Friedman Industries, Incorporated (FRD) reported a disappointing first quarter of fiscal 2025, marked by a significant decrease in both revenue and earnings. The company’s revenue for the quarter came in at $114.6 million, representing a 16.6% decline compared to the same period last year. This decline was attributed to a combination of lower sales volume and a decrease in average selling price per ton.
The company’s two segments, Flat-Roll and Tubular, both experienced revenue declines. Flat-Roll revenue fell by 17.4% to $103.4 million, while Tubular revenue dropped 7.7% to $11.2 million. The decline in Flat-Roll revenue was driven by a decrease in sales volume and a drop in average selling price. The Tubular segment, however, saw an 11.1% increase in sales volume, but this was offset by a 16.1% decrease in average selling price.
The decrease in sales volume was attributed to challenging market conditions for some of Friedman Industries’ customers and planned downtime for equipment upgrades and maintenance at its Sinton and Decatur facilities. The company’s gross profit also declined significantly, falling 37.7% to $18.1 million, resulting in a gross margin contraction of 536 basis points to 15.8%.
Despite the negative results, the company offered a cautiously optimistic outlook for the second quarter. While management expects sales volume to remain similar to the first quarter, they indicated that the second quarter began with a further decline in hot-rolled coil (HRC) prices. However, as of August 8, 2024, HRC index prices have started to increase, and futures are predicting further increases. This trend suggests that Friedman Industries could experience improved physical margins towards the end of the second quarter and into the third quarter.
While Friedman Industries’ first-quarter results were disappointing, the company’s outlook for the remainder of the year is more optimistic. The potential increase in HRC prices offers a glimmer of hope for improved profitability in the coming months. However, the company will need to navigate challenging market conditions and maintain a focus on operational efficiency to drive sustainable growth in the future.
