Insteel Industries Inc (IIIN) 2024 Q1 法說會逐字稿

Good morning, and welcome to Insteel Industries first-quarter 2024 earnings call. My name is Carla, and I will be your operator for today. (Operator Instructions)

早安，歡迎參加 Insteel Industries 2024 年第一季財報電話會議。我叫卡拉，今天我將擔任您的接線生。（操作員說明）

I will now hand over to your host, H. Woltz, CEO, to begin. Please go ahead when you're ready.

現在請主持人、執行長 H. Woltz 開始發言。準備好後請繼續。

Thank you. Good morning. Thank you for your interest in Insteel, and welcome to our first-quarter 2024 conference call, which will be conducted by Scot Jafroodi, our Vice President, CFO, and Treasurer; and me.

謝謝。早安.感謝您對 Insteel 的關注，歡迎參加我們的 2024 年第一季電話會議，該電話會議將由我們的副總裁、財務長兼財務主管 Scot Jafroodi 主持；和我。

Before we begin, let me remind you that some of the comments made in our presentation are considered to be forward-looking statements that are subject to various risks and uncertainties which could cause actual results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC.

在開始之前，請允許我提醒您，我們的簡報中提出的一些評論被認為是前瞻性陳述，這些陳述受到各種風險和不確定性的影響，可能導致實際結果與預測結果有重大差異。我們定期向 SEC 提交的文件中描述了這些風險因素。

The recent environment has been challenging for the company, in view of inventory accumulations throughout the supply chain and a significant downward reset in steel prices that occurred following several quarters of extreme supply tightness and significant market price escalations. We believe these headwinds have about run their course, and we continue to be optimistic about the underlying level of demand for our products.

鑑於整個供應鏈的庫存累積以及幾個季度供應極度緊張和市場價格大幅上漲後鋼材價格大幅下調，近期的環境對該公司來說充滿挑戰。我們相信這些逆風即將結束，我們繼續對我們產品的潛在需求水準持樂觀態度。

I'm going to turn the call over to Scot to comment on our financial results for the quarter and the macro environment. And then I'll pick the call back up to discuss our business outlook.

我將把電話轉給斯科特，以評論我們本季的財務表現和宏觀環境。然後我會接聽電話，討論我們的業務前景。

Thank you, H. And good morning to everyone joining us on the call. As we anticipated, business conditions remain challenging during the first quarter of fiscal 2024 as we continue to navigate through the ongoing pressure of narrowing spreads between selling prices and raw material costs, coupled with elevated unit manufacturing costs. As a result, net earnings for the quarter declined to $1.1 million, or $0.06 per share from $11.1 million or $0.57 per share in the prior year period.

謝謝你，H。祝所有加入我們電話會議的人早安。正如我們預期的那樣，2024 財年第一季的業務狀況仍然充滿挑戰，因為我們繼續應對銷售價格與原材料成本之間價差縮小以及單位製造成本上升的持續壓力。因此，本季淨利潤從去年同期的 1,110 萬美元或每股 0.57 美元下降至 110 萬美元，或每股 0.06 美元。

Net sales for the quarter fell 27.1% from a year ago, driven primarily by a reduction in average selling prices as shipments remained flat. The decline in ASPs for the quarter reflects a persistent competitive environment and the steep decline in steel scrap prices over the past year. Sequentially, ASPs dropped by 7.9% from the fourth quarter as pricing pressure continues during the period, driven by both ongoing domestic competition and the growing impact of low price imported PC strand.

該季度淨銷售額較去年同期下降 27.1%，主要是由於出貨量持平而導致平均售價下降。本季平均售價的下降反映了持續的競爭環境以及過去一年廢鋼價格的急劇下降。隨後，由於持續的國內競爭和低價進口 PC 線的影響不斷加大，定價壓力持續存在，因此，平均售價較第四季度下降了 7.9%。

As we move into the second quarter, there are indications that the decline in our selling prices may be ending. Steel scrap prices reversed their downward trend during the quarter and have risen by $80 since November. Wire rod producers have followed, implementing price increases in December and January.

隨著進入第二季度，有跡象表明我們的銷售價格下降可能會結束。廢鋼價格扭轉了本季的下跌趨勢，自 11 月以來已上漲 80 美元。線材生產商也緊隨其後，在 12 月和 1 月實施了漲價。

In response to the rising costs of our raw materials, we have initiated our own price increases earlier this month, extending across most of our product lines. The start of an upward trend or a leveling out of prices due to these increases could put an end to a headwind that has been negatively impacting our results over the last year.

