Executive Summary

Q2 FY2026 delivered record sales volume and strong top-line growth: revenue $152.4m (+42.7% YoY; +13.1% QoQ), net earnings $2.2m ($0.32 diluted EPS), with volumes up 28% YoY; gains were tempered by lower QoQ margins and ~$0.9m of non‑recurring Century Metals acquisition costs .
Flat‑Roll drove the quarter (revenue $143.3m; operating profit $5.7m), while Tubular swung to profitability ($0.9m op profit) on higher ASPs despite lower volume .
Hedging delivered a $0.9m gain, partially offsetting compressed physical margins amid a declining HRC environment; management expects Q3 volumes to be consistent with Q2 and margins to improve modestly on anticipated metals price increases (near‑term catalyst) .
Strategic acquisition of Century Metals (8/29/25) expands product mix and SE/LATAM reach; pro forma Q2 net sales would have been ~$173.5m, indicating incremental scale; integration “already seeing promising synergies” .

What Went Well and What Went Wrong

What Went Well
- Record sales volume and execution: 154,500 tons sold from inventory (+31.6% YoY) and 24,500 tons toll processed (+36.1% YoY); CEO: “we achieved record sales volume driven by…capacity utilization” .
- Segment profitability improved: Flat‑Roll operating profit rose to $5.7m (vs. $2.7m YoY); Tubular generated $0.9m profit (vs. $(0.6)m YoY), aided by ASP increases .
- Strategic M&A: Century Metals closed 8/29; broadened product portfolio (incl. coated/stainless/non‑ferrous) and geographic reach; management cites “promising synergies” and immediate accretion .
What Went Wrong
- Margin compression QoQ: Gross margin fell to ~6.0% (from ~9.3% in Q1) as HRC softened, consistent with management’s prior warning of lower Q2 margins vs. Q1 .
- Higher SG&A including deal costs: SG&A increased YoY with ~$0.9m acquisition‑related non‑recurring expenses in Q2, impacting bottom line .
- Tubular volume softness: Tubular tons were ~7,500 vs. ~9,000 YoY; while ASPs rose, lower volume limited absolute contribution .

Financial Results

Metric	Q2 FY2025 (Sep 30, 2024)	Q1 FY2026 (Jun 30, 2025)	Q2 FY2026 (Sep 30, 2025)
Revenue ($USD millions)	$106.8	$134.8	$152.4
Diluted EPS ($)	$(0.10)	$0.71	$0.32
Gross Profit ($m)	$3.93	$12.50	$9.17
Gross Margin %	3.7% (=3.933/106.759)	9.3% (=12.498/134.777)	6.0% (=9.166/152.383)
Operating Income ($m)	$(0.22)	$7.04	$2.88
EBIT Margin %	(0.2%)	5.2% (=7.043/134.777)	1.9% (=2.879/152.383)
Net Income ($m)	$(0.68)	$5.03	$2.24
Net Income Margin %	(0.6%)	3.7% (=5.028/134.777)	1.5% (=2.240/152.383)
Hedge Gains ($m)	$0.19	$0.28	$0.85

Segment breakdown (sales and operating income)

Segment	Q2 FY2025 Sales ($m)	Q2 FY2025 Op Inc ($m)	Q1 FY2026 Sales ($m)	Q1 FY2026 Op Inc ($m)	Q2 FY2026 Sales ($m)	Q2 FY2026 Op Inc ($m)
Flat‑Roll	$97.4	$2.7	$124.1	$8.8	$143.3	$5.7
Tubular	$9.4	$(0.6)	$10.7	$1.3	$9.0	$0.9

KPIs and operating drivers

KPI	Q2 FY2025	Q1 FY2026	Q2 FY2026
Tons sold (inventory)	~121,500 tons	~141,500 tons	~154,500 tons
Toll processing volume	~18,000 tons	~19,000 tons	~24,500 tons
Flat‑Roll ASP (inventory)	~$858/ton	~$926/ton	~$963/ton
Tubular ASP	~$1,030/ton	~$1,206/ton	~$1,185/ton
Hedge gains	$0.19m	$0.28m	$0.85m

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Sales volume	Q3 FY2026	Q2 volume to be slightly higher than Q1 volume	Q3 volume expected consistent with Q2, as Century offsets holiday slowdown	Maintained/level sequentially
Margins	Q3 FY2026	Q2 margins lower vs Q1 due to softer HRC	Margins to improve modestly QoQ on anticipated metals price increases	Raised (directionally)
Dividend	Ongoing	$0.04 per share quarterly (declared)	$0.04 per share declared in Q2	Maintained

