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MI

Metallus Inc. (MTUS)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered sequential improvement: net sales $305.9M, GAAP diluted EPS $0.19, and adjusted EPS $0.28, with adjusted EBITDA rising to $29.0M; strength came from favorable mix led by aerospace & defense and better fixed-cost leverage .
  • Against S&P Global consensus, adjusted EPS was a significant beat (actual $0.28 vs $0.183*), EBITDA beat (actual $29.0M vs $22.7M*), while revenue was a slight miss (actual $305.9M vs $307.9M*) .
  • Guidance: management expects Q4 adjusted EBITDA lower than Q3 due to normal seasonality, $11M shutdown costs, lower melt utilization and less favorable mix; shipments expected down 5–10%, base prices up slightly as 5% spot increases flow through .
  • Potential stock reaction catalysts: clear EPS/EBITDA beat, strengthening A&D backlog and VAR steel supply agreement, but tempered by Q4 seasonality, maintenance headwinds and ongoing labor negotiations after October 30 non-ratification and contract extension to Jan 29, 2026 .

What Went Well and What Went Wrong

What Went Well

  • Continued A&D strength and favorable product mix drove sequential net sales and adjusted EBITDA up for the fourth straight quarter; melt utilization improved to 72% (from 71% in Q2) .
  • Management secured new 2026 defense programs and executed a long-term VAR steel supply agreement to support targeted $250M A&D annual run-rate by mid-2026: “We have recently been awarded several new 2026 defense programs… We have executed a long-term supply agreement for vacuum arc remelt (VAR) steel” .
  • Strong cash/liquidity: $191.5M cash and total liquidity $436.9M; operating cash flow $22.0M; share repurchases of $3.0M with $90.9M authorization remaining .

What Went Wrong

  • Q4 outlook soft: shipments down 5–10%, less favorable mix, $11M shutdown costs and decreased melt utilization driving lower adjusted EBITDA vs Q3; fixed cost leverage headwind ~$3M .
  • Energy market volumes remained subdued; sequential shipment decline weighed on ship tons (-3% q/q), with energy and industrial down; automotive and A&D offset, but mix expected less favorable in Q4 .
  • Labor agreement risks: tentative agreement rejected Oct 30; contract extended 90 days and negotiations ongoing; potential additional labor/benefit costs in Q4 depending on timing .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$227.2 $304.6 $305.9
Diluted EPS (GAAP, $)-$0.13 $0.09 $0.19
Adjusted EPS ($)-$0.09 $0.20 $0.28
Adjusted EBITDA ($USD Millions)$6.1 $26.5 $29.0
Adjusted EBITDA Margin (%)2.7% 8.7% 9.5%
Net Income Margin (%)-2.6% 1.2% 2.6%
Ship Tons (000s)119.9 167.7 163.1
Segment Net Sales ($M) / Ship Tons (000s)Q3 2024Q2 2025Q3 2025
Industrial Net Sales$91.4 $104.4 $106.7
Industrial Ship Tons53.1 66.5 65.1
Automotive Net Sales$104.9 $122.8 $125.9
Automotive Ship Tons57.1 69.6 71.6
Aerospace & Defense Net Sales$14.5 $30.8 $21.6
Aerospace & Defense Ship Tons6.3 16.2 10.1
Energy Net Sales$4.1 $4.5 $4.5
Total Net Sales$227.2 $304.6 $305.9
Total Ship Tons119.9 167.7 163.1
KPIsQ2 2025Q3 2025
Melt Utilization (%)71% 72%
Operating Cash Flow ($M)$34.8 $22.0
Free Cash Flow ($M)$32.3 $15.6
Capital Expenditure ($M)$17.8 $28.4
Cash & Equivalents ($M)$190.8 $191.5
Total Liquidity ($M)$437.0 $436.9
Share Repurchases ($M)$3.3 $3.0
Government Funding Received ($M)$5.1 (Q2) $10.0 (Q3)
Estimates vs ActualsQ3 2025 Consensus*Q3 2025 ActualSurpriseQ4 2025 Consensus*
Revenue ($M)$307.9*$305.9 Miss$290.8*
EPS (Adjusted, $)$0.183*$0.28 Beat$0.023*
Adjusted EBITDA ($M)$22.7*$29.0 Beat$14.3*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAQ3 2025Modestly lower than Q2 2025 Actual came in higher than Q2 (Q3 $29.0M vs Q2 $26.5M) Outperformed prior guide
Adjusted EBITDAQ4 2025N/ALower than Q3 due to seasonality, $11M shutdown costs, less favorable mix; slight YoY improvement vs Q4’24 Lower sequentially
ShipmentsQ4 2025N/ADown 5–10% q/q Lower
Base Price per TonQ4 2025Spot SMT +$100/ton effective Nov (from Q2) Slight increase as 5% bar & tube spot increases take effect through Q4 Raised
Product MixQ4 2025N/ALess favorable vs Q3 Deteriorating
Melt UtilizationQ4 2025Increase in Q3 from 71% Decrease in Q4 from 72% due to melt shop shutdown Lower
Shutdown Maintenance CostH2 2025~$15M total; ~$5M in Q3 ~$11M in Q4 (sequential +$8M vs Q3) Higher
Fixed Cost LeverageQ4 2025N/A~$3M headwind q/q Worse
Labor/Benefit CostsQ4 2025Anticipated $3–$5M incremental in H2 linked to negotiations Additional Q4 costs possible depending on timing of agreement Potential increase
FY Capex2025~$125M incl. ~$90M funded by U.S. Govt ~ $120M incl. ~$90M funded by U.S. Govt (timing driven) Lower

