Q3 2024 Earnings Summary
- Atkore expects growth initiatives, including solar torque tubes and global mega projects, to contribute at least $50 million of incremental EBITDA in FY 2025, driving earnings growth and offsetting market challenges.
- The ramp-up of the Broadband Equity, Access, and Deployment (BEAD) program funding is anticipated to increase HDPE volumes, leading to profit pickups starting next year and continuing through 2025 and 2026.
- Atkore considers the $650 million EBITDA estimate for FY 2025 as a minimum base, indicating resilience and potential upside from volume growth, productivity improvements, and growth initiatives, despite current market challenges.
- Increased competition from imported steel conduit, particularly from Mexico, now represents around 20% of the market, causing significant pricing pressures and negatively impacting volume and margins. The company's ability to mitigate this is uncertain due to the unknown timing of potential tariffs or trade actions.
- Ongoing softness in key markets such as telecom and utility, with no meaningful sequential increase, and the expected seasonal uptick in construction demand did not materialize. This has led to lower volumes and pricing pressure.
- Adjusted EBITDA expectations have been revised downward, with Q4 adjusted EBITDA projected at $145 million, lower than prior quarters, and FY2025 adjusted EBITDA expected to be around $650 million, indicating a challenging pricing environment and potential lower profitability than previously anticipated.
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Price Normalization Timeline
Q: Has the price normalization timeline been pushed out?
A: Management indicated that the timeline for price normalization may extend beyond the end of calendar 2024. They stated that next year will serve as a baseline, with pricing potentially moving up or down, but they are not including significant pricing changes in their $650 million EBITDA forecast for 2025. -
2025 EBITDA Target and Margins
Q: What is the EBITDA outlook for 2025?
A: The company reaffirmed its initial estimate of $650 million EBITDA for 2025, viewing it as a baseline that could be exceeded. They anticipate benefits from growth initiatives like solar and global mega projects, with very modest volume growth built into that number. However, they did not provide a specific EBITDA margin range. -
Import Pressure from Mexican Steel Conduit
Q: How are Mexican steel conduit imports impacting the business?
A: Imports of steel conduit from Mexico have grown significantly, now representing around 20% of the market, up from single digits in previous years. This surge is causing increased price competition and impacting the company's margins. Management is responding to this challenge and noted that potential tariff enforcement under USMCA agreements could reduce these imports substantially. -
PVC Pricing Risk in Fiscal 2025
Q: Is PVC pricing still the biggest risk for fiscal 2025?
A: Management acknowledged that PVC pricing remains the largest pricing risk moving forward, citing uncertainty in the PVC market and its significant impact on their products. They emphasized that demand levels greatly influence pricing, and with current market softness, they are cautious about PVC pricing trends in fiscal 2025. -
Hobart Solar Facility Ramp-Up
Q: How is the Hobart solar facility ramp progressing?
A: The ramp-up of the Hobart solar torque 2 facility is progressing well, with utilization rates north of 50%, and expectations to increase volume by 20–30% into fiscal 2025. Management expressed pride in the team's efforts and anticipates continued growth from this asset. -
Bead Program Funding and HDPE Volumes
Q: Any updates on bead program funding and HDPE volumes?
A: Management expressed cautious optimism about bead program funding, expecting profit contributions in fiscal 2025 but anticipating a more significant ramp through calendar 2025 into 2026. They noted that some states have approved funding, and they are monitoring opportunities as they develop. -
Softness in Telecom and Utility Markets
Q: How are telecom and utility markets performing sequentially?
A: Telecom and utility markets remain flat sequentially, with no meaningful increases in activity. Management observed minor increases in quotes but overall activity is weaker than expected, partly due to contractor backlogs and delays in projects like grid hookups. -
Inventory Levels and Price Weakness
Q: Is price weakness due to excessive inventory?
A: Management believes inventory levels are somewhat normal, but lower-than-expected demand has resulted in distributors holding more inventory relative to sales. Distributors are reducing inventory levels slightly to avoid devaluing stock amid pricing pressures, which contributes to price weakness. -
Comments on PVC Pricing and Collusion Noise
Q: Any comments on noise about PVC pricing and collusion?
A: Management dismissed reports from a short seller alleging unsubstantiated claims about PVC pricing and collusion. They emphasized their strong internal pricing mechanisms and processes, and declared those reports to be unfounded.