IIIN Q3 2025: Margins Hold as 25% Steel Imported Amid Shortage
- Robust demand recovery: Executives noted that strong business activity continues with lengthy backlogs and growing project inquiries across key sectors, signaling sustained market demand.
- Successful integration and scale: The effective integration of recent acquisitions, including engineered wire products, has enhanced their product mix and nationwide presence, positioning the company for stronger competitive performance.
- Resilient margin management: Despite raw material constraints and tariff-induced cost pressures, the company’s proactive pricing actions and cost management allow it to pass through higher costs, supporting steady margins.
- Raw material supply disruptions and scheduling challenges: Management highlighted severe raw material shortages—with some plants operating with as little as 10 days or even zero supply—which forced more frequent changeovers, led to operational inefficiencies, and resulted in lost shipments and higher production costs.
- Tariff policy ambiguity and cost uncertainty: Ongoing uncertainty regarding the applicability of the Section 232 tariff—especially concerning the value declared on imports—creates risk of higher input costs and potential retroactive adjustments, which could compress margins.
- Operational risks including staffing issues: The company continues to face challenges in properly staffing its plants to manage increased demand and raw material constraints, potentially leading to further cost pressures and reduced service levels.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue (Q2 2024) | -19.9% | **The Q2 2024 decline was mainly driven by a 17.3% drop in average selling prices due to competitive pricing pressures and persistent low-priced import competition, combined with a 3.2% decline in shipments amid weaker commercial construction demand and adverse weather conditions. ** |
Total Revenue (Q2 2025) | +26.1% | **The Q2 2025 growth reflects a 28.9% surge in shipments driven by strong construction demand and additional volume from Q1 2025 acquisitions, despite a modest 2.2% decline in average selling prices due to ongoing competitive pressures. ** |
Average Selling Prices (Q2 2024) | -17.3% | **In Q2 2024, selling prices fell steeply as the company reset pricing in response to competitive pressures and low-priced imports, which significantly impacted revenue. ** |
Average Selling Prices (Q2 2025) | -2.2% | **For Q2 2025, the average selling prices experienced only a slight YoY decline of 2.2% due to competitive market dynamics, although sequential improvements were noted as price increases offset raw material cost pressures. ** |
Shipments (Q2 2024) | -3.2% | **The Q2 2024 shipments dropped by 3.2%, affected by competitive challenges, reduced demand in the commercial construction sector, and adverse weather conditions that curtailed construction activity. ** |
Shipments (Q2 2025) | +28.9% | **In Q2 2025, shipments jumped by 28.9% driven by a rebound in construction end markets and the positive impact of strategic acquisitions in Q1 2025, indicating a robust recovery from previous declines. ** |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Gross Margin | Q4 2025 | Expected improvement | Expected to remain near current levels | lowered |
Effective Tax Rate | FY 2025 | 23% for the remainder of the year | 23.4% for the remainder of FY 2025 | raised |
Capital Expenditures (CapEx) | FY 2025 | Full‐year target: $17 million (revised from $22M) | Full‐year FY 2025 target: $11 million (revised from $17M) | lowered |
Raw Material/Tariffs | Q4 2025 | Tariff impact: pass through higher costs | Higher costs associated with tariffs and raw material price increases will be passed through | no change |
Demand Trends | Q4 2025 | no prior guidance | Optimistic outlook with robust business conditions expected | no prior guidance |
Wire Rod Supply | Q4 2025 | Concerns about supply with plans to import to mitigate disruptions | Anticipated importation of 25–30% of steel requirements | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Robust Demand Recovery and Order Backlogs | Q4 2024 discussions highlighted sluggish market conditions, weak order backlogs, and cautious optimism. Q1 2025 noted an early uptick with uncertainty. Q2 2025 emphasized strong demand recovery and improving backlogs. | Q3 2025 shows continued robust demand recovery, though order backlogs are growing due to raw material constraints. | Consistent improvement in demand with increasing backlog challenges driven by supply constraints. |
Successful Integration and Post-Acquisition Scalability | Not mentioned in Q4 2024. Q1 2025 demonstrated a smooth integration process and cost synergies. Q2 2025 reinforced rapid integration and operational synergies. | Q3 2025 continues to highlight very positive integration results with post-acquisition scalability across multiple facilities. | A narrative emerging post-Q4 2024 with strong, progressively positive integration efforts. |