為了應對原材料成本上漲，我們在本月早些時候開始了漲價，涉及我們的大部分產品線。由於這些上漲而導致價格開始上升或趨於平穩，可能會結束去年對我們業績產生負面影響的逆風。

Shipments for the quarter, which has historically been our slowest period of the year due to the onset of winter weather and holiday schedules, were essentially unchanged from the same period last year, but down 16.1% sequentially from Q4. Volumes during the quarter benefited from improved shipping levels within our residential construction end markets, helping offset ongoing weakness in our infrastructure and commercial markets, which continue to be impacted by project delays, customer destocking, and weak demand in certain regions of the country.

由於冬季天氣和假期安排的影響，本季的出貨量歷來是我們一年中出貨量最慢的時期，與去年同期基本持平，但比第四季連續下降 16.1%。本季的銷售得益於住宅建築終端市場運輸水準的提高，有助於抵消基礎設施和商業市場持續疲軟的影響，這些市場繼續受到專案延誤、客戶去庫存和該國某些地區需求疲軟的影響。

Gross profit for the quarter declined $11.5 million from a year ago, while gross margin narrowed 550 basis points to 5.2%. On a sequential basis, gross profit fell $7.7 million from the fourth quarter and gross margin decreased 370 basis points. The continuing compression of spreads can be attributed to the pricing pressures I mentioned earlier with the year-over-year decrease in ASPs surpassing a reduction in our inventory carrying values.

該季度毛利較去年同期下降 1,150 萬美元，毛利率收窄 550 個基點至 5.2%。與第四季相比，毛利季減 770 萬美元，毛利率下降 370 個基點。價差的持續壓縮可以歸因於我之前提到的定價壓力，平均售價的同比下降幅度超過了我們庫存帳面價值的下降幅度。

As noted earlier, in response to the recent escalation in our raw material costs, we've implemented price increases this month, which should favorably impact our second-quarter spread and margin as higher selling prices will be matched against the consumption of lower cost inventories under the first-in, first-out accounting methodology.

如前所述，為了應對最近原材料成本的上漲，我們本月實施了提價，這將對我們第二季的價差和利潤率產生有利影響，因為較高的銷售價格將與較低成本庫存的消耗相匹配根據先進先出會計方法。

Apart from the spread compression, we also experienced higher unit conversion costs as we continued to plan reduction of finished good inventories in certain plants. This led to operating inefficiencies and elevated unit conversion costs, which were further amplified by on billing inflationary cost pressures. However, as we move into the second quarter, we expect a reduction in unit conversion costs as operating levels are gradually increased.

除了價差壓縮之外，由於我們繼續計劃減少某些工廠的成品庫存，我們還經歷了更高的單位轉換成本。這導致營運效率低下和單位轉換成本上升，而計費通膨成本壓力進一步加劇了這個問題。然而，隨著進入第二季度，隨著營運水準逐漸提高，我們預計單位轉換成本將會下降。

SG&A expense for the quarter decreased $800,000 to $6.4 million or 5.2% of net sales from $7.1 million or 4.3% of net sales last year, mainly due to lower compensation expense under our return on capital-based incentive plan, which was negatively impacted by weaker results in the current year period. Our effective tax rate rose to 27.2% from 22.9% a year ago. The increase was largely driven by permanent book tax differences and the effect of a discrete tax item, which had an amplified impact on our rate due to the lower pre-tax earnings.

本季的SG&A 費用從去年的710 萬美元（佔淨銷售額的4.3%）減少80 萬美元至640 萬美元（佔淨銷售額的5.2%），主要是由於我們基於資本的激勵計劃回報率降低了補償費用，而該計劃受到了疲軟的負面影響。本年度的結果。我們的有效稅率從一年前的 22.9% 上升至 27.2%。這一增長主要是由永久性帳面稅差異和離散稅項的影響所推動的，由於稅前收益較低，這對我們的稅率產生了放大的影響。

Looking ahead to the balance of the year, we expect our effective rate to run close to 23%, subject to the level of pre-tax earnings, book tax differences, and the other assumptions and estimates that compose our tax provision calculation.

展望今年剩餘時間，我們預計有效利率將接近 23%，具體取決於稅前收益水準、帳面稅差異以及構成我們稅務撥備計算的其他假設和估計。

Moving to the cash flow statement and balance sheet, cash flow from operations provided $21.8 million of cash in the first quarter. This is primarily due to the work -- change in working capital driven by a reduction in receivables, reflecting the usual seasonal slowdown in sales and a decrease in inventories due to the lower average unit carrying values. Our inventory position at the end of the quarter represented three months of shipments on a forward-looking basis, calculated off of our forecasted Q2 shipments.

轉向現金流量表和資產負債表，第一季營運現金流提供了 2,180 萬美元的現金。這主要是由於應收帳款減少導致的營運資本變化，反映了通常的季節性銷售放緩以及平均單位帳面價值較低導致的庫存減少。我們在本季末的庫存狀況代表了三個月的前瞻性出貨量，是根據我們預測的第二季出貨量計算得出的。

Finally, our inventories at the end of the first quarter were valued at an average unit cost lower than our first-quarter cost of sales and now approximate current replacement costs. We should favorably impact spreads and margins during the second quarter as we consume the lower cost material.

