Citing high costs and competition due to tariff policies, Insteel Industries Inc. reported a $1.77 million net loss for the fourth quarter of 2019, compared to $9.41 million in net earnings for the same quarter last year.
Shares were trading down 11.3 percent Thursday on the unexpected loss, the most since April.
Insteel is a North Carolina-based manufacturer of steel wire reinforcing products for concrete construction applications. The company operates 10 manufacturing facilities in the U.S.
For the fiscal year ended in 2019, Insteel reported net earnings of $5.60 million, or 29 cents per diluted share, an almost 85 percent drop from its net earnings of $36.3 million, or $1.88 per diluted share, a year earlier.
On average, analysts estimated fourth-quarter earnings per share of 18 cents. Actual figures for the fourth quarter missed the mark by almost 150 percent, coming in at a loss of 9 cents.
Fourth-quarter net sales decreased this year, with Insteel reporting $113.4 million in net sales for the fourth quarter, compared to $121.4 million a year earlier. Net sales for the fiscal year decreased by a smaller margin, with $455.7 million in 2019 compared to $453.2 million in 2018.
Cost of sales increased for both the fourth quarter and fiscal year, a trend Insteel alluded to in its conference call on Thursday. Michael Gazmarian, chief financial officer of Insteel, said tariffs have driven the costs of Insteel’s products higher than global market levels, making it more difficult for the company to drive a profit.
“It’s driven both by domestic competition and import competition, and steel prices worldwide have been under tremendous domestic and foreign pressure in 2019,” Chief Executive Officer H.O. Woltz III said during the call.
The company said the heightened level of foreign competition due to tariff policies is one reason for the company’s poor financial performance in 2019. Woltz said Insteel is in talks with the Trump administration about making changes to the tariff policies that would benefit domestic steel production.
Woltz said Insteel is not interested in the ending the tariffs, but rather changing them to not affect product pricing for domestic companies. Woltz says that foreign competitors are able to introduce their products downstream and avoid tariffs in their pricing. He added that the Trump administration is “more devoted than any to the strength of current domestic manufacturing.”
A positive trend for Insteel during 2019, Woltz said during the conference call, was that highway and street construction rose year-over-year. He said he expects state contracting growth to be favorable as the company moves into fiscal year 2020.
“Public construction, particularly for roads and bridges, should remain strong driven by increased state and local spending together with FAST Act and supplementary funding,” Woltz said in a statement. “The latest third-party forecasts for our other primary demand driver, nonresidential construction, reflect continued growth supported by the ongoing economic expansion.”
Shares of Insteel stock were trading at $17.74 on Thursday, down $2.26.
