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MI

Metallus Inc. (MTUS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 was a clean beat on Street revenue and EPS: Net sales of $304.6M vs S&P Global consensus ~$296.1M*, and adjusted diluted EPS of $0.20 vs ~$0.17*; adjusted EBITDA rose to $26.5M, driven by higher shipments and better melt utilization .
  • Sequential momentum: Ship tons +10% q/q to 167.7K, melt utilization 71% (vs 65% in Q1) and operating cash flow $34.8M; liquidity at $437.0M, no outstanding borrowings .
  • Near-term caution: Q3 adjusted EBITDA guided “modestly lower” on labor negotiation costs ($3–$5M H2), higher electricity costs, and planned maintenance ($15M total; ~$5M in Q3) despite similar shipments and steady base pricing .
  • Structural positives: Pension required contributions in H2 cut to ~$3.5M (from ~$10M prior), ongoing government funding ($10M in July; $71.5M received to date), and progressing capacity expansions aligned with Army munitions needs .
  • Catalyst set-up: Tariff backdrop supporting domestic demand, announced $100/ton SMT spot price increase effective November, longer lead times into October; watch labor negotiations and Q3 cost headwinds vs utilization improvements .

What Went Well and What Went Wrong

What Went Well

  • Profitability inflection: Adjusted EBITDA expanded to $26.5M (+50% q/q), with melt utilization improving to 71% and shipments +10% q/q .
  • Demand breadth: Higher shipments across aerospace & defense, automotive, and energy; lead times extend to October, and SMT spot price increase announced for November .
  • Strategic execution and funding: Progress on Army-supported bloom reheat and roller furnaces; $5.1M Q2 and $10.0M July funding received, $71.5M to date .
  • Management quote: “We delivered solid second-quarter results with significant improvement in profitability and operating cash flow, supported by improving end markets, continued market share gains, and strong execution by our teams” .

What Went Wrong

  • Cost overhang into Q3: Guidance for “modestly lower” adjusted EBITDA due to labor negotiations, higher electricity, and planned maintenance (~$15M H2; ~$5M in Q3, ~$10M in Q4) .
  • Price/mix headwind vs prior year: Net sales +3% y/y on higher shipments, but partially offset by lower price/mix; aerospace & defense shipments lower y/y within the mix commentary .
  • Non-GAAP add-backs: Loss on extinguishment of debt ($3.6M) and IT transformation costs ($1.0M in Q2) were sizeable components in the adjusted EPS bridge .

Financial Results

P&L and Profitability (GAAP and Non-GAAP)

MetricQ4 2024Q1 2025Q2 2025
Net Sales ($USD Millions)$240.5 $280.5 $304.6
Net Income ($USD Millions)$(21.4) $1.3 $3.7
Diluted EPS (GAAP)$(0.50) $0.03 $0.09
Adjusted Diluted EPS (Non-GAAP)$(0.08) $0.07 $0.20
EBITDA ($USD Millions)$(12.1) $15.4 $21.7
Adjusted EBITDA ($USD Millions)$8.3 $17.7 $26.5
EBITDA Margin (%)(5.0)% 5.5% 7.1%
Adjusted EBITDA Margin (%)3.5% 6.3% 8.7%
Net Income Margin (%)(8.9)% 0.5% 1.2%
Operating Cash Flow ($USD Millions)$13.9 $(38.9) $34.8

Segment Net Sales by End-Market (GAAP)

End-Market Net Sales ($USD Millions)Q2 2024Q1 2025Q2 2025
Industrial$103.0 $101.7 $104.4
Distribution/Industrial Ship Tons (K)56.4 66.3 66.5
Automotive$43.7 $32.5 $42.1
Automotive Ship Tons (K)16.4 8.6 15.4
Aerospace & Defense$20.9 $28.7 $30.8
A&D Ship Tons (K)9.5 13.9 16.2
Energy$4.8 $4.4 $4.5
Total Net Sales$294.7 $280.5 $304.6
Total Ship Tons (K)150.1 152.9 167.7

KPIs and Operating Metrics

KPIQ2 2024Q1 2025Q2 2025
Ship Tons (K)150.1 152.9 167.7
Melt Utilization (%)53% 65% 71%
Operating Cash Flow ($USD Millions)$8.3 $(38.9) $34.8
Free Cash Flow ($USD Millions)$(5.8) $(52.5) $32.3
Cash & Cash Equivalents ($USD Millions)$272.8 $180.3 $190.8
Total Liquidity ($USD Millions)$458.6 $432.0 $437.0

Results vs S&P Global Consensus (Q2 2025)

MetricConsensusActualBeat/Miss
Revenue ($USD Millions)$296.1*$304.6 +$8.5M / +2.9%
Primary EPS ($USD)$0.173*$0.20 +$0.027 / +15.6%

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAQ3 2025N/A“Modestly lower than Q2” Lowered
ShipmentsQ3 2025N/ASimilar to Q2 Maintained
Base Price per TonQ3 2025N/ARelatively steady Maintained
Melt UtilizationQ3 2025~70% in Q1 commentary Increase from 71% in Q2 Raised
Annual Shutdown CostH2 2025~$15M total (timing unspecified previously) ~$15M total; ~$5M in Q3, ~$10M in Q4 Clarified timing
Electricity CostsStarting Q3 2025N/AHigher (new contract) Raised cost
Labor Negotiation CostH2 2025N/A$3–$5M incremental New item (Raised cost)
Capital ExpendituresFY 2025~$125M incl. ~$90M gov’t funded ~$125M incl. ~$90M gov’t funded Maintained
Required Pension ContributionsH2 2025~$10M ~$3.5M Lowered
Government Funding2025$66.4M received through Q1 $71.5M by Q2; +$10.0M in July Increased received