最後，我們第一季末的庫存以平均單位成本估值，低於第一季的銷售成本，現在接近目前的重置成本。由於我們消耗成本較低的材料，我們應該會對第二季的價差和利潤產生有利的影響。

We incurred $12.3 million in capital expenditures in the first quarter and remain committed to our full year target of $30 million. H will provide more detail on this topic in his remarks.

我們第一季的資本支出為 1,230 萬美元，並繼續致力於實現 3,000 萬美元的全年目標。H 將在他的演講中提供有關此主題的更多詳細資訊。

In December, we returned $48.6 million of capital to our shareholders through the payment of a $2.50 per share special dividend in addition to our regular quarterly dividend, marking the highest special dividend the company has paid in seventh year -- over the last eight years, we have paid a special dividend. Also, during the quarter, we repurchased $539,000 of our common equity equal to approximately 19,000 shares.

12 月，除了定期季度股息外，我們還透過支付每股2.50 美元的特別股息，向股東返還了4,860 萬美元的資本，這是該公司第七年支付的最高特別股息，這是過去八年以來的最高特別股息。我們已經支付了特別股息。此外，在本季度，我們回購了價值 539,000 美元的普通股，相當於約 19,000 股股票。

From a liquidity perspective, we ended the quarter with $85.6 million of cash on hand and no borrowings outstanding on our $100 million revolving credit facility, providing us ample liquidity and financial flexibility going forward.

從流動性角度來看，本季末我們手頭現金為 8,560 萬美元，1 億美元的循環信貸額度沒有未償還借款，這為我們未來提供了充足的流動性和財務靈活性。

As we move into second quarter of fiscal 2024, we expect gradual improvement in our construction end markets. Leading indicators for non-residential construction spending, Architectural Billing and Dodge Momentum Indexes, imply roughly stable conditions going forward. In November, ABI remained in negative territory for the fourth consecutive month with a score of 45.3% and a score below 50 in the case of decline in business conditions. However, despite the low score, there were positive signs of in report and there's indications that credit conditions are beginning to ease with firms noting an increase in inquiries for future projects.

隨著進入 2024 財年第二季度，我們預計建築終端市場將逐步改善。非住宅建築支出的領先指標、建築帳單和道奇動量指數表明，未來的情況大致穩定。11月份，ABI連續第四個月處於負值區域，得分為45.3%，在經營狀況下滑的情況下得分低於50分。然而，儘管得分較低，但報告中也出現了積極的跡象，並且有跡象表明，隨著企業注意到對未來項目的詢問有所增加，信貸條件開始放鬆。

The Dodge Momentum Index, another leading indicator for non-residential building construction, rebounded 3% in December, rising to 186.6 with commercial planning improving 1% and institutional planning up 6.1% on a year-over-year basis. The overall mix was lower by 2%. Dodge noted that despite ongoing labor and construction cost challenges, there are a substantial -- a number of projects currently in the planning stages that will support construction spending into 2025.

非住宅建築施工的另一個領先指標道奇動量指數 12 月反彈 3%，升至 186.6，其中商業規劃年增 1%，機構規劃年增 6.1%。整體組合下降了 2%。道奇指出，儘管勞動力和建築成本持續面臨挑戰，但仍有大量目前處於規劃階段的項目將支持 2025 年的建築支出。

Turning to the macro indicators of our construction end markets, the monthly construction spending data continues to remain strong, with the November report showing total spending on a seasonally adjusted basis, up approximately 11% from last year, with non-residential construction of 18%, with public idling street construction, one of our larger end users for our products, up over 15%. However, while construction spending remained elevated, US [met] shipments, another measure that we track, continue to lag 2022 levels and shipments were down 3.6% for the month of October and 2.9% year over year.

至於建築終端市場的宏觀指標，月度建築支出數據持續保持強勁，11月報告顯示經季節調整後的總支出比去年增長約11%，其中非住宅建築支出增長18% ，隨著公共空轉街道建設，我們產品的較大終端用戶之一，成長了15% 以上。然而，儘管建築支出仍然較高，但我們追蹤的另一個指標——美國的發貨量繼續落後於 2022 年的水平，10 月的發貨量下降了 3.6%，同比下降了 2.9%。

This concludes my prepared remarks. And I will now turn the call back over to H.

我準備好的發言到此結束。現在我將把電話轉回給 H.

Thank you, Scot. As we commented last quarter, the difficult Q1 operating environment was expected as we faced headwinds, including declining steel prices, inventory liquidations by customers, the need to align our finished goods inventories to reflect lower shipments, and finally, the normal seasonal downturn in construction activity.

