openings for labor on any given day. We're probably down to a couple of hundred, which is -- that's a level we can cover with overtime and extra shifts and things like that. It's we just went through our merit review process for the majority of the company. It wasn't outrageous. We had made adjustments as the year went on to attract labor and retain labor. So we feel pretty good. It's not a high ramp at this point in terms of increase increased cost on labor. We're doing -- we've done some things to retain labor better and manage it more efficiently. Precoat uses more skilled, highly skilled labor. That's still tight in certain parts of the country. And -- but once again, we've implemented programs to attract and retain.

In terms of the acid chemicals, some of the things that really impacted Precoat was these additives and chemicals and things like that, that we're outside of pain. So that's why we kind of got behind the cost curve there towards the latter part of the year. On the Metal Coatings side, we're doing a better -- I mean, one of our big focuses is on acid and asset disposal and managing assets. So even though costs are up on everything from wire to acid, we've been able to maintain the price curve at least staying even with it. So it's -- our focus has been on availability and making sure we can service our customers when some of our competition can't. So -- and we've been able to do all that.

This concludes our Question-and-Answer Session. I would like to turn the conference back over to Tom Ferguson for any closing remarks.

Well, thank you all for joining us today. I look forward to updating you on our first quarter results in just a few weeks, and I'm confident that fiscal year 2024 will result in further value creation as we capitalize on strong demand environment in ACC's diverse markets and the investments that we've made. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.