Insteel Industries, the leading U.S. manufacturer of steel wire reinforcing products for concrete construction, has posted stellar results for the second quarter of fiscal 2025. The company’s performance is a welcome contrast to the broader economic challenges posed by shifting global trade policies, particularly the ongoing changes in the U.S. tariff framework. As construction markets show signs of recovery, Insteel has capitalized on increasing demand for concrete reinforcement products, driving significant revenue growth.
The financial results also highlight Insteel’s strategic maneuvers through acquisitions, which have contributed both to higher production volumes and expanded market reach. The company’s ability to reduce unit manufacturing costs while maintaining strong pricing power has been central to its success. Additionally, the impact of U.S. tariff changes on steel products has proven to be more favorable than initially anticipated, adding to Insteel’s positive performance.
Who’s Involved?
At the helm of this performance is H.O. Woltz III, the President and CEO of Insteel Industries. Woltz has been instrumental in navigating the complexities of a recovering market while handling the shifting political landscape. His leadership has been central to the company's ability to capitalize on both internal acquisitions and external market changes.
Under his direction, Insteel has also benefitted from key acquisitions that have added value to their overall offering, expanding their capabilities. Woltz expressed optimism about the company’s prospects, particularly in light of positive trends in construction and the steel industry.
In an interview, Woltz stated, “The demand for our products has remained strong throughout the second quarter, and we are confident that these positive trends will continue in the coming months. However, the impact of tariff changes must be monitored carefully, as they are a critical factor in the cost dynamics of the steel industry.”
Alongside Woltz, Insteel’s strategy is supported by the broader team, including operational heads and acquisitions experts who have worked to strengthen the company's footprint in the market.
Second Quarter Results
Insteel reported a net income of $10.2 million for Q2 FY2025, a significant jump from the $6.9 million reported in the same quarter of the previous year. This translates to earnings per diluted share of $0.52, up from $0.35 a year ago. The robust earnings were driven by a 26.1% year-on-year increase in net sales, which reached $160.7 million, compared to $127.4 million in Q2 FY2024. This growth was underpinned by a 28.9% increase in shipments, partly offset by a 2.2% dip in average selling prices.
Insteel’s gross profit expanded by 21.4%, reaching $24.5 million, or 15.3% of net sales, up from 12.3% in the same period last year. The company also reduced manufacturing costs due to increased production volumes. Speaking about this achievement, Woltz said, “Our ability to reduce unit manufacturing costs while increasing production volumes has been pivotal in improving profitability. This has allowed us to improve our gross margins even amidst fluctuating market conditions.”
Insteel’s operational performance is further highlighted by a 300 basis point improvement in gross margin, reflecting the impact of higher production volumes and cost management initiatives. Despite a 17.9% quarter-on-quarter increase in shipments, the company’s SG&A (selling, general, and administrative) expenses increased, partially offsetting some of the gains in profitability.
Improved Profitability & Market Outlook
Insteel's profitability continues to improve, bolstered by its strategic decisions to ramp up production and manage costs. Gross profit margins reached 15.3%, up from 12.3% a year earlier, driven largely by increased shipment volumes, which resulted in greater economies of scale. As Woltz noted in a conference call with analysts, “Our results reflect the successful integration of recent acquisitions and the continued strengthening of our product offering, both of which have allowed us to benefit from growing demand across the construction sector.”
Looking ahead, Insteel remains cautiously optimistic about its growth trajectory. The company’s executives have been upbeat about the trends they are witnessing in their core markets, despite broader macroeconomic uncertainties. Woltz expressed confidence in the outlook, adding, “While the global economy presents certain challenges, we believe that demand in the construction sector will continue to support growth in the coming months, especially as we enter the summer and fall seasons.”
Capital Allocation & Liquidity
In terms of liquidity and capital allocation, Insteel remains well-positioned with a solid cash balance of $28.4 million and no outstanding debt. The company’s strong financial position allows it to pursue opportunities for further expansion while maintaining flexibility to manage market fluctuations.
Capital expenditures for the first half of FY2025 amounted to $4.9 million, down from $14.2 million in the same period last year. The company anticipates capital outlays for the year to total approximately $17 million, primarily focused on cost efficiency and productivity improvement initiatives.
Woltz emphasized, “Our focus on improving our cost structure and productivity is key to maintaining our competitive edge, and we plan to continue investing in these areas in the second half of fiscal 2025.”
Six-Month Performance Overview
For the first half of FY2025, Insteel's net earnings increased to $11.3 million, or $0.58 per share, from $8.1 million, or $0.41 per share, in the prior-year period. Net sales for the period rose 16.6%, reaching $290.4 million compared to $249.1 million in the first half of FY2024. This growth was largely driven by an increase in shipments, despite a slight decrease in average selling prices. Gross profit for the period climbed to $34.1 million, up from $22 million, and gross margin expanded to 11.7%, up from 8.8%.
As Woltz explained, “The first half of fiscal 2025 has been strong for us. Our ability to grow both top-line revenues and profit margins highlights our operational strength and the positive momentum we’re experiencing in the market.”
Impact of U.S. Tariff Policy
One of the significant factors influencing Insteel’s performance has been the recent changes to the U.S. tariff policies, particularly the expansion of Section 232 steel tariffs to include derivative steel products like PC strand. This shift has been beneficial for Insteel, which had previously been at a competitive disadvantage due to the exclusion of these products from the tariff. Woltz commented on the tariff changes, saying, “The extension of the Section 232 tariff to include derivative steel products has leveled the playing field for domestic producers like Insteel, which had previously faced an influx of low-priced imports that eroded our competitive edge.”
However, Woltz also cautioned that the broader implications of the U.S. tariff policies could have mixed effects, particularly with the potential introduction of reciprocal tariffs. As he put it, “While the tariff expansion is favorable, we must remain vigilant about the potential for increased costs related to offshore purchases of capital equipment and spare parts. Managing our exposure to these tariffs will be crucial in maintaining our profitability.”
Key Takeaways:
• Insteel’s Q2 FY2025 net earnings reached $10.2 million, reflecting a significant 26.1% increase in net sales.
• Shipments increased by 28.9%, driven by stronger demand in the construction sector and recent acquisitions.
• The company’s gross margin expanded by 300 basis points, reflecting higher production volumes and lower manufacturing costs.
• Insteel remains positive about the market outlook, with expectations for continued growth into the second half of FY2025.
• Despite tariff policy shifts, Insteel views recent changes to U.S. steel tariffs as favorable, helping to level the playing field for domestic producers.