謝謝你，斯科特。正如我們上季度評論的那樣，由於我們面臨不利因素，包括鋼材價格下跌、客戶清理庫存、需要調整成品庫存以反映出貨量下降，以及建築業的正常季節性下滑，預計第一季的經營環境會困難重重。活動。

As a first-in, first-out reporter, declining steel prices unfavorably affect reported earnings as a matter of simple mathematics. The particularly sharp increase in steel prices during 2021 and 2022 produced a tailwind for earnings during these periods. And the sharp reduction of prices during 2023, extending into Q1 2024, created a substantial headwind for the company that was exacerbated by inventory liquidations and inflationary pressures on costs.

作為先進先出的報告者，從簡單的數學角度來看，鋼鐵價格下跌會對報告的收益產生不利影響。2021 年和 2022 年鋼鐵價格的大幅上漲為這段期間的盈利帶來了推動力。2023 年價格大幅下跌，一直持續到 2024 年第一季度，給該公司帶來了巨大的阻力，而庫存清理和成本通膨壓力又加劇了這種阻力。

Fortunately, it appears that pricing is heading up. More steel price stability should contribute to an improved environment for the company. As mentioned in the release, shipments of reinforcing products into the housing markets have recovered nicely since collapsing beginning in May 2022 at the onset of Fed's interest rate increases.

幸運的是，價格似乎正在上漲。鋼材價格的進一步穩定應有助於改善公司的環境。正如新聞稿中所提到的，自 2022 年 5 月聯準會升息開始崩盤以來，進入房地產市場的加固產品出貨量已恢復良好。

Margins have been compressed. However, its higher cost inventory flowed through cost of sales, a process that's now behind us. Shipments of welded wire reinforcement into infrastructure markets continued to show weakness, particularly in the Midwest and Western markets. While customers are by and large busy, many have storage yards that are full of finished products due to contractor delays and others are reducing inventories.

利潤空間被壓縮。然而，其較高成本的庫存透過銷售成本流動，這個過程現在已經成為過去。基礎設施市場的焊絲加固出貨量持續疲軟，特別是在中西部和西部市場。儘管客戶總體上很忙碌，但由於承包商的延誤，許多客戶的堆場都裝滿了成品，而其他客戶則在減少庫存。

While there's not objective data to support our view, it's not surprising that inventory corrections would occur following the recent extreme tightness of supply. This phenomenon was repeated throughout the supply chain, and we experienced the same dynamics in our raw material supplies. If we are correct, Insteel shipments and productions should accelerate at seasonally favorable weather patterns displaced the winter chill.

雖然沒有客觀數據支持我們的觀點，但在近期供應極度緊張之後出現庫存調整也就不足為奇了。這種現像在整個供應鏈中不斷重複，我們的原料供應也經歷了同樣的動態。如果我們的預測是正確的，那麼在季節性有利的天氣模式取代冬季寒冷的情況下，Insteel 的發貨和生產應該會加速。

PC strand shipments were flat for the quarter, although the mix improved. As mentioned in our last two earnings calls, we are increasingly affected by low-priced imported PC strand.

儘管結構有所改善，但本季 PC 線材出貨量持平。正如我們在最近兩次財報電話會議中提到的，我們越來越受到低價進口 PC 線的影響。

For instance, the average unit value of imported PC strand for November quarter to date, which is the most recent data, was lower than the domestic market price for wire rod, the raw material from which PC strand is produced. The industry is carefully scrutinizing strand imports and will pursue any trade actions that are justified.

例如，截至目前為止的最新數據，11月季度進口PC鋼絞線的平均單位價值低於線材（生產PC鋼絞線的原料）的國內市場價格。該行業正在仔細審查鋼絞線進口，並將採取任何合理的貿易行動。

We're optimistic about the impact on our markets of the Infrastructure Investment and Jobs Act, although it's still difficult to point to any specific projects that have affected demand. With respect to the IIJA, the Secretary of Transportation has acknowledged, quote, delays of one, two, three or more years between funding, when funding is appropriated and authorized and when those dollars are assigned to a project, unquote.

我們對基礎設施投資和就業法案對我們市場的影響持樂觀態度，儘管仍然很難指出任何影響需求的具體項目。關於 IIJA，運輸部長承認，在撥款和授權資金以及將這些資金分配給專案時，資金之間存在一年、兩年、三年或更長時間的延遲，請取消報價。

Meanwhile, of course, inflation is impacting project cost and jeopardizing the viability of some projects. Despite these obstacles, we believe that IIJA funds will ultimately be allocated to projects and spent as intended with a beneficial impact on our industry. The question is when, not if.