No numeric revenue, OpEx, OI&E, or tax rate guidance was provided. Management’s commentary remains qualitative and directional .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2025 and Q1 FY2026)	Current Period (Q2 FY2026)	Trend
HRC pricing and margins	Q4 FY25: HRC rose ~35% in Q4, supporting margin recovery ; Q1 FY26: HRC peaked then softened; Q2 margins expected lower vs Q1	Both Q2 FY26 and prior‑year Q2 saw compressed physical margins in declining HRC environment	Softened QoQ; stabilizing outlook
Capacity utilization/volume	Q4 FY25: record volume; Sinton at full capacity ; Q1 FY26: +12% YoY tons; capacity utilization focus	Record Company‑wide volume; +28% YoY, +12% QoQ	Improving
Hedging strategy	Q4 FY25: $1.8m gain in quarter; FY25 $7.6m total ; Q1 FY26: $0.3m gain	$0.9m gain in Q2; continues to smooth volatility	Active; supportive
M&A/Integration (Century)	Announced 9/2/25; immediately accretive; expands SE/LATAM and product mix	Integration “progressing well,” early synergies; pro forma Q2 net sales $173.5m	Positive
Balance sheet/ABL	Q1 FY26: ABL $150m; renewal in process	ABL renewed to $125m through 2030; ~$83.5m outstanding at 5.8%	Extended/liquidity in place
Tubular demand/pricing	Q1 FY26: volume down but ASP up; turned to profit	ASP higher YoY; profit of ~$0.9m despite lower tons	Mixed: ASP up, volume down

Management Commentary

“This quarter marks a significant milestone…we achieved record sales volume driven by our focused efforts to improve capacity utilization…[and] completed the acquisition of Century Metals & Supplies which expands our product portfolio, processing capabilities, and geographic reach.” — Michael J. Taylor, President & CEO .
Outlook: “Third quarter fiscal 2026 sales volume will remain consistent with second quarter levels…Margins are expected to improve modestly quarter over quarter, driven by anticipated increases in metals pricing.” .
On Century: “The integration…is progressing well, and we are already seeing promising synergies…” .

Q&A Highlights

No public Q&A disclosures were provided this quarter. Management’s release and 10‑Q clarified:
- ~$0.9m non‑recurring Century transaction costs in SG&A during Q2 .
- Both Q2 FY26 and prior‑year Q2 faced compressed physical margins due to declining HRC; hedging gains helped offset .
- Segment profitability drivers: Flat‑Roll ASP up to ~$963/ton; Tubular ASP ~$1,185/ton with lower tons .

Estimates Context

Street consensus (S&P Global) for Q2 FY2026 EPS and revenue was unavailable; as a result, we present no beat/miss versus consensus and focus on YoY/QoQ comparisons instead. Values retrieved from S&P Global.*

Key Takeaways for Investors

Volume momentum strong: record shipments and toll processing signal execution on utilization; Flat‑Roll remains core earnings engine .
QoQ margin step‑down occurred as guided, driven by HRC softness and deal costs; management now guides to modest margin improvement in Q3 on pricing tailwinds .
Century Metals adds scale, mix, and geography; early synergies plus pro forma sales suggest incremental runway; watch integration benefits and cross‑sell .
Risk management working: $0.85m hedge gains helped smooth volatility; program remains a lever in down cycles .
Balance sheet/liquidity: ABL extended to 2030 ($125m), ~$83.5m drawn at quarter‑end; supports working capital and integration needs .
Segment signals: Tubular profitability improved on pricing even with lower tons—monitor for volume normalization alongside price trends .
Near‑term setup: With Q3 volumes seen flat and margins modestly higher on expected price increases, prints may hinge on metals price trajectory and Century integration milestones .

Citations:
Press release and 8‑K Q2 FY2026: .
10‑Q Q2 FY2026: .
Press release and 8‑K Q1 FY2026: .
10‑Q Q1 FY2026: .
FY2025 Q4 press release: .
Acquisition release (Century Metals): .

Footnote
*Values retrieved from S&P Global.

FRIEDMAN INDUSTRIES INC (FRD)·Q2 2026 Earnings Summary