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Tariffs / Trade EnvironmentExec order, expectations to boost domestic demand; increasing customer inquiries “Anticipate growing demand for domestically produced steel”; SMT price +$100/ton effective Nov Improving demand backdrop
Aerospace & Defense Supply ChainRamp expected through 2025–2026; hitting milestones for Army equipment A&D shipments nearly doubled q/q; VAR-related sales more than doubled YTD; continued supply chain challenges improving Positive momentum with some near-term constraints
Melt Utilization / OperationsTarget ~70% Q1; optimization and efficiency initiatives 71% achieved; external resources engaged to accelerate process optimization; ~$10M annual savings expected by 2026 Improving execution
Government-Funded CapexBloom reheat and roller furnace; funding timing On schedule to commission bloom reheat by year-end; roller furnace commissioning in 2026; $5.1M Q2 and $10M July funding On track
Automotive DemandTarget ~40% of shipments in 2025; recovery post operational issues Sequential +9% shipments; market share gains; stable programs Stabilizing/up modest
Energy ProgramsLDPE reactors and well applications; targeting $20M sales by 2026 Sequential +17% shipments; investing in thermal treat capabilities Building
Labor NegotiationsNoted union relations importance Negotiations begin Aug 18; expect $3–$5M incremental H2 costs Cost overhang short term
Electricity CostsNot highlightedHigher costs starting Q3 (contract expiration mid-Q2) Cost headwind

Management Commentary

  • “Demand for our domestic steel remains strong…we remain on track with the installation of new assets that will expand our capabilities and directly support the Army’s mission to increase munitions production” — Mike Williams, CEO .
  • “Lead times are currently extended to October for our SPQ bars and seamless mechanical tubing products” .
  • “We expect third quarter adjusted EBITDA to be modestly lower than the second quarter…impacted by costs associated with labor agreement negotiations, higher electricity costs, and planned annual shutdown maintenance costs” — CFO .
  • “Our melt utilization rate improved to 71%…we expect melt utilization to further increase in the third quarter” — CEO .
  • “We expect to realize annual savings of approximately $10 million as a result of [process optimization] initiative, with savings ramping up throughout 2026” — CFO .

Q&A Highlights

  • Tariff-driven demand and market share: Management sees modest increase in new inquiries/orders tied to tariffs but larger steel consumers await final agreements; expect increased demand into Q4 as import inventories are consumed .
  • Operations efficiency and melt utilization: Utilization pressured by power interruptions and crane reliability; external firm engaged to improve scheduling and shop-floor execution, targeting ~$10M annual savings by 2026 .
  • Contracting and pricing: ~70% demand under annual contracts, 30% spot; broader annual discussions in late Sep–Nov; SMT spot price increase $100/ton effective Nov .
  • Order book texture: Lead times to October; order book roughly double y/y; expect modest price appreciation as prior increases flow into shipments .
  • Cost outlook clarifications: Full-quarter higher electricity cost in Q3; ~$5M of shutdown costs in Q3 and ~$10M in Q4; labor negotiation costs $3–$5M to be reported within adjusted EBITDA (not excluded) .

Estimates Context

  • Q2 2025 vs S&P Global: Revenue $304.6M vs ~$296.1M* (beat); Primary EPS $0.20 vs ~$0.173* (beat). Company also delivered adjusted EBITDA $26.5M alongside higher shipments and utilization .
  • Forward quarters: Consensus implies Q3 2025 revenue ~$307.9M*, EPS ~$0.18*, EBITDA ~$22.7M*; Q4 2025 revenue ~$290.8M*, EPS ~$0.02*, EBITDA ~$14.3M*. Management guides Q3 adjusted EBITDA modestly lower vs Q2 given cost headwinds, despite similar shipments/base pricing .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term setup: Strong operational execution and demand breadth, but expect Q3 profitability dip on cost headwinds (labor, electricity, maintenance) despite similar shipments/base prices; monitor cost cadence vs utilization gains .
  • Strategic funding and capacity: Continued government funding and on-schedule commissioning of key furnaces should support defense-aligned growth in 2026; VAR-related revenues accelerating .
  • Pricing power into late 2025: SMT spot price increase in November and tariff tailwinds may underpin pricing/mix improvement; lead times extended to October suggest firm demand .
  • Balance sheet strength: Liquidity $437.0M, cash $190.8M, no outstanding borrowings; remaining buyback authorization $93.9M at Q2 end .
  • Pension relief: H2 required contributions lowered to ~$3.5M vs prior ~$10M—supportive of H2 cash flow .
  • Watch risks: Labor negotiations outcomes and timing, electricity cost inflation, and Q3 maintenance execution; align expectations with “modestly lower” Q3 adjusted EBITDA guide .
  • Medium-term thesis: Process optimization savings (~$10M annually by 2026), defense program ramp, and government-funded capex should improve profitability through cycle .

Additional referenced press releases

  • Earnings release and full financial schedules (Aug 7) .
  • Earnings webcast reminders (July 18 and Aug 8) .