當然，與此同時，通貨膨脹正在影響項目成本並危及某些項目的可行性。儘管存在這些障礙，我們相信 IIJA 資金最終將分配給專案並按預期使用，對我們的行業產生有益的影響。問題是何時，而不是是否。

Turning to CapEx, we indicated in prior calls and press releases that CapEx for 2024 was expected to come in at approximately $30 million. Following 2023 CapEx of $30.7 million, we have been asked whether there's been a permanent step-up in CapEx expectations for the company. The answer is no.

談到資本支出，我們在先前的電話會議和新聞稿中表示，2024 年的資本支出預計約為 3,000 萬美元。繼 2023 年資本支出達到 3,070 萬美元之後，我們被問及該公司的資本支出預期是否永久提高。答案是不行。

On an ongoing basis, we would expect CapEx to range closer to depreciation and amortization. And to be elevated in years, we elect to expand capacity or incorporate new technology into our facilities through equipment replacement.

我們預計資本支出將持續接近折舊和攤提。為了在幾年內獲得提升，我們選擇擴大產能或透過設備更換將新技術融入我們的設施。

As a reminder, the CapEx amounts for 2023 and 2024 are heavily influenced by the addition of three new production lines that are welded wire reinforcement plants and the addition of a production line at a PC strand plan. The scale of these additions is not a recurring event.

需要提醒的是，2023 年和 2024 年的資本支出金額很大程度上受到增加的 3 條新生產線（焊絲加固工廠）和 PC 鋼絞線計劃中增加的生產線的影響。這些新增項目的規模並不是重複發生的事件。

The investments we're making in state-of-the-art technology will expand our product capabilities and favorably impact our cash cost of production. And companies that fail to make such investments will become increasingly uncompetitive. As you know, Insteel continues to be debt-free and has substantial flexibility to make decisions for the long-term best interest of the business.

我們對最先進技術的投資將擴大我們的產品能力，並對我們的現金生產成本產生有利的影響。未能進行此類投資的公司將變得越來越沒有競爭力。如您所知，Insteel 仍然沒有債務，並且具有很大的靈活性，可以為企業的長期最佳利益做出決策。

Looking ahead, we are aware of the substantial risks related to future performance of the US economy and we're monitoring the environment. We believe that in addition to elevated interest rates, heightened conservatism among customers that are concerned about the macro environment could be contributing to a slower market recovery. In any event, we're well positioned to aggressively pursue actions to maximize shipments and optimize our costs and to pursue growth opportunities, both organic and through acquisition.

展望未來，我們意識到與美國經濟未來表現相關的重大風險，並且我們正在監控環境。我們認為，除了利率上升之外，客戶對宏觀環境的擔憂加劇也可能導致市場復甦放緩。無論如何，我們都處於有利位置，可以積極採取行動，最大限度地提高出貨量，優化成本，並透過有機成長和收購來尋求成長機會。

This concludes our prepared remarks, and we'll now take your questions. Carla, would you please explain the procedure for asking questions?

我們準備好的發言到此結束，現在我們將回答你們的問題。Carla，您能解釋一下提問的程序嗎？

(Operator Instructions) Julio Romero, Sidoti & Company.

（操作員說明）Julio Romero，Sidoti & Company。

Thanks. Hey, good morning, H. and good morning, Scot.

謝謝。嘿，早上好，H.，早上好，斯科特。

Good morning.

早安.

To start, I was hoping you could update us. Hey, good morning. I was hoping you could update us on the competitive pricing pressures that you spoke about last quarter in October. And has the rise in steel scrap ease some of those competitive pressures?

首先，我希望你能給我們更新最新消息。嗨，早安。我希望您能向我們介紹十月份上個季度談到的競爭性定價壓力的最新情況。廢鋼的增加是否緩解了部分競爭壓力？

Of course, it's always difficult to know exactly what drives behavior in the markets, but I would suspect that the entire marketplace has experienced the rather disappointing volume -- volume experienced that Insteel has seen, and there's been an overreaction by certain competitors to believe that reducing prices stimulate volume.

當然，要確切地了解市場行為的驅動因素總是很困難，但我懷疑整個市場都經歷了相當令人失望的成交量——就像英鋼所經歷的那樣，而且某些競爭對手反應過度，認為這一點降低價格刺激銷量。

And of course, as steel costs came down, I suppose that competitors believe that they would be able to offset lower average selling prices with lower steel cost. Of course, that dog chases its tail for quite a while.

當然，隨著鋼鐵成本的下降，我認為競爭對手相信他們能夠用較低的鋼鐵成本來抵消較低的平均價格。當然，那隻狗追著它的尾巴很長一段時間。

So the bottom line is we were glad to see that steel scrap prices stopped their freefall. We're glad to see that the overall steel market in our segment of wire rod and [rolled] products has begun to stabilize and move up. And we think that the stable steel market that we see in front of us for the next few months will certainly benefit our operating environment.

