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MI

Metallus Inc. (MTUS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue of $240.5M rose 6% QoQ on 9% higher shipments and stronger aerospace & defense mix, but fell 27% YoY; GAAP diluted EPS was $(0.50) while adjusted EPS was $(0.08); adjusted EBITDA improved to $8.3M from $6.1M in Q3 .
  • Mix and low utilization weighed on margins: melt utilization fell to 56% (from 60% in Q3), and manufacturing costs rose $10.3M sequentially on lower cost absorption and inventory cost timing .
  • Outlook constructive: Q1 2025 shipments expected to increase, melt utilization near ~70%, and adjusted EBITDA to be higher than Q4; lead times extend to May; 2025 capex ~$125M (incl. ~$90M funded), required pension contributions ~$65M, and tax rate ~25% .
  • Potential stock catalysts: U.S. trade/tariff action expected to impose at least 25% tariffs on steel long products effective 3/12/2025, improving domestic demand; order book strengthening, A&D ramp, and government-funded capacity additions support the recovery narrative .

What Went Well and What Went Wrong

  • What Went Well

    • Sequential top-line and EBITDA improvement on higher shipments and favorable A&D mix; adjusted EBITDA rose to $8.3M from $6.1M in Q3 .
    • A&D strength: shipments rose to ~11k tons in Q4 vs ~3k in Q3, full-year A&D sales +17% to ~$135M; management targets >$250M A&D sales by 2026 and sees ~$30M revenue in 2025 leveraging VAR/VIM partners .
    • Strengthening order book and longer visibility; CEO: “encouraged to see stronger customer order patterns with higher average weekly orders compared with the second half of 2024” .

  • What Went Wrong

    • YoY deterioration: revenue down 27% and adjusted EBITDA down sharply vs Q4’23 as broad end-market demand remained weak and pricing/surcharge tailwinds faded .
    • Lower utilization and higher costs: melt utilization dropped to 56% in Q4 (from 60% in Q3), with $10.3M higher manufacturing costs sequentially on lower absorption and inventory cost timing .
    • 2025 near-term headwinds: expected low-to-mid single-digit base price per ton decrease for annual agreements, and Q1 price/mix headwind as mix skews to carbon grades; required 2025 pension contributions (~$65M) and Q1 working capital build will weigh on early-year cash flow .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Sales ($M)$328.1 $227.2 $240.5
GAAP Diluted EPS ($)$0.03 $(0.13) $(0.50)
Adjusted Diluted EPS ($)$0.36 $(0.09) $(0.08)
Adjusted EBITDA ($M)$35.7 $6.1 $8.3
Adjusted EBITDA Margin (%)10.9% 2.7% 3.5%
GAAP EBIT Margin (%)0.5% (4.2%) (11.0%)
Ship Tons (000s)157.6 119.9 130.2
Gross Profit ($M)$41.4 $12.1 $10.9
Net Income (Loss) ($M)$1.3 $(5.9) $(21.4)

Segment/end-market net sales ($M)

End MarketQ4 2023Q3 2024Q4 2024
Industrial$118.0 $91.4 $77.2
Automotive$127.1 $104.9 $102.2
Aerospace & Defense$44.1 $12.3 $32.6
Energy$32.7 $14.5 $23.9
Other$6.2 $4.1 $4.6
Total$328.1 $227.2 $240.5

KPIs and balance sheet/cash flow

KPIQ4 2023Q3 2024Q4 2024
Melt Utilization (%)N/A60% 56%
Operating Cash Flow ($M)$74.1 $(15.3) $13.9
Capex ($M)$15.4 $17.6 $15.2
Free Cash Flow ($M)$58.7 $(27.1) $0.9
Cash & Equivalents ($M, end)$280.6 $254.6 $240.7
Total Liquidity ($M, end)$539.4 $496.8 $458.6
Share Repurchase ($M)$(4.1) $(20.1) $(3.5)
Conv. Notes Repurchased ($M cost)——$17.2

Estimates vs. actuals (S&P Global consensus)

  • Consensus estimates from S&P Global were not available at time of writing due to API limits; comparisons to Street estimates are therefore unavailable. We default to S&P Global for consensus when accessible.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
ShipmentsQ1 2025Q4’24: slight increase vs Q3’24 Increase vs Q4’24 as order book strengthens New period; positive sequential
Melt UtilizationQ1 2025Q4’24 similar to Q3 (60%) ~70% in Q1’25 Raised vs Q4 run-rate
Price/Base PriceFY 2025—Annual agreements: base price/ton down low–mid single digits YoY (mix dependent) New (negative)
Surcharge Revenue/tonQ1 2025—Sequentially higher on scrap price increases New (positive)
Manufacturing CostsQ1 2025Q4’24 had planned maintenance; similar utilization guided Sequential improvement from Q4 on end of maintenance and higher utilization Improved
Adjusted EBITDAQ1 2025Q4’24 modest sequential increase vs Q3 guided Higher than Q4’24 expected Positive
CapexFY 2024~$65M (excl. gov’t funded) ——
CapexFY 2025—~$125M incl. ~$90M funded by U.S. government New (elevated)
Required Pension ContributionsFY 2025—~ $65M; heavier in Q1 New
Effective Tax RateFY 2024Low 20% range FY 2025 ~25% Higher vs FY24

