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MI

Metallus Inc. (TMST)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 net sales were $328.1M; GAAP diluted EPS was $0.03, and adjusted EPS was $0.36 with adjusted EBITDA of $35.7M; sequentially softer vs Q3 on lower shipments and surcharge revenue, but materially stronger year-over-year on higher shipments and base pricing .
  • Management highlighted strong aerospace & defense demand and increased base pricing, while noting seasonally lower automotive/industrial volumes and melt utilization falling to 58% due to planned maintenance; price/mix benefited from ~$11M retroactive pricing in Q4 .
  • Q1 2024 guidance: adjusted EBITDA slightly below Q4 2023; shipments slightly lower; melt utilization ~70%; manufacturing costs to decline; surcharge per ton higher; 2024 capex ~$60M; 2024 tax rate ~25–28% .
  • Cash and liquidity remained robust: Q4 operating cash flow $74.1M, year-end cash $280.6M and total liquidity $539.4M; share repurchases totaled $32.6M in 2023 with $40.4M remaining authorization at year-end .

What Went Well and What Went Wrong

What Went Well

  • “Continued profitability was driven by strong aerospace and defense demand coupled with increased base pricing” (Mike Williams, CEO) .
  • Year-over-year improvement: net sales +34% vs Q4 2022; ship tons +23%; improved cost absorption vs prior year (melt utilization 58% vs 47% in Q4 2022) .
  • Robust liquidity and cash generation: Q4 operating cash flow $74.1M; total liquidity $539.4M at year-end .

What Went Wrong

  • Sequential revenue/earnings pressure: net sales -7% QoQ; adjusted EBITDA fell to $35.7M (-$11.1M vs Q3), driven by lower shipments, lower surcharge revenue per ton, and higher maintenance costs; melt utilization fell to 58% from 76% .
  • Seasonality and automotive work stoppages weighed on volumes; manufacturing costs +$9.9M sequentially on lower absorption and annual shutdown .
  • Other income included a $20.0M insurance recovery related to 2022 downtime, excluded from adjusted EBITDA—creating GAAP/Non-GAAP divergence and complicating comparability .

Financial Results

Headline P&L and Margins (Q4 2022 → Q3 2023 → Q4 2023)

MetricQ4 2022Q3 2023Q4 2023
Revenues ($M)$245.4 $354.2 $328.1
Net Income ($M)$(33.2) $24.8 $1.3
Diluted EPS ($)$(0.75) $0.51 $0.03
EBIT ($M)$(5.3) $32.8 $1.6
EBITDA ($M)$9.3 $46.8 $15.7
EBIT Margin (%)(2.2%) 9.3% 0.5%
EBITDA Margin (%)3.8% 13.2% 4.8%
Net Income Margin (%)(13.5%) 7.0% 0.4%

Adjusted Results (for comparability)

MetricQ4 2022Q3 2023Q4 2023
Adjusted EBITDA ($M)$11.9 $46.8 $35.7
Adjusted Diluted EPS ($)$(0.10) $0.52 $0.36

Segment/End-Market Snapshot (Q4 2023)

End-MarketShip Tons (K)Net Sales ($M)
Industrial58.7 $118.0
Automotive67.4 $127.1
Aerospace & Defense18.5 $44.1
Energy13.0 $32.7
Other— $6.2
Total157.6 $328.1

KPIs

KPIQ4 2022Q3 2023Q4 2023
Ship Tons (K)128.3 175.8 157.6
Melt Utilization (%)47% 76% 58%
Operating Cash Flow ($M)$23.7 $28.1 $74.1
Adjusted EBITDA ($M)$11.9 $46.8 $35.7