因此，最重要的是，我們很高興看到廢鋼價格停止了直線下跌。我們很高興看到我們線材和[軋材]產品領域的整體鋼材市場已經開始穩定並上漲。我們認為，未來幾個月我們看到的穩定的鋼鐵市場肯定有利於我們的經營環境。

Got it. That's very helpful. And I guess that stabilization, one would think would lead to more rationality within the marketplace, at least on the domestic side. But I'm curious if you're seeing a divergence on the imported side and if there's any notable differentiation between pressures you're seeing from domestics versus imports.

知道了。這非常有幫助。我猜想，人們會認為這種穩定會導致市場更加理性，至少在國內方面是如此。但我很好奇您是否看到進口方面存在差異，以及您看到的國內壓力與進口壓力之間是否存在顯著差異。

Are you referring to our raw material, Julio? Or are you referring to import competition with our finished products?

你指的是我們的原料嗎，胡里歐？還是您指的是與我們成品的進口競爭？

I'm referring to the finished product side and if the imported finished products are still underpricing domestic such as yourself.

我指的是成品方面，如果像你這樣的進口成品仍然低於國內價格。

Yes, that is the case. And it's interesting in that import volumes of PC strand are actually down but pricing for imported products has really collapsed. So in certain segments of the PC strand business, imports are a major competitive factor. And in that area, we have definitely been affected by that import competition.

是的，就是這樣。有趣的是，PC 線材的進口量實際上下降了，但進口產品的價格卻確實暴跌了。因此，在PC鋼絞線業務的某些領域，進口是一個主要的競爭因素。在這個領域，我們肯定受到了進口競爭的影響。

Julio, this is not new for the company. We've experienced this over and over and over again, to the extent that today we have 22 dumping or countervailing duty orders against foreign countries. And if the kind of disruptive pricing that we're seeing now continues, I think you can expect to see more trade activity by the domestic PC strand industry.

Julio，這對公司來說並不新鮮。我們一次又一次地經歷過這種情況，以至於今天我們收到了 22 項針對外國的傾銷或反補貼稅令。如果我們現在看到的這種顛覆性定價持續下去，我認為國內 PC 線材產業將會出現更多的貿易活動。

That's very helpful there. And then typically, when steel scrap prices reverse towards the positive and when finished goods prices also reverse towards the positive, you'd typically see a one quarter FIFO tailwind as you benefit from those higher prices of finished goods and the consumption of lower price inventory. Do you foresee that on the horizon? And if so, what's maybe your best guess as to when the timing is realized within the P&L?

這非常有幫助。通常情況下，當廢鋼價格反轉為正值且成品價格也反轉為正值時，您通常會看到四分之一的先進先出順風，因為您受益於成品價格上漲和較低價格庫存的消耗。您預見到這一點即將到來嗎？如果是這樣，您對損益表中實現時間的最佳猜測是什麼？

Well, it's a day-to-day issue with us. We did announce price increases across practically all of our products that were effective January 1. We are collecting those increases as we speak.

嗯，這是我們的日常問題。我們確實宣布了幾乎所有產品的價格上漲，並於 1 月 1 日生效。正如我們所說，我們正在收集這些增量。

What next week brings is hard to say. But this week, we're collecting the increases. And if that were to continue for the quarter, then you would see the impact of those increases in our Q2 results.

下週會發生什麼事很難說。但本週，我們正在收集增量。如果這種情況持續到本季度，那麼您就會看到這些成長對我們第二季業績的影響。

Understood. I'll hop back in the queue. Thanks very much.

明白了。我會跳回到隊列中。非常感謝。

Thank you.

謝謝。

(Operator Instructions) Tyson Bauer, KC Capital.

（操作員指令）Tyson Bauer，KC Capital。

Good morning, gentlemen.

早安，先生們。

Good morning, Tyson.

早安，泰森。

Just to follow up on Julio's last question. As he has mentioned, we have seen historically that sometimes you'll overshoot for a quarter. And then we end up in this lower yo-yo situation on the margin.

只是為了跟進胡里奧的最後一個問題。正如他所提到的，我們從歷史上看到，有時你會超越四分之一。然後我們最終會陷入邊緣較低的溜溜球狀態。

But when you've had price increases or announced price increases, you've also benefited from increased shipments ahead of those price increases. And I'm wondering if that will be reflected in Q2 or because we're in a seasonally weaker quarter, that somewhat gets muted as opposed of -- if this happened during the summer months?

但是，當您提價或宣布漲價時，您也會從提價之前發貨量的增加中受益。我想知道這是否會在第二季度反映出來，或者因為我們正處於季節性疲軟的季度，所以這種情況會有所減弱，而不是——如果這種情況發生在夏季？

I think that shipments for our Q2 will probably be affected by weather conditions as much as any quarter for the company. And it's hard to know what the impact will be.