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Aerospace & Defense rampQ1: A&D shipments down sequentially due to customer startup challenges but strong demand outlook ; Q2: A&D shipments nearly doubled sequentially; VAR sales more than doubled YTD; targeting ~$30M bar revenue in 2025 Added several new 2026 programs (munitions, gun barrels, bearings); confident in $250M A&D run-rate by mid-2026 Improving
VAR steel supplyQ1/Q2: Building momentum in VAR via strategic partnership; significant orders; unique downstream processing Executed long-term VAR supply agreement securing reliable high-quality material Strengthening
Tariffs & domestic onshoringQ1/Q2: Support for enforcement/expansion; customer inquiries rising; energy imports declining; onshoring increases demand Tariff environment favorable; taking new customers; greater inquiries for 2026; some tariff cost pressure on select offshore operating supplies Positive demand tailwind
Automotive supply chainQ1: Seasonality drove auto up; monitoring tariffs impact Risk from global supply chain (chips, Ford F-150 aluminum) cited; no Q3 disruption observed; seasonality expected in Q4 Neutral to cautious
Energy marketQ1/Q2: Improving sequentially; tariff enforcement helps; LNG build constructive but time-lag; imports overhang being worked off Remains subdued; inquiries increasing for 2026 with tariffs affecting buying strategies Gradual improvement in ’26
Operations & melt utilizationQ1: Improved 9ppt; initiatives to optimize ops ; Q2: 71%; external resources engaged for process optimization; target ~$10M savings in 2026 72% in Q3; Q4 planned shutdowns to reduce utilization; ~$3M fixed cost leverage headwind Q4 seasonal dip then resume improvement
Energy input costsQ2: Higher electricity costs starting Q3 after contract expired; guided $2–$3M sequential cost increase Experienced $2–$3M electricity cost increase; two-year agreement in place; partial market exposure remains Cost pressure realized
Labor negotiationsQ2: Negotiations to begin Aug 18; $3–$5M H2 costs expected Tentative agreement reached Oct 3; membership rejected Oct 30; contract extended 90 days to Jan 29, 2026; operations continue; potential additional Q4 costs Unresolved; watch timing

Management Commentary

  • “We delivered another quarter of solid results, benefiting from steady demand, improving operational performance and favorable product mix, led by continued strength in aerospace and defense shipments.” – Mike Williams, CEO .
  • “We have recently been awarded several new 2026 defense programs… which support our $250 million targeted annual run rate of aerospace and defense total sales by mid-2026.” .
  • “We have executed a long-term supply agreement for vacuum arc remelt (VAR) steel, reinforcing our strategic position and ensuring a stable, high-quality material source to support continued sales growth in our aerospace and defense end-market.” .
  • CFO outlook: “Fourth quarter shipments are expected to be 5%–10% lower… base price per ton is anticipated to increase slightly… annual shutdown maintenance… approximately $11 million… sequential decrease in fixed cost leverage of approximately $3 million… Q4 adjusted EBITDA to be lower than Q3.” .

Q&A Highlights

  • Automotive and supply chain: Management cited chip supply concerns and Ford F-150 aluminum issues as potential risks; no Q3 impact, but flagged for Q4 seasonality .
  • Tariffs: “Tariffs environment has been favorable to us… tremendous amount of inquiry activity for 2026… customers positioning domestic supply chains,” while some tariff-related cost impacts on offshore operating supplies .
  • Energy volumes: Longer-term drivers include oil prices, sanctions effectiveness, LNG capacity additions; inquiries rising for 2026 as tariffs influence procurement .
  • Electricity costs: Confirmed $2–$3M sequential increase aligned with new two-year contract; partial market exposure remains; multiple projects underway to reduce electrical consumption intensity .
  • Operations optimization: External process optimization engagement progressing; benefits to be realized into 2026; management reiterated ~$10M annual savings target discussed in prior quarter .

Estimates Context

  • Q3 2025 vs consensus: EPS (Adjusted) $0.28 vs $0.183* – significant beat; adjusted EBITDA $29.0M vs $22.7M* – beat; revenue $305.9M vs $307.9M* – slight miss .
  • Q4 2025 consensus: revenue ~$290.8M*, EPS ~$0.023*, EBITDA ~$14.3M*; management’s guidance for lower Q4 adjusted EBITDA and shipments suggests downside risk to profitability, with slight base price tailwind .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Narrative shift: EPS/EBITDA beats anchored by A&D mix and improved leverage; watch Q4 seasonality and shutdowns that temporarily compress margins .
  • A&D optionality: New 2026 programs and VAR supply agreement strengthen path to $250M mid-2026 run-rate, a medium-term multiple-expansion lever if execution holds .
  • Tariff tailwinds: Customer onshoring inquiries rising across energy/industrial/auto segments; 2026 demand setup improving; monitor timing and award cadence .
  • Cost watchlist: Electricity and potential labor/benefit increases into Q4; fixed-cost leverage headwind ~$3M and $11M shutdown costs are known drags .
  • Balance sheet/capital returns: $436.9M liquidity, no borrowings, active buybacks ($90.9M remaining authorization) provide downside support and flexibility .
  • Estimates reset: Expect near-term earnings moderation in Q4 vs Q3; consensus for Q4 appears low on EPS and EBITDA*, but directionally consistent with guidance; 2026 setup looks stronger as capex projects commission and optimization benefits accrue .
  • Risk factors: Labor negotiations unresolved; energy demand subdued near-term; supply chain uncertainties in auto; ensure position sizing reflects Q4 operational headwinds .