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2, Q-1)Current Period (Q4 2024)Trend
Trade/tariffs & importsOngoing softness in industrial/energy amid elevated imports; short lead times (Q2) Executive order imposing at least 25% tariffs on steel long products expected 3/12/2025; company sees increased customer engagement and domestic demand Improving domestic setup
Order book/lead timesQ3: lead times moving into Dec/Jan; Q4 shipments slight increase guided Order book strengthening; lead times extend to May Strengthening
Aerospace & DefenseQ2/Q3: strong, expected to increase; target >$250M by 2026 Q4 A&D shipments ~11k tons vs ~3k in Q3; VAR/VIM partnerships; ~$30M 2025 revenue target; >$250M 2026 reiterated Accelerating
AutomotiveQ2: steady; Q3: customer downtime impacted shipments Target ~40% of shipments in 2025; expect modest increase; EV participation across platforms Stabilizing/modest growth
EnergyQ2/Q3: weak; capex funded for Army projects Sequential shipments +78% from low base; new LDPE reactor tubes and tie-back casing programs, targeting ~$20M sales in 2026 Early recovery/new programs
Pricing/mix & surchargesQ2/Q3: unfavorable price/mix periods; lower surcharge revenue Q1’25 mix headwind (more carbon vs alloy); surcharges per ton to increase on scrap Mixed (near-term headwind)
Utilization & costsQ2: utilization fell to 53%; Q3 improved to 60% Q4 56% on planned downtime; Q1’25 ~70% expected; costs to improve sequentially Improving in Q1
Capex & fundingQ2/Q3: initial/continued U.S. Army funding; 2024 capex ~$65M 2025 capex ~$125M incl. ~$90M funded; $53.5M funding received in 2024 Stepping up
Pensions/cashQ3: contributions YTD ~$42.8M 2025 required ~$65M; Q1 weighted; Q1 operating cash flow expected negative Near-term cash headwind

Management Commentary

  • CEO on demand and strategy: “As we progress through the first quarter of 2025, I am encouraged to see stronger customer order patterns with higher average weekly orders compared with the second half of 2024… Looking ahead, our focus will continue to be on safety, exceptional customer service, and advancing our strategic imperatives to drive sustainable profitability and cash flow in all market conditions.” .
  • CEO on trade: “President Trump recently issued an executive order introducing a tariff of at least 25% on all steel long products… We believe these actions will help level the playing field… reduce imports… which should boost domestic demand.” .
  • CEO on A&D: “On a full year basis, aerospace and defense sales increased by 17% to nearly $135,000,000 in 2024… we expect to grow aerospace and defense sales to over $250,000,000 by 2026.” .
  • CFO on Q4 non-GAAP/one-offs: “GAAP net loss of $21.4 million… inclusive of a $9.4 million loss on the repurchases of convertible notes and an $8.5 million non-cash mark-to-market pension remeasurement loss… adjusted EBITDA was $8.3 million.” .

Q&A Highlights

  • Demand drivers: Management attributes order book improvement to recapture of automotive share, distribution restocking from low inventories, broader industrial recovery, and customers reacting to tariff expectations; no additional planned downtime beyond normal maintenance .
  • Seasonality and A&D ramp: Expect restocking bubble to normalize, with A&D ramping through 2025 as customer capacity comes online .
  • Q1 price/mix: Expect unfavorable price/mix vs Q4 due to higher share of carbon SBQ vs alloy grades; surcharge uplift to help revenue .
  • Pensions/cash: Required 2025 contributions ~$65M, weighted to Q1; Q1 operating cash flow expected negative given working capital build; shares outstanding to decrease ~1M from convertible repurchase .
  • Automotive outlook: Well-positioned on platforms; modest increase in 2025 expected with auto demand steady to slightly improving .

Estimates Context

  • Street consensus from S&P Global (EPS, revenue, EBITDA) for Q4 2024 could not be retrieved at time of analysis due to API limits, so we cannot quantify beats/misses vs consensus. We rely on company-reported actuals and management qualitative guideposts for context [GetEstimates attempts returned errors].
  • Given sequential shipment and EBITDA improvement with a guided step-up in Q1 utilization, we would expect near-term estimate revisions to focus on higher volumes and EBITDA, partially offset by lower base pricing and mix headwinds in Q1 .

Key Takeaways for Investors

  • Sequential bottoming signs: shipments +9% QoQ, adjusted EBITDA up to $8.3M, and Q1 utilization poised to ~70% with higher shipments; watch for sustained order momentum beyond restocking .
  • Tariff tailwind and domestic substitution: the 3/12/2025 tariff implementation on steel long products could reduce imports and benefit domestic pricing/volumes; monitor enforcement scope and duration .
  • Aerospace & defense is the growth wedge: near-term ramp underway with multi-year funded capex; management targets >$250M A&D sales by 2026 and ~$30M 2025 revenue from VAR/VIM pathways .
  • Near-term mix/price headwinds: Q1 price/mix expected negative (more carbon vs alloy) even as surcharges help; margin inflection rests on mix normalization and utilization gains .
  • Cash flow cadence: Q1 operating cash flow likely negative (pensions and working capital build) before improving through 2025; 2025 capex $125M ($90M funded) moderates net cash outlays .
  • Capital allocation: continued share and convertible note repurchases reduced diluted share count (~1M less shares from note repurchase), providing potential EPS leverage as profitability recovers .
  • Watch list: monthly surcharge postings, utilization progression, A&D program milestones/funding receipts, and any changes to base price agreements (low–mid single-digit YoY decrease guided) .