我認為第二季的出貨量可能會像公司任何季度一樣受到天氣條件的影響。而且很難知道會產生什麼影響。

But traditionally, either Q1 or Q2 is our lowest shipping quarter. I suspect that Q1 will be our lowest shipping quarter and that Q2 will be better, but it is weather affected. But in terms of whether this environment would be more beneficial in the summer months, in the winter months, I don't really think so, Tyson. I mean, except for -- from all suppliers higher as we ship more product. But the change is -- I think the important issue here, and it's very welcome at Insteel.

但傳統上，第一季或第二季是我們出貨量最低的季度。我懷疑第一季將是我們出貨量最低的季度，第二季度會更好，但受到天氣影響。但至於這種環境在夏季或冬季是否會更有利，我真的不這麼認為，泰森。我的意思是，除了——隨著我們運送更多產品，所有供應商的價格都會更高。但變化是——我認為這裡的重要問題，而且它在 Insteel 非常受歡迎。

I think the other thing that's important to understand is just how volatile this raw material market has been over the course of the last 18 months. We've seen highs that are unprecedented, and then we've seen those numbers drop back to lows. And that whipsaw effect is going to affect the Insteel's results just by matter of simple mathematics, and it's just part of the business.

我認為另一件需要了解的重要事情是原材料市場在過去 18 個月中的波動程度。我們看到了前所未有的高點，然後我們又看到這些數字回落至低點。僅僅透過簡單的數學計算，這種鋸齒效應就會影響 Insteel 的業績，而這只是業務的一部分。

Okay. It sounds like you're implying that there's been really no pushback to your price increases. Would that necessitate further price increases?

好的。聽起來您的意思是，您的漲價確實沒有受到阻礙。這是否需要進一步提高價格？

Well, I mean, there's always pushback to price increases, but I think the magnitude of increases in costs that we've seen are undeniable. And I don't think there's any competitor in our industry that would expect to absorb those raw material increases. And I think the customer base is pretty realistic about sources of supply.

嗯，我的意思是，價格上漲總是會遇到阻力，但我認為我們所看到的成本增加的幅度是不可否認的。我認為我們行業中沒有任何競爭對手會期望吸收這些原材料的成長。我認為客戶群對於供應來源的看法非常現實。

So I think supply and demand have matched up in a way that makes this price increase realm look attainable. What happens in the future is going to be determined by the strength of demand for our products and also about what happens in the overall steel market. And it's just beyond us to be able to project that past a month or two out.

因此，我認為供給和需求的匹配使得這種價格上漲看起來是可以實現的。未來會發生什麼將取決於我們產品的需求強度以及整個鋼鐵市場的情況。我們無法預測過去一兩個月的情況。

And were you the industry leader in implementing the price increases? Or were you following others within the industry and their actions or have others followed your actions now?

你們是實施提價的產業領導者嗎？或者您是否正在關注行業內的其他人及其行為，或者其他人現在是否正在關注您的行為？

We are typically the leader in the industry, and we have seen others follow our actions.

我們通常是業界的領導者，我們也看到其他人效仿我們的行動。

Okay. Inventory levels, I think, were $9 million below where we were the prior quarter, which you have some seasonal lift in there. What's the split between the raw material and the finish? And is that split something that was impacted by delayed shipments at the end of the quarter? Or is that fairly normal split from what you've seen in prior quarters?

好的。我認為庫存水準比上一季低了 900 萬美元，其中有一些季節性的提升。原料和成品有什麼差別？這種分裂是否受到季度末出貨延遲的影響？或者，與您在前幾個季度看到的情況相比，這種差異是相當正常的嗎？

It would be fairly normal split, Tyson. There are a couple of product lines where we needed to reduce finished goods inventories. I don't think that you'll see our raw material inventories fall any further than where they are today. They're at a very comfortable level. And of course, raw material inventories are a function of steel mill service levels. The worse the service levels are and the longer the lead times are extended, then the higher the inventory levels we end up carrying.

這將是相當正常的分裂，泰森。我們需要減少一些產品線的成品庫存。我認為您不會看到我們的原材料庫存比現在下降更多。他們處於一個非常舒適的水平。當然，原料庫存是鋼廠服務水準的函數。服務水準越差，交貨時間延長得越長，我們最終的庫存水準就越高。

And the other real driver there is our activity in the offshore markets, which is today at a low [area]. So our raw material inventories are comfortable for the state of the business and our finished goods inventory liquidations are about complete. But I wouldn't say that there's any change in the split between raw materials and finished goods that would be surprising.