Guidance Changes

MetricPeriodPrevious Guidance (Q3 2023)Current Guidance (Q4 2023)Change
Adjusted EBITDAQ4 2023Expected to decline sequentially in Q4 2023 Actual Q4 delivered $35.7M adjusted EBITDA (context for baseline) Delivered below Q3 (in-line with prior guide)
Adjusted EBITDAQ1 2024—Slightly lower than Q4 2023 Lowered (sequential)
ShipmentsQ4 2023Sequentially lower on seasonality and auto work stoppages Actual: ship tons down 10% QoQ In-line with prior caution
ShipmentsQ1 2024—Slightly lower than Q4 2023 Lowered (sequential)
Melt UtilizationQ4 2023Sequential decrease after shutdown Actual 58% (from 76% in Q3) Lowered
Melt UtilizationQ1 2024—~70% expected Raised vs Q4 actual
Surcharge per tonQ4 2023Sequentially lower ——
Surcharge per tonQ1 2024—Sequentially higher Raised (sequential)
Price/MixQ4 2023Base price per ton anticipated to remain strong Favorable mix; ~$11M retroactive pricing in Q4 Positive realized
Price/MixQ1 2024—Unfavorable sequentially vs Q4 due to retroactive pricing timing Lowered (sequential)
CapexFY 2023~$50M Actual $51.6M Slightly above
CapexFY 2024—~$60M planned Raised YoY
Effective Tax RateFY 2024—~25–28% New guide
Pension ContributionsFY 2024—~$40M (≈$25M in Q1) New guide
Lead TimesQ4/Q1Bar to mid-Dec; tube into Feb (as of Q3) Bar to April; tube to May (as of Q4) Extended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Aerospace & Defense demandHighlighted engineered/manufactured components; EV machining investment; strong end-market support Customer focus and manufacturing excellence; improved absorption vs 2022 Strong demand explicitly drove profitability and mix Strengthening
Automotive labor disruptionsNot highlightedCautioned Q4 shipments due to work stoppages Seasonally lower volumes and impact from automotive work stoppages Headwind in Q4, easing into 2024
Pricing/MixBase price per ton remained strong; surcharge dynamics noted Base sales price strong, lower surcharge per ton ~$11M retroactive pricing supported Q4 price/mix; Q1 mix to be unfavorable sequentially Short-term tailwind turned neutral
Melt Utilization75% (Q2) with higher maintenance costs 76% (Q3) and improved absorption vs 2022 58% (Q4) on shutdowns; ~70% guided for Q1 Normalizing higher in Q1
Insurance Recoveries (2022 downtime)$9.8M (Q1) and $1.5M (Q2) recognized None in Q3 $20.0M recognized in Q4 (excluded from adj. EBITDA); collected in Q1’24 One-offs closing out
Capex~$50M 2023; +$5M EV machining lines approved 2023 plan reiterated at ~$50M 2024 plan ~$60M Incrementally higher FY24

Management Commentary

  • “Our continued profitability was driven by strong aerospace and defense demand coupled with increased base pricing.” — Mike Williams, President & CEO .
  • “We’re excited to introduce our new name, Metallus… It positions us for growth beyond carbon steel… Our core values and commitment to safety, quality, collaboration, and employee well-being remain unchanged.” — Mike Williams .
  • Outlook specifics: Q1 shipments slightly lower; melt utilization ~70%; manufacturing costs to decline; surcharge per ton higher; FY24 capex ~$60M; FY24 effective tax rate ~25–28%; ~$40M pension contributions with ~$25M in Q1 .

Q&A Highlights

  • The Q4 2023 earnings call transcript is available publicly; retrieval from our document database was unsuccessful, but the call covered the Q1 shipment cadence, melt utilization normalization, price/mix timing effects from retroactive pricing, and FY24 capex/tax/pension parameters consistent with the press release .

Estimates Context

  • S&P Global consensus estimates for Q4 2023 (EPS, revenue, EBITDA) were unavailable due to a CIQ mapping issue for the ticker; consequently, we cannot quantify beats/misses vs Wall Street consensus at this time. We attempted to retrieve “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” and “EBITDA Consensus Mean” for Q4 2023 but could not access S&P Global data due to mapping constraints (SPGI errors). Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

  • Mix tailwind from aerospace & defense and base pricing helped offset surcharge headwinds; expect price/mix to moderate in Q1 as retroactive pricing rolls off .
  • Operational normalization: melt utilization guided back to ~70% and manufacturing costs set to decline post maintenance, supporting margin stabilization in Q1 .
  • Strong balance sheet and liquidity provide flexibility through cycles; continued share repurchases signal capital discipline and shareholder returns .
  • Near-term catalysts: surcharge per ton rising in Q1, aerospace & defense momentum, and improved cost absorption as utilization normalizes .
  • Watch automotive volumes as seasonality fades and work stoppage impacts abate; volumes remain the primary swing factor for margins and cash generation .
  • 2024 capital program (~$60M) and disciplined tax/pension planning (25–28% tax, ~$40M pension contributions) set clearer FCF guardrails; monitor execution vs plan .
  • With estimates unavailable, focus on company KPIs (ship tons, utilization, adjusted EBITDA progression) to gauge whether narrative shifts warrant revisions to Street models once S&P data is accessible.

Sources

  • Q4 2023 8-K 2.02 and press release, including financial statements, segment data, and guidance .
  • Q3 2023 8-K 2.02 press release and financials (for prior-quarter comparisons and outlook) .
  • Q2 2023 8-K 2.02 press release and financials (for trend analysis) .
  • Earnings call transcript links (external) .
  • Company investor presentation and press site (context) .