Pricing Power and Resilient Margin Management | Q4 2024 reported competitive pricing pressures and margin pressure with slight resilience. Q1 2025 described proactive price adjustments and margin improvements. Q2 2025 outlined margin normalization and strong spread improvements. | Q3 2025 shows significant margin expansion through effective price increases and strategic raw material cost management. | An increasingly robust pricing strategy resulting in steadily improving margins. |
Raw Material Supply Constraints and Disruptions | Q4 2024 mentioned tariff impacts on raw materials, setting context without detailed supply shortfalls. Q1 2025 highlighted severe domestic supply curtailments and reliance on imports. Q2 2025 emphasized tightening wire rod availability and increased import use. | Q3 2025 details pronounced raw material shortages causing scheduling and production challenges. | An intensifying challenge with progressively tighter supplies negatively impacting operations. |
Tariff Policy Ambiguity and Regulatory/Trade Risks | Q4 2024 discussed tariff loopholes adversely affecting competitiveness. Q1 2025 highlighted the inequitable impact on raw materials versus finished product and noted uncertainty. Q2 2025 described tariff regime adjustments and potential reciprocal risks. | Q3 2025 stresses continuing ambiguity in tariff application and heightened regulatory risks with potential retroactive penalties. | A persistent risk factor with evolving ambiguity and increasing complexity impacting cost structures. |
Operational Challenges Including Staffing and Scheduling Issues | Q4 2024 referenced operational inefficiencies from weather and production disruptions. Q1 2025 alluded to plant closures and integration challenges without deep focus on staffing. Q2 2025 noted difficulties in hiring and ramping up production. | Q3 2025 explicitly details scheduling headaches due to raw material shortages combined with ongoing staffing challenges. | Emerging as a more pronounced issue as supply constraints amplify production scheduling difficulties. |
Macro-economic Trends and Infrastructure Spending Opportunities | Q4 2024 discussed mixed macro indicators with signs of future infrastructure stimulus from IIJA and hurricane‐induced demand. Q1 2025 noted a rebound in commercial planning and early signs of supportive construction spending. Q2 2025 described a disconnect between broad indicators and solid customer quoting activity. | Q3 2025 presents mixed macro data but strong underlying indicators, with IIJA funds and nonresidential project momentum supporting optimism. | Despite a mixed macro backdrop, sentiment is slowly shifting toward optimism thanks to infrastructure spending and nonresidential growth. |
Product Conversion Strategy and Transitioning Product Mix | Discussed solely in Q4 2024 where the company committed to converting rebar users to engineered structural mesh, indicating significant internal transition. | Not mentioned in Q1, Q2, or Q3 2025 transcripts. | No longer emphasized, suggesting that the product mix transition is either complete or deprioritized. |
Weather-related Operational Disruptions | Q4 2024 highlighted significant losses in production/shipping hours from hurricanes and tropical events. Q1 2025 mentioned typical seasonal weather delays affecting shipments and operating hours. Q2 2025 acknowledged winter weather disruptions, though with minimal effect on volume growth. | Not mentioned in Q3 2025 earnings call. | The focus on weather-related issues has diminished, indicating either resolution or lower impact in recent operations. |
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Margin Outlook
Q: Will margins hold in Q4?
A: Management expects to pass through higher costs, so current margins should hold in a solid market environment. -
Tariff Timeline
Q: When will tariff issues resolve?
A: They believe the section 232 tariff should cover full value and are pressing commerce, but no specific timeline is provided. -
Raw Materials
Q: How severe is the wire rod shortage?
A: They have had to import about 25–30% of their steel to offset a domestic shortfall, highlighting constrained raw materials. -
Cash Management
Q: Will cash near $155M by year-end?
A: After spending nearly $100M on acquisitions and a dividend, they remain cautious with cash levels. -
New Project Quotes
Q: Are new project quotes strong?
A: Despite minimal backlogs and scheduling challenges, rising inquiries—especially from sectors like data centers—signal healthy activity. -
Acquisition Impact
Q: Is EWP the best acquisition?
A: They view the transformative IV acquisition as having a stronger, nationwide impact than the EWP deal. -
Residential Recovery
Q: Can residential demand improve?
A: Residential remains weak, but robust commercial and infrastructure segments are compensating effectively. -
Yearly Outlook Comparison
Q: Is current outlook better than post-Covid years?
A: The current environment is fundamentally different from 2021–2022, making direct comparisons unproductive.
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