另一個真正的驅動因素是我們在離岸市場的活動，目前該市場處於低位[區域]。因此，我們的原料庫存對於業務狀況來說是合適的，我們的成品庫存清算也即將完成。但我不會說原料和製成品之間的比例有任何令人驚訝的變化。

And the overall level should be as we gear up for the warmer seasonality, we'll start to see the inventory amount creep up as we get into the end of Q2 forward. Okay. Sounds like from --

整體水準應該是，當我們為溫暖的季節性做好準備時，隨著進入第二季末，我們將開始看到庫存量逐漸增加。好的。聽起來像是來自--

Yeah. That's correct.

是的。這是正確的。

Scot, was there no incentive calculations or a pay compensation that was included in Q1? So does that imply a true-up possibility in future quarters that may have better profitability?

史考特，第一季是否沒有包含激勵計算或薪資補償？那麼，這是否意味著未來幾季有可能實現更好的獲利能力？

Yes, there was no expense pickup in Q1 for the incentive plan, but -- and yes, it would -- improving results in Q2, Q3 would accelerate that.

是的，第一季激勵計劃的費用沒有增加，但是 - 是的，它會 - 第二季度和第三季度業績的改善將加速這一過程。

Okay. And when we look at Dodge, we look at ABI, we look at all their AIA data, how much of that do you think is -- as far as the expected projects, having better numbers is really dependent upon rate cuts and when those rate cuts occur, that would spur actual activity, whether that be in housing, commercial or otherwise.

好的。當我們看道奇，我們看 ABI，我們看他們所有的 AIA 數據，你認為其中有多少 - 就預期項目而言，擁有更好的數字實際上取決於降息以及何時降息削減的發生，將刺激實際活動，無論是住房、商業或其他方面。

It seems like the infrastructure piece will be there given state and local municipality budgets on DOT with the matching of the federal funds. So that side seems to be fairly high conviction level that will show up. What about the residential and more of the commercial side? Is that more rate dependent?

鑑於州和地方政府在 DOT 上的預算與聯邦資金的匹配，基礎設施部分似乎將在那裡。因此，這一方似乎有相當高的信念水準。住宅和商業方面怎麼樣？這更依賴利率嗎？

I think in residential, higher rates have already had the impact. And as you can see from new home construction, which is the primary consumer of our product, it hasn't been hurt nearly to the extent that overall home sales has been hurt by higher rates.

我認為在住宅領域，較高的利率已經產生了影響。正如您從新房屋建設中看到的那樣，新房屋建設是我們產品的主要消費者，它受到的影響遠遠沒有達到整體房屋銷售受到更高利率影響的程度。

So I think on the new construction side, that that trauma has run its course and that we should see reasonable market conditions going forward. Now, we may not be building 2 million homes a year, but it's not 1.2 million either. So I think it's run its course. And really, the issue for us in that market over the last few months has been more margin compression than it has been volumes. Volumes have recovered pretty nicely.

因此，我認為在新建設方面，這種創傷已經結束，我們應該看到未來合理的市場條件。現在，我們每年可能不會建造 200 萬套房屋，但也不會是 120 萬套。所以我認為事情已經順其自然了。事實上，過去幾個月我們在該市場面臨的問題是利潤壓縮比銷售壓縮更多。成交量恢復得相當不錯。

Commercial construction has undoubtedly been affected by higher interest rates, particularly speculative projects that are not undertaken by owners. I think that interest rates have been high enough and the change has been dramatic enough to make some projects uneconomic. And we see many of those coming back to market for requotes time and time again just as investors assess the viability of projects.

商業建築無疑受到了利率上升的影響，尤其是非業主承建的投機項目。我認為利率已經足夠高，變化也足夠巨大，足以使一些項目變得不經濟。當投資者評估專案的可行性時，我們看到許多人一次又一次地回到市場重新報價。

But it has been -- that market has been adversely affected. And certainly, if interest rates were to begin coming down, I think it would have a beneficial impact there.

但市場確實受到了不利影響。當然，如果利率開始下降，我認為這將會產生有益的影響。

All right, thank you, gentlemen.

好的，謝謝你們，先生們。

Thank you, Tyson.

謝謝你，泰森。

Thank you. We have no further questions registered. And with that, I will hand back to your host, H. Woltz, for final remarks.

謝謝。我們沒有登記任何其他問題。接下來，我將請主持人 H. Woltz 作最後發言。

Okay. Thank you. We appreciate your interest in the company. We look forward to our next call where we fully expect to report much improved results. Thank you.

好的。謝謝。我們感謝您對公司的興趣。我們期待下一次電話會議，我們完全希望報告大大改善的結果。謝謝。

This concludes today's call. Thank you for your participation. You may now disconnect your lines.

今天的電話會議到此結束。感謝您的參與。現在您可以斷開線路。